A recent report showed that company landlords now own 20% of rented houses, which is a new record since renting records began. The question is, what has caused this increase, and is it a growing trend?
One key reason could be the hike in stamp duty on second homes of 3%, which was introduced last April. Property corporations noted a surge in individuals buying property to rent before the new changes came in April 2016. This April has seen landlords hit again by changes in tax relief laws. Over the next four years, the tax relief that landlords can claim on mortgage increase payments is being phased out. By 2020 landlords will no longer reap anywhere near the same benefits on the mortgages they hold on the property they rent out.
New data shows that a significant number of landlords are now seeking to own rent-to-buy portfolios as limited companies rather than as individuals. 20% of rented houses are now owned by company landlords, with the reason for increase rather simple; companies receive more favourable tax concessions than individual landlords.
Landlords can make considerable savings by operating as limited company, with the reduction in tax relief sufficient enough to make landlords consider owning a portfolio of rented properties. According to Countrywide, the estate agency group who compile the statistics on property rentals, the amount of tax that landlords can claim in tax relief will see a reduction of from 40% to 20% by 2020.
The tax changes were introduced in an effort to encourage less renting and more house buying, particularly for first time buyers. Clearly the changes in tax relief have not deterred most landlords thus far, they have merely changed the way they operate. According to rental data, over 9,500 properties were taken on by company landlords wishing to increase their portfolios in 2016. This had led to fears that the boom in rented properties may push up the prices of those people looking to buy their own homes. Currently, with company landlords now owning 20% of the house market, this fear may not be unfounded.
Company landlords in London are definitely on the increase. Data held by Countrywide reveals that rental properties the figure is 27% in London, with a similar level in some other big cities in England. Conversely, the figure is only at 4% in Scotland, although this may change in time. The new tax changes are likely to see less individual investors in buy-to-rent scenarios, particularly in London and other large cities.
No longer, it seems, will people who move out of a house simply look to rent the original house out. This is not as lucrative as it used to be, with evidence that there is an ever decreasing activity in this kind of renting. Whilst the number of people renting properties has doubled over the past two decades, the proportion of rented properties owned by company landlords hitting 20% suggests that using a company name now seems to be paying dividends.
For a range of stunning properties available across North Wales and North West England visit Houses for Sale in Rhyl to see their selection of homes.