Landlords reveal their biggest fears in new survey

Landlords have a right to be worried as they begin to feel the effects of the tax relief that they get for financial costs such as mortgage interest has started to be restricted to the basic rate of income tax.  

Regulation is a key concern for 40 per cent of landlords, who are nervous about the increased risk of prosecution and higher penalties. Many worry about being prosecuted under the Immigration Act due to not checking a tenant’s right to rent. This can lead to them facing criminal prosecution with an unlimited fine and up to five years in prison. Landlords are also concerned about inflationary pressures (40 per cent), which will reduce the value of a landlord’s income and increase their costs.  

Landlords are also nervous about competition in the marketplace pushing rental prices down. This could be exacerbated further as 40 per cent of landlords are considering new ways to expand their property portfolio in the coming months, thus increasing supply for renters.

Table one:  Negatives in the landlord outlook for the short term

Landlords are most positive about house prices improving in the short term (31 per cent). This optimism appears to be justified too, with the average house price in the UK rising by £12,000 – or 5.6 per cent – in the year leading up to April 20172.

They are also confident that the low interest rate environment will continue for the near future (29 per cent). Indeed, almost a third (32 per cent) of landlords are planning to remortgage their properties, which could in part be linked to the fact that 58 per cent are planning minor renovations to their properties in the coming months – a strong sign that confidence is high in the sector.

Landlords are also optimistic that domestic demand for rental properties will remain buoyant and that the international market for UK properties will remain high (27 per cent).

Perhaps surprisingly, the UK leaving the European Union doesn’t rank in the top ten short term concerns for landlords, suggesting they don’t think it will have an immediate impact on the property market.  Indeed, more than a quarter (28 per cent) of landlords said they thought Brexit would bring positive benefits for landlords.

Table two:  Short term positives in the landlord outlook

Christina Dimitrov, Business Manager at Direct Line for Business said: “It’s great to see landlord’s being resilient towards the ever-changing property marketplace and it’s really positive to hear they don’t appear to be worried about Brexit and the impact on demand.

The continued low interest rate environment can only benefit landlords and tenants. However, experts are predicting an interest rate rise in the future and the Prudential Regulation Authority’s tougher underwriting rules for buy-to-let mortgage lenders may bring some challenges for landlords wanting to expand their portfolios.”