New figures released by Savills, and published by The Times, show exactly why it no longer makes sense to be a landlord.
The newspaper, using data prepared for it by the high-end agency, compares buy to let profitability a decade ago, with the situation today.
It says: “The average sold price for a buy to let property was £161,404 in the first quarter of 2014, according to Savills, and an investor borrowing 70% of the purchase price would have needed a deposit of £48,421. They would have paid stamp duty at a rate of 1% - £1,614 - meaning an upfront cash outlay of £50,035.”
Compare that with today, when the average sold price of a buy to let property is £236,311 sir a borrowing with a 70% mortgage would need a deposit of £70,893 and a huge £7,089 stamp duty at 3% of the purchase price. The total outlay for the landlord now would be £77,892.
However, the Savills/Times data shows that rental yields have hardly changed.
What the article does not bring into the equation is the much higher additional payments landlords have to make outside of times of purchase or sale - local council licensing, more expensive letting agency fees, plus numerous charges for typically-mandatory checks and measures required for private rental property.
In 2014 a landlord with a £112,983 mortgage on the market average 3.85% inters-only loan would have annual borrowing costs of £4,345 but at least an annual rental income of £10,072.
However in today’s low-allowance, high tax landscape, a landlord with the average £165,418 mortgage on a 5.48% interest-only mortgage would pay £9,058 a year; with typical annual management fees and repair costs of £2,934 they would have a pre-tax profit of just £2,820.
Worse still, a higher rate landlord would pay £2,940 in tax - 104% of their profit, leaving them with an annual loss of £120. Many landlords will be above this average loss.
You can see the whole article here, but for many readers it will be behind a paywall.
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