Buy to let landlords in the UK are divided over the future of the sector in light of tax and market changes and whether to stick it out or sell up,
Some 56% want to keep or buy more rental properties, but 44% are looking to sell, according to new research from Octopus Choice.
The report says, however, that while the majority of landlords still view it as a money making asset class, they also think that it will be on the decline in the future.
Among those looking to exit the market, some 24% blame falling yields while 23% say it is due to tax changes and 19% are put off by cooling house prices. Some 60% say that property management had become a burden and 61% had undervalued the costs involved.
‘The hassle and cost of buy to let is a source of growing frustration, and some landlords may find that their once reliable day to day income is becoming harder and harder to come by,’ said Sam Handfield-Jones, head of Octopus Choice.
But this isn’t the case across all parts of the market, with money still to be made from the right property in the right location, he pointed out, adding that London landlords faces the toughest choice, with falling yields and slowing house price growth set to reduce profits.
An analysis by the firm shows that typical buy to let properties in London cost landlords over £1,250 per annum for the first five years and an average London house worth £475,000 would have to be sold for £590,000 eight years later, just to break even, even taking into account the income over that eight year period.
While London hotspots can still be found, such as Tower Hamlets, Barnet and Hackney, three quarters of landlords in the capital think investing in buy to let will be less worthwhile in five years’ time, more than any other area.
In Scotland and the East Midlands, it’s a different story with Scottish landlords already enjoying average annual returns of 8.8% on their investment over an eight year period, while those in the East Midlands return 8.2%.
Millennial landlords are more inclined to sell than stay 65% planning to sell one or more of their properties. This compares to 29% of those aged 55 and over. Younger landlords are also more likely to admit that managing a buy to let has become a hassle with 81% doing so compared to 39% for investors over 55.
The biggest annoyance cited by millennials is dealing with onerous tax returns, while older generations blame high one off costs. Some 87% if millennials admitted that they underestimated the costs involved, including repairs and upkeep, insurance and initial legal and conveyancing fees, compared to just a third for those over 55.
