Rents look set to rise in the near term, as landlords pass on the higher taxes that they face, according to the latest Buy to Let Britain report from Kent Reliance.
In the past year, rents have increased by 3.5% to reach £872 per month.
And it’s not good news for tenants, as 4% of landlords expect to push their rents up in the next six months by an average of 5.6% (or £49 per month).
If you are planning to increase your rent price in the near future, ensure that you protect your income from rent arrears with Rent Guarantee Insurance. Our policy also covers your legal expenses if you are forced to evict your tenants.
Despite a number of Government interventions in the buy-to-let sector, 71% of landlords still consider it a positive long-term investment, rating it more highly than other investment options.
Kent Reliance estimates the average return across Britain at be around 13.6%, combining a yield of 4.6% with current house price growth of 9%.
The report also found that there was an inevitable rise in the number of buy-to-let landlords purchasing properties via a limited company in the first three months of the year, in response to the new 3% Stamp Duty surcharge and changes to mortgage interest tax relief from 2017.
Kent Reliance reports that buy-to-let lending to limited companies rose to around 38,000 loans in the first quarter of 2016 – higher than the total for the whole of 2014.
The mortgage lender also estimates that 98,400 loans for buy-to-let properties will be issued to limited companies by the end of this year, up from about 55,000 across the whole buy-to-let market in 2015 and almost three times its share of the market in 2014, as landlords aim to alleviate the impact of the tax changes.
Borrowing through a company structure means that investors are taxed on profits at lower corporation tax rates and can offset all finance costs against rental income.
If you are thinking of changing your business structure to a limited company in order to avoid the mortgage interest tax relief changes, this advice could help: https://landlordnews.co.uk/landlords-form-limited-companies-avoid-tax-changes/
The Chief Executive of OneSavings Bank, which owns Kent Reliance, comments: “The buy-to-let market now sits firmly in the crosshairs of both politicians and regulators, and we are seeing landlords react.
“Thousands hurried purchases to beat the Stamp Duty deadline and the popularity of limited companies is soaring as investors seek to reduce tax exposure.
“But it is tenants who are feeling the real brunt. Rents are rising and landlords will increase them further, as they pass on the increased cost of running their businesses. Far from supporting tenants, recent intervention will see them bear a heavier financial burden.”