Due to a wide range of measures including increased regulation, hikes in stamp duty and higher taxes, the UK has been placed among some of the worst countries within Europe for buy-to-let investors. New research released by the Daily Telegraph has shown that in the course of the past year, the UK has fallen ten places, from 15th to 25th, in a league table ranking EU countries by their convenience for landlords to operate their businesses. The adjustment comes after a wave of changes which have been imposed on Britain’s landlords. These include stamp duty surcharges and tax revisions to section 24, which have affected landlords’ capacity to reclaim interest on mortgages. These developments have create significantly higher costs for landlords, which reduces their potential profits.
As a consequence of these measures, average yields for landlords in the UK have dropped during the past 12 months, from almost 5 per cent to 4 per cent. This is a drop of almost 20 per cent. The shifting landscape for landlords, due to the government’s changes in policy, has culminated in a stagnant rental market in the UK, with landlords failing to invest, which has caused a growing shortage of rental properties and raising rents. The tightening regulations which now govern lending for portfolio landlords, in addition to the next stage in restrictions on mortgage interest relief, will only aggravate the situation come April 2019.
The Daily Telegraph has consequently started a campaign to persuade the government to lower the cost of stamp duty which is payable on property purchases. Earlier this year, Jacob Rees-Mogg, Conservative MP, stated that stamp duty must be cut urgently. According to the research, Britain now sits behind Italy, Greece and Finland in the rankings, becoming one of the worst countries in the EU in which to invest in rental property. Ireland was placed at the top of the rankings, where the country brings an average yield of over 7 per cent in rent, with the Netherlands, Portugal and Malta also scoring high.
The UK was placed within the worst five countries in the EU for landlords, with only Sweden, Croatia, France and Austria performing worse. As landlords are now powerless to reclaim any relief from mortgage interest after 2020, industry experts have warned that profitability will likely be severely impacted, with rents likely to rise and more landlords also exiting the private rented sector. However, with the average savings account paying under 1 per cent, an average yield of 4 per cent on investment properties still makes a wise investment.
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