Landlords remain committed to buy-to-let but taxation is preventing many from investing further in the private rented sector, according to research from Benham and Reeves.
The survey of landlords in England finds 50.6% still regard residential property as a good long-term investment despite increased regulation, while 62.7% intend to maintain their existing portfolio over the next year.
However, just 3.9% plan to expand, compared with 13% intending to reduce their holdings and 14.2% planning to leave the rental market altogether.
Confidence in future profitability is also subdued. Some 38.9% expect their buy-to-let portfolio to become less profitable over the next 12 months, compared with just 7.6% anticipating an improvement.
TAXATION TOPS CONCERNS
Almost four in five landlords (78.5%) believe buy-to-let is less attractive than it was five years ago, including 51.9% who consider it “much less attractive”.
Taxation is identified as the biggest obstacle to further investment by 28.3% of respondents, ahead of the Renters’ Rights Act and wider regulation at 15.1% and property prices at 12.6%.
Mortgage rates and finance costs are cited by 6.2%.
More favourable landlord taxation is also the measure most likely to encourage additional investment, selected by 36.9%, followed by lower Stamp Duty at 13.7% and a faster or easier possession process at 12%.
Among landlords considering further investment, traditional single-let residential property remains the clear favourite, selected by 48.2%, followed by refurbishment opportunities at 18.3% and holiday or short-term lets at 11%.
‘APPETITE HASN’T DISAPPEARED’
Marc von Grundherr, Director of Benham and Reeves, says: “Despite years of headlines predicting the demise of the private landlord, the reality is that buy-to-let remains an incredibly strong long-term investment and, importantly, half of landlords themselves still believe this to be the case.
“The issue isn’t that landlords have lost faith in property. Almost two-thirds intend to maintain their existing portfolios and, amongst those looking to expand, long-term investment planning is by far the most common motivation.
“The problem is that the environment in which landlords are being asked to operate has become substantially less attractive. Almost eight in 10 believe being a landlord is less attractive than it was five years ago and, as a result, very few are currently prepared to increase their exposure.
“It’s particularly telling that taxation ranks well ahead of the Renters’ Rights Act when it comes to the biggest barrier preventing further investment. Regulation has understandably dominated the conversation recently, but landlords have also faced a sustained increase in the financial burden placed upon them and our survey suggests this is having the greatest impact on investment appetite.”
“The appetite for buy-to-let hasn’t disappeared.”
And he adds: “The government should pay particular attention to the fact that more favourable taxation is also, by some distance, the most common change landlords say would encourage them to invest again.
“Rental demand remains extremely strong and the traditional residential rental property remains the preferred choice for those looking to expand.
“The appetite for buy-to-let hasn’t disappeared, but we need an environment that encourages landlords to put additional capital into the sector.
“Without this investment, rental supply will remain constrained and, ultimately, it will be tenants who suffer through greater competition and continued upward pressure on rents.”
