9:54 AM, 13th September 2023, About A year ago 4
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Landlords have been reducing their property portfolios across England and Wales due to unfavourable policies by the past few Conservative governments, one letting and estate agent says.
The research by Benham and Reeves compared the number of properties owned by investors in the first quarter of 2022 and 2023.
It found that the average portfolio size had fallen by 5.6%, from 9.1 to 8.6 properties.
The decline was more pronounced in some regions, especially in Wales, where portfolio sizes plummeted by 42.9%, from 12.6 to 7.2 properties.
The East Midlands also saw a sharp drop of 33.9%, from 11.8 to 7.8 properties.
Marc von Grundherr, a director of Benham and Reeves, said: “It’s getting harder to be profitable as a landlord, and that impact is starting to show.
“Losing income tax relief had a big effect, while many investors are understandably worried about the upcoming changes to Capital Gains Tax, minimum EPC rules, and the elimination of Section 21 evictions.
“Declining portfolio sizes should act as a warning to the government.”
However, not every region is seeing landlords reduce portfolios, in the East of England typical portfolio sizes increased by 43.8% year-on-year, from 6.4 to 9.2.
There are also smaller increases in Yorkshire and the Humber (11.1%), South East (10.1%), and West Midlands (8.2%).
The remaining six regions have all seen portfolio sizes fall, with the North East (-1.0%), London (-1.3%) and the South East (-3.8%) seeing only minor reductions.
The agency attributed the exodus of landlords to a series of hostile policies that have eroded their profits and increased costs.
These include the 3% stamp duty surcharge introduced in 2016, the phasing out of mortgage income tax relief, and the recent legislation in Wales that extended the no-fault eviction notice period to six months.
The outlook for investors is not optimistic, and those that sell up from April next year will see Capital Gains Tax allowance reducing to £3,000.
Plus, government legislation would see section 21 ‘no-fault’ evictions being abolished and a decision of whether rented homes will have to meet an EPC rating of CC by 2028 will be made.
Mr von Grundherr added: “The tax landscape is unfairly balanced against landlords and unless the authorities want rental stock to continue falling in the years ahead, they may need to reverse some of these hostile policies which are driving professional landlords away.
“However, there are alternative challenges associated with offloading buy to let portfolio properties at present.
“While many of our landlords are disgruntled due to rising mortgage costs, they understand the difficulties of the resale market in the current climate.
“As a result, they are choosing to keep hold of their current investments for the mid-term until market values strengthen.”
Teessider
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Sign Up17:29 PM, 13th September 2023, About A year ago
I’m not planning to add to my 4 x properties.
Section 24 doesn’t affect me because I’m a basic rate taxpayer. That doesn’t mean that I think it’s right but I don’t admire those switching to Ltd companies in order to avoid Section 24 (I understand why they do so).
EICR directly impacted the rents that I needed to charge. As did EPC improvements.
I’m not selling so CGT does not bother me. I’ve never sought possession of my tenants’ homes. I consider Section 21 to be evil (unless it’s a Section 8 in disguise).
The Renters (Reform) Bill doesn’t bother me. Rents will rise to cover the additional costs to fund a pointless database and unnecessary redress scheme membership.
If you think it’s bad now, wait until you see see what the future holds.
Maybe I’ll buy another one or two if the predicted fire sale kicks off as expected.
Mike D
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Sign Up10:48 AM, 14th September 2023, About A year ago
The risk reward balance is completely gone. its easy to lose £20,000 with a bad situation. That takes several years to recover. But now all the risks are high and you can get 5% in bond's while 6-8% in B2L but 10-15% in risks....
The flood leaving the sector in next 12m will make homelessness a battle ground for the election, self imposed political damage by incompetent egotistical vote winning fools
Morag
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Sign Up10:11 AM, 16th September 2023, About A year ago
Section 21 was a crucial part of the 1988 Housing Act, giving landlords the confidence to invest, knowing that they would always have a means to recover their property regardless of the reason. Landlords always have a reason, and 90% of the time it's a breach by the tenant. This was the only route guaranteed to get them out, as long as it was meticulously executed. In the small number of cases where the tenant has done nothing wrong, but the landlord's circumstances mean they need the property back, I am all for giving tenants a long notice period and some compensation, but private tenancies can never be guaranteed for life, and in a healthy PRS, it should be possible to find another good property within the notice period. Of course, we no longer have a healthy PRS, so tenants are now struggling to find anywhere else and local authorities can't help either. It's a disaster of the government's making.
Stella
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Sign Up23:55 PM, 16th September 2023, About A year ago
Reply to the comment left by Teessider at 13/09/2023 - 17:29
I disagree with your comments about section 21
If we did not have the security of section 21 it would scupper the rental market as was the case prior to the 1988 housing act.
I also expect the government (no matter what colour) will tighten the screw even further by bringing in rent caps at some stage.
It is not difficult to see where this might be heading.