A National Landlords Association (NLA) survey showed landlords’ business expectations have tumbled over the past year, which NLA CEO Richard Lambert will tell delegates at a Building Societies Association (BSA) annual meeting today.
If landlords follow through with their intentions, the data projects a sell-off of 500,000 properties in the next year, followed by another 100,000 sold every year to 2021.
The net effect will be that the private rental sector will be smaller by up to 136,000 properties, the NLA said.
The figures, from its Quarterly Landlord Panel Survey, show 28% of landlords do not plan to buy any more properties, 10% plan to reduce their portfolio and 5% plan to sell up completely. The proportion of landlords looking to sell has more than doubled since last July, increasing from 7% to 19%.
“Two speeches from the Chancellor in 2015 have led to a crisis in confidence greater than when all but a few buy-to-let products were immediately withdrawn from the market following the 2007 financial crash,” Lambert said.
He said that the Chancellor would no doubt see 500,000 properties on the market as a success, but that there is no guarantee that these will be the one or two-bedroom flats or small houses that first-time buyers are looking for as landlords are more likely to sell off less desirable stock in less desirable areas.
“We’ve always said that Mr Osborne is blinded to the impact of his decisions by his commitment to homeownership. He may have intended to focus on the small-scale part-time investor, but it’s the larger and more professional landlords who will be hit worst by cuts to mortgage tax relief and increases to stamp duty, and who appear most likely to leave the sector.
“What happens to the people these landlords house if they still can’t buy and there are fewer and fewer properties available to rent?”
The government is preparing to charge landlords tax on turnover rather than their profit. It will also reduce the maximum amount of tax relief which can be claimed by landlords on their mortgage payments from 45% to 20%.
Cherie Blair QC and human rights lawyer Adam Smith-Anthony are challenging these changes on the grounds that it breaches landlords’ human rights.
Meanwhile, buy-to-let mortgage rates continue to drop offering landlords some of the most competitive rates ever seen, according to Moneyfacts.co.uk.
The average two-year fixed mortgage rate for buy-to-let products has fallen to 3.25% compared to 4.92% in February 2012.
Five-year fixed rate products have also fallen significantly in four years, from 5.57% to 4.09% today.
The number of available products has skyrocketed from 486 in February 2012 to today’s figure of 1,292.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “Potential landlords are clearly conscious of the upcoming increase in Stamp Duty on second properties, which is due to come into play in April. It has sharpened the minds of investors, and as a result, many are looking to buy before the changes are implemented. This extra demand means that providers are competing heavily to attract landlords’ custom, leading to some of the lowest deals on record.”
Nelson said there is great potential for landlords as rental demand is high and interest rates low. She said that pensioners with access to pension pots who are fed up with poor returns in the annuity and savings markets are particularly likely to find this sector appealing.
The 3% surcharge to buy-to-lets and second homes was announced by the Chancellor in the Autumn Statement in November.
