Buy-to-let could be unprofitable by 2020

Buy-to-let could be unprofitable by 2020

Buy-to-let could become unprofitable in seven out of 10 towns by 2020 when mortgage tax relief changes take effect, research from property crowdfunding platform Property Partner predicts.

From 2017 to 2020 the amount of mortgage tax relief landlords can claim back will be cut from 40% to 20%.

By the end of the decade if interest rates have risen by 2.5% Property Partner estimates typical buy-to-let properties will make just £2,555 annually, down from £3,419 today. Landlords in the South West will suffer the most, making a loss of £2,984 per year.

Dan Gandesha, chief executive of Property Partner, said: "The phased withdrawal of mortgage interest tax relief will be felt across the country, but add in a modest interest rate rise, and many investors will see their rental profits completely wiped out.

“When you factor in April’s stamp duty hike on new property purchases, it’s clear that direct investment in buy-to-let no longer adds up. Traditional landlords from Land’s End to John O’Groats need to face up to the stark reality. In a few years, the whole structure of the UK housing market will have changed.

“We’re seeing traditional landlords abandoning direct property investment and coming to us instead.

“It’s a tipping point. Landlords will lose out but millions more will be better off, with more affordable homes for first-time buyers, more high-quality accommodation for tenants, and an asset class made available for everyone to invest in.”

One of the cities that will suffer the most isSalisbury which will see returns drop froma£2,200 today to a loss of £2,984 by 2020.

In Cambridge and Winchester meanwhile today’s profit of £4,257 will becomea £2,418 loss by the end of the decade.