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Demand for good quality rental accommodation across the Greater London area continues as we head into 2018. This is a positive trend for landlords and should provide reassurance that investment in the buy-to-let market can still offer a good return on investment in the long-term.
Landlords have had to contend with a variety of tax and regulatory changes affecting the buy-to-let market over the last few years, including the additional 3% stamp duty applicable on the purchase of second homes, and the growing restriction of tax relief on mortgage interest costs. Mortgage regulations have also been tightened, which impacts portfolio landlords. 2018 will be a year when many landlords look to see how they can still make the figures stack up – can they still make a profit?
Some landlords who are feeling the pinch from changes to mortgage interest tax relief plan to sell off some of their portfolios in 2018, which will dampen supply when the demand for rental property in London is set to continue. Buy-to-let investors can capitalise on this, finding good deals on the market and picking up ready-to-rent properties.
Landlords who plan to grow their property portfolios this year, and who already own four or more properties, should make sure they are aware of the new, stricter portfolio lending criteria and what it means for them.
The general forecast is that the lettings market will continue in much the same vein as 2017. The tax changes may see some landlords reduce the size of their properties, which will mean fewer properties on the market and perhaps not enough to accommodate the demand. This won't necessarily lead to rent rises, however, as wage growth is still below inflation. So, rent prices may flatline during 2018.
Though the lettings market looks much the same now as it did in 2017, in 2018, the main change might be landlords leaving the buy-to-let market. It remains to be seen how many landlords decide to sell some of their properties.
According to research carried out by the Council of Mortgage Lenders (CML) and published in December 2016, over the next five years 14% of landlords expect to reduce the size of their portfolios. Interestingly, only 21% of landlords signalled out tax changes as their reason for choosing to sell. Though there is an expectation that some landlords will sell, it is unlikely there will be a lot of landlords leaving the market.
At Oscar Knight, we anticipate the lettings market, which at present remains stable, will see growth in 2018, albeit at a slower pace than the previous year. There may be some good property deals for buy-to-let investors entering the market, especially if some landlords do decide to sell. But property investment in the long-term remains the most preferred asset class.
If you want advice on property investing or letting out a property in Putney, Southfields, Wimbledon or the surrounding areas, contact our lettings team today.