Buy to Let Property Investors Planning to Exit Market

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New research has suggested that over a quarter of UK buy to let property investors are planning to exit the private rental sector this year.

The survey of 800 landlords, carried out by landlord insurance provider Simply Business, revealed that with uncertain market conditions, fourth fifths (82 per cent) of landlords are not planning on buying any more properties in 2020. Just one tenth (13 per cent) said they would buy another property this year, while a third (35 per cent) also reported a decrease in their rental yield in 2019.

The top reasons buy to let property investors gave for wanting to sell are tax increases and government reform, such as shifting House in Multiple Occupation (HMO) licensing, which added new stipulations on the minimum size of rooms, as well as banning of admin fees. Well over a tenth cited these as their reasons.

Other reasons that buy to let property investors gave for planning to sell include rising rental costs (10 per cent), cashing in on their investment (9 per cent), economic instability (5 per cent) and slowing house price growth (4 per cent). This comes after a third (35 per cent) also reported a decrease in their rental yield in 2019, which adds to the desire to sell.

A fifth (20 per cent) reported a decrease of 0-5 per cent, just under one in 10 (9 per cent) reported a decrease of 5-10 per cent and 3 per cent of buy to let property investors reported a decrease of 10-15 per cent.

Looking ahead to this year, over a quarter (27 per cent) of landlords expect to see a further decrease in their rental yield in 2020. One in five (18 per cent) expect to see a decrease of 0-5 per cent, and a further 6 per cent of landlords expect to see a decrease of 5-10 per cent. Only 2 per cent of landlords expect to see a decrease of 10-15 per cent. However, over half (52 per cent) are still optimistic and expect their rental yield to increase in 2020.

Bea Montoya, Chief Operating Officer at Simply Business commented: ‘Landlords around the country are telling us that government reforms, tax increases, and rising rental costs are forcing them to put their investments up for sale. The tax increases imposed by the government are proving counter-productive for landlords, while ongoing political and economic uncertainty hasn’t been providing landlords with the confidence they need to stay in the market. But selling a buy to let is a big decision, especially if you’re selling more than one.

‘Any landlord looking to sell up should make sure they understand the complexities surrounding buy to let sales, particularly if the property is occupied. Any tenants should be made aware of plans to sell as early as possible and given reassurance their tenancy still stands. When it comes to selling, landlords need to understand any tax implications involved, such as capital gains tax. If the property is sold for more than it was paid for, there will be a capital gains tax liability.’

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