Landlords who see their incomes being squeezed by new regulatory burdens may be tempted to turn to alternative ways of securing income in the UK housing market, by switching into short-term letting through outlets, such as AirBnB.
Apropos by DJ Alexander Ltd, a property management firm, advises landlords to think carefully about how they choose to change their investment strategies in the private rented sector (PRS) before “making a leap into the unknown.”
The Government is gradually phasing out mortgage tax relief on landlords in recent years. A report by Paragon indicated that as many as 24 per cent of landlords intend to sell properties they own as a way of coping with higher tax bills.
Landlords seek higher yield
One of the benefits of shifting to short-term letting is the potential for higher yield, Apropos claimed. “The growth in some parts of the UK has been substantial, with Edinburgh, for example, now having over 12,000 hostings, which has doubled in the past year.”
The property management firm said AirBnB had: “223,200 active listings in the UK, generating £854 million with average earnings for the owners of £3,100 per year.”
However, Apropos identified potential disadvantages, saying: “there may be considerable dead periods when you aren’t earning; the maintenance costs will be higher as you have beds to change and properties to clean on a regular basis.”
They also claimed that: “[AirBnB] have already been banned in some cities and had their activities restricted in various places around the world, (…) coming under considerable pressure from numerous local and national governments in the UK and abroad.”
Not suited to all landlords
Apropos stressed the importance for landlords to think about their options carefully when considering a shift in investment strategies as a result of increasing regulatory burdens.
“The issue for any wavering landlord contemplating the move from long to short term letting is the level of return, the guarantee of occupancy, the limiting of regulatory and financial restrictions and the impact on the long-term value of the property investment,” Apropos claimed.
They concluded: “Equally, many landlords could substantially improve their earnings by reviewing their portfolio, their finances and their individual circumstances. There is still a very good return to be made from the PRS, but it requires a professional approach.”