_Buy-to-let landlords sit tight in prime London after tax changes

The number of landlords who re-let their property increased last year despite a recent series of tax changes affecting the buy-to-let sector, Knight Frank data shows.

There was a 10.1% rise in the number of re-let properties in the year to August 2017 according to the analysis, which covered new tenancy agreements and excluded extension deals with existing tenants.

“We see no signs of an exit,” said Tim Hyatt, head of Knight Frank’s lettings division, which has grown turnover by 50% in three years “Buy-to-let investors typically hold properties for an average of 16 years and most professional investors will ensure their portfolio is able to weather such storms.”

^{Above: Tim Hyatt, head of Knight Frank’s lettings division talks to London head of residential research Tom Bill}

Housing affordability remains a live political issue in the UK and recent changes affecting landlords include the reduction of tax relief on mortgage interest, the loss of the wear-and-tear allowance and a 3% stamp duty levy for buy-to-let investors.

The changes have dampened demand for buy-to-let mortgages, which has led to a 38% reduction in the number issued compared to before the introduction of the additional rate of stamp duty in April 2016.

However, a key reason landlords are not selling up is because they value the longer-term benefits of property ownership, said Noel Flint, head of London Residential Sales at Knight Frank.

“The reason we are not seeing many landlords come to the sales market is because they know there is nowhere else to put their money at the moment and they appreciate that property is a tangible asset that will always be income-producing.” 

Despite growing speculation around an impending rate rise in the UK, interest rates are likely to remain ultra-low by historic standards in the medium term, which means the yields on investments such as cash or government bonds will also remain low.

Current average gross yields are 3.2% in prime central London, which compares to a yield of about 1.4% on a ten-year government bond.

Our letting agents are on hand to help landlords in need of expert advice, rental valuations and property management services, or tenants searching for their ideal rental property in London or across the UK.