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Experts warn of buy-to-let crunch as landlords sell off unprofitable properties and hike rents

Daily Mail logo Daily Mail 01/03/2018 R Rickardstrauss

a close up of a sign © Provided by Associated Newspapers Limited Further evidence that buy-to-let is struggling has emerged with new evidence that landlords are selling properties and hiking rents where they plan to hang on.

A report from the Association of Residential Letting Agents found the supply of rental properties fell 8 per cent between December and January while the number of prospective renters registering to find a new home shot up 18 per cent.

It marks a continuing squeeze on the number of properties available to tenants, which is piling pressure on the cost renting.

The report found that a fifth of tenants were told by their landlord they'd be paying more from January.

David Cox, ARLA Propertymark chief executive, said it pointed to 'a rough ride' for renters in 2018.

'Housing stock is falling as rising taxes continue to force established landlords out of the market and deter entry into the sector,' he said. 

'And the volume of renters is increasing as the cost of buying a home is moving further out of reach for many. The fact that one in five tenants is experiencing rent increases is just another blow. 

'Ultimately, until the prospect of investing in the buy-to-let market is more attractive for prospective landlords, and stock subsequently increases, tenants will continue to feel the burn.'

It comes after sweeping reform of the buy-to-let sector over the past two years, with landlords hit by a 3 per cent surcharge in stamp duty on new buy-to-let purchases, the loss of valuable tax relief on mortgage interest and a crackdown by the Bank of England making it harder to get a buy-to-let mortgage.

Anecdotal evidence has suggested that many landlords in London, the South East and pockets of the country where house prices are at their highest and profit margins are skinny have since been forced to sell up. Others are planning to as the reality of higher costs kicks in. 

Bleak future for buy-to-let 

Today's report paints an increasingly bleak picture of buy-to-let, which has been under pressure since April 2016.

And it builds on recent research from the Intermediary Mortgage Lenders Association which showed net investment in buy-to-let has slumped by 80 per cent over the past two years - from £25billion in 2015 to just £5billion in 2017. 

This represents a steeper drop than was seen immediately after the credit crunch in 2008 and shows the vast majority of landlords have been selling off existing properties and not replacing them with alternatives at the same value, not expanding their portfolios, and/or have been paying down their mortgages.

Separate research out this week and commissioned by online letting agent MakeUrMove claimed 75 per cent of landlords say they would have to sell if they were making a loss, breaking even or not making enough profit.

As it stands, 41 per cent of landlords said they will be forced to increase rents to cope with their rising overheads.

Alexandra Morris, managing director of MakeUrMove, said: 'The rising costs associated with the changing legislative and regulatory environment will result in either increased rents or landlords having to sell their properties. 

'The worst-case scenario will be a housing market crash if landlords default on their mortgage payments or decide to cut their losses. 

'The Government is currently sleep walking into this crisis when the alarm bells should be ringing.' 


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