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Scottish Rental Market Continues Struggle Due to Tax Changes
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Tax changes continue to cause pressure on the Scottish rental market, causing buy-to-let landlords to cut down on properties in their portfolio, or even leave the private rented sector entirely. This is even likely to increase in the coming months.
The letting agent Aberdein Considine has released a report warning that these government tax changes and the removal of tax relief on mortgage payments for landlords have had an adverse effect on the Scottish rental market.
Their report goes on to claim that the amount of buy-to-let landlords has already dropped due to these changes. According to their quarterly Property Monitor report, this has led to a drop in the demand for homes to buy in certain areas of Scotland.
We are looking at a fall of property sales in 17 of Scotland’s 32 local authority areas during the final quarter of 2017.
The introduction of a 3% Additional Dwelling Supplement (ADS) in April 2016 for those looking to invest who already own property, and the Land and Building Transaction Tax (LBTT) are proving to be the major changes causing this financial strain. On top of this, the phasing out of mortgage interest relief is taking its toll.
The buy-to-let mortgages themselves are not as easy to secure these days, due to the increasingly strict underwriting rules set for portfolio landlords.
Jacqueline Law, managing partner at Aberdein Considine, has said: “What started as a trickle of landlords leaving the sector in 2017 has now become a steady flow.”
The letting agent is predicting a sharp decline in available properties to rent appearing on the market in the near future, largely due to landlords making the decision to reduce their portfolios. If the market does indeed go this way, then the pressure will grow on the private rented sector, with a possible consequence of rising rent prices.
Law also commented: “There has been a significant change in the Scottish property market in the last six months and it is gathering pace.
“By targeting landlords, politicians north and south of the border are squeezing one of the biggest and most powerful buying forces out of the Scottish property market, which is already affecting sales in certain areas.”
This pace will have to slow soon, otherwise we run the risk of a market flooded with overpriced rental properties, yet not much choice.
