Tax changes and increasing regulation mean a fifth of landlords are considering reselling

Posted on

Property is often seen as a way to generate a passive income or to fund retirement. Yet a survey has found that an increasing number of landlords are considering selling at least a portion of their property portfolio due to tax and regulation changes.

Property can be a useful asset to invest in. However, if you’re thinking about purchasing a buy-to-let property, it’s important you fully understand the responsibilities and potential financial returns. If you already have buy-to-let properties, it’s just as important that you keep on top of changes and understand whether it’s still the right decision for you.

According to a Nottingham Building Society survey published in FT Adviser, 20% of landlords are considering selling all or part of their portfolio. The number of landlords planning to sell outweighs those planning to buy more properties.

There are many reasons why a landlord may be ready to sell, but factors outside of their control are having a big impact.

2 reasons landlords are selling

1. End of tax relief

The number one reason people purchase buy-to-let properties is for income generation. This is one of the reasons 83% of potential buyers gave in the survey. So, if rental yields fall it’s no surprise that more landlords would sell.

Tax relief on buy-to-let mortgages began phasing out in 2017. Landlords are now taxed on their total income, including rental yields, and the relief provided is less generous than it used to be. This has meant many have seen profits fall in the last four years. Some 24% of landlords thinking of selling cited the end of tax relief as a reason.

The pandemic has also exacerbated the issue. As demand fell, average rental prices also fell. While the easing of restrictions has led to a recovery, rent in some areas is still lower than they were at the start of 2020. According to Zoopla, in May 2021 the average rent in Westminster was £2,259 a month, down from the pre-pandemic figure of £2,617 a month in February 2020.

In contrast, house prices have reached a record high, making it an attractive time to sell property.

2. Increased regulation

More than half of landlords wanting to sell cite increased regulation as the reason why. The responsibilities and commitments of landlords have also gradually increased in recent years.

For some, this will have affected profitability. For others who wanted a hands-off approach, it may mean that investing in buy-to-let properties no longer suits their needs. Legal obligations for landlords range from ensuring a property is fit for purpose to having a professional carry out regular gas inspections. You must ensure you meet all obligations as you could risk fines and legal action if you do not.

Once again, the pandemic is likely to have made this issue worse. Emergency measures were brought in to ban evictions to protect tenants who were struggling due to being unable to work, but this also placed further pressure on landlords and potentially affected income.

Is buy-to-let property right for you?

Despite the challenges some landlords are facing, many still see property as a way to build wealth. Low interest rates when saving money have led to 61% of people thinking about becoming a landlord, while 57% also said they believe property prices will continue to rise.

So, is purchasing a buy-to-let property right for you? There’s no one-size-fits-all solution and you need to weigh up the pros and cons with your circumstances and goals in mind. What is important is that you give as much consideration to the drawbacks as the potential benefits.

With landlords facing more pressure, if you do decide to purchase a buy-to-let property, it’s important to find the right mortgage deal for you. You’ll typically need a larger deposit (20%–40%) than if you were buying a home to live in and buy-to-let mortgages will usually be interest-only. This means your repayments will be lower, but you’ll still owe the full amount borrowed when the term ends, so you’ll either need to sell the property, save to pay off the debt, or find another mortgage deal.

With landlords facing increased downward pressure on rental yield, the interest rate on your mortgage becomes even more important. A lower interest rate can have a significant impact on your repayments. Finding a lower rate can help you create a financial buffer if needed and get the most out of your asset.

If you need help finding the right buy-to-let mortgage for you, please contact us. Whether this will be your first property investment or you’re expanding your portfolio, we can help you.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

 

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.





    Subscribe to our newsletter