Tax changes and stamp duty have seen landlords head for the hills in the UK, seeing a drop in private rentals coming onto the market. The buy to let market has been a hot topic within parliament to the landlord’s peril, with the Conservative’s former chancellor George Osbourne doing away with many tax benefits.
April 2016 saw the introduction of an additional 3 per cent stamp duty charge on all additional properties purchased (all those other than a main residence). Landlords looking to add to their property portfolios would see their tax bills skyrocket and a reduction in profits. The withdrawal of tax relief in relation to mortgages, along with the scrapping of the wear and tear allowance has also left many landlords angered, some having second thoughts about further investment into the buy to let sector.
Bleak financial returns in the private rental sector have led to some investors turning to commercial properties. The rate of return when investing in shops, restaurants and offices has increased, with many landlords experiencing higher yields as rental costs tend to be higher in this sector. Longer leases and the fact that most commercial property tenants are usually responsible for covering the cost of property maintenance provides an almost hassle-free investment opportunity.
The private rental sector is extremely important when it comes to the economy. However, with recent changes made by the government, many landlords feel that first time buyers are being favoured to the detriment of landlords everywhere. The knock-on effect is that some landlords are seeking alternative investments outside of the sector, believing that buy to let is no longer able to provide them with the same profit potential as in previous years.
But, for those landlords sticking with buy to let, they can hope to see an increase in rental returns. Simply put, less properties available and a higher tenant demand will in most areas lead to rental price inflation. As the gap between house prices and earnings widens, home ownership becomes more unaffordable and with a limited supply of social housing, demand for homes within the private rental sector will remain strong.Back to news