Landlords face grim returns as stamp duty rise starts to bite

BRITAIN is among the worst countries in Europe for buy-to-let investments, thanks to hikes in stamp duty.

Over the past year the UK has plunged down the league table of the best EU countries in which to be a landlord, falling 10 places to 25th.

Average yields for landlords fell from nearly 5pc to 4pc over 12 months. The slump comes a year after stamp duty changes were imposed on UK landlords, significantly increasing the cost of property investment and reducing investors’ potential for profit.

On top of regular stamp duty, landlords and second-home owners must

‘The Treasury has raked in twice as much money from the stamp duty changes as it initially anticipated’

pay an extra 3pc “landlord tax”, which must be settled in advance.

The Daily Telegraph is heading a campaign to persuade the Government to reduce the duty.

Last month, Jacob Rees-mogg, the Tory MP for North East Somerset and a himself a fund manager, said cuts were needed “as a matter of urgency” amid reports the duty was stifling the economy.

British landlords have been targeted in a series of Government reforms which have combined to cause stagnation in the UK’S rental market. Tighter regulations over lending to portfolio landlords coming into force at the end of the month will worsen matters.

The league table was produced by Worldfirst, international payments experts, and was based on a mix of Government statistics and surveys.

It showed that the UK ranks behind Finland, Greece and Italy. Ireland is the most landlord-friendly, with an average rental yield of 7pc, while Malta, Portugal and the Netherlands also score highly.

Only Austria, France, Croatia and Sweden perform worse than Britain.

However, UK landlord rental yields at 4pc is still 10 times higher than the interest on average savings accounts that pay just 0.4 per cent.

Under further tax changes, landlords will be unable to offset mortgage interest from their taxable profits from 2020. Experts warn this, combined with other changes in the industry, will hit landlord profits to such a degree that rent rises are inevitable.

The Treasury has raked in twice as much money from the stamp duty changes as it initially anticipated.

Analysis last month by the accounting firm Blick Rothenberg estimated that HMRC has so far taken around £2billion as a result of the three per cent additional tax. Originally, officials had estimated it would make half as much from the policy in the four years between 2016 and 2020.

The UK sits at the bottom of the table of poor landlord buy-to-let investments along with Austria, France, Croatia, and Sweden who also have high property prices and a stagnant rental market. All the bottom five show returns of less than four per cent. Sweden has been in last position for three years because of its tightly controlled rental market.

In contrast, in Ireland the average rent for a one-bedroom flat has risen to £12,000 a year, making it the second most expensive country to rent below Luxembourg, where a flat can set a renter back £14,000 annually.

However, in Ireland freehold property prices are lower, with the average one-bed property in an Irish city costing around £168,000.