Landlords are leaving the PRS as tax hikes and reforms loom

The UK’s private rented sector (PRS) is facing a potential storm as landlords reassess their portfolios in response to anticipated tax changes and reforms.

Now members of The Guild of Property Professionals have been asked their views and they are warning of significant disruptions in the short to medium term.

They point to a proposed hike in Capital Gains Tax (CGT) and the Renters’ Rights Bill (RRB) which is making its way through Parliament.

These issues are creating concern and the PRS could see an exodus of smaller landlords, members fear.

Landlords are considering selling

Edward Chelton Brown, the managing director of Chelton Brown in Northampton, notes that many landlords with just one or two properties are considering selling due to the looming CGT increase.

He said: “We are seeing smaller, often accidental landlords selling their properties.

“In the short term, we expect to see some landlords exiting, leading to a reduction in rental stock.”

Larger portfolio landlords, with more financial resilience, appear to be taking a more cautious approach, waiting for greater clarity on the government’s tax plans before making any major decisions.

However, in London, Jason Werter, of Living Residential in West Hampstead, reports that the proposed CGT increase is already pushing landlords to offload properties.

He says: “This tax hike could be the final straw for many landlords.”

Landlords are ‘rethinking their property ambitions’

Lisa Hunt, the residential director of Maguire Jackson in Birmingham, a market where 70% of stock is owned by private landlords, echoes these concerns.

She says: “The feedback we are receiving is that the pipeline of the anticipated legislation coming forward, from Capital Gains Tax to the Rental Reform Bill, is encouraging some landlords to rethink their property ambitions.”

While landlords are expressing concerns about the RRB, Ms Hunt notes that it has not yet had a significant impact on demand or supply in Birmingham.

The city centre’s rental market remains robust, with high levels of interest for well-presented properties.

However, the increased supply of stock for sale is being absorbed by an increase in first-time buyers encouraged by falling interest rates.

Consequences of the landlord exodus

Rent rises and supply shortages are expected to be major consequences of the landlord exodus.

Anita Lovell, the owner of Results Estate Agents in Rothwell, predicts that with fewer properties available, landlords can charge premium rents.

Also, landlords may become less willing to accept short-term lets, fearing difficulties in evicting non-paying tenants.

Spencer Bullard, the managing director of Abode Town and Country Properties in Royston, warns that further tax increases could exacerbate an already difficult situation, especially as immigration rises and financial returns for landlords diminish.

He says this could lead to higher rents and more supply shortages.

Abolition of Section 21

The abolition of Section 21 ‘no-fault’ evictions, a key element of the proposed RRB, is another major concern for landlords.

Rachel Horton, the lettings director at Richard Watkinson and Partners, highlights that some landlords are reducing their portfolios to limit potential tax impacts, but many are more concerned about losing the ability to easily regain possession of their properties under the new legislation.

Darren Moore, the head of lettings at Bentons in the East Midlands, adds that while long-term landlords are used to adapting to new legislation, the removal of Section 21 is causing anxiety about regaining possession of properties through an already strained court system.

He urges landlords not to panic, stating that the PRS will continue to evolve, and knowledgeable letting agents can guide landlords through these changes.

Landlord taxes and laws

As a result of the potential changes to landlord taxes and laws, landlord sentiment varies across the country, with some regions seeing a more pronounced shift in landlord behaviour.

In the East Midlands, Darren Moore reports that portfolio landlords remain optimistic, with rising rents and strong demand countering any immediate concerns.

However, he warns that the lack of new BTL investment could worsen the supply-demand imbalance in certain areas, leading to higher rents.

In contrast, regions like Birmingham and London are already experiencing a landlord sell-off, though new Build to Rent developments may help offset this in city centres.

PRS is facing a period of uncertainty

The membership of The Guild of Property Professionals warns that the PRS is facing a period of uncertainty.

While some landlords may exit the market, especially those with smaller portfolios, larger landlords seem prepared to ride out the turbulence.

However, members agree that the proposed reforms could potentially lead to higher rents, reduced availability of rental properties, and a more challenging environment for tenants in the short to medium term.

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