Number of landlords reducing portfolios surges


The number of UK landlords reducing their portfolios, or even selling off their investments entirely, has increased significantly, according to law firm Irwin Mitchell.

The law firm has blamed the government for the surge in landlords exiting the sector after it introduced a series of reforms which have made buy to let investments less profitable.

Recent changes to the sector have included the introduction of Section 24, which has begun phasing out mortgage interest tax relief for landlords, the 3% hike in Stamp Duty on the purchase of second homes, the cap on tenants’ deposits and the ban on letting agents’ fees, which has seen these costs passed onto landlords.

Some buy to let investors have also expressed concerns about the future of the market, in light of falling house prices in parts of the country and the possible introduction of rent controls, which was proposed by the Labour Party at its recent annual conference.

Jeremy Raj, partner at Irwin Mitchell, said that it was ‘understandable’ that landlords would withdraw from the private rented sector under the circumstances.

Exiting the sector may not be as straightforward as some landlords expect, however, especially if they have several properties.

Mr Raj warned; “The capital gains tax liability that will crystallise on each property sale must be factored in when weighing up whether it is best for landlords to divest of their property portfolio.

“Any restructuring of a portfolio should factor in the overall tax implications and a comparison of the costs of alternative investments, for which legal advice should be taken.”

The situation will be even more difficult for landlords who are still paying off the mortgage on one or more rental properties, especially if the properties have fallen into negative equity, as they will still have to cover their outstanding mortgage costs.

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