What the future holds for the buy-to-let property market

16/03/2017

It is predicted that Philip Hammond's failure to reverse George Osborne's tax reforms in the Spring Budget will have extensive implications for the buy-to-let property market. Here's a look at the changes and how they will affect Landlords.

Tax relief changes

From next month, Landlords will begin to lose the right to tax deduct their mortgage interest costs at the rate they pay income tax - currently up to 45%. Instead, they will see this decrease over the next three years and eventually replaced with a 20% tax credit.

David Hannah, of Cornerstone Tax has criticised the move, claiming it will have a negative impact on the UK's housing market. The tax expert said: "With real estate representing 21% of the UK economy, it is a mystery as to why the government persists in hindering a crucial sector, by creating an unnecessary burden on Tenants, Landlords and homeowners."

He insisted that the "double blow effect wiping out the buy-to-let economy", specifically the restricted mortgage interest relief for Landlords from April 2017 to the basic rate of income tax, and the 3% stamp duty surcharge on additional properties, "doesn't chime with the current socio-economic needs of the UK." Hannah is urging the government to stop "their obsession with homeownership" and to "think carefully" about what our country really needs which is "an accessible, flexible and affordable housing supply."

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Rental increases

Luke Gidney, Managing Director of Let Leeds spoke of the changes and commented that "Let Leeds is proactively working to increase rents by 4% this year, in line with the rental price index sharing increases in Leeds of 4% over the last 12 months. This will help relieve the pressure of extra costs and taxation on our Landlords."

Plus, a recent property survey predicts that rents will increase by more than 20% over the next 5 years. This is due to the falling number of new Landlord instructions, according to the Royal Institution of Chartered Surveyors (RICS). Their latest monthly residential property market survey indicated that the number of new Landlord instructions decreased by 10%, which is a 2 year record low.

RICS estimate that this trend will continue for the foreseeable future as changes to mortgage interest tax relief from next month have an adverse impact on investment levels in the buy-to-let property sector.

However, whilst new housing supply in the private rented sector falls, demand for rental accommodation is set to increase further and it is this widening supply-demand gap that will force rental values to rise. In terms of house prices, Chartered Surveyors stated that they anticipate an increase of around 18% over the course of the next 5 years. All of which is good news for the property market.

Leeds Landlords

In Leeds, the supply-demand imbalance for rental accommodation is likely to expand even further. This is due to the thriving business hub which attracts high volumes of working professionals and the 3 prestigious universities which see growing numbers of students relocating to Leeds each year.

To see our full list of buy-to-let properties click here or call 0113 320 2000 to speak to a member of our award-winning team about our new Landlord package.

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