One in five buy-to-let investors plan to sell up

London houses
London has become much less attractive to property investors Credit: Jason Alden/Bloomberg

One in five buy-to-let investors plan to sell their properties, a survey by Britain's biggest landlord organisation has found.

A weakening housing market, tough new tax legislation and increased difficulty in obtaining mortgages have all made buy-to-let a less attractive investment.

The new data, published by the Residential Landlord Association - a trade body representing 50,000 private sector landlords - also found that almost half plan to increase rents over the next year.

London has been hardest hit by the negative factors weighing on the market, as high property values and low rental yields are being compounded by weakening rents. 

Rents fell by 1pc in the 12 months to July in the capital according to data compiled by peer-to-peer firm Landbay. 

Instead those landlords who wish to remain invested are focusing on other regions, including northern cities and Scotland, where the yields are much higher and tenant demand strong. 

Outside of London rental prices increased by 1.6pc across the UK in the 12 months to July. The greatest rise, 2.4pc, occurred in the east of England.

According to data from the Council of Mortgage Lenders, the number of property purchases by landlords in 2017 so far is a sharp decline on previous years.

In the first three months of 2017, landlords purchased 18,100 mortgaged properties, compared to a quarter average of 27,250 in 2014 and 2015.

While the weaker property market is a factor, analysts say, it is recent tax changes that are having the biggest impact.

Between now and 2020 landlords in the higher-rate tax bracket will lose their ability to offset their mortgage interest against their profits. In effect, they will have to pay income tax on their turnover, rather than profit, drastically reducing profits or in some cases triggering losses. 

There is now also an additional three percentage point stamp duty surcharge applied to any additional home purchases beyond a main residence. 

Winding down a property portfolio can take months or years depending on the size, and capital gains tax will be due if the annual £11,300 allowance is exceeded.

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