Phil Spencer Why it is not time to sell

The war on landlords has gone too far – but I am not giving up

Landlords have not had an easy time of it lately. As a landlord myself for more than 20 years, it feels as though we are being squeezed on all sides.

Mortgage rates have risen astronomically over the past five years. The average five-year fixed buy-to-let mortgage rate was 3.4pc on Oct 1 2018, at the start of this month it was 6.32pc.

Compounding this are legislative changes from the Government that have made it even harder for landlords to make money from their investments. All the while, the media portrays us as the bogeyman of the housing market.

So I want to make the case for being a landlord to you and sticking with it even though it feels the tide is against us.

There are two types of payoffs with rental property; the income you get from rent and then the sale of the house or flat when you decide it’s time to exit.

Regarding your rental income, while mortgage rates are eating into what you take home, helped by the Government’s decision to remove tax relief on the loans, there is increased demand in the market. Estate agent Hamptons has projected that rents will rise by around 25pc over the next four years, in part owing to housing supply issues.

And in terms of house prices, I think it is always important to remember that they don’t matter until they do. You don’t need to know the value of your home unless you want to sell. At which point you get the gearing benefit that you have put down a 10pc or 20pc deposit, but you receive the gain or loss on 100pc of the value. You don’t get that with shares. There is a dip at the moment and it is easy to panic. However, if you can, I think it’s best to hold firm and remember the reason you invested in the first place.

Currently I am making no money on a couple of flats I own and rent close to Victoria in central London. A combination of increased service charges and mortgage rates mean I am only just breaking even, despite putting up rents. So why aren’t I selling up (current housing market aside)? Because the reasons I bought in the area still hold true.

Yes, it is going to take longer for the area to reach the potential I think it has, but it will get there and when it does, then I will make a decision about selling.

Many landlords are setting themselves up as a limited company to reduce the tax burden. The number of buy-tolet companies that have been set up doubled from 2016 to last year, according to Hamptons. Now almost three quarters of

new buy-to-let purchases are put into limited companies rather than individual holdings. It is easy to see why. The structure offers full tax relief on mortgage interest and arrangement fees, and for some access to lower tax rates.

However, for the vast majority of us who are already invested, the financial burden of having to pay stamp duty in order to effect a transfer of ownership into a company makes it hard to justify.

In my mind the current regulatory set up is too heavy handed for the task. It leaves the majority of landlords, who are decent and want the best for their tenants, with onerous requirements and very little sweetener.

But, and here comes the optimism, I think it will swing back the other way. Hopefully there is a dawning realisation that landlords leaving the sector doesn’t help the country’s rental crisis.

Despite being a popular punching bag for its ills, the housing market needs landlords. That is another of my reasons to stay in the market, you play a vital role in society. The final reason to stay invested is the question of what you are going to do with the money from any sale. I understand if you are now in your 60s and looking to access your pension. Or maybe you are younger and want to put the money into pension savings. It is not my place to offer financial advice, but make sure you have a plan for the money.

Don’t leave it languishing in a basic account while you decide what to do when it could be earning for you. All that said, if I am wholly honest, would I join the market right now if I was starting out? No, I can’t say I would. However, once you’re in, you’re in. I am sure investing in rental properties is not a decision you took lightly, and exiting shouldn’t be one either.

Phil Spencer says times may be hard but property is a long-term investment