One year on from the Government’s big shake-up of buy-to-let investing, new research from Property Partner reveals how landlords have responded.
54% of buy-to-let landlords responded that they are selling all or some of their buy-to-let properties as a result of the Government’s changes.
Of the three key buy-to-let changes, the phased reduction of mortgage interest tax relief, which began exactly a year ago (April 2017) has caused the biggest financial shock for investors:
- 64% of respondents have had their finances negatively impacted by the mortgage interest relief changes
- 59% have had their finances negatively impacted by increased stamp duty on second homes
- 44% have had their finances negatively impacted by harsher mortgage affordability checks
Some might hail this a success story for the Government, with their intention to cool the market working. Yet not everyone’s a winner. The changes are having a knock-on effect on tenants, as landlords are left with little choice but to pass increased costs on.
47% have already increased or are considering increasing rents in the face of new buy-to-let rules. Those considering upping rent would be willing to do so by an average of 16%.
Robin Foxhall, a buy-to-let investor affected by the changes comments: “My wife and I manage a small portfolio of eight buy-to-let properties which we have built up over time. Whilst we believe residential property continues to be a strong asset class, the new Government regulations have made us reconsider where we invest in the future. The new rules mean that returns from our portfolio will reduce whilst also making future investments less appealing. As a result we continue to look for alternative channels to invest in residential property which are easier to use and deliver healthier returns.”
Mark Weedon, Head of Research at Property Partner comments: “The Government’s plan is to cool the buy-to-let market in order to increase access to property for potential first time buyers. Unfortunately it’s clear many landlords are being forced to consider increasing rents to offset their losses, which could actually hinder those looking to take their first step on the housing ladder. The UK housing market remains vastly undersupplied. Attempts to tweak demand with a crackdown on investors will not solve the housing crisis, the real solution is to build more houses.
“We should also remember a number of people in the UK choose to rent and enjoy the flexibility renting provides. Professionalised landlords are central to supporting this group in the UK.”
Property as an investment remains attractive. 32% of respondents are now looking for alternative property investments.