The majority of landlords want to expand their portfolios over the next five years despite battling economic changes such as increased interest payments and new government regulations, reveals new data from IMLA.
The report shows that on average, landlords with mortgages expect to see their monthly interest payment rise by 80% over the next two years.
This is equivalent to 26% of these landlords’ rental income and 54% of their trading profit, highlighting the need that many landlords will face to raise rents further to cover rising costs.
The survey asked respondents believed they were paying more tax as a result of the removal of the mortgage interest deduction.
Some 36% of the total said they were paying more tax as a result of this change.
But looking at their total stated income, IMLA calculated that 58% will be paying more tax.
So it would seem that more than a third of those paying more tax do not realise they are doing so, or are unaware of future liabilities.
In addition, new regulations have increased landlords’ costs and further regulation could prove unaffordable for some landlords, pushing them out of the sector, with 64% of landlords saying that increased regulation has added to their costs, rising to 73% amongst portfolio providers.
More than two-fifths (44%) said upgrading all their properties to an EPC rating of C, which could become policy under a future government, would either require a grant, the sale of at least one property or is unaffordable.
Despite the current headwinds, most landlords said they planned to expand their portfolios.
Over the next five years, 35% plan to add properties while only 18% plan to downsize.
Among portfolio landlords these figures are even higher: 50% and 17% respectively.
Kate Davies, executive director at IMLA, commented: “The PRS plays a vital role in the UK’s housing landscape, providing homes to 20% of households.
"While a great deal of attention is, quite rightly, paid to the difficulties faced by tenants, there has been surprisingly little understanding of landlord finances and the strains on these, until now.
“Our research shows that many landlords are small businesses with modest financial turnover and trading profits, facing rapidly rising costs.
"Sadly, reality dictates that many mortgaged landlords will have no choice but to increase rents in order to keep their businesses viable, while debt-free landlords may well do the same in order to make an adequate return, even if that is lower than current returns available elsewhere.
“There are tough times ahead for all parties in the PRS, and it is in everyone’s interest to understand the pressures involved.
"Landlords’ tenacity is to be commended, and it is a great relief that so many plan to stay in the sector and increase supply when they can.
"Policymakers should beware adopting any policies which could upset what is already a delicate balance, and ensure they do nothing further to deter the small businesses which form the backbone of the PRS from continuing to invest.
