Tax change hits landlord confidence in UK as they put up rents to cope
Landlords’ confidence in the UK has fallen as they face the prospect of higher tax costs and weakening house prices, although rents are climbing, pushing up yields, the latest research shows.
Just 41% of landlords are confident about the prospects for their portfolios, following the recent taxation and regulatory changes, according to the sixth edition of Kent Reliance’s Buy to Let Britain survey report.
This represents a fall from 44% in the previous quarter, and compares to 67% seen three years ago. Political and economic uncertainty will only add to landlords’ concerns, the report points out.
Overall, the value of the sector has risen by £68 billion in the last year, climbing to a record of £1.3 trillion. However, this annual rate of increase of 5.5% is just half the level seen a year ago.
The report explains that lower confidence amongst landlords mirrors this slower growth in the value of the private rented sector and the slowdown in house price inflation has been a key driver, with the annual average increase slowing to 3.2% in the last year. Indeed, in the last two quarters, prices actually fell.
There are now 5.5 million households in the sector, but annual growth of 2.3% is now only a third of the level seen three years ago. Tenant demand is still growing, albeit more slowly. 27% of landlords saw tenant demand increase in the last quarter, more than saw it decrease, but this was down from 39% a year ago, as first time buyer numbers continue to recover.
On the supply side, there is a noticeable change too. In the first three months of 2017, the number of landlords expanding portfolios only slightly outnumbered those reducing them. 19% of landlords now expect to reduce their portfolios, compared to 13% increasing, as amateur landlords leave the market in response to the new tax rules affecting higher rate taxpayers.
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