Landlords have undoubtedly been the target for the government in recent years in terms of new legislation, regulation and tax changes, in an attempt to make buy-to-let less profitable and attractive.
This has included measures such as the 3% additional stamp duty surcharge, the phasing out of mortgage interest tax relief, the banning of tenant fees and increased obligations regarding energy efficiency, HMOs and licensing.
Despite all this, being a landlord remains a profitable and attractive investment opportunity when done right – with bricks and mortar currently the most reliable and lucrative asset class when compared to traditional asset classes such as stocks, shares and pensions.
And the rental market has stood up well in the face of Brexit, Covid and other challenges, which means it remains a good and safe place for landlords to put their money and build up their pension pots.
This might help to explain why recent research, carried out by BVA BDRC on behalf of lender Paragon Bank, found that the proportion of landlords currently feeling optimistic about different parts of the letting process is at its highest level for five years.
Landlords were asked, as part of the survey, to rate their expectations for rental yields, their own lettings business, capital gains, the private rented sector in general, and the UK financial market.
The number believing the outlook for these measures to be ‘good’ or ‘very good’ surpassed the levels seen in the third quarter of 2016 – the survey conducted just prior to the EU referendum. What’s more, investor optimism has been steadily increasing since the record low levels witnessed in the first quarter of 2020, when coronavirus first hit Britain.
The research, which spoke to more than 600 landlords, also found a link between optimism and portfolio size. Landlords managing bigger portfolios tend to be more upbeat about the prospects for their own lettings business, with 56% of landlords with eleven or more properties feeling ‘good’ or ‘very good’ about the future. This dropped to 46% amongst those with between one and 10 properties.
There was also, according to the survey, a direct link between confidence and property purchase behaviour, with a positive outlook recorded amongst nearly two-thirds of those who have recently purchased a property, falling to just under half amongst all respondents.
Furthermore, it revealed that more than three-quarters of landlords who aim to grow their lettings business in the next year are optimistic. Amongst those looking to divest, though, confidence was seen in a much lower proportion, standing at just 26%.
“Understandably, landlord confidence fell sharply in the first quarter of 2020, as the extent of the pandemic became clear,” said Richard Rowntree, Paragon’s managing director for mortgages.
He added: “It is fantastic to see optimism bounce back and rise in the time since; it is an indication of the strength of the sector. Landlords see the sector’s issues and opportunities on a daily basis so measuring their outlook can provide useful insight for the industry and, as we see here, investor confidence can have a real impact on behaviour.”
Why else is it a good time to be a landlord?
At the recent Budget, despite speculation that changes and major reform to property taxes would be introduced, the private rented sector was almost entirely left alone by the Chancellor. The only tax change that was mentioned should actually be a positive one for most landlords with regards to Capital Gains Tax – with the time they have to file a claim increasing from 30 days to 60 days, effective from midnight on October 27 (the day of the Budget).
Other than that, the PRS didn’t get a mention, which will come as a relief to many after years of major announcements for landlords – most of them not particularly welcome – at recent Budgets and fiscal events. Others, though, may be disappointed that the promised reform to property taxation, to make it a more simplified system, has still been left on ice.
A little while after the Budget the government also revealed that its White Paper on rental reform will be delayed until 2022 to give it more time to consult with the industry and other stakeholders and get the proposals right. This means that the threat of an abolition of Section 21 notices is no longer an imminent one.
While some will again be left frustrated by the lack of clarity this delay brings, others will be breathing a sigh of relief that widespread rental reform isn’t yet being introduced and isn’t being rushed through.
There are positive aspects to rental reform, but it needs to be done right and to the benefit of landlords, agents and tenants alike.
For now, too, the market remains strong, with demand continuing to outstrip supply across most of the country, and yields holding up well.
According to Seven Capital, the East Midlands remains a great place for buy-to-let landlords, with above average yields and more affordable buy-in prices. Meanwhile, research carried out by Select Property had Birmingham in fourth place in its list of the top 10 investment property hotspots.
Here at Howland Jones, we will do all we can to help you get the most from your rental properties. Our offices are based in the village of Measham in the East Midlands, and we operate within a 20-mile radius of our base, giving us extensive knowledge of the local area. Measham sits on the border of four counties and we are almost equidistant from Derby, Leicester, Nottingham and Birmingham.
To find out more about what we can do for you, please get in contact with us today.