BTL market will move forward despite changes
Speaking to an audience of intermediaries and investors at yesterday's Financial Services Expo in Glasgow, Ian Boden, Head of Commercial Mortgages, at Aldermore Bank asked the intermediaries present whether they thought lending in the buy to let market would continue to grow in the next two years.
The audience were split in their response, with 42% saying they thought the market would grow but 33% expecting a decrease.
Mr Boden commented: “A recent survey showed that 29% of landlords say that they are looking to increase their portofolios, so it’s not a market that’s looking to slow down.
Tax and regulation changes were at the forefront of things to consider when looking at how the buy to let market could alter in the coming months.
Most landlords will take this in stride. Many will still see buy to let as being an attractive investment, where they can continue to drive returns through rentals.”
He added, however, that the changes may have some ‘limited’ impact on the lower end of the market, in terms of the ‘pension planner landlords’, and that the market may see a shift towards limited company purchase.
Stuart Law, CEO at Assetz for Investors, said: “In my view, the uncertainty has been removed from Buy-to-Let taxes in the budget.
The Budget has clarified that the 3% additional stamp duty will apply to second residential properties that are bought by individuals and companies alike. It has become a cost of investing in the best asset class for several decades and at the forecast growth rate of 5% in house prices this year will take just 7 months to get back! So let’s move on.
In addition it still looks like companies that are used to purchase buy-to-let property will be able to fully offset their mortgage interest against income and achieve full tax relief. The many and varied company tax reliefs such as a 17% tax on profits and capital growth could also mean that setting up a company actually made matters better for a BTL investor than before the tax changes when investing privately.”
Gráinne Gilmore, head of UK residential research at Knight Frank, comments: “The Government’s reversal on the exemption for large-scale investors is surprising, but unlikely to lead to a significant dampening of interest in the build-to-rent sector.
Bulk purchases of residential units at the lower value end of the scale will be most affected by the Chancellor’s move, which seems counter to the Government’s pledge to provide more affordable housing. But the rental market is an entrenched and growing part of the UK housing market, and as such, institutional investment in this asset class will likely continue to grow.”
Celebrity property expert, Sarah Beeny, had this to say: “The new stamp duty rate increase for buy-to-let investors is definitely coming in and I think it will help to slow price rises at the entry end of the market, which is great news for first-time buyers. I don't think hitting buy-to-let landlords is unreasonable as helping to correct the market shouldn't be at the expense of the tax payer, so I fully support the rise in stamp duty on investment properties.”