UK landlords have increased rents by 3.5 percent
UK landlords have increased rents by 3.5 percent in the last year, as tax hikes begin to bite, lender Kent Reliance has said.
According to a new Kent Reliance survey, the average monthly rent is now GBP872 (USD1,245). Four in ten landlords questioned said they expect to raise rents in the next six months by an average of 5.6 percent. Among this group, three-quarters blamed the impending reduction in mortgage tax relief to the basic rate of income tax.
Kent Reliance also found that landlords “have flocked to incorporate to mitigate the impact of the tax changes.” It explained that borrowing through a company means that investors are taxed on profits at lower corporation tax rates, and can offset all finance costs against rental income. It found that mortgage applications via limited companies increased by more than 80 percent in 2015, while limited company loans accounted for more than one in five buy-to-let mortgages last year.
Kent Reliance added that the introduction in April of a three percent stamp duty land tax (SDLT) surcharge on buy-to-let properties led to a 176 percent year-on-year increase in such purchases in March. It said: “The new stamp duty surcharge has already distorted the market. March saw an unprecedented spike in activity, as landlords hurried to complete purchases ahead of the introduction of the higher stamp duty tax in April.”
Andy Golding, Chief Executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy-to-let, commented: “The buy-to-let market now sits firmly in the crosshairs of both politicians and regulators, and we are seeing landlords react. Thousands hurried purchases to beat the stamp duty deadline, and the popularity of limited companies is soaring as investors seek to reduce tax exposure. But it is tenants who are feeling the real brunt. Rents are rising, and landlords will increase them further as they pass on the increased cost of running their businesses. Far from supporting tenants, recent intervention will see them bear a heavier financial burden.”
“Increasing landlords’ tax bills won’t alter the root cause of the UK’s housing crisis. As long as the demand for homes every year far outweighs the number of new houses, the only way to reduce the cost of housing in this country for tenants and first-timers alike is to build more. We need to see a paradigm shift, moving the focus from sustaining demand to expanding supply in all tenures.”
Source: Tax News
