The Evolving Landlord

There’s no doubt that due to the governments enthusiasm to tax and regulate the Private Rental sector, Landlords are having a tough time of it. However, many are adapting to take advantage of the potential that still exists.

Due to the issues faced, it’s probably no surprise that some landlords have sold up or have reduced their holding, and others are deterred from entering this sector.

In October 2018, RightMove reflected this by stating that there were 8.7% fewer properties available to rent in Q3 2018, compared to the same period a year earlier. A possible impact of this decreasing supply is that the average rents outside London have now hit more than £800 per month for the first time.

Rent increases might be sustainable in some areas, as the demand may be there when you consider that the cheapest local homes are out of reach for at least 40% of 25-34 year olds, even if they’ve saved a 10% deposit. Yet back in 1996, over 90% of the same age group could have purchased a home. For many, renting is the only way forward at this stage.

And plenty are renting. One-fifth of all households are now in the private rented sector, of which almost 40% include at least one child. Which means the days of the rental market being largely one for young, single people with few commitments are over.

Issues for Landlords

  • Stamp Duty surcharge of 3% on the properties of second homes.
  • Stepped reduction in mortgage interest tax relief.
  • Stricter regulatory rules requiring lenders to stress-test likely future interest rates over a five-year period (unless the loan rate is fixed or capped for five years or more).
  • Special underwriting rules for ‘portfolio’ landlords that have four, or more, mortgaged properties.
  • New rules for HMO (House in multiple occupation) landlords.
  • Negative developments in the budget regarding both Private Residence relief, and Lettings relief.

Limited Company Status

Placing properties within a limited company means that they shouldn’t be affected by the tax relief changes, and lenders may apply a less stringent rental calculation as a result.

This is a route several landlords have opted for, but it won’t be right for everyone, particularly those with just one or two properties. Also, interest rates may be higher, and there might be implications for both capital gains tax and stamp duty. Therefore it’s vital that you obtain tax advice from your accountant.

The Mortgage Deals on Offer

Lenders still want to lend to this market and would be affected by any lower take-up from landlords. As a result, the subsequent fight for market share has delivered some decent rates in this sector.

It would make sense to have a chat with if you’d like to discuss the current deals or seek advice on a way forward through the plethora of red tape that now exists.


Article Courtesy of our partner, the Finance Advice Centre. Taken from the Spring 2019 issue of Mortgage & Protection. 

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