Taxation named biggest barrier to landlord investment, survey finds
More than half of landlords (50.6%) still regard residential property as a sound long-term investment despite mounting regulatory pressure, though new research from London lettings and estate agent Benham and Reeves suggests appetite for growth has largely stalled.
The survey of landlords in England found that 62.7% plan to maintain their current portfolio size over the next 12 months.
By contrast, 27.2% intend either to reduce their holdings or leave the sector entirely — seven times the 3.9% planning to expand.
Confidence subdued
While belief in property as a long-term asset remains, wider confidence in the private rental market is more cautious. Some 39.1% of respondents said they were either somewhat or very unconfident about the sector's long-term future, compared with 33.9% who remained confident.
Profitability expectations have also weakened. Nearly four in 10 landlords (38.9%) anticipate their buy-to-let returns will decline over the coming year — more than five times the 7.6% who expect an improvement. A further 45.8% expect profitability to hold steady.
The broader appeal of buy-to-let has diminished markedly. Some 78.5% of landlords said the investment proposition is less attractive today than it was five years ago, with 51.9% describing it as much less attractive. Only 2.7% said it had become more appealing over the same period.
Tax burden leads concerns
When asked what prevents them from investing further in rental property, landlord taxation was the most commonly cited barrier at 28.3%. This placed tax ahead of the Renters' Rights Act and wider regulation (15.1%), property prices (12.6%), economic uncertainty (9.8%), concerns around problem tenants or rent arrears (8.6%), Stamp Duty (6.8%), and mortgage rates and finance costs (6.2%).
The same theme emerged when landlords were asked what would most encourage additional purchases. More favourable taxation was cited by 36.9% — the most common response by a considerable margin — followed by lower Stamp Duty (13.7%), a faster or easier possession process (12%), greater economic confidence (11.6%), and lower property prices (9%).
Traditional lets retain appeal
Among landlords considering expansion, long-term retirement and investment planning was the primary motivation (43.7%), followed by strong tenant demand (17.2%), belief that property represents good value (16.1%), and expectations of house price growth (11.5%).
The traditional single-let residential property remains the preferred vehicle for those looking to invest, favoured by 48.2%. Properties requiring refurbishment ranked second at 18.3%, followed by holiday or short-term lets (11%), HMOs (5.5%), student accommodation (4.3%), corporate lets (3.7%), and new-build properties (3.7%).
"Despite years of headlines predicting the demise of the private landlord, the reality is that buy-to-let remains an incredibly strong long-term investment and, importantly, half of landlords themselves still believe this to be the case," said Marc von Grundherr (pictured right), director at Benham and Reeves.
He added that the issue was not a loss of faith in property, noting that almost two-thirds of landlords intend to maintain their existing portfolios and that long-term investment planning is the primary motivation among those looking to expand.
Von Grundherr said the operating environment for landlords had become substantially less attractive, with almost eight in 10 believing the proposition is worse than it was five years ago, leaving very few willing to increase their exposure.
"It's particularly telling that taxation ranks well ahead of the Renters' Rights Act when it comes to the biggest barrier preventing further investment," he said. "Regulation has understandably dominated the conversation recently, but landlords have also faced a sustained increase in the financial burden placed upon them and our survey suggests this is having the greatest impact on investment appetite."
Von Grundherr called on the government to take note that more favourable taxation is also the change landlords most commonly say would encourage them to invest again.
"The appetite for buy-to-let hasn't disappeared, but we need an environment that encourages landlords to put additional capital into the sector," he said. "Without this investment, rental supply will remain constrained and, ultimately, it will be tenants who suffer through greater competition and continued upward pressure on rents."
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