Buy-to-let yields drop to three-year low

A number of BTL landlords are beginning to feel the effects of recent tax changes, resulting in a squeeze on their profits, new research shows.

Average rental yields in the UK have dropped to a three-year low of 5.6%, according to fresh research by BM Solutions.

Those with large portfolios have been worst affected, with three quarters of landlords managing between 11 and 19 properties having reported a drop in profitability over the past three years.

Almost a quarter of buy-to-let investors, especially those with larger portfolios, now plan to sell up and quit the private rented sector, with the research citing tax and regulation changes as the main reasons why landlords are offloading properties.

Having said that, some landlords are still planning to add to their portfolios, with one in seven landlords planning to purchase more properties, the results from BM Solutions’ quarterly landlords panel shows.

The research also found that confidence among landlords in the UK financial market in the short-term has dropped by 8% year-on-year to reach just 9% - the lowest level in five years.

But despite the fall in their confidence levels, the majority of buy-to-let landlords still make a healthy profit from their property investments, with 86% of landlords saying that they still make a profit from their letting business.

Some 31% of landlords surveyed make a full time living from their property portfolio, while 55% use the income to supplement their earnings.

Phil Rickards, head of BM Solutions, commented: “The buy-to-let industry has been through many regulatory changes over the past few years, and the effects of this are clearly being felt.

“However, the landscape is not entirely bleak. The proportion of landlords making a profit from their lettings activity remains at 88%, equalling the record high seen in quarter three 2018.

“It is clear that the market is sensitive to the current legislative and macro-economic environment and this has been reflected in the latest findings.”

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