Landlords have seen the profitability of their buy-to-let investment shrink by 17% since last year, according to Howsy.

The lettings management platform found that, despite reductions in the cost of being a landlord, they are worse off overall.

Initial investment costs drop

The initial cost of Stamp Duty Land Tax has fallen by 26% as a result of the recently announced Stamp Duty holiday.

This has cut costs by an average £4,957, coupled with the average tenant finding fee of £827, means the initial price of investing in a buy-to-let has dropped 23% year on year to £5,784.

Ongoing costs down

There’s also been a 10% reduction in the ongoing costs of running a buy-to-let property.

This is driven by low mortgage rates, and landlords have seen their interest drop 10% in the last year.

The 73% of landlords that buy with a mortgage are now paying out £6,232 in annual interest, compared to £6,921 a year ago.

The average annual maintenance and repair bill for a buy-to-let has also dropped 20% year on year to £1,652.

The total ongoing running costs of a buy-to-let now averages £9,414 per year.

Reduction in return

The average rental yield is now 5%, and landlords have enjoyed a 2% increase in annual rental income.

But there’s also been a decrease in the average rate of bricks and mortar capital appreciation over the last 10 years, down from 4.70% the previous year to 3.81% a year currently.

This means the value of a buy-to-let property has only increased by an average of £6,296 this year compared to £8,614 last year.

With both capital appreciation and annual rental income considered, the average buy-to-let is bringing an overall return of £14,564, a 13% decrease on 2019.

Profits down 17%

Once the average UK landlord has paid the ongoing costs associated with a buy-to-let property on an annual basis, they’re left with a profit of £5,150, and overall profitability has fallen 17% in the last year.

CEO of Howsy, Calum Brannan, said: “Bricks and mortar remain a very sound investment, and in many pockets of the market, the return is far higher than that of the average landlord.

“But we need to do more to encourage landlords to return to the market at all tiers and in all areas to meet the massive demand from tenants for rental homes.”