Landlords optimistic about future of buy to let in the UK
Buy to let is still regarded as an attractive long term investment in the UK with new research showing that landlords are more optimistic about the outlook for the private rented sector than a year ago.
Some 37% of landlords anticipate growing rents over the next six months, a year in year increase of 36%, and 44% of landlords had good or very good expectations for their own letting portfolio over the next three months.
However, the research from independent property consultancy Allsop also shows that the percentage of landlords intending to purchase one or more property in the next 12 months fell to 16%, the lowest level in just over four years.
And the Rent Check Rent report on the rental market in England and Wales published with BDRC Continental, reveals that the majority, some 83% of landlords, reported that obtaining buy to let finance had become more difficult in the last six months.
The report calculates the estimated annual return for three, five and 10 year periods after tax for basic rate 20% tax payers and 40% tax payers, and analyses rental yields, house price growth and running, finance and legal costs.
Using Office for Budget Responsibility national forecasts for wage growth and house prices, the top performing regions for indicative returns are the East Midlands and Yorkshire, with returns of 11.25% per annum over a five year period for a 20% tax payer, and 9% per annum for a 40% tax payer.
Using the same national analysis, London was the worst performing region at a still respectable 5.75% per annum for 20% tax payer and 4.75% per annum for a 40% tax payer over the same period. Of the landlords polled, 45% were higher rate income tax payers.
‘For those with equity to invest, buy TO let returns still have the potential to outstrip savings accounts over the long term. Whilst tax changes and toughening lending criteria is challenging landlords, most are in it for the long term and we still only expect a small minority to exit as the tax changes feed through,’ said Paul Winstanley, partner at Allsop.
‘With no quick solutions to the housing crisis, long term private landlords providing decent accommodation will continue to play an important role in housing our population. As long as there are no new tax rises targeting landlords, buy to let will remain a stable and attractive sector for the long term,’ he added.