Thanks George! But will buy-to-let market really be so badly hit?

Rents are to shoot up in the next five years, easily outstripping inflation, two major agency groups have forecast – but a poll of landlords has drawn very different conclusions.

According to Savills, as a result of George Osborne’s tax changes the number of mortgaged buy-to-let investors is set to drop by one-third within two years.

But a poll by Simple Landlords Insurance has found that only one-fifth of landlords plan to raise their rents next year, with 80% keeping rents as they are. It also found that most landlords will continue to invest in the market.

Some 70% of the 543 landlords polled said the reduction of tax relief on buy-to-let mortgage payments would not affect their plans, and 4% said they were planning to invest more.

Another 12% said the changes meant they planned to wait before adding new properties to their portfolio, while 8% said they would now sell one or more properties.

Almost 90% said they intend to still be a landlord in two years’ time while a third plan to increase the number of properties they let in that time.

Despite the confidence shown, 48% said government legislation was their main concern alongside void periods, while 39% were worried about tax changes.

Jenny Mayes from Simple Landlords Insurance said: “While some landlords are adopting a cautious wait and see approach and slowing down their investment, others see opportunity in the changes and the vast majority want to keep or grow their property investment.

“Landlords are reacting in different ways to political changes, but one thing they have in common is that most are refusing to let negativity deter them.

“With many, re-evaluating their objectives, changing their strategy, moving to limited company ownership or focusing on capital appreciation, they are ultimately continuing to invest.”

The poll’s results conflict with forecasts from Savills that average rents in London are set to rocket 25% in the next five years, and in the rest of the country by 19%, because of George Osborne’s tax assaults on private landlords.

Savills said that average rents in London would rise from £1,452 now to £1,815 by 2021 – a hike of £363.

Nationally, the average rent would rises by £123.50 to £773.50 a month.

JLL’s predictions are also for large rent rises – 17.6% across the UK by 2021, and 19.9% in London.

Savills is also forecasting a drop in mortgaged buy-to-let investors of 33%, down to 80,000 by 2018, recovering only slightly by 2021 to 90,000. Cash buyers, including investors, will drop by 18% within the next two years, says the firm.

Osborne’s tax clampdowns on landlords include being stripped of the ability to claim mortgage tax interest, and a Stamp Duty surcharge of 3% on the purchase of additional homes. The latter means that a buy-to-let investor purchasing a £200,000 property now pays £7,500 Stamp Duty instead of £1,500.

Lucian Cook, director of residential research at Savills, said the changes have put off many buy-to-let investors, leading to a shortage of rental properties.

ARLA managing director David Cox has described Osborne’s tax raids as “an outright assault” on the buy-to-let market.

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5 Comments

  1. Will

    Surely the level of housing supply would have a significant affect on any predictions?

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  2. pierce

    If agent fees are banned the costs will no doubt be passed to the landlords, what then? Will their rent then stay the same?

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  3. Vanessa Warwick

    I don’t know about you, but this jumped out at me – the number of mortgaged buy-to-let investors is set to drop by one-third within two years.

    What plans to you have to compete for the ever-dwindling pool of landlords?  If you are not worried by S24 you should be.  It is potentially going to have a huge impact on your livelihood imho.

    David Cox, M.D. of ARLA shared his concerns in a recent interview:

    http://www.propertytribes.com/section-24-letting-agent-perspective-arla-t-127626688.html

    Please lend your support to the Axe The Tenant Tax Campaign which is lobbying government on this issue.  It affects the whole PRS and we need to create a united voice against this damaging tax which is going to have many disastrous knock-on effects other than landlords increasing rents imho.

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  4. The_Maluka

    My rents will not increase in the next year, I have already increased them.  Next year there will be another increase and the year after and so, ad infinitum.  A big thanks to George Osborne for allowing me, an unencumbered landlord, to make more profit.

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  5. Mark Connelly

    Despite the confidence shown, 48% said government legislation was their main concern.

    Wow who would have thought that a Tory government would be a landlords biggest concern. What a job Osborne did on ******** up housing.

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