Buy to let landlords face increasing challenges

Buy to let landlords face increasing challenges, terraced houses in sunshine

Research shows fall in investment

Recent changes have had a major impact on the buy-to-let (BTL) property market. Many landlords are now planning to exit the market.

A survey of their members by the National Landlords Association found that 19% were planning to offload property. And research by the Intermediary Mortgage Lenders Association (IMLA) showed that net investment in buy-to-let property has fallen. The study shows a drop of 80%, from £25 billion in 2015 to just £5 billion in 2017.

One of the biggest issues for landlords is the 2016 changes to the SDLT regime. The 3% surcharge on additional properties has made BTL significantly less profitable for many considering entering the market. For example, a landlord buying a property for £200,000.00 will pay £7,500 in SDLT, compared to £1,500 under the old regime.

Investors in new build property also face more restrictive regulations. In December 2017 the Government announced plans to ban new build leasehold houses and make it easier for current leaseholders to buy their freeholds. Some of the larger housebuilders are in the process of renegotiating punitive leases, for example, those where rents double in each decade of the lease term. This will make new build property considerably less attractive to BTL investors in future.

A number of other factors are also dampening BTL investment:

In November 2017 the Government introduced a draft bill to ban letting agents from charging fees in England. This draft bill proposed banning letting agents from charging tenants a fee, capping holding deposits at no more than one weeks rent and capping security deposits at six weeks rent.

It is presently up to Local Authorities to decide whether landlords are obliged to sign up to a Code of Practice. These schemes vary from council to council. In January, the Government put forward proposals to inspect rental properties every three years and to introduce accreditation and refresher courses for landlords.

Tougher lending restrictions for portfolio landlords came into force at the end of September 2017. Landlords with four or more properties now need to show full financial information for each property when applying for new finance.

Landlords were previously able to offset 75% of their mortgage interest. This dropped to 50% in April 2018 and will continue to reduce to nil in 2020. At this point it will be replaced by a tax credit worth 20% of mortgage interest.

From April this year, local councils have had access to a new database of rogue landlords and letting agents. The database names and shames landlords who have been banned from letting properties.

Along with increasing interest rates, falling yields and a more stringent regulatory framework the impact of these factors on the BTL market is significant.

Video: Portfolio landlords – how recent changes affect your investment

If you have any questions relating to BTL property please give us a call on 0114 249 6926 or email

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