Since last year, those purchasing second homes have paid an extra 3 percent tax; as of last month, landlords are facing added costs in the form of reduced tax relief for rental income.
“If I thought stamp duty was bad, the tax relief issue really was the nail in the coffin,” landlord Jennifer Pickford told Bloomberg. “It just makes the whole exercise unprofitable and pointless.”
Pickard isn’t alone: Landlords have retreated from the market, with homes purchased as rental properties dropping to 12 percent of the market in February compared to 20 percent a year earlier, according to brokerage Hamptons International. That number jumped to 29 percent in March, however, as landlords rushed to make purchases before the tax took effect.
With more rentals available, the average asking rent in London fell 4.3 percent in the first quarter to $2,490 a month, according to Rightmove Plc., a property website.
Landlords with rental income of 15,000 pounds — or $19,273 dollars — who pay 40 percent tax will see profits fall 86 percent in 2020, according to mortgage broker John Charcol.
“It’s no surprise that investors are now buying fewer rental properties in London and some are even leaving the market altogether,” said Lucian Cook, head of residential research at Savills.
One reason to stay? London home values are up 86 percent since 2009, and are now the highest level on record. It now costs buyers 14.2 times their salary to buy their place. [Bloomberg] — E.B. Solomont