With a raft of taxation and lending changes, there are signs that some landlords are leaving the buy-to-let sector. How much money do they currently stand to make by selling up? Here, we take a look at new research showing the regional differences in how much profit landlords make when they sell their buy-to-let properties.
Landlord buy-to-let profits New research by the estate agency group Countrywide has found that landlords made an average of £86,851 when selling a rental property in 2017. These findings are based on landlords selling up after an average of 8.7 years of property ownership. While this figure might sound high, it’s less than the £92,886 made by the average owner-occupier, with capital gains tax bills eating into buy-to-let profits. Find out more: capital gains tax on property Regional variations Perhaps unsurprisingly, London investors made the biggest profits, with more than a quarter (28%) doubling their initial investment and average profits clocking in at four times those in the rest of the UK. This is in stark contrast to North East England, where a quarter of landlords didn’t make any profit at all.
How much profit do landlords make when they sell?
|Region||Average profit||Proportion of sellers making a profit||Proportion of sellers doubling their money|
|Yorkshire & The Humber||£32,671||78%||11%|
Top local authorities for landlord profits The picture varies only slightly when we look at local authorities rather than regions. Again, London dominates the list, but there are also places in the top 10 for Maldon in Essex, where landlords enjoy average profits of over £100,000, and Pendle in Lancashire (£19,525). The lowest percentage profits were found in Selby, North Yorkshire, where investors made £9,703 on average.
Rents in London rising most quickly The average cost of a new let in Great Britain increased by 1.5% in February to £954 a month. For the third month in a row, London rents increased at the fastest speed to reach £1,686. Scotland was the only region to see rents drop, with the monthly average now standing at £587.
Five changes for landlords in 2018 Landlords face continuing challenges that threaten to eat into their profits in 2018. Mortgage rates increasing: the Bank of England is likely to increase the base rate soon, and the closure of the Term Funding and Funding for Lending schemes could push up the cost of mortgages. Tighter lending regulations: portfolio landlords (those with four or more mortgaged properties) face stricter lending criteria. Rather than supplying details of overall profits, landlords must now provide details of every property in their portfolio when applying for further finance. Mortgage interest tax relief cuts: from April landlords will only be able to offset 50% of their mortgage interest when filing their tax return (currently 75%). This figure will steadily decrease until 2020, when it will be replaced by a tax credit worth 20% of mortgage interest. Landlord licensing: an increasing number of local councils are bringing in additional and selective licensing schemes, with landlords facing big fines if they don’t adhere to the rules. Check out our table to see if you need a licence. Energy efficiency regulations: from April, rented properties will need to have a minimum EPC rating of E – with fines of up to £5,000 for those who breach the rules. You can learn more about the challenges facing landlords in our full story on 12 things buy-to-let landlords need to know in 2018.