Ruth Bloomfield

The death of the landlord

How buy-to-let properties went from cash cow to financial burden

  • From Spectator Life
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Spring is property auction season, when a motley collection of semi-derelict houses, flats with leases in the single figures and the homes of mortgage defaulters get sold off. This year, though, a scan of the catalogues of some of the UK’s leading property auction houses reveals a new class of property under the hammer: rental flats.

Under pressure from rising interest rates and increasing regulation, many landlords are opting for an exit strategy. According to recent research from estate agent Hamptons, Britain’s rental sector is losing homes at a rate of 66 per day. Agents across the country report an influx of instructions from small-time landlords who’ve decided to invest elsewhere.

The great rental exodus has been triggered by a complex mixture of government policy and wider economic conditions. But one thing is clear. Owning a buy-to-let (BTL), once seen as a copper-bottomed way to earn an easy, passive income, is rapidly becoming a financial albatross.

The first hint of lean times for landlords came in 2016, when buyers of ‘additional properties’ to their main home were hit with a 3 per cent stamp duty surcharge. A year later, in 2017, HMRC began stripping landlords of the right to claim tax relief on their mortgage interest payments. Meanwhile local councils began introducing registration schemes for landlords, adding to their administrative burdens. 

More recently, a combination of rising interest rates and increasing maintenance have trimmed even more fat off BTL profitability. The average rental yield in the UK now sits at 3.63 per cent, according to Seven Capital – barely more than interest rates on the high street. 

Figures show Britain’s rental sector is losing homes at a rate of 66 per day, and agents across the country report an influx of instructions from small-time landlords who’ve decided to invest elsewhere

And this year will bring more pain for landlords. Their capital gains tax allowances will be cut in April, followed later in the year by an overhaul of rental rules, featuring indefinite tenancies and the end of ‘no fault’ section 21 evictions.

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