Arthur Dallimer bought his first property at 18 back in 2014. Now, 12 years later, he owns in excess of 25.
The 30-year-old, from Swindon in Wiltshire, says he has been “successful” in the property business, but mortgage hikes, changes in regulation and higher taxes means he’s looking to move towards what he calls a “leaner model”, selling around nine of his portfolio.
He says the recent changes mean some of his buy-to-lets are making less profit than the value of the properties would make in a savings account, and, also, not growing in value.
All of his properties are owned with some sort of mortgaging or financing, and in recent months some have come off their fixed rates and on to variable ones.
With mortgage rates soaring in recent weeks because of the conflict in the Middle East, this has meant extra costs for Arthur.
New rules revealed in the Budget also mean landlords will pay an extra two percentage points in tax from next year, and new renter regulations are making it harder for tenants to be evicted.
As a result, Arthur says he is taking time to re-evaluate his porfolio.
“I’m actively selling properties that no longer support the business,” Arthur says.
He says the combination of higher mortgage rates, more regulation and upcoming tax changes make the landscape “less attractive” for landlords like him.
“Landlords are facing higher financing costs, increased compliance obligations, and reduced flexibility, all while returns are being squeezed. For many, the risk-to-reward ratio is becoming harder to justify,” he says.
He doesn’t know exactly how much the recent mortgage hikes will add to his costs yet, but says that some of his rentals are already making less profit than he could make in the bank, and that situation could become worse.
One of his properties is a two-bedroom flat in Royal Wootton Bassett, Wiltshire, which he has owned for five years. Over that period, the total net profit was £5,600, with no capital appreciation.
“The money earned more in a risk-free savings account with no hassle of tenants not paying, or replacing broken washing machines,” he explains.
“Once you account for the full cost of ownership, including insurance, mortgage repayments, and tenant management, the return on investment was approximately 3 per cent.”
Most top savings accounts pay a rate of 4 per cent or more.
Arthur says that landlords like him selling up will have a “knock-on effect” on the housing market, as there will be less supply for tenants.
According to analysis by Moneyfacts, landlords taking out a mortgage now face paying an average of £1,100 more a year than they would have at the start of March.
English Private Landlord data shows that 57 per cent of landlords have a buy-to-let mortgage. More than a third (38 per cent) have no debt or borrowing.
Smaller proportions had a commercial loan (3 per cent) or a loan from family or friends (2 per cent).
The National Residential Landlords Association (NRLA) has said that most landlords cannot absorb growing costs without passing them on through higher rents.
And it has called for the Government to scrap next year’s income tax hike on the sector.
“It is simply stereotyped nonsense that every landlord can somehow absorb ever-increasing costs indefinitely. They can’t, and as a result, it is tenants who will suffer most as rents continue to creep up,” said Ben Beadle, chief executive of the NRLA.
Some lenders have also made changes to the way they test that landlords can afford their mortgages in light of recent rate hikes.
Santander for example recently increased its standard affordability rates on buy-to-let mortgages from 7 to 7.5 per cent, meaning landlords would have to show they were able to afford their mortgage at this rate before taking it out.
Lewis Shaw, a mortgage broker at Shaw Financial Services, said the changes, along with rate rises and new taxation, were “bad news for landlords and potentially great news for first-time buyers,” who might be able to buy some of the homes being sold.
“I wouldn’t have a buy-to-let if someone gave me one. Maybe this is the end of buy-to-let as we know it. It certainly feels like it,” he said.
Rental groups said landlords should not need to raise rents to cover more expensive mortgages.
Ben Twomey, chief executive of Generation Rent, said: “Homes are the foundations of our lives. High rents shatter those foundations by pulling people into poverty and pricing them out of their homes.”
He said many landlords did not have a mortgage, but added: “For those that do, the huge increases in rents in recent years should mean they won’t need to hike rents even further.
“Rather than tax breaks for landlords, renters need better protection from the rising cost of living. The Government must urgently give mayors the power to limit rent increases in their areas, making sure renters don’t bear the cost of international events.”
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