Is it Time to Leave the Buy-to-Let Market for Good?

This year has seen record numbers of landlords selling their rental properties in response to regulatory changes and economic uncertainty post-Brexit. But is it time to leave the buy-to-let market for good?

A recent survey by the Residential Landlords Association (RLA) shows that this trend is set to continue, with 22% of landlords planning to sell at least one of their rental properties over the next 12 months, while less than a fifth said that they are planning to purchase additional buy-to-let properties.

Many landlords have exited the buy-to-let market for good following the Chancellor’s new taxation rules, which have seen investors charged an additional 3% in Stamp Duty since April last year and a reduction in tax relief on finance costs from April this year.

So, should more landlords be selling up and investing their money in other asset classes? Or should they sit tight and ride out the storm?

According to Peter Armistead, the Managing Director of Armistead Property, landlords should not sell their properties unless they can get a better return elsewhere.

He explains: “It is widely recognised that buy-to-let property is a medium to long-term investment. If we take a long-term view, it is easy to see how property performs so well compared with other asset classes.

“Over the last 35 years, for which accurate house price index information is available, house prices have increased 11% per year on average. The longer landlords can hold onto property, the better.”

He continues: “Investors that acquire property in the best buy-to-let hotspots in the UK can enjoy yields of between 8-12%, excellent capital growth and steady rental income. However, if landlords are experiencing poor leads or they think that the long-term potential of an area is not very good, then it’s best to sell.

“But, before landlords put their property on the market, it is worth investigating if you can remortgage, raise the rent, repurpose the property into a House in Multiple Occupation (HMO) to boost yields, or renovate/refurbish it to attract different tenants. There are plenty of mortgage brokers that can provide refinancing for property portfolios, which may be much more attractive than selling up.”

He adds: “The best time of year to sell buy-to-let property is March-June and September-November. Ideally, landlords should sell when they don’t actually need to i.e. you aren’t being forced into a quick messy sale. It’s best to give the property a makeover with a lick of paint, new carpets and maybe a new kitchen to maximise the selling price.”

Are you planning to leave the buy-to-let market for good?