A new trend seems to be developing that shows one in five landlords intend to sell at least one of their properties in the next year. With an increase in rental incomes from tenants, what could possibly be the catalyst for this shift and what does it mean?
A recent report has shown that 22% of property investors looking to sell investment properties, whilst only 18% plan to buy more property for their portfolios. It seems that in the last six months, the number adding to a portfolio has dropped by 7%, whilst those reducing their list of assets has grown by 2%.
The Rental Market
This change in those looking to sell is not due to demand, as 33% of landlords have reported seeing an increase in those looking to rent over the last three years. With a distinct lack in supply, almost half of the landlords surveyed expect to increase their rents in the next 12 months.
This rise in rental rates is largely due to the new buy to let tax changes which will now eat into a landlords profit margins. Many have been left feeling that putting their rents up is the only way to combat the new shortfall.
There are still investors looking to add to their portfolios, but the number of those with such an intention has seen a drop. This might show that these tax changes are a major factor in the decision to reduce portfolios, with many feeling discouraged to invest when monthly incomes have been hit so hard.
A recent survey has also uncovered the fact that a third of landlords have attempted to evict a tenant in the last year, with most blaming rent arrears as the reason for this. This has become a serious concern for many investors, and changes to mortgage interest relief will only serve to make landlords feel more uncomfortable.
Welfare reform has also led to some concerns, as 38% of those who let to tenants on universal credit or housing benefit have experienced tenants going into rent arrears in the last year.
More than half of landlords have successfully requested an Alternative Payment Arrangement, but a similar number found that the DWP were unhelpful. Rent arrears from these tenants are the main reason for many landlords regaining possession of their property. This indicates that some changes to the universal credit system must need to be made in order for landlords to be able to claim alternative payments and keep arrears to a minimum if landlords are to be expected to keep providing housing.
The current political and economic climate has shaken the confidence of many industries, and this is certainly true of landlords. A weak result in the general election coupled with the uncertain outcomes of the Brexit negotiations has left landlords doubtful of adding to their portfolios. Whilst 38% were reported to be confident in the sector, 28% described feeling the opposite way, which might explain why plans for landlord portfolios have now seen this shift.