UK landlords looking to reduce or sell off their property portfolios
There is a significant increase in the number of private landlords looking to reduce their property portfolios or sell off their investments entirely, according to Irwin Mitchell.
The law firm has blamed a succession of government changes for the exodus; all of which it claims have made Buy-to-Lets a less profitable investment option.
These changes include stricter underwriting standards for mortgage lending, particularly for those with four or more properties, as well as the introduction of an additional 3% stamp duty surcharge on the purchase of second homes. The phasing out of the ability to claim mortgage interest against tax and the possible implementation of rent controls as proposed at the recent Labour Party Conference are also making life tougher for landlords it is claimed. In addition to legislative changes, the firm also highlights a shift in public sentiment towards landlords during the current housing crisis.
As a result, partner Jeremy Raj reports that Irwin Mitchell has seen an increase in enquiries from landlords worried about the future market and said that it was “understandable” that landlords are now considering alternative investments.
However, despite the desire to sell Buy-to-Let portfolios, Mr Raj warned that it might not be as straightforward as some landlords think. Indeed, he highlighted that property investors with large portfolios might find themselves under the spotlight of HMRC, commenting that: “The capital gains tax liability that will crystallise on each property sale must be factored in when weighing up whether it is best for landlords to divest of their property portfolio.”
He went on to add that: “Any restructuring of a portfolio should factor in the overall tax implications and a comparison of the costs of alternative investments, for which legal advice should be taken. It is easy to overreact to the recent negative signals, but existing portfolios can continue to produce good income and capital growth, and in a low-interest environment with significant geo-political uncertainties, many of the attractions of bricks and mortar remain.”
The report comes following a survey last month from the Royal Institute of Chartered Surveyors (RICS) which suggests that, over the next few months, surveyors expect rental prices to increase while many landlords exit the market. Long term, 52% of surveyors expect there to be a reduction in the number of landlords, with only 17% predicting a rise.