David Alexander comment: Report of landlord woes puts ‘fat cat’ myth to bed

Those who still believe the stereotype of the “fat cat landlord” – sunning himself on the patio of a Majorcan villa, paid for by exploited tenants back home in rain-lashed Britain – could educate themselves by studying a new report issued by the insurance company, LV General Insurance.
One more tax burden could lead to a significant decline in investment in property letting, says Alexander. Picture: contributedOne more tax burden could lead to a significant decline in investment in property letting, says Alexander. Picture: contributed
One more tax burden could lead to a significant decline in investment in property letting, says Alexander. Picture: contributed

Taken from a survey of landlords across Great Britain during May this year, the results show that though still profitable in terms of income and capital appreciation, letting out a property for residential rent does involve quite hard work… as well as ongoing financial investment.

From the statistics produced by the survey, LV estimates that landlords spend £4.7 billion a year on maintaining their properties. This equates to an average of £3,134 per landlord, with the figure in Scotland being slightly higher at £3,146. Boilers account for the biggest single outlay (£370) while other high-spend items are flooring and white goods. Spending on installing or replacing alarms is highest in Scotland at £253, suggesting that either security is given a higher priority or there is greater fear of break-ins north of the Border.

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As for the hassle factor of being a landlord, one third (34 per cent) admit that bad tenants are the most challenging aspect of the job. The better news is that nearly half of landlords (46 per cent) have never experienced a tenant dispute, however almost a quarter (23 per cent) have done so at least once a year, with 6 per cent unlucky enough to have them at least once a month. The most common causes of disputes are delayed rent (43 per cent), damage to property (41 per cent), cleanliness (33 per cent) and disputes over bills or deposits (10 per cent).

It seems reasonable to infer a connection between these problems and the fact that 48 per cent of the landlords surveyed did not use the services of a letting agent. Of the respondents, 17 per cent said being a landlord had a “moderate or significant” impact on their free time. Consequently, the average tenure of a property for a rental landlord is just six years – although I would maintain that in a high-value area such as Edinburgh this figure would be significantly higher.

With tenant problems and reductions in net income due to taxation changes, 41 per cent of landlords are thinking of selling up. The insurance company clarified this by stating that only 10 per cent were “definitely considering” doing so, which seems the more realistic figure, being closer the annual “turnover” of rental properties. Therefore it would appear that at least 90 per cent of those who are landlords today are still likely to be so this time next year.

However, while one should always be careful with “averages”, the results of the survey do probably mirror a trend which carries a subtle message for government, whether at Westminster or Holyrood: that added to the effort and expense involved, one more tax burden could lead to a significant decline in personal or family investment in property letting, with the obvious consequences for the supply of the nation’s rental stock.

Back in Edinburgh, it has been revealed that hotel operator Best Western had targeted the former House of Fraser store at the West End before being beaten to it by Diageo, which plans to turn the site into a high-end Johnnie Walker-branded “whisky experience”.

Hopefully, Best Western will find another location in the capital given its aim of doubling an already 260-strong portfolio by 2022. And with soaring visitor numbers, coupled with the (hopefully) city council intention of regulating the number of residential properties given over to short-stay holiday lets, Edinburgh will certainly need more hotel rooms.

But this or any city needs to have a range of attractions to bring in tourists in the first place. Given the (likely permanent) over-
supply of retail space the Diageo development will do just that – in addition to shoring up the city centre as a place which people have a reason to visit.

- David Alexander is MD of DJ Alexander