More than half of UK investors no longer believe property is a good proposition, a survey has revealed.
Research by Rathbone Investment Management found less than a third of people now see property as one of their main investments.
The change in sentiment toward the once popular asset class comes amid a raft of new legislation which has reduced the benefits of owning a buy-to-let home. Anyone buying a second home must now pay an additional stamp duty levy of 3% of the property’s value. Meanwhile, from 2020 landlords will no longer be able to offset mortgage payments against their tax bill, and wear and tear allowances have become less generous.
A survey of 1,000 UK investors and 500 high-net worth individuals by investment house Rathbones found just 7% of people have plans to increase their exposure to the property market.
Research by Aldermore Bank found 25% of landlords think tax relief changes are the main challenge to investing in buy-to-let property, while 22% are concerned about the additional stamp duty levy. Its research found 17% of landlords are planning to increase rents to cover higher costs.
It is thought that rising costs are more likely to put off the 49% of landlords who have just one buy-to-let property than portfolio landlords. According to Statistica, some 27% of landlords own two or three properties, 10% own four or five, 7% between six and 10, and 6% have more than 10 properties in their portfolio.
Robert Szechenyi, investment director at Rathbones, said: “Recent changes to tax and regulatory treatment of buy-to-let has caused investors to take a step back and assess the viability of these investments.”
Those with more than £100,000 to invest were more positive about the outlook for property, but 38% still said it was not a good investment.
Nearly Half Favour Property Over Pension
Property has, until recently, been an incredibly popular place for Brits to stash their cash as UK homeowners looked to cash in on soaring house prices. A recent survey by the Office for National Statistics found some 49% of people felt investing in property was a better way to save for retirement than putting money into a pension.
Indeed, a quarter of high-net worth individuals surveyed by Rathbones said they had accumulated their wealth through property. Some 17% have investments in private real estate, 8% in commercial property and 5% in land.
But that may be about to change. Research by the National Landlords Association earlier this year found 20% of members plan to sell a property in 2018. Figures from trade body UK Finance show just 5,500 buy-to-let mortgages were completed in March – some 19% fewer than the same period a year ago. Uncertainty around Brexit is thought to also believed to have contributed to dampening demand.
Szechenyi added: “While it’s understandable that property has been a popular investment in the past, it’s now making less and less sense. Not only are returns being impacted by increased tax, but it can prove high risk due to a lack of diversification – property investments require a large amount of capital to be held in one single asset and landlords will often hold a number of properties within one region.”
To tackle this, some investors are turning to pooled funds as an alternative way to gain exposure to the UK property market. Indeed, some £26bn was poured into property funds in March, according to latest figures from trade body the Investment Association.
Charles McDowell, commercial director at Aldermore, said: “Despite recent changes, many people still view buy-to-let as a good investment. There is no denying that the market has taken a bit of battering thanks to regulatory, underwriting and tax changes but there remains a net sense of optimism among landlords.”
