Buy-to-let Landlords - time to consider a sale?

Some figures released this week give the first definite indications that landlords in England and Wales are re-evaluating their portfolios and properties, and beginning to sell properties.  Richard Carter, the Managing Partner of Martin Tolhurst and Residential Property Partner, has been considering the data released by UK Finance in early November 2017.

He commented,

“For the first time in ten years, there was a significant difference between the number of new buy-to-let mortgages granted in June 2017 (78,000) but the number of mortgage rental properties only grew by 28,000, which is a net difference of 50,000 properties.  The figures exclude remortgages but are a clear acceleration of a trend that began in late 2016.  The evidence now strongly suggests that mortgages are being redeemed as buy-to-let investors sell some rental properties.”

“It is not an exodus or mass offloading of properties by landlords but the additional tax increases that landlords have had to bear, combined with increased regulatory requirements, and high property prices means that some landlords have decided to vote with their feet and sell properties at a greater rate than are being purchased for buy-to-let.

Buy-to-let landlords have been hit by two significant tax changes in the last two years.  In March 2016, the rate of Stamp Duty Land Tax that was payable on the purchase of any buy-to-let property increased by 3%.  In April 2017 the phased withdrawal of higher rate tax relief on mortgage interest on buy-to-let properties began and by 2020, the relief will be withdrawn entirely.”

Mr Carter also argued that it was not only the tax changes that have made difference.  He continued,

“Residential property prices, in the Southeast in particular, have continued to increase year on year for the last 4–5 years.  Some landlords see that as an opportunity to realise some capital value particularly as Capital Gains Tax rates are relatively low.  In addition, landlords have been finding that owning a buy-to-let property is not without its challenges – annual gas safety checks, insurances, and tenants struggling to meet increased or rising rents have added to the burden.

Is it a good time for buy-to-let landlords therefore to consider selling their properties?

Mr Carter commented,

“Investors should always be looking to evaluate their investments from time to time.  For someone with multiple residential properties that they let out it may be prudent to consider sale of one or more of those properties, particularly with a view to paying down mortgage debt or diversifying your investments.  The likelihood of further rental increases is limited because rents in the southeast are already quite high.  Mortgage rates have increased recently and may do so again.  Recent surveys have shown that the highest yielding post codes for rental properties are outside of London and the southeast.  It may be a good time to consider your portfolio and whether you wish to make any changes.”

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