FT Advisor reports record number of landlords leaving market

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Buy-to-Let:

Research carried out by international research group BVA
BDRC, a consumer insight consultancy headquartered in Paris, finds that a record
number of landlords are planning to sell their rental properties in the next 12
months.

The BVA report cited by the FT finds that over a quarter (26
per cent) of UK residential landlords are planning to sell at least one
property from their portfolio.

The report states that the number of landlords intent on
selling is the highest level of planned sales the BVA had measured (since 2006).

Although of the 738 landlords polled in June 2019, just one
in seven intended to purchase additional buy-to-let properties over the next 12
months, by far the largest proportion to-date were contemplating sales.

Financial viability was the most commonly cited reason for
wanting to sell property, with taxation and an increased burden of legislation creating
a “hassle verses return� imbalance.

Net profitability in buy-to-let is reported as having fallen
for three successive quarters, this being the first decline since BVA started tracking
in 2006.

Rental yield was a major factor in profitability falls, with
the recorded yield of 5.5% in Q2, 2019, the lowest for nine years. HMO landlords
were seeing the highest average yields, with their multiple occupancy and student
housing the most profitable.

Landlords’ profitability has also been hit by tax and
legislative changes, including an additional 3 per cent stamp duty surcharge introduced
in April 2016, and a tightening of the lending rules on buy-to-let mortgages followed
by a phased-in reduction of mortgage interest tax relief over four years.

UK Consumer organisation Which? has calculated that the average
small-scale landlord’s income will take a 43% hit due to the cumulative effect
of the changes.

One strategy now being used to reduce the impact of many of
the changes, and one that favours portfolio landlords, is the purchasing of buy-to-let
properties through limited companies. The method has become more than twice as
popular as buying rental properties as a private individual.

The banning of all tenant fees now means that letting agents
must pass on these costs to their landlords, and landlords fear that the proposed
abolition of the Section 21 possession or the “no-fault eviction� process will
make managing rentals more problematic.

Given all the difficulties though, agents are still seeing
new purchases and with the right strategies industry experts are still
predicting a healthy future for buy-to-let in what is still a multi-billion-pound
industry in the UK.

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