Recent tax and regulation changes have made it difficult for many landlords to remain in the sector, according to calculations by The Times. These changes have prompted significant debate within the property community, with many questioning the future viability of buy-to-let investments.

We covered this development on Landlord Today, where you can read the full story and explore the implications of these changes on landlords. The article delves into the specific tax adjustments and regulatory measures that are impacting the profitability of rental properties, providing insights from various industry experts.

In response to these concerns, Marc von Grundherr, director at London agency Benham and Reeves and a landlord himself, has offered a counterargument. Von Grundherr challenges the notion that being a landlord is no longer viable, presenting an alternative perspective based on his experience in the market. His viewpoint sheds light on potential strategies and opportunities that landlords can explore to navigate the current landscape successfully.

This is what he says: 

In recent years, UK landlords have been significantly affected by government policies that seem to target the private rental sector. These measures are often seen as a political strategy to attract tenant voters, frequently at the expense of those who invest in and maintain rental properties.

There is a notable irony in this approach, as approximately 1.1 million tenants in the private rental sector receive housing benefits. This means that landlords who own these properties are, in essence, providing a form of social housing that the government itself has not managed to supply adequately. These landlords are filling a crucial gap in the housing market, yet they are often portrayed negatively in political discourse.

The challenges faced by landlords have been numerous and multifaceted. Various Chancellors of the Exchequer have introduced policies that have progressively squeezed landlords’ profitability and operational capacity. For instance, the removal of tax relief on mortgage interest payments has significantly increased the financial burden on landlords. Additionally, increases in capital gains tax and additional stamp duty charges have made property investment less attractive and more costly.

During the COVID-19 pandemic, landlords were also required to grant amnesty to non-paying tenants, a move that, while protecting tenants in a time of crisis, placed substantial financial strain on landlords. The court system, already slow, became even more clogged, making it difficult for landlords to reclaim possession of their properties. This issue was compounded by an unsuccessful attempt to pass the Renter Reform Act, which sought to make it even harder for landlords to repossess their properties.

Moreover, the recent hike in interest rates has led to a significant increase in buy-to-let mortgage costs. This has made it more expensive for landlords to finance their properties, further eroding their potential returns. These combined factors have led some to question the viability of continuing to invest in the private rental sector.

Despite these challenges, some industry voices, like Marc von Grundherr, director at London agency Benham and Reeves, argue that it is still possible for landlords to succeed. Von Grundherr, himself a landlord, offers a counterargument to the prevailing negative sentiment, suggesting that with careful management and strategic planning, landlords can navigate these obstacles and continue to thrive in the rental market.

In conclusion, while recent government policies and economic conditions have undoubtedly made it more difficult for UK landlords, there remains a potential for success. Landlords must stay informed, adapt to changing regulations, and consider long-term strategies to mitigate these challenges. The role they play in providing housing, particularly to those receiving housing benefits, underscores their importance in the broader housing market.

Property investors have every right to feel downtrodden.

But, being a landlord is still lucrative in spite of Whitehall’s attempts to dampen the sector.

Let’s look at some facts that might persuade you that the challenges you’ve faced recently were worth enduring:

• Not every landlord has a mortgage. In fact, more than a third (38%) do not. Therefore, increased interest rates affect only some landlords.
• Interest rates at 5.25% Bank base rate are not high by historic standards. The average rate over the last 100 years is 5.25%. Many landlords, who have been in the market for a while, know that current borrowing rates are more ‘normal’ than ‘high’.
• House prices have increased by 54% in the past decade and by 152% since 2000. This equates to a 6% annual return in the latter case, which is a solid return on investment. Inflation has run at an estimated average of 4.4% over the past five years, meaning property has outperformed inflation.
• Rents are up 31% since 2014, translating to an annual increase of 3%. Tenant demand is higher than ever.
• The number of new homes built is significantly lagging behind demand. The annual deficit is around 100,000 homes, making property more scarce than ever before.
• Many well-known figures, such as Alan Sugar, Donald Trump, the Duke of Westminster, Ellen DeGeneres, Jeremy Renner, Arnold Schwarzenegger, and Robbie Fowler, have made significant fortunes through property, not just through their primary careers.

Capital appreciation, higher rents, limited supply, and strong demand from a population growing by around 1 million people each year are all significant positives for landlords.

However, the real advantage for landlords is that their rental yields are often much higher than traditional statistics suggest. Traditional analysis compares annual rent to the current value of the property. Many landlords have owned their properties for years, so today’s higher rents as a percentage of the original purchase price result in much higher actual yields. For instance, a 5% annual yield today can actually be 7% if the property has been owned since 2014, as is the case for many landlords.

Reasons to be optimistic? Despite the negative sentiment in the sector, there certainly seem to be plenty.

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