A recent report by the National Landlords Association’s (NLA) shows that around 20% of its members plan to reduce their portfolio over the next 12 months.
The main reason given is due to the new government pressures on the private sector, notably the 3% charge on buying additional properties and the withdrawal of mortgage interest relief for higher rate tax payers.
The NLA have produced four new videos highlighting the issues, which can be found on their official Facebook page here. The videos look at the following scenarios:-
- How the new policies will affect the overall sector
- That some landlords and tenants will now be paying above their fair share of tax
- The way landlords could respond to the changes, and
- How tenants will be faced with higher rents and fewer properties to choose from
The CEO of the National Landlords Association, Richard Lambert, has noted:
“The videos were created to explain simply some quite complex policies, for both landlords and their tenants. They, along with our own research, show that the Government needs to look at the impact these policies will have on the PRS.
“More people are relying on this sector for a home, so it is vital that landlords not only provide a high standard of accommodation but are also incentivised by the prospects of a reasonable return on investment.
“It is our view that these policies are undermining the viability of many landlords’ businesses and removing the incentives to invest in residential property for business purposes.”
Although the reaction from the NLA is understandable, many commentators believe the buy-to-let market is still a viable route for investors. In fact, a study by Private Finance has shown that rental income is still increasing in various hotspots across the UK.
This is especially the case in northern regions where yields consistently hit around 7%. In comparison, you will struggle to find a ROI above 2% in London due to the inflated market.
A common tactic used by experienced investors is to target university areas with the intention of capitalising on strong demand. Student numbers in the UK are holding up despite increased tuition fees, proving that youngsters will always be drawn into higher education.
With 5 main universities in the North-East (Durham, Newcastle, Northumbria, Teesside and Sunderland) along with a whole host of colleges, a fresh intake of potential tenants is guaranteed every year. In relation to this, landlords must recognise the growing influence of purpose-built student accommodation (PBSA) in particular.
Students now tend to prefer modern en-suite flats as opposed to HMO’s (houses with multiple occupants). This is especially the case with wealthy international students who contribute a sizeable £25.8bn of gross output every year. At the present time, there’s a notable undersupply of PBSA available, meaning flats will be quickly snapped up. See what student lets we offer here.
Student property is expected to stand up well against the new government measures, proving its status as a robust asset class. This means it can shrug off external factors without being affected too much; a welcome relief for landlords concerned about the recent pressures.
Invest in Buy-to-Let
So, despite the NLA warnings, as demand for rented accommodation continues to rise, it appears that high occupancy rates will underpin rents and maintain buy-to-let profits for the foreseeable future.
If you’re looking for a low-entry route onto the market or wish to bolster your existing portfolio, feel free to view our investment opportunities or get in touch via our contact page.