industry news
Buy to let landlords are increasing rents to offset cost hikes from regulations and tax changes, report says
Tenants will be feeling the brunt of regulatory and tax changes imposed on buy to let landlords as property investors look to recoup additional costs from stamp duty increases and tax relief cuts, according to a new report. The report, from lender Kent Reliance, found
that at least four in 10 landlords in Britain planned to raise rents in the next half year. The firm’s research found that about a third of
buy to let landlords intended to pass on increased costs to their tenants following the surcharge on stamp duty for second property owners and the cap on tax relief for buy to let mortgages. Four in 10 of the landlords expected to
increase rents in the next six months, with three- quarters saying they would do so to offset the reduction in tax relief on mortgage interest. The average rent rise buy to let investors anticipated making was 5.6%, or £49 a month. The then Chancellor, George Osborne, had
surprised investors by cutting the rate at which higher rate taxpayers could claim relief on their mortgage interest payments in last year’s Budget. The change, which will be phased in from next April, means that by 2021 only relief of 20% will be available.
Switching
The research, carried out for Kent Reliance’s latest Buy to Let Britain report, also found a large number of landlords are changing the way they manage their properties, with many switching to running their portfolio through incorporated
“The research carried out for Kent Reliance’s latest Buy to Let Britain report, also found that a large number of landlords are changing the way they manage their properties, with many switching to running their portfolio through incorporated companies”
THE SPECIFIER’S
companies, as these are exempt from the changes. The number of mortgage applications
through limited companies increased by more than 80% in 2015 to 54,750 a month, making up more than a fifth of the market. So far in 2016, 40% of buy to let loan applications had been from companies, the report said. As well as the planned changes to tax relief, a
new rate of stamp duty for second-home owners was brought in during April 2016.
Threats
Three-quarters of the landlords surveyed said that Government action was the biggest threat to investment. However, the report found that
those who owned property were still getting strong returns. Tenants were paying on average 3.5% more
than in the previous year. The average monthly rent was £872, while the average total annual return, including capital growth, stood at £28,617. A spokesman for Kent Reliance, said the buy
to let market was now “firmly in the crosshairs of both politicians and regulators”, and that landlords were reacting. “But it is tenants who are feeling the real brunt,” he said. “Rents are rising and landlords will increase them further as they pass on the increased cost of running their businesses. Far from supporting tenants, recent intervention will see tenants bear a heavier financial burden.”
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14 | HMM July 2016 |
www.housingmmonline.co.uk
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