The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Landlords of The Future

Richard Blanco, portfolio landlord and London regional representative for the National Landlords Association (NLA), comments

What could renting look like in a decade’s time? Shifts in attitude from government and the Bank of England have jolted landlords and investors into taking a step back and looking long into the future. I speak regularly at events across London and in 2016 and 2017 I witnessed a fog of depression descend on many of my colleagues. This was also reflected in the National Landlords Association (NLA) index of landlord optimism in their lettings business plummeting to an all-time low. Worryingly still, according to the research, only 49% of landlords fully understand the implications of those Section 24 tax changes that were sprung upon us by Osborne in 2015. But for those of us who have taken the pragmatism pills - and maybe after a bit of peer group counselling - we are taking stock and looking forward.

How much evidence is there that Section 24 tax changes and Prudential Regulation Authority (PRA) changes to buy to let mortgage lending are changing behaviour? Some 19% of landlords plan to reduce the number of properties they own in the next 12 months. Of course selling off the portfolio can be a slow process with a need to spread capital gains liability over a number of tax years. The restriction of tax relief on finance charges to the basic rate of 20% is also being phased in over four years and 40% of landlords still only partly understand the implications. So we are going to see behaviour continue to evolve over the next few years. If you are waiting for the government to do a U- turn, then I am sorry, forget it. In my view, these tax changes are here for a generation – probably until there is a welcome and complete overhaul of how property businesses are taxed. Removing Section 24 would be headlined in the media as ‘restoring tax perks for landlords’ and that would go down with voters like a political lead balloon.

And yet 15% of landlords are intending to increase their portfolio, while 38% of them are buying new properties through a limited company. The evidence suggests that it is larger landlords that are seeing opportunities in the current market and want to continue expanding. One landlord in the NLA survey said optimistically that: “Rental income is better than income from safe investment elsewhere, and capital growth whilst slow at the moment will increase in time.”

Low interest rates continue to make letting property profitable as long as you run it like a business and make sound, well thought through decisions and stay compliant. However 60% of landlords say that they are finding it harder to get mortgage finance. This is a challenge that is spurring a growing cohort of specialist lenders into action, a trend which will undoubtedly continue.

The size of the private rented sector (PRS) in the UK is at an all-time high of 20%. I don’t think we’re going to see any shrinkage in the next 10 years, I think we are likely to see this figure nudge up slightly. What we won’t see is 100,000 new landlords coming into the business every year as we have regularly seen in this decade. We will see landlords with larger portfolios adjusting and expanding but I think many new entrants will be deterred and only those with their eyes wide open will take the plunge.

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