The new tax outlook for landlords has led to a shift in sentiment in the buy to let market, with an average of 41 per cent now positive about the prospects of their portfolios.
A survey of 754 landlords conducted by Kent Reliance, run in association with BDRC Continental in the first quarter of 2017, found that 41 per cent were confident about their portfolios. This marks a slight decline from 44 per cent in the previous quarter. Despite this, the number of those with a positive perspective largely outnumbers those who feel negative, making the overall sentiment one of positivity.
In the first three months of 2017, 10 per cent of landlords added to their portfolios, slightly outranking the 8 per cent who reduced their holdings. On a longer term basis this appears likely to change, with 19 per cent expecting to reduce their portfolios. 13 per cent expect to expand. This changing sentiment can be largely attributed to the new reality of higher tax and running costs.
Chief Executive Officer at OneSavings Bank, Andy Golding, said: ‘Changes have come thick and fast for landlords since our last edition. First, the housing market came to the fore in the government’s housing white paper in February, which recognised the need to stimulate housebuilding and loosen restrictive planning rules. This was followed by a raft of pledges in each of the political parties’ manifestos ahead of the recent general election. The Conservatives promised to build 1.5 million homes by the end of 2022 while Labour committed to build 100,000 council and housing association homes a year. The failure of either party to secure a majority questions whether these promises will be met with action, however we have at least seen a firm recognition of the scale of the housing crisis.
‘While this will hopefully shape the wider housing market in the longer term, landlords have been getting to grips with more immediate changes. This April saw changes to tax treatment of BTL mortgages introduced, raising costs for many landlords. The Prudential Regulation Authority (PRA) first round of changes to mortgage underwriting took effect from January, with the second; altering the way larger portfolio landlords are treated, set to come in to play in October. Against this backdrop, costs continue to rise, even before we factor in higher tax bills for many landlords. In the last report from our Buy to Let Britain Research Series showed that the annual running costs of a buy to let property have reached £3,632 – up a quarter since 2007.’
He concluded: ‘These factors are clearly beginning to drag on the growth of the sector; landlords have had to navigate the changing tides of taxation and regulation, at the same time as seeing the cost of doing business increase. We look at how they are doing so, how returns and rents are performing, and whether demand for, and access to, mortgage finance has been hit.’