Rent and property portfolios under landlord review
The political and economic uncertainty which is hanging over the buy-to-let market, has prompted many landlords to review the size of their portfolios and to increase rents.
New data published by Foundation Home Loans shows that 38% of UK landlords have reviewed the size of their portfolios as costs increase, while 30% had increased the rent that tenants pay.
The report also showed that 7% have sold properties to either reduce portfolio sizes or diversity, rising to 19% for those holding 20 properties or more.
These actions have come as mortgage interest tax relief is being phased out, the 3% stamp duty surcharge on second homes begins to have an effect, EPC rules come into play on minimum energy performance standards next April and more imminently, new underwriting rules come into play on portfolio landlords, thanks to the new PRA rules on September 30th.
Jeff Knight, marketing director at Foundation Home Loans, said:
Landlords have been met with a raft of changes, from stamp duty charges to shifts in tax policy, and the lack of certainty on the political front has clouded the picture somewhat.
The fact remains that, whether it’s as a stepping stone to home ownership or a longer term lifestyle decision for tenants, the rental sector is an increasingly important part of the housing mix.
The data also indicated a big drop in confidence among landlords, with 71% confirming as much, a number that rose to 78% for those with properties in central and outer London.
The second phase of Prudential Regulatory Authority changes comes into effect from September 30th, 2017, and will affect the way portfolio landlords are affected, as outlined by the Commercial Trust article titled: PRA deadline for portfolio landlords and lending changes.
Andrew Turner, chief executive at Commercial Trust, said:
Whilst there are still good returns to be made by investing in property, the combination of political uncertainty and the financially punitive changes made by government through its stamp duty surcharge, the loss of mortgage interest tax relief and forthcoming PRA changes, have all created an air of caution amongst landlords.
There remains a great degree of uncertainty over the longer-term implications of Brexit and also conflicting political statements on the housing market.
The new PRA rules will have an impact on underwriting procedures for any buy-to-let landlord with four or more properties, so it is to be expected that some will review their circumstances.
At the same time, the demand for new housing remains high and the UK is simply not building enough houses per year to satisfy needs. That, along with affordability issues are forcing more people into the rental market – and with fewer properties available, there is naturally an increase in costs as landlords look to meet their own rising costs and the effects of inflation.
It makes perfect sense for landlords to review their circumstances ahead of the next tranche of changes and to speak to an expert if in any doubts. At Commercial Trust we can discuss each individual’s personal circumstances and look at a wide variety of products across the market.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.