Will the buy-to-let market move forwards?

With the Budget taking place in London yesterday, the Financial Services Expo also occurred, north of the border in Glasgow.The Expo saw the intermediaries in attendance asked what their views were on potential buy-to-let growth in the next two years by Ian Boden, Head of Commercial Mortgages at Aldermore Bank.

Split

There was a split response to the question, with 42% of respondents expecting growth in the next two years. However, 33% said they believed there would be a decrease.

Mr Boden noted that, ‘a recent survey showed that 29% of landlords say that they are looking to increase their portfolios, so it’s not a market that’s looking to slow down. Tax and regulation changes were at the forefront of things to consider when looking at how the buy to let market could alter in the coming months.’[1]

‘Most landlords will take this in stride. Many will still see buy to let as being an attractive investment, where they can continue to drive returns through rentals,’ he added.[1]

Removal of uncertainty

Stuart Law, CEO at Assetz for Investors, noted, ‘in my view, the uncertainty has been removed from Buy-to-Let taxes in the Budget. The Budget has clarified that the 3% additional stamp duty will apply to second residential properties that are bought by individuals and companies alike. It has become a cost of investing in the best asset class for several decades and at the forecast growth rate of 5% in house prices this year will take just 7 months to get back! So let’s move on.’[1]

Will the buy-to-let market move forwards?

‘In addition, it still looks like companies that are used to purchase buy-to-let property will be able to fully offset their mortgage interest against income and achieve full tax relief. The many and varied company tax reliefs such as a 17% tax on profits and capital growth could also mean that setting up a company actually made matters better for a BTL investor than before the tax changes when investing privately,’ Law continued.[1]

Affected

Grianne Gilmore, head of UK residential research at Knight Frank, observed, ‘bulk purchases of residential units at the lower value end of the scale will be most affected by the Chancellor’s move, which seems to counter to the Government’s pledge to provide more affordable housing. But the rental market is an entrenched and growing part of the UK housing market and as such, institutional investment in this asset class will likely continue to grow.’[1]

Celebrity property guru Sarah Beeny acknowledged, ‘the new stamp duty rate increase for buy-to-let investors is definitely coming in and I think it will help to slow price rises at the entry end of the market, which is great news for first-time buyers. I don’t think hitting buy-to-let landlords is unreasonable as helping to correct the market shouldn’t be at the expense of the tax payer, so I fully support the rise in stamp duty on investment properties.’[1]

[1] http://www.propertyreporter.co.uk/landlords/btl-market-will-move-forward-despite-changes.html