There are new warnings, including from Savills, that the buy-to-let market is looking increasingly bleak with landlords deterred from entering the sector or considering quitting it altogether.
According to one study, as many as three-quarters of landlords could quit, including 10% who say they are definitely selling up, while four in ten say they will be forced to put up rents.
The majority of landlords thinking of getting out of the sector have just one property and say they will sell if they are making a loss, breaking even, or even just not making enough profit to make it worthwhile.
They blame continued financial pressure and costs created by a steady drip of new legislation, specifically citing the impending tenant fees ban, and the loss of tax relief on mortgage costs which is currently being phased in.
The new survey of 1,000 landlords has indicated that 41% will be forced to increase rents – but has also revealed that a majority will not hike rents because they believe tenants are already at the edge of affordability.
The survey was conducted by 3Gem for online letting agent MakeUrMove.
Managing director Alexandra Morris said: “The result of the rising costs associated with the changing legislative and regulatory environment will either be increased rents or landlords having to sell their properties.
“The worst-case scenario will be a housing market crash if landlords default on their mortgage payments or decide to cut their losses. The Government is currently sleep-walking into this crisis. The alarm bells should be ringing. The Government needs to act now to ensure it remains financially viable for landlords to meet their financial obligations.
“While we wholly believe the industry needs to be regulated, the taxation changes could have a huge impact on smaller landlords.
“They might struggle in the new environment, having potentially devastating effects on the housing market. This is particularly concerning when private landlords provide a vital role as the backbone of the UK housing market.
“The Government is supposedly bringing in this legislation to protect tenants, but the unintended consequence will likely be landlords having to increase rents, especially if they are forced into debt on their rental property. And this is the best-case scenario. In reality it could be much worse.”
Savills has also expressed concern, saying that the combination of prospective interest rate rises and the reducing ability to offset mortgage interest costs against tax is proving a double whammy for landlords.
Lucian Cook of Savills said: “It’s why we’re beginning to see signs of some people exiting the sector or reducing their porfolios.”
Landlord associations have repeatedly warned of a likely exodus of small private landlords, principally because of the loss of ability to offset mortgage interest costs against tax. Anecdotally, agents have reported in EYE posts being instructed to sell properties rather than re-market them to let.
From next month, landlords will be able to offset only 50% of their mortgage interest costs against tax, rather than the 75% they are currently able to offset. This figure will continue to drop until 2020 when the ability to claim any tax relief will be scrapped and replaced by a tax credit worth 20% of mortgage interest.
* The Residential Landlords Association has today rebranded to add the tagline “The home for landlords”. It follows the rebranding last month of the National Landlords Association which added the tagline “The Knowledge Network”.