How rental buying has boosted the UK property market

Vanessa Warwick, 59, first became a homeowner in 1992 while working as a presenter on MTV in London. She fell into the business by chance, renting her studio in the capital when a faulty lease prevented her from selling it. Since then she has built a portfolio of properties across the UK.

“The rental mortgage has taken property out of the domain of the rich into the arena of the masses, and has helped millions of people use it as a vehicle to create significant wealth outside the normal roads,” she declared. .

The real boom came after the 2008 financial crisis. Homeowners who were not forced into negative equity and survived the crash were rewarded with a boom in tenant demand and, as a result, an increase in renters. rents. The number of tenants increased by 74pc over the decade between 2007 and 2017.

During this period, homeownership among those under 45 declined sharply. In 2003-04, before the crisis, 64% of those under 45 owned a home, according to the UK Housing Survey, but by 2015 that figure had fallen to 45%. Homeowners rich in equity, supported by low taxes, high yields and skyrocketing house prices, have gobbled up properties, expanding their portfolios. But, that would amount to hitting the entire sector.

Regulatory compression

After the boom came the repression. Labor’s lax buy-and-lease approach helped the industry soar, so it was surprising that it was the Tories who cracked down on landlords. The idea behind squeezing investors’ profits was to force them out of the market and free up properties for first-time buyers.

Since 2016, landlords must pay a stamp duty surcharge of three percentage points on rental purchases. This change, and the decrease in mortgage interest tax relief, would have forced a quarter of a million people to sell and exit the market altogether.

These punitive tax changes and increasingly stringent regulations are the biggest pitfalls cited by real estate investors. English homeowners are now required to comply with 168 pieces of legislation, a 40% increase over the past decade, according to the National Residential Landlords Association, a professional body.

Angus Stewart, Property Master, a rental broker, said: “A much heavier regulatory burden and changes in the way rental income is taxed have crowded out hundreds of thousands of small landlords and concentrated the private sector. leased area in a smaller number of hands.

“We see that notch increase every time the government introduces a new tax adjustment or introduces a new layer of regulation.”

The rise of professionals

Homeowners have increasingly turned to incorporation in an attempt to adjust to tax changes.

Some 33,000 landlords started new rental companies between January and August this year, more than triple the amount that did the same in 2015, according to Hamptons. There are now 258,000 incorporated letters of purchase in Britain, up from 133,000 in 2015.

Penny D. Jackson