Existing landlords benefit from Stamp Duty fallout with rise in returns

The latest buy-to-let index from Your Move and Reeds Rains, shows the fastest annual rate of return for existing landlords since November 2014. The index factors in rental income and capital growth, but does not include property-related costs.

In absolute terms this means that the average landlord in England and Wales has seen a return of £22,135 over the last twelve months, before any deductions such as property maintenance and mortgage payments. Of this, the average capital gain contributed £13,494, while rental income made up £8,641 over the twelve months to March.

Adrian Gill, director of Your Move and Reeds Rains, said the Stamp Duty levy is making it more expensive for prospective landlords to get on the property ladder for the time-being.

“In particular, this month’s new Stamp Duty surplus has driven an extra wedge between those aspiring landlords planning to invest in additional homes to let, and those existing landlords who have already built up their portfolios. That difference will not last for long. But by making it more expensive to invest in property, it will hamper the healthy growth of the private rented sector,” he said.

“Over the longer-term there will still be a sharpening shortage of homes available, and rents will rise in line with any extra costs – so being a landlord will remain a profitable investment, though tenants will just see unnecessarily higher rents in order to price-in the extra bill for the taxman.”

The index found average rents in England and Wales stood at £791 per month in March, 3% higher than at the same point last year.

However, month-on-month rent growth dipped marginally from 0.1% between January and February, to 0.0% in the month to March.

Growth in England and Wales was led by the East Midlands in the year to March, where rents grew 8.5% to an all-time record of £613 per month.

This is followed by the West Midlands with 6.7% annual rent rises, taking the average rent in the region to another all-time record of £597 per month.

London is in third place in terms of annual rent rises, up 4.6% from the same point last year. However at £1,231 the capital’s average monthly rent remains below the all-time record of £1,301 set six months ago in September 2015.

Paying the rent on time has become slightly more of a challenge for tenants in March, the index found. Across England & Wales the overall level of rental arrears now stands at 9.1% of all rent due in the private rented sector, compared to 8.8% in February 2016 and to 7.4% in March 2015.

However, last month still compares very favourably to the all-time high of 14.6% of all rent payable in arrears in February 2010.

Gill added: “Landlords need tenants with sound finances, and tenants need a property they can afford. While there is always room for healthy negotiation on rents, both landlords and tenants need each other to reach a deal. So some of the language of confrontation between landlords and tenants is not healthy or constructive.

“Good landlords also understand that their interests and the interests of their tenants are aligned – a tenancy should be a mutually beneficial deal.”