Over half of investors in the UK no longer view property as a good investment with changes in buy to let tax and costs affecting their views, new research has found.
New regulations by the Prudential Regulation Authority affecting portfolio landlords have also led to many investors re-evaluating the cost-effectiveness of property, according to the survey commissioned by Rathbone Investment Management.
The research also found that just under a third of investors say that property is one of their main investments while of the 25% who own buy to let properties just 7% plan to increase their business.
A breakdown of the results show that investors with over £100,000 of investible assets are slightly less bearish about property with 38% not viewing it as a good investment.
In April 2016, the government introduced a Stamp Duty surcharge of 3% on additional properties. In addition, the tax relief that buy to let landlords could claim on mortgage interest costs has started to be reduced since 2017, and will continue until April 2020 when landlords will no longer be able to claim.
Investing in property has been a popular investment option and 49% of Britons when surveyed by the ONS said that investing in property instead of a pension was the best way to save for retirement.
However, the research report points out that the popularity of property as an asset class has largely been due to the high returns that property can generate. In addition, less experienced investors will often choose property over investing in the stock market as they are more familiar with this asset class.
Some 25% of the investors surveyed had accumulated their wealth through property, whilst 17% currently had investments in private real estate, 8% in commercial real estate and 5% in land.
‘Recent changes to the tax and regulatory treatment of buy to let has caused investors to take a step back and assess the viability of these investments,’ said Robert Szechenyi, investment director at Rathbones.
‘Whilst it’s understandable that property, and in particular residential property, has been a popular investment in the past, it’s now making less and less sense. Not only are the returns now being impacted by an increased rate of tax, but they can also prove high risk investments due to a lack of diversification,’ he pointed out.
‘Property investments require a large amount of capital to be held in one single asset and landlords will often hold a number of properties within one region. Investors who are looking to invest in property, should make sure to assess their risk appetite, look at all alternative options and make sure this property is held within a well-diversified portfolio of investments,’ he added.
