19^th Jan 2018

Landlords looking to property as a financial asset have been warned of a ‘perfect storm’ ahead.

The CEO and founder of property investment platform Simon Heawood, agrees with the results of the latest survey held by an industry body that claims 20% of private rental landlords are seriously considering selling up or reducing their portfolios, which will reduce numbers of private rental properties.

Heawood believes that the future of the buy-to-let market will be controlled by landlords with large portfolios that have been consolidated. These landlords will be able to take advantage of tax efficiencies, will have better business acumen for investment and will improve tenants' provision.

Heawood said: “A perfect storm is brewing for landlords looking to property simply as a financial asset.

“Policy makers across the political spectrum are acknowledging that home ownership is valuable because it affords permanence and security, and not just for the financial returns which placated constituents of yesteryear.”

Charles McDowell, Commercial Director of mortgages for a retail bank, believes that many tenants could be in for a tough time if the survey proves to be correct.

He said: “Many commentators predicted that the buy to let mortgage market would contract by 20% – to see this number of landlords intending to sell is in line with expectations.

“From our perspective however, the most worrying comment in the report is that most landlords will increase rents before they sell, to cover the increase in costs, due to these changes.

“This would be a disaster for tenants, especially those who are renting and have aspirations to buy their own home, as ultimately it will affect their ability to save a deposit and get on the ladder.

“Our latest First Time Buyer Index found that raising an adequate deposit continues to be the biggest concern for first time buyers across the UK and that one in three (35%) believe buying their first home will be an extremely difficult process."

He added: “We have always believed that first time buyers are the lifeblood of the housing market, but to have a healthy first time buyer market, we need a healthy private rental market, not one that adds further obstacles to a house buying journey, which is already difficult for tenants and prospective first time buyers.”

The introduction of the stamp duty increase, wear and tear allowances and mortgage interest tax relief being reduced, and in the case of the latter being finally phased out, are the reasons why 20% of landlords may be selling up over the next year.

If this is the case then it could be highest the level of property sales in the last decade.

The industry body that held the survey is applying pressure on the government to examine the major effects that the changes will have on the private rented sector.

The spokesperson said: “More and more people are relying on this sector for a home, so it is vital that landlords not only provide a high standard of accommodation, but are incentivised to do so by the prospects of a reasonable return on investment.

“It is our view that these policies are undermining the viability of many landlords’ businesses and removing the incentives to invest in residential property for business purposes.”

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