For landlords in the UK which include many oversea investors comprising Nigerians and other nationals, the property market has no cheering news as increasing tax burden is weighing heavily on them.
This burden is also seen impacting the country’s wider property industry as the landlords are already looking to cut their annual spending unlike their Nigerian counterparts who would, automatically, have transferred that burden to property buyers.
The fear that is already palpable in that industry is that, in the event of the landlord’s cutting their annual spending, professionals, artisans and sundry stakeholders in the industry would feel the impact by way of income loss.
Latest research by Kent Reliance, a specialist mortgage lender and part of OneSavings Bank plc, says that move could also hit lettings agents and the top areas where landlords feel they can make savings are agent fees, property maintenance and mortgage costs.
The firm says landlords currently contribute £15.9 billion per year to the British economy through pre-tax spending on running their portfolios, supporting thousands of jobs and that this has more than doubled from an estimated £7.1 billion in 2007, owing to the rapid growth of the private rented sector and climbing costs per property.
The cost of property upkeep, maintenance, and servicing is the largest outlay at £5.5 billion while landlords spend £2 billion in service charges and ground rent, £963 million on insurance, £904 million on utilities, and a further £1.1 billion on other associated costs of letting a property.
Spending on letting agents’ fees totals £4.7 billion each year with £644 million spent on legal and accountancy fees and £218 million on administration costs. Altogether, landlords provide £5.5 billion of revenue for these sectors.
The research also shows that costs per property have increased by a quarter since 2007. Looking at the running costs per individual property, the average landlord now spends £3,632 per year in running costs, before tax or mortgage interest, a third of rental income. This has jumped by a quarter since the start of 2007, an estimated rise of £714, without factoring in increasing taxes.
Of this, £1,025 is spent on maintenance, repairs and servicing, with £870 spent on letting agent fees per property. A typical landlord spends £374 per property each year in ground rents and service charges. Insurance typically costs £181, and legal and accountancy fees £121, while administrative and license fees add another £41 per year. A further £652 is lost in void periods each year.
Against the backdrop of rising costs, and higher tax bills, landlords are taking action with 36 percent of landlords, surveyed by BDRC Continental on behalf of Kent Reliance, saying they are already reducing or planning to reduce their spending, while one in five are looking to raise rents.
Some 17 percent of landlords identified property upkeep and maintenance as a target area for cutting costs, while 10 percent identified letting agent fees and the same number said mortgage costs. Those landlords anticipate they will reduce spending on letting agent fees by 28 percent, property maintenance and servicing by 21 percent and mortgage costs by 15 percent.
CHUKA UROKO
