Written By Em

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.”

According to the latest research provided by Foundation Home Loans, 1 in 5 landlords are intending to remain in the buy-to-let market indefinitely. In addition, portfolio landlords are equally adamant.

Seemingly unaffected by the recent regulatory and tax changes paving the way for exit and indications of a mass exodus, 18% of landlords claimed that they would expect to remain a landlord indefinitely, and 19% of landlords with four properties or more said the same.

This is consistent across the age groups: one in ten landlords aged 18-34 intend to remain indefinitely, increasing to 17% of those aged 35-54 and 20% of those aged 55 and over.

At a regional level, a quarter of landlords in the East of England – more than any other region – claimed they had no plans to exit the market.

However, 6% of all landlords questioned claimed that they only intended to remain a landlord for the next 1 or 2 years.

Moreover, the research also discovered that existing portfolio landlords expect to stay invested in the market for an average of 15 years, in comparison to 10 years for non-portfolio landlords.

Furthermore, 20% of portfolio landlords have been a landlord for 16-20 years.

Jeff Knight, marketing director, Foundation Home Loans, said: “There have been ripples of concern that a mass exodus of landlords is expected, and certainly the changes introduced are a handful to deal with if not addressed in the right way. But this is clearly an exaggerated view of the market.

“With so much interest in investing in the long-term, it is therefore imperative that newer landlords are sufficiently supported to avoid any knee-jerk exits. This is particularly the case for portfolio landlords as diversification is key to maintaining cash flow.

“Seeking the help of a financial adviser will help landlords navigate these hurdles, professionalise their approach and ultimately ensure they can remain in the market.”