BTL Faces Three More Years of Decline, Forecasts Shawbrook Bank

New reports, compiled by the Centre of Economics and Business Research for Shawbrook Bank, indicate that the buy-to-let sector will persist in its decline up until 2021. This forecasts a further price correction for the London housing market.

The number of buy-to-let mortgage approvals for purchase experienced a drop in 2016 by 13% followed by a decrease of 27% in 2017.

The report details that further falls will be taking place as the sector adapts to a raft of tax changes and new regulation.

The bank claims that Government policies have had a marked effect It suspects that the market will stabilise in 2021, which will be followed by returns to growth in the following two years.

Shawbrook expects that strong tenancy demand will continue, and that supply will be underpinned by professional landlords.

The report further detailed that London house prices could drop further. It commented: “London has long dominated the BTL sector.

“But a flat housing market and limited capacity for rental growth in the capital means that other places in the country offer better yields to investors, especially cities with large student populations.

“Brexit adds a further layer of uncertainty: with a number of City jobs at stake, London’s housing market might be in for a further price correction.”

Managing Director for commercial mortgages at Shawbrook Bank, Karen Bennett, commented: “Whilst the series of government and regulatory changes have had a significant impact on the sector, we have seen the impact felt more heavily amongst the “amateur” landlord community which has presented growth opportunities for professional investors.

“Recent political turbulence has had an amplifying effect on investor confidence but positively, the market remains buoyant for those with a long-term strategy who draw upon specialist advice to fully understand the impact of these policy shifts.

“Regulatory change that supports the public interest is not something to be afraid of, and we predict that this high performing asset class will remain a fundamental strength over the long-term provided lenders continue to adapt and change alongside it.”