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Almost half of landlords to quit by 2020 says AXA

Monday 10 April 2017

Tax relief for landlords began to be phased out from 6 April 2017 under measures first announced in the 2015 Budget. AXA’s latest study of UK landlords reveals that far more believe they will be affected than Government estimates suggest, and almost half plan to quit the rental market by 2020, fearing they are being unfairly targeted.

AXA’s research shows that more than 40 per cent of landlords believe they will be worse off as a result of the changes. This is despite the UK Government’s assurances that 82 per cent will not have any additional tax to pay.

AXA found evidence that this change coming on top of a raft of legislation aimed at landlords in recent years means that almost half of private landlords will withdraw from the market by 2020.

Twenty one per cent said they plan to sell all their rental properties, ten per cent will reduce their portfolio, and seven per cent will switch to commercial property ownership, which is perceived as a safer option. A further eight per cent say they will transfer ownership of their rental property to their spouse or other family member who is in a lower tax bracket as a way of avoiding extra tax.

As one West Midlands landlord put it: “Landlords with mortgages on their buy-to-let properties are unlikely to make much profit with the new system coming in. People like me may just decide the new system isn’t worth the hassle and sell their properties leaving less accommodation for people to rent”.

Landlords feel scapegoated
Two thirds of landlords surveyed said they feel stigmatised for running a rental business: (“It’s a myth that we are rich. After mortgage, tax and repairs, I don’t make a profit on the two properties I own“, “People think landlords are fat cats who sit back and do nothing for their tenants”). Just over half directly quoted government policy as a source of this stigma: “We are being victimised by the Chancellor. Government finds landlords a convenient scapegoat and is shifting the blame for the housing crisis”.

The reality is that just four per cent of private landlords have a portfolio big enough to be able to give up work and live off the proceeds. The average UK landlord makes £343 rental profit each month (after expenses), and profit levels vary widely across the country, ranging from £297 in the West Midlands to £713 in London**.

“Landlords have been subject to one piece of new legislation after another in recent years, much of it very complex indeed”, says Gordon Rutherford, Head of Marketing, AXA Insurance. “We see a real confusion as to what the new tax changes will mean, with government and landlords giving very different estimates of the impact.”

“We need to remember that few landlords are professional property tycoons: two thirds in the UK are ‘accidental’ landlords. They tend to own just one rental property that they’ve inherited or are finding hard to sell, and they make a modest income once time and expenses are out. They do feel increasingly apprehensive, as we can see from the numbers thinking of withdrawing their properties from the rental market in the coming years.”

* Figures are from a study of 382 private residential landlords in the United Kingdom conducted by AXA and Taylor Main March 2017.
** Table showing average monthly profit made by private landlords from their rental property(ies) after mortgage and other expenses are taken out.

 

Region

 

Average monthly profit on rental income

Greater London

£713

South East

£552

South West

£524

North East

£500

East Midlands

£453

Yorkshire/Humber

£392

Scotland

£389

Wales

£381

North West

£306

West Midlands

£297