Buy to let investors are facing a double whammy as stagnating rents and reduced tax relief are hitting profitability.
A study from Apropos by DJ Alexander, a property management firm, says that over the last five years the average private rental increase in England has fallen from 1.7 per cent in January 2014 to 1.1 per cent in December 2018.
Over the same period average private rental increases have fallen in Scotland from 1.7 per cent to 0.6 per cent whereas in Wales the numbers have risen from 0.5 per cent to 0.8 per cent.
In England the market peaked over the five-year period between May 2015 and December 2016 when the average rental price increase was between 2.4 and 2.8 per cent.
Scotland peaked between April 2013 and July 2015 with average rental price increases of between 1.7 and 2.1 per cent while Wales had its peak between July 2017 and September 2018 when figures ranged from 1.0 to 1.7 per cent.
“The tightening of rent price increases could not have come at a worse time for many landlords who have just had the third phase of George Osbornes’ policy of decreasing tax relief coming into force on April 6. For many landlords they will find that their net income may have halved over the last two years with lower returns to come over the next two years” explains David Alexander, Apropos joint managing director.
“Many landlords may be considering selling up, but they need to think carefully as the rules are changing and if they sell after April 2020 there could be more bad news from a further loss of tax relief. From next year the availability of capital gains tax lettings relief has all but been removed and will now only to apply where owners share occupancy with the tenants” he adds.
Alexander says this is the time for all landlords to review their circumstances, look at ways to reduce their costs and increase their income, and to look more closely at their property investments.
“I think we may see these rental price increases remain flat for some time to come so it is essential for landlords to look at all aspects of their business and work out the best strategy to not just survive but to thrive in the coming years. There is no doubt that London will recover over the next few years and once again be an excellent place to invest as will many other parts of the country.”