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Buy to let investors in the private rental property sector contribute a huge £16.1 billion to the UK economy.
Through their spending over the year, landlords in the UK contribute towards thousands of jobs from builders and tradesmen through to accountants and letting agents. This figure has nearly doubled from £8.5 billion a decade ago, following the long-term expansion of the rented sector and rising costs per property.
Property maintenance and servicing represents the largest running cost for landlords across the private rental sector (PRS), totalling £5.8 billion. The next largest outlay is for those landlords that use a letting or management agent and contribute a collective £5 billion.
Investors spend a total of £567 million on accountancy and legal fees, £341 million on administration and registration costs, contributing an additional £908 million of spending solely dependent on the PRS’ existence.
Landlords also contribute £2.3 billion on service charges and ground rents, £848 million on utilities, £791 million on insurance, and £618 million on other associated costs of running a property.
The average landlord now spends £3,571 per property in annual running costs, before tax or mortgage interest – equivalent to 32.9 per cent of rental income. These costs have risen by 5.6 per cent in the last two years without factoring in increasing taxes. Since the start of 2009, costs have jumped by 28 per cent, a rise of £771.
£1,086 is currently spent on maintenance, repairs and servicing, and £935 spent on letting agent fees per property. A typical landlord spends £426 per property each year in ground rents and service charges. Insurance typically costs £149, and legal and accountancy fees £107, while administrative and license fees add another £64 per year.
A further £528 is lost in void periods each year, a figure that has climbed in recent years as a result of higher rents, and a slightly longer gaps between tenancies.
Faced by rising costs, and higher tax bills following the recent changes to mortgage interest tax relief, landlords are now looking to cut the amount they contribute.
36 per cent of landlords, surveyed by BVA BDRC on behalf of Kent Reliance, are already reducing or planning to reduce their spending. Overall, a typical landlord reviewing their outlay would cut spending per property by around 6 per cent. If replicated across the PRS, this would reduce their total spending by nearly £1 billion each year, reducing the revenues of the industries that depend on the PRS.
Sales Director of OneSavings Bank, Adrian Moloney, commented: ‘The political discourse around the private rented sector has been one-sided to say the least. Overlooked is the significant economic contribution landlords make, supporting thousands of jobs through their spending and housing a large portion of the country’s workforce. Instead, landlords have faced punitive tax and regulatory changes, at a time when running costs are climbing.’