Losses made by landlords disposing of investments in residential property have jumped in the last tax year by 32%.
It’s now at £1.15 billion, up from £870m, according to Bowmore Wealth Group.
The data provided by HMRC to Bowmore shows the value of losses that have actually been crystallised by the sales of those residential property investments.
Bowmore says that paper losses are likely to be far higher.
The study looks at reported losses and not profits made by other investors.
David Floyd, head of private clients of Bowmore Financial Planning, explains that buy-to-let (BTL) investors have been hit by stagnating property prices nationwide and by falling prices in some key markets such as London.
Lloyds House Price Index for September shows that prices have been flat over the last 12 months. However, for London prices fell by 2.2% over the last twelve months.
Floyd says that the fall in property prices in real terms (post inflation) comes at the same time as rising mortgage costs and the impact of the Renters’ Rights Act.
The Renters Rights Act makes it harder to remove a tenant that has defaulted on their rent and also makes it harder for landlords to increase their rent.
He adds: “BTL investors are looking at the growth in global stock markets and the high yields on UK Government bonds and asking themselves if they should still be in an investment that has a relatively low net yields.”
“The Renters Rights Act may have also prompted BTL investors to sell up even if it means taking a loss.”
“A lot of BTL investors found that the administrative burden of being a landlord, as opposed to being a stock market investor, was surprisingly high.”
“That administrative burden and the costs of maintaining the stock left BTL investors with net yields that were fairly low and were flattered by house price inflation. However, house prices have now stalled and the prices of many flats has fallen sharply.”
“The new Act added an extra level of jeopardy and risk into being a landlord.”
