Landlord taxation proves biggest barrier to landlords wanting to grow portfolios
More than half of landlords (50.6%) still believe residential property remains a good long-term investment, despite increased regulation, and nearly two-thirds (62.7%) intend to maintain their current portfolio over the next year. However, only 3.9% plan to expand, according to research from Benham and Reeves.
Of those landlords considering expansion, long-term retirement and investment planning is the primary motivation, cited by 43.7%, followed by strong tenant demand (17.2%), an opinion that property represents good value (16.1%), and expectations of house price growth (11.5%).
However, for those not looking to expand or maintain current portfolios, 13.0% intend to reduce their holdings and a further 14.2% plan to exit the rental market entirely.
A lack of confidence
Current confidence is mixed. Although a third (33.9%) remain confident, 39.1% say they are either somewhat or very unconfident about the sector’s long-term future, with more than a third (38.9%) expecting their buy-to-let portfolio’s profitability to decrease over the next 12 months. That’s more than five times the 7.6% who expect it to increase. Meanwhile, 45.8% expect profitability to remain unchanged.
More than three-quarters (78.5%) say that being a landlord today is a less attractive investment proposition than five years ago, with half (51.9%) saying it is much less attractive.
Landlord taxation is having the biggest impact on further property investment, cited by 28.3% and above other factors such as the Renters’ Rights Act and wider regulation (15.1%) and property prices (12.6%).
Economic uncertainty (9.8%), concerns around problem tenants or rent arrears (8.6%), Stamp Duty (6.8%) and mortgage rates and finance costs (6.2%) were also cited as barriers to investment.
When asked what would prompt them to expand portfolios, more favourable landlord taxation (36.9%) was the most popular option, followed by lower Stamp Duty (13.7%), a faster or easier possession process (12%), greater confidence in the economy (11.6%) and lower property prices (9%).
Residential single-let remains most attractive
Traditional residential single-let remains by far the most attractive option, favoured by 48.2%, followed by properties requiring refurbishment (18.3%), and holiday or short-term lets (11.0%).
HMOs (5.5%), student accommodation (4.3%), corporate lets (3.7%), and new-build properties (3.7%) follow.
Marc von Grundherr, director of Benham and Reeves, said: “Despite years of headlines predicting the demise of the private landlord, the reality is that buy-to-let remains an incredibly strong long-term investment and, importantly, half of landlords themselves still believe this to be the case.
“The issue isn’t that landlords have lost faith in property. The problem is that the environment in which landlords are being asked to operate has become substantially less attractive.
He said it was also interesting to see that taxation was the biggest block. “Regulation has understandably dominated the conversation recently, but landlords have also faced a sustained increase in the financial burden placed upon them and our survey suggests this is having the greatest impact on investment appetite,” he said.
