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Here's how harsh regulatory changes are affecting landlords' profits

2-minute read

Mollie Millman

6 February 2019

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Almost nine out of 10 landlords say they continue to make a profit despite the harsh regulatory changes they’ve experienced.

The findings published by mortgage lender BM Solutions suggested that an impressive 88 per cent of landlords are generating a profit from their buy-to-let portfolio.

This is in spite of the regulatory changes that have taken place, which include the reduction of the tax relief that landlords can claim on mortgage interest.

Buy-to-let profits down

These changes have, nonetheless, begun to take their toll, according to the research.

While the majority of landlords say they’re still making a profit, that profit is no longer as high as it used to be.

A total of 55 per cent of landlords suggest that the amount of profit they make has been affected by the regulatory changes.

Are landlords buying more properties?

For some landlords, the regulatory changes are proving too much and they’re reducing the number of properties they own.

Almost a quarter (23 per cent) said they plan to sell at least one of their investment properties this year.

Those who own a larger number of properties (between 11 and 19) are twice as likely to sell at least one, and only 15 per cent of landlords are saying they’ll buy a new property.

Rental yields

Average rental yields in Britain have dropped to 5.6 per cent according to the report, which covered October to December 2018.

This is the lowest they’ve been for three years, and the joint lowest level recorded in the past eight years.

However, there are significant differences between the regions, with some areas achieving above average yields.

Read our article for tips on how to work out rental yield.

Regional differences in tenant demand

The East of England saw the biggest fall in demand, down 18 per cent, followed by a 12 per cent fall in the South East, and an 11 per cent fall in both central London and Wales.

While overall rental yields fell to an average of 5.6 per cent, some areas are seeing better yields – including outer London, Yorkshire and the Humber, and the North East all at 6 per cent.

Phil Rickards of BM Solutions said: “The buy-to-let industry has been through many regulatory changes in the past few years, and the effects of this are clearly being felt – however, the landscape is not entirely bleak.

“The proportion of landlords making a profit from their lettings activity remains at 88 per cent, equalling the record high seen in quarter three 2018. It is clear that the market is sensitive to the current legislative and macro-economic environment and this has been reflected in the latest findings.”

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