It needs to be business as usual for UK landlords

It has not been a great week for headlines relating to landlords and the buy-to-let sector in the UK with the tax change, letting fees and a rogue crackdown, all featuring on Property Wire and other industry publications.

The first two have created a wide variety of emotions but I have to keep going back to the recent Property Wire roundtable debate when Tony Gimple of Tax for Landlords spelt it out, when he said that if you are a landlord you are running a business and if there is tax change then you just deal with it.

There has also been a lot of research into the potential implication of these changes for landlords and it does not paint a picture of landlords floundering around, wondering what to do and moaning about the impact on their potential yields.

Some of the most recent suggests that landlords have known about the change for some time and have been quietly getting on with preparing for it, dealing with it and incorporating it into their business plans going forward.

Indeed, there is an increased understanding of the implications of the changes to tax relief on finance costs amongst more experienced landlords, according to new research from Paragon Mortgages, suggesting that the more savvy landlords have a better grasp of it. However, managing director John Heron warned that the full impact won’t be felt until 2022 as the change is being phased in.

But there is a substantial group of landlords who probably do not fully understand the impact the changes could have. Research from AXA found that far more believe they will be affected than has been suggested by officials and almost half of landlords involved in the research plan to quit the rental market by 2020, fearing they are being unfairly targeted.

The research shows that more than 40% of landlords believe they will be worse off as a result of the changes. This is despite the UK government’s assurances that 82% will not have any additional tax to pay.

AXA found evidence that this change coming on top of a raft of legislation aimed at landlords in recent years, means that almost half of private landlords will withdraw from the market by 2020, with 21% saying they plan to sell all their rental properties, 10% to reduce their portfolio and 7% plan to switch to commercial property ownership, which is perceived as a safer option.

As one West Midlands landlord put it: “Landlords with mortgages on their buy-tolet properties are unlikely to make much profit with the new system coming in. People like me may just decide the new system isn’t worth the hassle and sell their properties, leaving less accommodation for people to rent.”

There will be an impact on the market, there is little doubt about it. Indeed, recent research from the Council of Mortgage Lenders, some of the most comprehensive to date, predicts that lending for buy-to-let house purchase reached a peak in 2015 and will decline over the next two years.

But it also found that around half of landlords had no mortgage debt at all, buyto-let landlords held larger and more valuable portfolios than other landlords, and accounted for almost half the properties in our survey, more than half of buy-to-let landlords had mortgage debt amounting to less than 60% of the value of their portfolios and more than 60% of all landlords – and around half of buy-to-let landlords – owned just one property for let.

Looking forward, the sector is vulnerable to change and the full impact could be several years away. The private rented sector is growing in the UK, but it is finely balanced and landlords need to be businesslike and remember they are in it to make money. But the outlook is not crystal clear and likely to remain murky for some time to come.