Brokers and leading experts discuss the state of the BTL space
Landlords are making their lowest profits for 16 years as interest rates rise, resulting in some choosing to exit the sector altogether, according to estate agency Savills.
Like much of the housing sector at present, the buy-to-let market is currently enduring a particularly difficult patch as economic conditions across the UK worsen.
Mortgage Introducer has spoken with brokers operating in the space to gain an insight into market conditions for landlords and what support they need, if any.
Scrapping Section 24
Michelle Lawson (pictured), director at Lawson Financial, said the government should really be looking at reversing Section 24.
“Letting property is a business and the costs of running this should be able to be deducted like in any other business,” Lawson added. She said this has been an unintended consequence of why rents are also rising – it is having an impact alongside additional regulation, increased mortgage rates, and impending legislative changes removing Section 21.
Local councils have sold off a significant amount of stock under Right to Buy, so Lawson said they now heavily rely on the private rented sector.
“However, at the same time, local councils do not support landlords accordingly, as they bite the hand that feeds them when it comes to landlords wanting to evict a tenant,” Lawson said.
The housing ministerial role, Lawson said, is another issue – she described it as a junior position that is not taken seriously enough; until this is made a senior department like education and defence, she believes the BTL crisis will deepen further.
Meanwhile, Craig Fish, director at Lodestone Mortgages & Protection, said landlords must feel like there is currently an all-out attack on them.
“Like the rest of us, landlords have a mortgage to pay, as well as other costs, and for many this is their business and livelihood, so it is not nice to see them packing up shop and exiting the sector,” Fish said.
Landlords exiting is also bad news for tenants - with a lack of supply, Fish said fewer properties available will lead to an even more dysfunctional rental market.
“The greed of the government to tax to the hilt and restrict landlord choice, although Section 24 is aimed at helping landlords and tenants, has had dire consequences on the sector,” Fish added. In his opinion, Section 24 needs scrapping and Fish said the government must tackle the age old problem of housing supply too.
“I am afraid the mortgage time bomb is about to have disastrous consequences on the housing market as a whole; I just hope the government is ready for the fallout,” he said.
Rhys Schofield, director at Peak Mortgages and Protection, said, unsurprisingly, if a landlord’s mortgage payment has just shot up, it is going to make a huge difference to their profit margins. All of a sudden, Schofield said those low-yielding properties may actually cost money each month, leaving little option but to sell.
“Exiting landlords does no-one any favours when tenant demand is skyrocketing, as it will do nothing but drive up prices further and make it even harder for people to save a deposit and get on to the property ladder,” he said.
No support necessary
Luke Thompson, director at PAB Wealth Management, however, believes there should not be any direct support for buy-to-let landlords.
“At the end of the day, they are running a business and, as such, it is not up to anyone else to provide them with support,” Thompson said.
Landlords who are considering exiting the sector, Thompson said, need to be aware of potential taxes that are payable and also need to remember that capital appreciation is something they must factor into their profit and loss figures.
“Landlords exiting the sector en masse has the potential to reduce house prices if the market becomes flooded, while at the same time increasing the costs for those who need to rent as there will not be as many properties available,” he concluded.
How have you seen landlords impacted by market conditions? Let us know in the comment section below.
