The latest Bank of England figures show that while there was an increase in new residential mortgage lending activity in the first half of 2017, the share of buy-to-let lending decreased to 12.5% in June 2017, the lowest percentage since Q3 2013.
It appears that the government’s strategy is working. A significant number of individual landlords and investors quit the BTL market last year, thanks to the higher stamp duty costs and the phasing out of mortgage tax relief. Again in 2017, estate agents reported an increase in landlords selling properties across their branches.
It has been suggested that with Brexit, lower migration from Europe will result in a reduction in demand on the housing market and less opportunity in the rental space. However, there remains a continuing shortage of housing due to the chronic undersupply, coupled with high prices and mortgage restrictions.
What is clear, is the property market in shifting. For those property investors and landlords with larger portfolios, it is easier to ride the storm and absorb all the tax hikes. But for newcomers, or those looking to invest in property, the traditional buy-to-let model is broken.
Jatin Ondhia, CEO of Shojin Property Partners commented: “The Government is very misguided, punishing landlords despite the fact that they provide much-needed affordable rental accommodation across our towns and cities.
There is also an increasing number of tenants that are choosing to rent because it gives them flexibility. University graduates nowadays opt for the ability to leave at short notice to work in other parts of the UK, or even other parts of the world. Unlike earlier generations, many young people don’t want to be bogged down by a mortgage so early in their lives.
Most buy-to-let landlords are concerned about protecting their profits in light of increasing taxation, stricter lending and increasing regulation. This has given fuel to the property crowdfunding firms that have launched in recent years.
Today, people of all ages and socio-economic backgrounds, can invest in the buy-to-let, via crowdfunding platforms, to generate both income and capital growth. This way of investing in rental property offers a hands-off investment and the opportunity to spread risk. Rather than having large amounts of capital tied up in property, investors take a share across a range of properties. Furthermore, it removes the regulatory burden from individuals because properties are managed by larger, professional outfits that also benefit from economies of scale.
At any time, investors can realise their capital by selling a stake in a property, using their annual capital gains allowance. This gives them freedom that would not be provided by traditional ownership of a buy-to-let property.
The biggest risk to the rental market, but government intervention. However, all of us in the UK have always loved investing in property and luckily crowdfunding is enabling us to continue investing. What’s more, crowdfunding enables investors to be totally hands-off.”
