Landlord's Guide | Spring 2022


Being a landlord has become increasingly more complicated and less profitable over the years, this has only led to less rental properties on the market.

It is well known that no area of the property market stays still for long. That’s certainly the case for the rental market, and the landlords who make their living from it.

Even before the pandemic, there were tax changes applied to the market five years ago. Prior to April 2017, buy-to-let landlords could claim tax relief from HMRC, by deducting all mortgage interest payments from their rental income. As most buy-to-let mortgages are interest-only, this used to mean a decent tax saving. However, since the 2017/18 tax year, the government has phased out the buy-to-let mortgage tax relief, eventually replacing it with a 20% tax credit in 2020.

This has led to many landlords – particularly higher-rate taxpayers – reducing their tax bill by starting a property company and paying corporation tax instead of income tax. Analysis of Companies House data from Hamptons shows that more buy-to-let companies were set up in 2021 than in any previous year. There were 47,400 new buy-to-let companies incorporated in the UK last year, a rise of 14% from 2020. During 2021, half of all new buy-to-let mortgages were taken out by landlords with a company, so buy-to-let companies now account for 29% of active buy-to-let mortgages.

"There were 47,400 new buy-to-let companies incorporated in the UK last year, a rise of 14% from 2020."

BUT WHAT ABOUT THE MARKET TODAY? In brief, there’s huge demand and not enough stock. A survey of private landlords across England and Wales from the National Residential Landlords Association found that 56% of landlords reported a rise in demand for privately rented homes in Q4 2021. People are renting for longer, but there are not enough properties for them, either new or existing. This is partly due to many landlords leaving the market for better investment opportunities elsewhere.

London still has the biggest private rented sector of any region in Britain, accounting for 29% of all homes in the capital. The vast majority are provided by individual landlords. Increasing interest rates and cost of living will mean that the rental market in the capital remains strong, with many struggling to get onto the ladder. The same report from the National Residential Landlords Association found the city would require approximately 83,000 new rental properties a year over the next decade to accommodate this demand.

Ben Beadle, Chief Executive of the National Residential Landlords Association said, “As the demand for private rental properties picks up following the pandemic, renters across the capital will struggle to find the homes they need and want. For all the efforts to support homeownership, the private rented sector has a vital role to play in housing so many Londoners.” The demand is reflected in void periods (the amount of time a property is empty between tenants) too. Property Tech company Goodlord had some interesting insight in its February property index, noting the biggest change came in Greater London. Despite diminishing void periods - a 24% reduction in their length, dropping from 17 to 13 days - there was a 3% reduction in the average cost of rent in the capital, from £1,675 to £1,609.

Looking to 2022 and beyond, with similar stock constraints to the homeowner market, wage rises forecast to continue at all income levels, and the economy picking up strongly, rent is expected to continue to rise – which presents an opportunity for both new and existing landlords.

To see the rest of our Q2/22 Magazine, click the link below to view the articles online: