Buy to Let Sales Suffer in the Last Year.
It is a headline many of us expected, but perhaps not to the degree that has occurred. The Council of Mortgage Lenders has confirmed a “weak start to 2017” for the buy-to-let market, and there is no sign this will change at present.
Activity in this portion of the housing market is around half the level it was at just 12 months ago. Figures for the past 12 months reveal an average of around 6,000 buy-to-let home purchases each month. This is a stark contrast to the 10,300 buy-to-let purchases seen in February 2016, and even more so when compared to July the year before, when 11,800 sales were made.
A revised figure for buy-to-let lending
While the CML originally estimated an annual figure of £38 billion in lending to this part of the market both this year and next, it has now revised this to £35 billion in 2017. It has revised the figure for 2018 even more, dropping it to £33 billion.
Darren Pescod, CEO of The Mortgage Broker Ltd, is not surprised by this latest turn in developments. “Landlords have been up against it with the changes implemented in the last year,” he said. “An increase in stamp duty and changes in tax relief laws have meant many no longer see this market as a profitable one. As the tax laws continue to come into effect, I would not be surprised to see the buy-to-let mortgage market dampen further, as people decide not to invest in further properties – mainly because they’re not profiting as they once were.”
Is buy-to-let still worth it?
There is no doubt some landlords have exited the market, while others have downsized their portfolios. Still more have opted to transfer their properties into a limited company arrangement, in the hope of paying less tax. The changes to tax relief, occurring from April this year and coming fully into effect by April 2020, mean some landlords will make no profit at all from their properties. Others may even lose money.
Add the tax changes to the more stringent stamp duty rules, and the buy-to-let market will continue to struggle. Landlords also look set to be affected by new lending stress tests, as implemented by the Prudential Regulation Authority. These look set to add more difficulties to those already faced by many landlords.
No recovery seen to lending in the buy-to-let arena
The CML had forecast a slight improvement in the area, but no such situation has occurred. With the new stricter rules coming into force as well, it seems as if no such improvement will be seen for the foreseeable future.
This has influenced the whole housing market, where lending has remained stable, rather than improving. The buy-to-let market has dragged down overall lending figures, which is only to be expected. It remains to be seen whether a potential future rise in interest rates also has an effect, and if so, which way it will send the figures next.