There is a running debate that a mass exodus is taking place with regard to landlords selling up and leaving the property market. Let’s take a look at why people may be thinking this.
But first, if you are a landlord who is looking for better insurance, contact CIA Landlords today to find the best quote for you.
Mortgage rate rises
Because of high inflation mortgage rates have begun to spike, resulting in an increase in rental prices. For a lot of landlords, this screams doom and gloom, however, leasing out a property can still be profitable even when a mortgage is not being paid back entirely. You will still be receiving money that goes towards the property that you want to pay off.
Landlords face bigger tax bills
Landlords now need to declare income used to cover their mortgage repayments on their tax returns, resulting in some landlords being pushed into the higher tax rate from the basic tax rate.
Additionally, there have been changes made to capital gains tax. As of April 2023, the capital gains tax-free allowance has been cut from £12,300 to £6,000 and is said to halve to £3,000 in 2024. It is no surprise that this is a massive cut and will result in landlords having to pay more capital gains tax when selling their properties.
Landlords are under pressure
A large portion of landlords are feeling overwhelmed by the higher rate of borrowing costs. In areas where property costs are higher, such as London and the South East (this accounts for 51% of landlords in the UK). There is a definite change in the rental market, and landlords are feeling this.
The Decent Homes Standard
According to the Decent Homes Standard, landlords should provide their tenants with modern facilities, being in a reasonable state of repair and insulation. At the moment, this only applies to social housing, however, the government is planning to enforce this for private properties shortly. Although this may be seen as inconvenient, it gives landlords the ability to keep their property modern and more attractive to tenants. Making sure that you have the right coverage for landlord insurance is an important aspect of this too.
Energy efficiency rules
By April 2028, under new government proposals, properties will need to meet a minimum energy performance of C. Any properties owned by landlords that fail to meet this could be fined up to £30,000.
Eviction law changes
As you may know, the Renters’ Reform Bill is bringing about new changes to eviction laws for landlords. The bill has banned Section 21 ‘no-fault’ evictions, meaning that landlords cannot evict tenants without a good enough reason to do so.
On the positive side, however, the government has ensured that there will be a few exceptions for landlords when wanting to sell their property or house to close family members instead.
Fixed-term tenancies ban
Rolling tenancies will now completely replace any fixed-tern tenancies as they are now banned under the new rental reforms. Rolling tenancies can only be terminated by the tenant giving the landlord two month’s notice, or if the landlord has enough leverage to evict the tenant under the new repossession grounds.
Landlords may have to pay to be registered
Under the new rental reforms, landlords will need to pay to be registered due to the new Private Rented Sector Ombudsman. The Ombudsman is being put in place to solve any disputes between landlords and tenants if they cannot resolve them between themselves.
Crackdown on rent increases
As a result of the Renters’ Reform Bill, landlords will only be able to increase rent once a year and will have to give two months’ notice before doing so. Tenants will also be able to appeal rental increases if landlords have increased rent by more than market value.
Where does this leave us?
Is there a mass exodus of private landlords leaving the property market? According to Zoopla, there has been a consistent flow of landlords exiting the property market since 2018. So what does this mean for landlords?
The cost-of-living crisis has definitely had a negative impact on the property market, which is influencing the decisions being made by landlords to stop leasing property.
In light of this, it is also important to ensure that your property is protected with the most affordable landlord insurance. Contact CIA Landlords today to find out more.
