The raft of recent tax changes is making it harder than ever for landlords to make substantial returns from their buy-to-let investment.
Despite this, a new report has revealed that investment in the private rental sector continues to increase in London.
Purchasing
Following a slight lull in activity following the introduction of the 3% stamp duty surcharge on additional properties, an investigation from Benham & Reeves Residential Lettings suggests that landlords are now looking to add to their portfolios.
In addition, the findings suggest that the majority of landlords are undeterred from the phasing out of mortgage interest relief.
Marc von Grundherr, lettings director at Benham & Reeves, observed: ‘Predictions that a flood of landlords will abandon their buy to let portfolios have been greatly exaggerated. In fact, we have seen very few clients exit the rental market this year – in fact most are actively looking to invest further.’[1]
Landlords in London being more strategic
Costs
The Government’s alteration to mortgage interest tax relief is expected to result in rent increases for tenants, with landlords left with little option but to pass on some of these increased costs.
However, Mr von Grundherr notes that strong demand for rental property is putting pressure on rents. Benham & Reeves saw a rise of 12.7% in lettings transactions during the first quarter of the year, in comparison to the same period in 2016.
Continuing, he said: ‘Property continues to remain a very stable investment in light of stock market volatility and historically low interest rates. The fundamentals continue to remain strong and that is why our outlook on London property continues to be bullish.’[1]
‘Professional investors have been able to navigate these legislation changes and capitalise on these localised rental hotspots,’ he concluded.[1]
[1] https://www.landlordtoday.co.uk/breaking-news/2017/5/landlords-adopting-a-more-strategic-approach-to-investing-in-londons-btl-market