It is no doubt that the past year has been extremely challenging for buy-to-let landlords. The raft of changes, such as increased stamp duty, changes to mortgage interest tax relief and the pending ban on letting agent fees have all impacted on investors.
There is growing concern that a number of landlords will struggle to make a profit from renting out their property, leaving many with no alternative but to leave the sector.
Restrictions
This is a high concern, as the level of housing stock available for tenants is already not enough to cope with spiralling demand.
Indeed, there has already been a fall in the overall total of buy-to-let property transactions since the additional 3% stamp duty surcharge came into force last April.
ARLA Propertymark fear that the phasing out of mortgage interest tax relief from April 6th will push landlords from the market.
However, the trade body feels it is still not too late for the Government to reconsider!
Is buy-to-let becoming less attractive?
Changes
David Cox, chief executive at ARLA Propertymark, observed: ‘It’s been a year since the government inflated Stamp Duty costs for landlords to 3%, and it’s already made the Treasury £1.3bn. That’s more than changes to mortgage interest relief, which are now in force, are expected to make in its first three years. This will only further squeeze the sector and make buy-to-let a less attractive investment for landlords.’[1]
‘Our monthly Private Rented Sector report shows that since the stamp duty reforms came into effect last April, letting agents have seen the supply of rental stock decrease. In February, 44% saw supply fall as a direct result, while only 9% saw it increase,’ he added.[1]
Costs
Concluding. Mr Cox said: ‘The impending letting agent fee ban will also make buy-to-let investment less attractive, as costs are passed on through inflated agents’ fees which landlords pay. A quarter [27% of landlords] are expected to stop increasing their portfolios as a result and a fifth plan to sell some of their properties. We’re facing a severe housing shortage at the moment, and if the supply of rental stock falls any lower relative to demand for housing, we’ll find ourselves in the midst of a real crisis.’[1]
[1] https://www.landlordtoday.co.uk/breaking-news/2017/4/buy-to-let-is-becoming-a-less-attractive-investment-for-landlords-says-arla