Expert singles out taxation and regulation changes in exodus from landlords
Close to half a million landlords are expected to exit the buy-to-let sector over the next five years, according to data from Hamptons.
The research also revealed that 140,000 landlords left the market last year; with an expectation for a mass exodus, one expert believes the reasoning behind this stems from a variety of challenges facing buy-to-let landlords, principally the changes in taxation and regulation.
Why are landlords choosing to exit the market?
Since 2015, Hiten Ganatra (pictured), managing director at Visionary Finance, said there have been several key changes to taxation and regulation that have combined to make it less attractive for landlords to remain in the buy-to-let sector.
“These include ending the mortgage tax relief, higher stamp duty for additional property purchase, removal of the wear and tear allowance, depreciation, and the reduction of CGT allowance,” he said.
Ganatra said landlords are also having to battle with local authorities who are charging them for multi-occupancy homes in which they are having to pay a fee for each room they rent.
This is decimating the sharer and student model for landlords, which Ganatra said is essentially creating another tax hike.
“The process of evicting tenants for breaches and non-rent payment is also, in recent times, becoming costly and time-consuming leaving landlords with the financial stress of having to meet their mortgage and upkeep costs,” Ganatra said.
Finally, he said mortgage interest hiking as it has done in the last six months has meant highly-geared landlords are finding that their rents no longer cover mortgage payments.
Overcoming the impact of a mass exodus
Ganatra said the figures showing the number of landlords leaving the sector are staggering, and he believes will only heap further pressure on tenants who will ultimately pay the price through higher rents and reduced stock in the rental market.
The argument that if landlords are forced to sell, more stock will become available in the housing market which will help to bring down house prices, Ganatra said, is futile because homebuyer affordability is being squeezed due to the increase in interest rates.
“The fact is, all these pressures will curtail any new investment or rental stock coming to the market, and result in increased competition among renters, which will drive up rents even further,” Ganatra said.
He added there is also a very real possibility of a rental and homelessness crisis, as more people struggle to secure or afford rental accommodation, which will only serve to harm the most vulnerable in society.
Encouraging landlords to remain
One possible solution, Ganatra said, would be to give landlords some level of temporary respite on the interest rate relief as that could help reduce the need for rising costs to be passed onto tenants who already spend a large part of their disposable income on rent.
Ganatra said it would also help safeguard the spiraling rental sector and protect the interests of both tenants and landlords alike, by encouraging landlords to remain in the market as well as keep rents affordable.
“As things currently stand, by doing nothing and leaving things how they are, we are at risk of seeing more buy-to-let landlords sell up and move on, prompting a contraction in the market which will result in a smaller and much more expensive private rental sector,” he said.
Have you seen buy-to-let landlords exiting the market? Let us know in the comment section below.