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The number of UK landlords reducing their portfolios, or even selling off their investments entirely, has increased significantly, according to law firm Irwin Mitchell.
The law firm has blamed the government for the surge in landlords exiting the sector after it introduced a series of reforms which have made buy to let investments less profitable.
Recent changes to the sector have included the introduction of Section 24, which has begun phasing out mortgage interest tax relief for landlords, the 3% hike in Stamp Duty on the purchase of second homes, the cap on tenants’ deposits and the ban on letting agents’ fees, which has seen these costs passed onto landlords.
Some buy to let investors have also expressed concerns about the future of the market, in light of falling house prices in parts of the country and the possible introduction of rent controls, which was proposed by the Labour Party at its recent annual conference.
Jeremy Raj, partner at Irwin Mitchell, said that it was ‘understandable’ that landlords would withdraw from the private rented sector under the circumstances.
Exiting the sector may not be as straightforward as some landlords expect, however, especially if they have several properties.
Mr Raj warned; “The capital gains tax liability that will crystallise on each property sale must be factored in when weighing up whether it is best for landlords to divest of their property portfolio.
“Any restructuring of a portfolio should factor in the overall tax implications and a comparison of the costs of alternative investments, for which legal advice should be taken.”
The situation will be even more difficult for landlords who are still paying off the mortgage on one or more rental properties, especially if the properties have fallen into negative equity, as they will still have to cover their outstanding mortgage costs.
At Landlord Debt Advisory, we offer bespoke debt solutions for landlords.
If you’re a landlord struggling with debt problems or the impact of recent reforms to the private rented sector, contact us on 0161 222 4311 or go to our website for an initial free, no obligation consultation.
Just wait 3 years and see the outfall with this
a lot of Landlords are still in the dark with the changes
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
What about LL like me who know all about what is going on but can't do anything about it!?
Increasing rents is my only option as I don't wish to be homeless just yet as I certainly can't afford market rents!
S24 is going to cause much upset to those who know what it will do and to those that currently don't.
I cannot think of a single other tax measure which has the capacity to devastate the lives of tenants
UC is just the tip of the iceberg.
If LL are selling up due this minor short term problem with the consequent devastating effects on tenants and LL alike then God help them all when S24 really kicks in.
It seems like the LL rats are taking their profits and leaving the sinking PRS ship.
I wish I could do the same! !!
We talk often about the north v south divide
There will also emerge a FTB v non FTB divide
Those LL`s who invested in high yielding low market areas will suffer disproportionally more
FTB`ers wont touch them and the reducing pool of investors means those prices will be hit hard
So the rise of the cash rich pure yield junkie LL will emerge
Units bought for 25K 20 years ago are now maybe 100K .
The Sec 24 hit LL`s will take a 40% hit just to get rid
They still make 35K so not so good but not too bad as they lick their wounds
15% yields will return and a new type of LL will emerge
Old school - who hibernated for a while to avoid the S24 noise and now awake refreshed
New school - who see yield for yields sake and understand 15% beats the banks 1%
Jonathan Clarke. http://www.buytoletmk.com
Cash is king as ever!
Trouble is there is simply insufficient cash rich LL to replace all the S24 LL bailing.
So there will still be many homeless tenants.
But certainly those cash rich LL sharks are circling
Who can blame them!?
No LL has the divine right to remain viable if relying on borrowed monies.
Trouble is a return to a PRS sustained by cash is simply not viable.
It needs to remain the same size or even larger to meet demand.
The last time cash was king was before BTL mortgages and after the HA AST changes.
Back then there were sufficient council houses and the PRS was much smaller.
But since then we have suffered from mass uncontrolled immigration and RTB and very few social houses being built
RTB has stripped the social sector of 2 million council houses.
This simply is unsustainable.
There is going to be a tsunami of homeless tenants as a result of Govt policies
Cash rich LL can only take up some of the slack left by exiting S24 and other LL.
There is simply not enough spare cash to replace all these mortgaged LL leaving the sector.
Agreed - the sums will not add up and more and more homeless will live on the streets
They got rid of the Calais Jungle but I see 1000 have now returned less than 12 months after it closed
They are still wanting to get to the UK
The people in charge in France cannot deal effectively with just one town
Imagine UC being rolled out across the whole of the country in its current state ...
Our own sec 24 homeless will soon match those French figures
We will soon have our own London Jungle equivalent
Yep totally agree with you.
But guess who will get the blame for all the homeless tenants! !!??.............yep you've got it; all those nasty mortgaged sole trader LL evicting tenants and selling up
Anyone would think that LL should have the right to decide what to do with their own private assets!!......the mere thought!!!??
give it time JC high yields will return
Prices will go on the slide and there will be bargains
If interest rate rises are higher enough Home owners will sell too
its a pack of cards just waiting for collapse
Its on the cards so they say and if you play your cards right you could take home a large prize
15% yields on single let properties wow and what will the mortgage market look like JC?
are you predicting this for the north only? I can't see that in the south? And if that happens it won't be for long as the southern money goes north ?
more thoughts JC and DL I trying to work out my next move
I think in selected areas in the SE 10% yields but more 15% yes in the north
With PRA and interest rate rises it will be 75% LTV tops with 60% becoming more the norm
I dont think this April will see this great exodus of LL `s as this is just the first s 24 phase
Many will hang on shrug it off ignore it and still carry on in denial
April 2019 will see many start to really waver so October 2019 the battered old ex LA property will be sold off as being seen more trouble than they are worth
People who have had a good run will forego equity and take a hit just to get out
The housing squeeze will continue as they will never build enough so families will stick together longer or go back together when their sisters / brothers / fathers / mums get evicted
Big ex LA units will do well . Families will look for these big properties in rough areas and all muck in to keep a roof over heir heads
So a large 4 bed will have maybe 5 family workers contributing 400 each for a 2000 rent on a 150K house = 16% yield
So HMO returns but classed as a single let as its all family
They are all stuck because no one has the income to break out on their own
I had one guy living in the conservatory of his ex with their son while she lived in the house with her new bloke and his kids .
Highly unsatisfactory but suited them both financially to keep a roof over their respective heads
I also think small pokey studios will do well . When the choice is the street or a studio a studio is luxury
And i think we will go smaller still and there will be a healthy market in Japanese pod style accommodation
Just a bed for the night - Out wandering the shopping mall during the day or at work
The Pursuit of Happyness film shows what can be done if push came to shove
I could split my studios in two if required and they still get a 10 x 7 exclusive living / bed space
500 a piece would mean a 13% yield
If the choice was a mates sofa or the street then a 10 x 7 exclusive space to rest your head is luring
I can't see 15% yields on single lets ever returning to the SE. When were they last in abundance? Pre-2000?