Is the buy-to-let sector doomed?

Writing in the Negotiator magazine, Adam Walker says, contrary to current headlines, the expected exodus of landlords may not necessarily be the outcome of the economic and regulatory strictures.

The article can be seen here, stating ‘Our government seems to be intent on destroying the buy-to-let sector. Changes to taxation have made it far more difficult for landlords with mortgages to make a satisfactory return on their investment. Frequent changes to legislation have imposed huge extra costs on landlords and have left them in fear of being hit with savage fines for minor breaches of the ever more complex rules.’

He goes to state that the ‘cost of complying with the new Minimum Energy Efficiency Standards (MEES) will be enormous and it may be impossible to make some properties compliant‘ but fails to say that this is made worse by the Government failing to tell landlords what they have to do, and when.

Walker goes ‘The constant threat of rent controls has frightened many landlords. The list of anti-landlord measures goes on and on, but the recently-announced plans to end Section 21 evictions is, for many landlords, the final straw. If the Government was trying to destroy the buy-to-let sector on purpose, they could not be doing a better job and hundreds of thousands of landlords are now saying that they will be selling off their properties.

But he doubts that many landlords will actually sell mainly because of Capital Gains Tax, stating ‘ if they sell their properties, they will pay Capital Gains Tax on the increase in value probably at 28%. Assuming a 4% net yield, this will wipe out every penny of rent that they have received from their property for many years. Most landlords are simply not prepared to pay this amount of tax.’.  Going on ‘What else could they do with their money which gives this rate of return for so little risk? The banks are still only paying savers 2 or 3% interest and they will probably reduce from this level quite soon. The stock market has been very volatile recently and many financial commentators think it is due for another crash so it’s not easy to see where investors could go for a better return with the same level of risk.’

He ends ‘Taking everything into account, I think that well-run letting agents will easily survive the latest threats to their existence. Whilst some landlords will sell, the increased rents on the properties that remain will mean that most agents will be able to maintain their fee income despite managing fewer properties. For this reason, we are still achieving record prices for letting agencies and there are plenty of buyers who still want to enter or increase their presence in the sector. It would seem therefore, pretty certain that the buy-to-let market will continue for a long time yet.’




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