Tax hikes and changes in stamp duty, as well as increased rules and regulations, have meant that landlords, particularly those on tight profit margins, are seeking alternative investments. While some are selling up, others are taking a more long-term view of the situation.
Many landlords are not unduly affected by many of the tax changes because, on the whole, it affects those paying higher rates of tax and those who have a mortgage. The mortgage interest relief reduction is being phased in, so it does not come as a major blow instantly. That said, interest rates are still low, which makes borrowing more attractive. It also means savings are earning so little interest that they are not seen as a good investment. For this reason, many landlords are continuing to put their faith in bricks and mortar, as property prices in many areas are increasing at a far healthier rate than investors could get from a bank account. Stocks and shares are volatile too, given the political and economic situation in the UK and the wider world. This makes the buy-to-let market a more solid investment than trading on the stock market or using savings accounts.
As well as the income from rent, property prices continue to rise, which makes buy-to-let a solid investment. Landlords who do sell up are making a decent profit, with buy-to-let investors getting £86,651 more, on average, for the property than they paid for it, according to countrywide figures. They owned the property for an average of 8.7 years to achieve this growth. Not surprisingly, landlords with London properties made the greatest profit – an average of £253,981. In the top 10 places where landlords made the greatest gains, eight are in London. Maldon, Essex, at 118% and Pendle, Lancashire, (109%) were the two exceptions. The smallest gains were in the North East, with an average of £23,874.
Also, as well as the professional landlords, there are a good many ‘accidental’ landlords in the UK. These are people who have a property which they do not want to sell immediately and are renting it to earn an income. It could be that they have inherited a property or moved away because of work, but do not wish to sell up.
Even if buy-to-lets are not as profitable as they were, they are still a better source of income and long-term investment than many alternatives. It also has to be borne in mind that more people are looking for decent rental accommodation because they cannot afford to buy or even save for a deposit.
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