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Buy-to-Let Landlords’ Confidence at an all Time Low

According to research conducted by BDRC Continental – a market research company – private landlords’ confidence is at its lowest since late 2006.

The research showed that 81% of big-scale landlords with 20-plus properties are of the view that the 2015 Budget will decrease their profitability. Among landlords generally, 59% believe their profit will be hampered by the budget.

In addition, less than half (48%) of mortgage-free landlords believe that their short-term prospect is good or very good; amongst landlords with specialist buy-to-let mortgage, the figure decreases to 39%.


Government announced a series of measures aimed at cracking down on buy-to-let buyers. The series of measured is part of government’s effort to tilt the property market in favour of owner-occupiers buyers.

The measures which were announced in June 2015, have gradually started taken their toll on buy-to-let buyers confidence as they started coming into effect this year.

April saw the extra3% stamp duty surcharge on property purchase by buy-to-let buyers and second homebuyers come into effect. In addition, the old wear and tear tax law that allowed landlords to claim tax relief on 10% of their profit regardless of if they made repairs or maintenance, replaced by a new tax law that only covered actual maintenance and repairs.

In anticipation of the extra 3% surcharge, purchase of properties spiked in March as buy-to-let investors and second homebuyers brought forward purchases to avoid the additional tax liabilities. The annual price growth rate climbed to 5.7% as a result.

However, after the tax duty came into effect in April, activities plummeted. Annual growth rate plunged to 4.9%. Judging by Mortgage Lending data, buy-to-let buyers may have accounted for 25% of the buying activities in March.

In London, buy-to-let purchases were up by 26 per cent on the previous quarter. This represents an upturn in the recent trend of lower investor confidence that has been in decline since it peaked in the 4th quarter of 2014.

Second home buyers accounted for about 23 per cent of the total of all first quarter purchases in London, an increase from barely 14 per cent in the 4th quarter of 2015.

Together, second homebuyers and buy-to-let investors accounted for almost 60 per cent of purchases in prime London.

In Prime Central London, second homebuyers accounted for 41 per cent of all purchases slightly edging out buy-to-let investors purchases which accounted for 35 per cent of all sales.

On the other hand, the new wear and tax law caused landlords to delay expensive maintenance on their properties till the tax took effect in April to take advantage of it.

However, a survey by published by HW Fisher and Company showed that 67% of landlords disapproved of the new wear and tax law, while 58% feel that the former flat-rate tax was fairer.

In addition to this, the maximum tax relief for landlords will gradually drop from 45% to just 20% gradually beginning from 2017. This means that if interest rate increased significantly in future, many landlords who borrowed to finance their property may be operating at a loss.

This may be part of the reason while a good number of buy-to-let purchases in March were done by cash buyers as they are better primed to absorb the tax relief cut that will be gradually phased in from 2017.  Robert Gardner, Chief Economist of Nationwide, said:

“Viewing the transactions and mortgage lending data together suggests that, while BTL lending is likely to have risen strongly in March, a large proportion of the boost to house purchase activity came from cash buyers.” He also expresses concerns on BTL purchase activity in future due to recent policies. He added:

“House purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions. The recovery thereafter may also be fairly gradual, especially in the BTL sector, where a wealth of other policy changes, such as the reduction in tax relief for landlords from 2017 are likely to exert an ongoing drag.’

Shortage of Supply

“There are few ‘happy ever after’ tales here. Many private landlords in Britain are really concerned about the impact of the 2015 Budget when tax relief on private rental properties was cut, and given the housing shortage, the potential knock-on effect on renters and the supply of rental homes is something that we all need to care about” claims BDRC director Mark Long.

Also, the flurry of activity in March also reduced the amount of properties in the market. Royal Institute of Chartered Accountants revealed that data available to them extending back to 1970 showed that the number of houses on estate agents books was close to all time lows (see chart below).

Article source: The House Shop

Also while returns on buy-to –let properties have been significantly hampered, reducing its attractiveness, house prices is still expected to keep increasing. For instance, although April was a bad month, prices still grew by 0.2%. This means that potential investors in this sector are not just faced with more taxes and dwindling return on investment, they still have to pay higher prices for houses. This is expected reduce buy-to-let purchases.

While the downturn in buy-to-let buyer’s confidence and government crackdown on this group of purchasers will reduce the number of properties on rent, the demand doesn’t show any signs of abating. In fact, about 40% of landlords report an increase in demand of rental properties in their area. This represents a 5% increase from the last quarter of 2015.

In this regard, landlords with medium to big sized portfolios are experiencing increase in demand of their properties.

To curtail the effect government policies may have on their bottom-line, landlords may increase price especially at the backdrop of constrained supply and increasing demands.


In conclusion, there is no doubt buy-to-let landlord’s confidence is very low due to recent measures taken by the government in its last budget. However, the can find little solace from the fact that demand is expected to increase as competition dwindle.