The Intermediary – March 2025 - Flipbook - Page 59
BUY-TO-LET
Opinion
Buy-to-let
investment:
Stick or twist?
T
hings haven’t exactly
been looking up for
landlords. Unlike
other small businesses
which claim tax
relief on all running
costs, landlords can no longer
deduct mortgage interest from their
income before tax. Then, the ra of
regulations governing evictions and
health and safety expected to come
in with the Renters’ Rights Bill are
likely to further increase the pressure,
while they may also have to invest
significant sums in upgrading their
properties’ energy efficiency.
With interest rates back to more
typical levels and house prices
remaining high, meeting affordability
requirements remains challenging.
Landlords could be forgiven for
throwing in the towel, and indeed
some have, though the general view is
that the much-mooted exodus has not
yet materialised.
We’re seeing positive signs that
those who remain are finding new
ways to make property investment
work, and we believe landlords
deserve a helping hand. In our
Home Improvements policy paper,
launched at a Parliamentary event last
October, we called for industry and
Government action to create a more
level playing field for landlords.
Recognising the vital role landlords
play in providing much-needed
private rented accommodation, we
want the new tax rules reviewed to
bring them back in line with other
small businesses. We also called for
greater clarity over energy efficiency
requirements. However, since then
the only change has been negative
– with the Budget increasing the 3%
additional Stamp Duty rate to 5%.
Landlords are a hardy bunch.
Zoopla’s ‘Rental Market Report’
for December 2024 concludes that
“the peak of the landlord sell-off
is now behind us,” suggesting that
landlords are likely waiting for when
“conditions look right” – lower base
rates and higher yields – to increase
their investments.
Recent developments have caused
landlords to reflect on how serious
they are. What we’re le with is
those who always saw property as a
long-term enterprise, prepared to
take the rough with the smooth, and
professionals with larger portfolios, a
commercial approach and foresight.
The minority who fell into leing
by accident either by inheriting,
having surplus property aer
forming a relationship, or deciding
to rent one they couldn’t sell in the
Credit Crunch, are the most likely to
have le.
Where brokers come in
So, what are the success factors for
those looking to stay, and how can
brokers support them? If an existing
landlord, when did they last review
their property’s potential? Is there
scope to increase their pricing? Many
small portfolio or accidental landlords
are reticent about charging tenants
more. However, like any business,
geing pricing right is vital. Every
extra £50 or £100 on their yields could
make the difference between securing
a new deal or not.
While rates are higher than they
have been for some time, some
landlords have purchased property in
cash to save money.
It is worth all rental property
owners considering whether they have
explored all possibilities to release
capital from any unencumbered
properties they might own, to
grow their portfolios. Or, could
they potentially release equity to
GURPREET CHAHAL
is corporate account manager
at Accord Mortgages
future-proof their rentals by making
improvements?
Have they really thought about
what their objective is? For example,
is it about monthly income, longterm capital growth to support their
retirement, or a mixture of both?
While the current picture might
seem quite bleak, going through
this thought process create a more
objective view. They might even be
pleasantly surprised what this reveals
when compared to other types of
investment, including savings. What
could their property be worth in five,
10 or 20 years, and what would this
mean for them and their life plans?
Landlords could see the new Income
Tax rules as a positive opportunity to
invest in renovating to future-proof,
and even add to the value of their
property, the cost of which they can
still offset against income. How much
could they potentially add to the value
by doing this?
Zoopla suggests some rebalancing
of supply and demand, although the
mismatch that still exists is likely to
be enough to maintain some upward
movement in rental costs. It comes
down to individual choice, of course,
and is all about landlords weighing
up how much they must invest to
make leing worthwhile, as well as
considering opportunities to diversify
into other areas and property types.
Ultimately, while there might be
higher costs to stomach now, the
strong demand and rental yields we’re
currently seeing, coupled with the
likelihood of longer-term increases
in value, suggest there are undoubted
benefits to be had. ●
March 2025 | The Intermediary
59
