industry news
Analysing buy to let: Are the market’s best days really over?
Experts are lining up to predict a sharp decline in the popularity and profitability of buy to let as a business model, with growing uncertainty for private landlords and their tenants.
While a growing number of commentators bemoan the impact of existing and future tax changes and restrictions in BTL mortgages, they appear to overlook the possible benefit this could have for first time buyers. Buy to let investor Fergus
Wilson, who once had a portfolio of almost 1,000 homes in Kent, told reporters that future investors will never be able to match the financial success he enjoyed and that landlords’ days in this country are numbered. Mr Wilson warned the much
tougher lending criteria, with larger deposits and higher rental income requirements, will kill off the market for future buyers. The number of houses bought
with buy to let mortgages is falling on the back of changes made by the Bank of England. The Council of Mortgage Lenders’ chief economist, Bob Pannell says that 2015 may turn out to have been “peak buy to let” year. “We are currently running at
around 6,000 new purchases a month using buy to let mortgages, compared with 10,000-11,000 in the corresponding period last year. The combination of a tightening in lending criteria and changes to tax relief are the key drivers,” said Mr Pannell.
Decline
A similar warning came from Paul Smith, chief executive of the haart chain of estate agents, who said the number of buy to let transactions has fallen 63 per cent this year, amid a “war on landlords”. “The scale of decline in buy to
let in just 12 months is deeply worrying – landlords have clearly pulled out of the market and are unlikely to return any time soon. This is entirely the result of
government policy, with Theresa May picking up George Osborne’s baton and proceeding to bash landlords with renewed vigour. The effect has been to more than halve the number of buy to let sales in England and Wales, and the inevitable consequence will be fewer properties available to renters next year, and higher rents.” But the forecasters of doom are
overlooking the fact that residential property remains an attractive investment, with property values and rents rising at levels ahead of inflation. What remains unclear is how the
tax changes impact on existing and future tenants. It is unclear if rents will rise quickly to compensate landlords or if tenancies will be ended at short notice, prior to properties being sold if large numbers of amateur landlords decide to sell up. Of course if this happens and
the market is flooded with properties for sale, this could spell good news for renters who are looking to buy their first home. The Residential Landlords
Association thinks that rent rises are inevitable. Policy director David Smith says “These changes will simply place an upward pressure on rents which in the end will only cause difficulties for tenants.”
“We are currently running at around 6,000 new purchases a month using buy-to-let mortgages, compared with 10,000-11,000 in the corresponding period last year”
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www.housingmmonline.co.uk | HMM January 2017 | 19
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