UK landlords are divided along generational lines over the future of the buy-to-let sector and whether to stay the course or sellup, new research suggests.
Overall, some 56 per cent want to keep or buy more rental properties, but 44 per cent are looking to sell, according to data from investment firm Octopus Choice.
Millennial landlords are more inclined to sell than stay, with 65 per cent planning to sell one or more of their properties. This compares to 29 per cent of those aged 55 and over. Younger landlords are also more likely to admit that managing a buy to let has become a hassle with 81 per cent doing so compared to 39 per cent for investors over 55.
The biggest annoyance cited by millennials is dealing with onerous tax returns, while older generations blame high one-off costs.
Some 87 per cent of millennials admitted that they underestimated the costs involved, including repairs and upkeep, insurance and initial legal and conveyancing fees, compared to just a third for those over 55.
Among those looking to exit the market, some 24 per cent blame falling yields while 23 per cent say it is due to tax changes and 19 per cent are put off by cooling house prices.
Some 60 per cent say that property management had become a burden and 61 per cent had underestimated the costs involved.
Sam Handfield-Jones, head of Octopus Choice, said: “The hassle and cost of buy-to-let is a source of growing frustration, and some landlords may find that their once reliable day to day income is becoming harder and harder to come by.”
But this isn’t the case across all parts of the market, with money still to be made from the right property in the right location, he pointed out.
He added that London landlords face the toughest choice, with falling yields and slowing house price growth set to reduce profits.
An analysis by the firm shows that typical buy to let properties in London cost landlords over £1,250 per annum for the first five years and an average London house worth £475,000 would have to be sold for £590,000 eight years later, just to break even, even taking into account the income over that eight year period.
While London hotspots can still be found, such as Tower Hamlets, Barnets and Hackney, three quarters of landlords in the capital think investing in buy-to-let will be less worthwhile in five years time, more than any other area.
In Scotland and the East Midlands, it’s a different story with Scottish landlords enjoying average annual returns of 8.8 per cent on their investment over an eight year period, while those in the East Midlands only return 8.2 per cent.
Handfield-Jones added: ” Against this backdrop, its not surprising that some investors are seeking alternative ways to indirectly invest in the property market.”
“For those looking to leave, there are growing numbers of ways to keep one foot in the door”
Richard Truman, Head of Operations at Simple Landlords Insurance added ” Our own research into the ’emerging landlord’ sees landlords in general getting younger. Perhaps what were seeing here is the difference between the small, accidental landlords, and the larger professional landlords. And it;’s a gap thats widening.
Those getting into property investment to make a quick hassle-free buck, and who haven’t done the due diligence, research and number crunching , are going to find things tough in today’s market.
Those investing for the long term, clear on their strategy and goals, looking to grow, and savvy about the market challenges and opportunities- those are the landlords winning at property, and confident about the future.”
Source: Simple Landlords Insurance