Bittersweet profits for buy-to-let landlords

Propety to let signs © Getty Images

Buy-to-let investors in the UK have suffered a dismal few years. The government’s determination to make the sector less appealing to investors seems to have worked.

As we pointed out in last week’s issue, the number of landlords in the UK has fallen by 120,000 in the past three years, according to figures from estate agent Hamptons International. Nevertheless, these landlords are leaving the sector with fairly significant profits. The average landlord in England and Wales sold their buy-to-let property in 2018 for £79,770 more than they paid for it (before tax), having owned it for nearly ten years on average.

Last year, 85% of landlords sold their property for more than they paid for it, with 15% making a loss. As you might expect, those selling property in London made a profit almost three times the national average, selling for a £248,120 profit. However, landlords made more money in 2017, selling for a £83,430 profit, with London landlords making £272,120. It’s also important to take into account the potential opportunity cost of leaving the sector.

Until a few years ago, buy-to-let was a fairly reliable source of income and capital growth for many. The government was concerned that landlords were pushing up prices beyond the reach of first-time buyers. While its clampdown has cooled the buy-to-let frenzy, it’s a shame that the Help to Buy programme is having the same effect.