No worries over Brexit, but landlords fear taxation

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Brexit not amongst the greatest concerns for landlords and more than a quarter think it will have a positive impact

New research by landlord insurer Direct Line for Business reveals that taxation and economic uncertainty are the greatest short term concerns for landlords. Landlords have a right to be worried, as the tax relief that they get for financial costs such as mortgage interest has started to be restricted to the basic rate of income tax. 

Regulation is a key concern for 40 per cent of landlords, who are nervous about the increased risk of prosecution and higher penalties. Many worry about being prosecuted under the Immigration Act due to not checking a tenant’s right to rent. This can lead to them facing criminal prosecution with an unlimited fine and up to five years in prison. Landlords are also concerned about inflationary pressures (40 per cent), which will reduce the value of a landlord’s income and increase their costs. 

Landlords are also nervous about competition in the marketplace pushing rental prices down. This could be exacerbated further as 40 per cent of landlords are considering new ways to expand their property portfolio in the coming months, thus increasing supply for renters. 

Table one:  Negatives in the landlord market

Factor

% Negative impact

 

Taxation

41 %

Economic uncertainty

41 %

Inflation

40 %

Regulation

40 %

Competition bringing rental process down

38 %

Source:  Direct line for Business 2017

Landlords are most positive about house prices improving in the short term (31 per cent). This optimism appears to be justified too, with the average house price in the UK rising by £12,000 – or 5.6 per cent – in the year leading up to April 20172.

They are also confident that the low interest rate environment will continue for the near future (29 per cent). Indeed, almost a third (32 per cent) of landlords are planning to remortgage their properties, which could in part be linked to the fact that 58 per cent are planning minor renovations to their properties in the coming months – a strong sign that confidence is high in the sector.

Landlords are also optimistic that domestic demand for rental properties will remain buoyant and that the international market for UK properties will remain high (27 per cent).

Perhaps surprisingly, the UK leaving the European Union doesn’t rank in the top ten concerns for landlords, suggesting they don’t think it will have an immediate impact on the property market.  Indeed, more than a quarter (28 per cent) of landlords said they thought Brexit would bring positive benefits for landlords.

Table two:  Positives in the landlord outlook

Factor

% Positive impact

 

House prices

31 %

Interest rates

29 %

Domestic demand for rental properties

28 %

Brexit / Triggering Article 50

28 %

Foreign demand for UK rental properties

27 %

Source:  Direct line for Business 2017 

Christina Dimitrov, Business Manager at Direct Line for Business said: “It’s great to see landlord’s being resilient towards the ever-changing property marketplace and it’s really positive to hear they don’t appear to be worried about Brexit and the impact on demand.

“The continued low interest rate environment can only benefit landlords and tenants. However, experts are predicting an interest rate rise in the future and the Prudential Regulation Authority’s tougher underwriting rules for buy-to-let mortgage lenders may bring some challenges for landlords wanting to expand their portfolios.” 

For more information about Direct Line for Business’ Landlord Insurance, please visit:https://www.directlineforbusiness.co.uk/landlord-insurance

 

 

 

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