A mass sell-off is currently underway in the landlord sector, and it only looks set to increase. EPC requirements, The Renters Rights Bill, mounting financial pressures, the list of reasons goes on.
No doubt you’ve seen the recent headlines, and if you’re a landlord yourself you’ll be forgiven for thinking that the worst is yet to come. In fact, the property market continues to deliver tough news for landlords, with recent proposals suggesting that evictions are just one of the issues that may become increasingly difficult.
Labour’s plans are ramping up, in what can only be described as the “final blow to landlords,” with measures that could prevent landlords from evicting tenants who fail to pay rent if doing so would leave them financially disadvantaged or homeless. While the full details are still being ironed out, many landlords are already feeling the pressure.
Labour risks pushing the current rental crisis beyond repair, a lender claims.
With Chancellor Rachel Reeves reportedly planning a capital gains tax raid on landlords in the October Budget, Octane Capital commissioned a survey of UK landlords to gauge current sentiment within the sector.
The survey found that 66% of landlords have already reduced the size of their investment portfolio in the past year, with reduced profitability due to previous legislative changes cited as the primary reason for these reductions.
The proposed rental market reform which includes the ban to Section 21 notices also placed highly along with the inevitable increase in age, as many approach retirement.
Half of those surveyed also stated that when it came to their investment into the rental market, they feel less confident under the new Labour government and as many as 75% said that they are concerned that the current Government may equalise capital gains tax in line with current income tax thresholds in the Budget.
If this change is implemented, 58% said that it would spur them to reduce the size of their buy-to-let portfolio as a direct result.
Additionally, 30% also stated that they plan to reduce their portfolio size anyway, with a reduction in profitability again cited as the driving factor behind this decision.
Jonathan Samuels, chief executive of Octane Capital, said “It seems that our new Labour government is picking up where its predecessors left off within the rental market landscape, driving legislative changes designed to deter landlords from the sector.
It’s quite worrying to see that such a large proportion have reduced their portfolio size over the last year, with more planning to do so should the proposed changes to capital gains tax come to fruition.
A tenant-first approach is all well and good but the key factor driving the current rental crisis is the lack of available stock and by further penalising landlords, Labour are set to push the current crisis to breaking point.
Raising rental market standards is an admirable endeavour, but without the homes themselves, rental prices will continue to spiral and it’s tenants that will pay the price, either financially or otherwise.”
Rents set to rise further as landlords scale back, RICS warns
Landlords are continuing to scale back their portfolios which could push rents higher in the coming months, the Royal Institution of Chartered Surveyors (RICS) warns.
The latest RICS Residential Market Survey shows new landlord instructions in August once again saw a negative trend, with the net balance slipping to -21% from -9% in July.
Anecdotally, agents said landlords were selling up due to first of tax changes and the end of Section 21 notices.
Meanwhile, tenant demand edged up slightly over the month, although the latest net balance of +11% is softer than the +26% recorded in July.
Near-term rental price expectations continue to point to a steady increase in the months ahead, returning a net balance of +39%.
Simon Rubinsohn, chief economist for RICS, said “affordability remains an issue in the sales market even with somewhat cheaper finance now available but the picture appears even more acute in the lettings market where the amount of rental stock continues to diminish. Contributors continue to point to landlords looking to scale back their portfolios which will inevitably increase the imbalance that already exists in the market.”