Here’s why our landlord clients are among the UK’s most positive
The nice people at Direct Line for Business have recently surveyed landlords of UK property to discover their biggest concerns and most positive expectations. You can forget what the mainstream press is saying. Landlords don’t consider Brexit as the big threat to their property investment profits. And they’re not worried about house prices falling.
In this article, I look at the results of the Direct Line survey. Do you share the same concerns as some landlords? Or are you optimistic about the future of UK property investment? Here, you’ll discover how to negate the negatives and prosper from the positives.
What makes landlords nervous today?
· Taxation
The most vexing concern among landlords is taxation on UK property investment. I don’t find this surprising. Nobody likes paying tax, and it seems the government has used landlords and the private rented sector as a political ball to gain precious votes. Stamp duty has been raised, and the maintenance allowance on buy-to-let properties has been slashed.
The major concern, though, is how mortgage tax relief benefits are being phased down to the basic rate. If you’re a higher rate taxpayer, by 2020 your tax liability on rental income could have increased because of this. If you’re worried about this, there are strategies you can put in place today to mitigate your tax liability. For example, you could transfer all or part of your property portfolio to a spouse who pays tax at a lower rate, or you could invest via a limited company structure.
· Inflation
Inflation is rising, though the Bank of England think it will ease back over the next 12 months. For now, though, landlord’s costs are increasing. But guess what? Your tenants know that inflation is going up. They see the effects in their weekly shopping trolley and utility bills. It is an ideal time to raise your rents and maximise your rental income. Your tenants will be expecting you to do so. Take the opportunity to negotiate a rental increase and eliminate the effects of inflation on your profits.
· Regulation
Increased regulation is a concern for around four in ten landlords. They are worried about the greater risk of being prosecuted and higher penalties for landlord misdemeanours. We don’t find this to be a big concern among our landlord tenants. But then, we keep on top of changing rules and regulations. We know our landlords and their properties. When regulation changes, we let all our affected landlords know, and tell them what action is needed to keep on the right side of landlord law.
· Competition bringing prices down
More than a third of landlords have expressed fear that competition from other property investors will bring prices down in the private rented sector. We think these fears are overdone. For a start, the private rented sector is expected to grow very rapidly over the next ten years, rising from around 5.4 million households to 7.2 million.
But what if you are still concerned about competition in the buy-to-let sector? How do you negate this negative? For a start, buy in the best places to invest in property UK. It should guarantee that demand for the rental property should remain high, and oversupply shouldn’t be an issue. Also, be a great landlord – read our top tips for landlords to keep tenants for longer. It’s our experience that tenants with great landlords are more willing to pay higher rents. The tenants with bad landlords are more willing to move on.
What holds the greatest promise for landlords?
· House prices
All this nonsense about falling house prices after the Brexit vote. Landlords don’t feel this way, and with good reason, too. House prices in the UK are rising faster than inflation. In fact, according to the Land Registry (the only measure of all sold house prices in the UK), the average house price in the UK increased by 5.6% in the 12 months between April 2016 and April 2017. With demand for homes so much higher than supply, we don’t expect any real short-term house price shock.
· Interest rates
Okay, so tax relief on mortgage interest is being eroded. On a brighter note, interest rates are low and look set to remain low. Despite tougher lending regulations, there is a lot of competition for property investors’ mortgage business. If interest rates remain low and you push your rents higher, you could increase your profit margin.
· Demand for rental properties
As I’ve highlighted earlier, demand for rental properties in the UK is exploding. This is being fuelled by two major factors: affordability issues and lifestyle living. As house prices continue to rise, people are less able to afford to buy. People are increasingly choosing to rent, to be close to work, shops and leisure, as well as retaining the flexibility to move more easily for work and lifestyle changes.
In addition to these massive plus points, landlords are increasingly positive about the outcome of Brexit negotiations now they are underway.
What are your concerns about the UK property market? Contact one of the Ezytrac team today on +44 01522 503 717, and discover how our investment property managers work with our landlord clients to help them maximise rental income profits. We’ll help you negate those negatives and prosper from the positives.
Yours in effortless property management,
Brett Alegre-Wood