It’s always good to gauge what other landlords in the private rented sector are thinking, particularly at times of uncertainty and upheaval – which the Brexit vote, whatever the long-term picture, has undoubtedly caused.
Property consultancy Allsop’s latest Rent Check helps to give us more of a flavour of landlord feeling, on matters ranging from tenant demand to government intervention in the sector.
The government has in recent times faced heavy criticism from landlords operating in the PRS due to a number of legislative and tax changes.
Some 59% of landlords surveyed by Allsop said they believe that recent government changes to PRS policy – in particular regarding tax – will have a negative effect on their profitability.
New mortgage legislation, which will reduce the amount of mortgage relief that landlords and investors can claim, is also set to be introduced in 2017, in what many see as another pointed attack on private landlords.
As things stand, landlords in the highest tax bracket can claim tax relief on their buy-to-let mortgage at that rate (40%). However, the new rules – phased in from 2017 and fully introduced by April 2020 – mean that landlords will be unable to deduct mortgage interest costs from their taxable profits.
The mortgage tax relief will instead be only at the basic rate of income tax (20%), something that could have a detrimental effect on the net income of many landlords.
With the Rent Check survey revealing that 45% of landlords are higher rate income tax payers, a substantial number are likely to be affected by the mortgage tax relief changes.
To cover themselves, 41% of landlords are now considering changing their business to a limited company, while 5% of landlords have already restructured in this way.
Despite the concerns and negativity surrounding the government’s tax changes and interventions in the PRS, landlord sentiment is still very positive.
In all, 71% of landlords still rank property investment above any other forms of investment. What’s more, 40% of landlords predict rental growth over the next six months (up 14% year-on-year).
It seems tenant demand also remains resilient, with 37% of landlords seeing tenant demand rise during the last six months. In addition, just 3% of landlords have had to lower rents across their portfolio in the last 12 months.
On the other hand, only 18% of landlords plan to buy at least one property in the next year (down 11% since last spring).
As the above suggests, landlord sentiment is still good, despite the challenges being put in the way of landlords and investors.
Expect that to remain the case, even with the fresh challenges that are likely to come about with the UK’s exit from the EU.
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