Buy-to-let tax alterations could lead to ‘price correction’

UK residential property prices could be set to fall sharply as a result of the Government’s buy-to-let tax changes, according to the head of Landlord Mortgages.

Alterations to stamp duty, mortgage interest tax relief and mortgage application rules could make it trickier to make a profit from property investment. This in turn could put off landlords from choosing to purchase property and drive prices down as a result.

Bubble burst

Landlords are facing changes in how much they can claim in mortgage interest tax relief from early next year. This figure will be limited to 20%, eating into many landlords’ rental yields. Higher and additional rate taxpayers could well be deterred, making buy-to-let a less attractive proposition.

Lee Grandin of Landlord Mortgages believes that no one is able to foresee when the buy-to-let bubble will burst. However, he feels that the buy-to-let changes could well be a catalyst for, ‘major price correction.’

Addressing the press, Grandin said: ‘If commentators are stating the property market is overvalued then the sudden supply of property post buy-to-let tax changes could well be the catalyst for a major price correction’[1]

‘It was never going to be politically acceptable or sustainable to have Tom, Dick and Harry own a buy-to-let portfolio. Take note: A price correction where the losers are Tom, Dick and Harry with a buy-to-let portfolio and the banks who supported them is a vote winner,’ he added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/10/buy-to-let-tax-changes-could-be-catalyst-for-a-major-price-correction