79% of Landlords only able to cover their mortgage interest

by Property 118

9:41 AM, 7th December 2018
About 7 days ago

79% of Landlords only able to cover their mortgage interest

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79% of Landlords only able to cover their mortgage interest

New research from the NLA shows 79% of landlords are only servicing the interest on their mortgages, not paying down their loans, as they contend with rising costs.

This statistic has prompted the NLA to examine the narrative that tenants are just paying off their landlord’s mortgage. In a discussion paper launched in London last night, the NLA and PricedOut, the campaign for affordable housing, looked at both sides of the argument.

The NLA holds that there are many costs to running a successful lettings business that tenants are either unaware of or don’t consider in this debate.

Richard Lambert, CEO of the NLA, says:

“There are myriad costs to running a letting business, including maintenance, repairs and upgrades, licensing, and insurance. Rents have to cover all these costs, as well as the interest on a mortgage, where there is one.

“Housing is expensive for everyone at present. The Government needs to encourage the supply of housing in all tenures, including the private rented sector.”

The NLA, in the discussion paper, recommends the Government:

  1. Allow more time for existing policies to bed in (five years), and evaluate their effectiveness, before new policies and regulations are made.
  2. Encourage building more housing of all tenures by simplifying planning and borrowing rules.
  3. Stop taxing professional landlords out of the market. The loss of good landlords will not make renting more affordable; it will simply drive up the cost for those who want to access decent rented homes.

For more information or to view the discussion paper, go to landlords.org.uk/therentingbusiness

*NLA Landlord Panel Survey Q3 2018 (690 respondents)

Note the above is note a huge sample in percentage term of the number of landlords



Comments

Gromit

13:53 PM, 7th December 2018
About 6 days ago

If this true then there is a ticking timebomb about to go off when the tax bills arrives in the next 2 months with the extra tax payable resulting from the first phase of Sec.24 having kicked in.

Jay James

17:06 PM, 7th December 2018
About 6 days ago

So, landlords are not making lots of money (as much of the left would have us believe).

Appalled Landlord

17:55 PM, 7th December 2018
About 6 days ago

PricedOut was allowed to make a fallacious claim without rebuttal by the NLA.

They wrote “If they [landlords] leave the market, they are not reducing the supply of housing. If a landlord sells their asset, it is either bought by another landlord or it is bought, eventually, by a homeowner/first time buyer (either immediately or at the end of a chain of transactions). In the former case, the supply of and the demand for rented homes is unchanged. In the latter case, there is one fewer rental home, but also one fewer household demanding a rental home. The overall supply/demand position is the same.”

This is Craw’s Second Law of Renting Dynamics, whose flaws are exposed here: https://www.property118.com/generation-rent-tries-hoodwink-policymakers/

Craw’s Law was derived from Mulheirn’s Theorem whose flaws are exposed here: https://www.property118.com/generation-rents-dream-based-fallacious-theorem-trustee/

Firstly, it assumes that for every renting household evicted due to a sale there is another renting household that is able to get a mortgage. This is unlikely as there is no correlation between the two factors. Secondly, the number of tenants evicted will tend to exceed the number of FTBs at the bottom of the chain. Thirdly, not all FTBs will have been renting. And finally, some dwellings have left the PRS without being sold to owner-occupiers; instead, the landlords switched to holiday lettings or sold to buyers of second homes. In these cases the eviction of renters does not result in a single renter buying.

For these reasons, as landlords leave the market the number of renters evicted will exceed the number of renters who buy. Rents will rise, and the poorest renters will be put into “temporary” accommodation.

Michael Holmes

21:40 PM, 7th December 2018
About 6 days ago

As a case in point, we have just sold a potential HMO to private buyers because we didn’t want the bother of upgrading the property to that level. It housed 6 students, now it will have a couple only using it. I expect many other landlords are thinking of doing the same thing, so there will obviously be a reduction in overall housing stock coming down the line in the next few years.

Rod

23:05 PM, 7th December 2018
About 6 days ago

It's the same amount of housing stock no matter who owns it!

Gromit

23:17 PM, 7th December 2018
About 6 days ago

Reply to the comment left by Rod at 07/12/2018 - 23:05
True, but the number of houses that can be used as homes is reduced if been used as a holiday let/AirBnB, or as a second home. Similarly a 6 bed HMO nominally 6 dwellings (albeit with shared facilites) becomes a single dwelling result in a net loss of 5 dwellings.
So the stock is the same be its utilusatin is what matters.

Mark Shine

23:58 PM, 7th December 2018
About 6 days ago

Reply to the comment left by Michael Holmes at 07/12/2018 - 21:40
Since Osbo’s 2015 decree, Michael so far I’ve sold one property. V popular 5 bed / 5 occupant HMO sold to a couple without kids. 5 -> 2. The h8rs repeatedly (and technically correctly) state that if a property is sold it doesn’t simply vanish into thin air...

Michael Holmes

8:14 AM, 8th December 2018
About 6 days ago

Reply to the comment left by Michael Holmes at 07/12/2018 - 21:40A slight amendment, yes the housing stock is the same, but the housing capacity is reduced as a result of all the fiscal and regulatory changes made to the PRS. With a steady influx of new immigrants still coming in at the rate of 250,000 plus per year, we never will have enough housing of course. Why do we have such idiots running the country, maybe there is something in the water ? Maybe the Chemtrails conspiracy theory is true after all!

Ian Simpson

21:34 PM, 9th December 2018
About 4 days ago

I suspect the number of 250,000 will revise dramatically downwards following Brexit. A lot of professional and semi-professional Europeans are already leaving, and this trend is set to accellerate in my opinion. Certainly I have seen a massive reduction in demand for HMO rooms, which used to generate 7-10 emquiries within an hour of being listed and are now taking around 8 weeks to re-fill on average... Massive change (reduction) in demand, (Home Counties)

Michael Holmes

23:40 PM, 9th December 2018
About 4 days ago

Reply to the comment left by Ian Simpson at 09/12/2018 - 21:34
The Home Counties may well be the first to see a reduction in enquiries. In the South West, we are in the midst of a building boom which has been going on for the last 6-7 years, mostly caused by white flight from the North and East. Our HMOs are in the Falmouth area which has had a major investment by Exeter University. this has kept the market very active. It is only showing a levelling off of interest at the most at the moment. Major operators are moving in to provide student blocks now.

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