Although last year was a difficult time for buy-to-let landlords, Romans estate agent reports that one in four buyers registered in 2017 were landlords.
From the phasing out of mortgage interest tax relief, to tougher buy-to-let lending criteria, to the additional homes Stamp Duty surcharge, landlords have faced a difficult few years. However, the Romans figures suggest that appetite for property investment has not been dampened by the Government changes.
Michael Cook, the Managing Director of Lettings at Romans, explains: “2017 showed steady demand from tenants throughout, with August being a new record for tenant move ins. Average rents rose steadily and, although some market places remained flat, most of our locations demonstrated growth of between 1-2.5%. Couple this with the slightly reduced capital values in some locations, those who purchased at the right time, in the right area, are likely to have benefitted from increased yields.
“We know that one in four of all new buyers that register are looking to purchase for buy-to-let, yet only one in eight properties sold by Romans in 2017 were sold to an investor – demonstrating a clear appetite, but also uncertainty from some landlords over tax implications, with the increased Stamp Duty levy on second homes and the continued phasing of the removal of mortgage interest tax relief.”
He continues: “My predictions for this year are: whilst there will be some uncertainty, not least caused by the continuing Brexit negotiations, we are fairly certain that tenant demand will remain strong, and there will remain an underlying demand/supply gap for suitable rental property.
“We believe that, with a steadying of house price inflation continuing this year, and no obvious signs of a sharp downturn in prices almost 18 months after the referendum result, investors that were sitting on the fence last year will now commit to a purchase.”
However, Cook also notes: “Conversely, there may be some landlords that are reviewing their tax position given some the changes, and consider selling their property the more viable option. If this is the case, we would urge them to speak to us first before making a firm decision, as, with the right advice, what at first seems an unviable investment can turn into something far more lucrative if structured differently.
“Whilst the political landscape is unclear, and will no doubt cause inhibitions for some to make the move, we believe the rental market will continue to provide consistent returns for landlords, with no real signs of tenant demand abating. Returns may not be as buoyant as previous years, with increased rents of around 1-1.5%, but they are returns nonetheless. Tenants will benefit from an improved financial position, with a slower rate of rent inflation and the introduction of legislation to regulate the industry, which we have been campaigning for as members of ARLA (the Association of Residential Letting Agents) for some time.”