BTL investors warned of 'completion bottleneck'
As buy-to-let investors rush to buy properties ahead of tax changes due in little over a month, concerns have been raised over a 'completion bottleneck'
Mortgage approvals reached their highest levels for two years in January with figures from one estate agent showing a 35% surge in buyer activity.
Data from HM Revenue and Customs however showed that the number of completed property sales failed to keep pace, falling from December to January.
Figures from the British Bankers' Association show its members approved 27% more loans in January 2016 than the same time the previous year, a rise it attributed to buyers “looking to get ahead of the increases in stamp duty for buy-to-let and second home buyers scheduled to come into effect in April”
Chancellor George Osborne announced a 3% rise in stamp duty for buy-to-let investors in November’s Autumn Statement, which has been dubbed “the buy-to-let tax”.
Ajay Jagota, founder and Managing Director of sales and lettings firm KIS, said: "The start of 2016 has seen a significant rise in mortgage borrowing and it seems perfectly reasonable to attribute that to property investors trying to get in ahead of April’s tax changes.
These changes are not insignificant and will undeniably drive up purchase costs, and are also being introduced at the same times as the scrapping of the 'wear and tear allowance' which allows landlords to claim tax relief for keeping their properties in good condition.
Anecdotally the industry is full of stories of a substantial number of homes stalled in the pre-completion stage and even a shortage of solicitors available to carrying out conveyancing. It’s clear we’re seeing something of a completion bottleneck. The real questions are whether or not buyers will persevere with the sales if their transactions are not completed when the tax changes come in. Will they take the hit, or will we see a spate of sales simply abandoned?
It’s more than likely that we will see demand from investors drop off after April, but this is unlikely to have a significant impact on the wider property market as residential buyers, particularly if first time buyers return to centre stage.”