New tax and policy changes among things PRS investors fear
There is widespread pessimism among landlords, despite strong fundamentals in the private rented sector (PRS), a new survey by mortgage market specialist Pegasus Insight has revealed.
The Q3 2024 Landlord Trends report indicates that most landlords view the new Labour government as hostile to their interests, with 91% of respondents predicting negative outcomes for the sector under the current administration.
Landlords cited several top concerns, including potential increases in taxes and regulatory costs, perceived anti-landlord bias in policy, and fears of losing control over property and tenant selection.
Among specific policy changes, 85% of respondents expressed worry about possible alterations to capital gains tax (CGT), 79% were concerned about the introduction of rent caps, and 73% were anxious over the proposed removal of Section 21 no-fault evictions.
Other concerns included mandatory licensing (54%) and stricter energy efficiency requirements, such as the need for properties to reach an energy performance certificate (EPC) rating of ‘C’ by 2025 (51%).
The report suggests that if CGT allowances are cut or changes are made to CGT rules, 39% of landlords would refrain from further investment in the PRS, with this figure rising to 48% among those with four or more buy-to-let mortgages. Additionally, 20% said they would consider selling all their properties and exiting the market, while 16% would sell some properties. Meanwhile, 26% of landlords indicated they would increase rents to offset potential losses from CGT changes.
Only 6% of landlords surveyed plan to expand their property portfolios in 2025, while 41% intend to sell properties in the coming year. Leveraged landlords, particularly those with outstanding buy-to-let mortgages, are more likely to sell (46%) than those who own outright (34%). Among large-scale landlords with 20 or more units, 59% plan to divest some of their holdings.
Key motivations for selling include concerns over potential future rental reforms, tax policy changes, rising interest rates, and looming EPC requirements.
This negative outlook contrasts with positive market conditions in the PRS. According to the report, 79% of landlords report strong tenant demand in their areas, and average rental yields have climbed to a 10-year high of 6.5%. Financially, 70% of landlords say they are making a modest profit on their rentals, while 17% report substantial profits.
“This research reveals the depth of concern over the attitude and potential actions of the new government when it comes to the treatment of landlords,” said Mark Long (pictured), founder and director of Pegasus Insight. “This concern is all the more striking given the strong evidence that the sector is in fact thriving, despite the challenging environment it has recently weathered.
“The chancellor would be wise to heed the warning that imposing a heavier CGT burden on landlords could result in quarter of them increasing rents immediately and a sizeable reduction in the number of properties in the PRS in the near term, leading to yet more rent rises as the supply/demand imbalance worsens over the longer term.
“The PRS is vital to the housing needs of the nation, and it is crucial that this government offers reassurance and support to the landlords who provide homes for almost 20% of our population.”
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