Number of New Landlords Increasing Despite Challenging Market

Buy To Let

With regulation tightening on the private rented sector, rising costs of compliance and increased tax legislation, it’s no wonder why private landlords are exiting the market or selling at least one investment property. However, a London based estate agent carried out some research which found the number of landlords entering the market is increasing and outweighs the number of landlords leaving the market!

New research shows that the majority of landlords own more than one buy to let investment properties each. This figure has risen for the fifth consecutive year since 2012. It shows that landlords are still considering residential property as a strong investment! Especially with the new services on offer to landlords, including Harry Albert Lettings & Estates offering to DIY landlords and those who really want to maximise their property revenues through a mix of long-term lettings and short-term accommodation.

These numbers apply across the UK but our understanding is that it would be mostly applicable to London when compared to Leicester as a result of the slowing (and stagnating) increases in house prices throughout the country, not to mention the 3% stamp duty that’s added on top of the stamp duty landlords pay on their second (or third, fourth, etc) properties introduced in 2016 meaning on properties below £125’000, which don’t have any stamp duty, will now incur a charge of 3% of the value of the property. which Leicester hasn’t experienced due to a less dramatic increase in house values over time and the abolition of mortgage interest tax relief for landlords in April 2017. Further research showed 64% of landlords had their finances negatively impacted by the mortgage interest tax changes.

The research that shows more landlords are entering the market also suggests that landlords continue to consider residential property as a strong investment, particularly for those based in the capital. They said;

The long-term picture for the buy to let market remains strong. Even taking into account the implementation of government changes to buy to let tax relief, there are a number of [other] tax reliefs available to landlords.

House on stack of pound coinsIt isn’t just an estate agent in London who are finding this to be true, Harry Albert Lettings & Estates has reported an upswing in enquiries from homeowners who are looking to buy a second property or own a second property they’d like to rent out who are looking for free advice on how best to approach the market in the current climate. Managing director of the company told us;

Many people who are landlords didn’t deliberately become landlords, they didn’t buy property for the purpose of renting them out. A lot of times, they’ve either moved in with their partner or are away from the property for long periods of time due to work. There’s several reasons why you may become a landlord and we’re there to offer the support, advice and guidance you need to really maximise your property revenues. We’ve also had more seasoned landlords with several properties enquiring about our no seller fee property auction services.

There is a lot of turbulance in the market at the moment but it’s still a very strong market. Homeownership is at a thirty year low in the UK as reported by Forbes in 2017, there’s plenty of tenants ready to rent the property you might no longer use.

We predicted in January that many areas of the UK will face a crash in the market where house prices may fall dramatically, potentially pushing homeowners and landlords into negative equity meaning they can’t afford to sell the property leaving little choice but to rent them out, as such, we agree with the research and expect the number of landlords to continue to rise.

Alongside this, giving substance to the research, the Bank of England data has also indicated that the buy to let sector is expanding. The data found that 12.7% of mortgages in the final quarter of 2017 came from buy to let investors which is a decrease from 14.4% on the previous year which shows that those becoming new landlords are increasingly doing so because they already own a property (whether mortgage free or with a residential mortgage with consent to let as these mortgages wouldn’t be considered as buy to let). The data from Bank of England also shows the number of first-time buyers has increased, largely down to government initiatives including help to buy.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said;

There was a welcome increase in number of first-time buyers as they continue to take advantage of the more level playing field between them and buy-to-let investors.

Lending for buy-to-let was subdued as the impact of the stamp duty surcharge and the phased introduction of changes to mortgage interest tax relief continues to act as a deterrent for some.

It is more likely to be would-be novice landlords having second thoughts about investing in property as we are seeing experienced investors remain committed to the sector, with a significant proportion incorporating.

Whilst the data from the London based estate agent provides firm foundations behind the reasons why new landlords are entering the market, one of their competitors found 93% of landlords own just one rental property in 2014 whilst other sources, such as TDPMarketing (who don’t appear to provide a date or any primary research findings) say 55% of landlords own one rental property whilst 36% owned 2-3 properties and only 1% own 10 or more properties. Suggesting the average number of property that most landlords own is between one or two properties each.

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