Changes to tax in the UK affecting buy to let is not putting off landlords in London as they see the long term benefits of their investment, it is suggested. Indeed, landlords are re-letting their properties in greater numbers despite recent tax changes such as the extra 3% stamp duty on additional homes, the loss of wear and tear allowance and a phasing out of mortgage tax relief, according to real estate firm Knight Frank.
There was a 10.1% rise in the number of re-let properties in the year to August 2017 according to the latest Knight Frank 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,’ he added.
The firm points out that 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, according to 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,’ he said. 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, the report points out. Current average gross yields are 3.2% in the prime central London lettings market which compares to a yield of about 1.4% on a 10 year Government bond.
