Buy-to-Let and the UK Housing Crisis
By |Published On: 13th February 2017|

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Buy-to-Let and the UK Housing Crisis

By |Published On: 13th February 2017|

This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.

We are now within a few months of tax changes within the buy-to-let scheme pricing a lot of potential investors out of the property market. Thanks to a rise in Stamp Duty and an ill-advised reduction in mortgage interest relief, private landlords are set to be getting squeezed more and more. When the market opened up in the mid-90s, it was hailed as being a great opportunity for those who wanted to build a pension pot out with the savings accounts being offered by banks.

Buy-to-Let and the UK Housing Crisis

Buy-to-Let and the UK Housing Crisis

This became especially pertinent in the financial world after the global market crash, when a combination of sustained low interest rates and a lack of trust with financial institutions, led people to put their money elsewhere. The buy-to-let scheme made a lot of sense for the people who felt they’d been bitten by the banks and wanted to have a greater amount of ownership with their money, rather than leave it in a low interest account.

As the market grew, the pool of experience grew deeper. Thanks to online communities such as Landlord News, and resources from the banks themselves there was a point where, with enough research and financial security, most people could consider getting into the property letting business. Now, with the new tax year looming, and the Government sticking to plans to change regulations originally set out by the former chancellor, George Osbourne, we are likely to see the end of the era whereby investors with less disposable income will bet met with more barriers to the market.

The planned changes were almost met symbolically by one of the country’s biggest private landlords, Fergus Wilson, announced plans to sell 1,000 of his properties as he is of the opinion that the cost of running a buy-to-let property is not worth the potential profits. When that kind of outlook is coming from the country’s biggest property investor, one can only imagine what it might mean for those who have much smaller ambitions within the market.

Another compounding factor within these changes to taxation is what this could mean for the so-called housing crisis, which Britain is currently in the midst of. It has been reported that consumer demand for rental property is on the rise, in part due to the fact that many young people are not at the stage where they have enough money saved to be able to buy their own property. Looking at London, the worst affected area in terms of the housing crisis, experts have predicted that rent is set to rise by 25% over the next five years, as the supply of property continues to be outstripped by demand.

In terms of addressing the lack of housing, the Government’s recently announced white paper has a number of different tactics designed to ease the pressure on the demand for affordable housing. A great number of proposals and concepts are covered, including the use of public land for housing developments whilst still protecting greenbelt areas. Critics have said that the White Paper isn’t going into enough detail, so the Government will have to think about how they plan on tackling this problem, especially when landlords are being discouraged from entering the market.

About the Author: Em Morley (she/they)

Em is the Content Marketing Manager for Just Landlords, with over five years of experience writing for insurance and property websites. Together with the knowledge and expertise of the Just Landlords underwriting team, Em aims to provide those in the property industry with helpful resources. When she’s not at her computer researching and writing property and insurance guides, you’ll find her exploring the British countryside, searching for geocaches.

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