A number of landlords relying on their property to fund their retirement could now face a ‘pension black hole’ because of new laws and regulations affecting buy-to-let investors.
MakeUrMove, an online letting agency, has uncovered evidence three quarters of the UK’s private landlords, who invested in property to provide for their retirement, are considering selling their properties if additional costs narrow their margins. Others, meanwhile, are shelving further investment plans.
Over the last few years, a number of changes have been made to buy-to-let including the phasing out of mortgage interest tax relief and tougher criteria being imposed on portfolio landlords with four or more properties. Landlords must also factor in the rising costs of managing properties.
According to MakeUrMove older landlords are disproportionately affected because they have little time to make changes before they need to rely on their properties for a retirement income. It said those aged over 55 were most concerned about making too small a profit on their investment.
MakeUrMove, warned, if they do decide to sell, a surge in supply of properties in the housing market could mean they are unable to cash in the investment or are forced to sell for less than they hoped. This would leave them less in their pension pot.
Smaller, casual landlords will be most impacted by the rising costs of managing properties, MakeUrMove explained, with 38% saying this was their biggest concern.
Alexandra Morris, managing director of MakeUrMove, added: “The problem impacts landlords with a buy-to-let mortgage the most severely, as these additional overheads, combined with recent changes to the private rental sector, mean smaller landlords hoping for a steady income in retirement are worrying that their properties won’t even cover their own costs.”
Eileen Cooper, a landlord with two properties, was one such person. The self-employed, part-time landlord was relying on her rental properties to provide an income in later life.
She said: “We planned to buy another property once the mortgages on our current rental properties are paid off, however we have now decided against this due to the new laws and regulations brought in by the Government, along with the ongoing changes to the tax system, which make it much less viable as a long-term investment.”
She added: “Due to the changes in law and regulation, the time required to manage the properties isn’t worth it.”
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