Savills has become the latest high-profile organisation to slam the upcoming buy-to-let tax changes. The firm believe that not a single alteration in legislation will assist first-time buyers get on to the ladder, as desired by Chancellor George Osborne.
Wrong tactics
Lucian Cooks, Savills’ director of residential research, noted that, ‘none of the measures aimed at buy-to-let investors will directly help the prospective first-time buyer overcome the underlying deposit hurdle. Neither will Government schemes eliminate this issue for the bulk of younger households. Therefore, the underlying demand for private rented accommodation is likely to continue to rise.’[1]
Undoubtedly, the changes to the private rental sector will cause a comprehensive shift in investment patterns.
‘For those (investors) requiring debt, we believe these measures will mean that future investment will be more targeted at lower-value higher-yielding stock, albeit avoiding markets heavily reliant on welfare payments, given the Government’s ongoing austerity agenda,’ Cooks continued.[1]
Buy-to-let tax changes criticised by Savills
Mortgages
Utilising data from the Council of Mortgage Lenders, Cooks suggests that just 31% of available stock in the private rented sector comes with a mortgage. This indicates that the mortgage interest problem could be lesser than some analysts believe.
With this said, the proposal is sure to affect cash surpluses landlords are able to achieve. Cooks observed, ‘our calculations indicate the net cash surplus on the average buy-to-let property will fall from £2,900 to £1,100 over this period.’[1]
‘This assumes a property worth £227,400 with a mortgage of £119,700 and generating a gross income yield of 5%. Those with greater levels of debt or invested in lower yielding markets will be more affected, he concluded.[1]
[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/current-buy-to-let-changes-wont-directly-help-first-time-buyers-savills-warns