A new report by the Centre for Economics and Business Research (CEBR) focuses on the state of the buy-to-let and private rented sector both now and into the future.
The report, cited in an October 2017 MortgageFinanceGazette.com article, says that the present situation for landlords is complex because of changing regulations that have increased stamp duty, decreased tax relief on commercial mortgage interest payments, and changed the rules about how much landlords can claim for wear and tear in their business accounts. New underwriting rules have made it more difficult for portfolio landlords to apply for new commercial mortgages.
These changes have added to landlords’ costs and caused them to reevaluate their business strategies. Many landlords in London are investing in areas outside of the capital where property prices are cheaper. Others are looking at diversifying into student accommodation and commercial property. Some landlords are even forming limited companies to reduce the amount of tax they pay, or are looking at going mortgage free by using cash to purchase cheap properties and refurbishing them for rental use.
The report concludes that, despite challenges, the buy-to-let market remains an appealing type of investment. It notes that some landlords may exit the sector, but those that remain should be profitable, and that the future of buy-to-let could favour the professional landlord who owns several properties rather than small landlords with one or two properties.
Since the buy-to-let market has become more complicated, landlords should seek professional advice when considering changes to their business plans.