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Buy-to-Let Investment Slumps by 80% since 2015
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Net investment in buy-to-let property has slumped by 80%, from £25 billion in 2015, to just £5 billion in 2017, due to excessive regulatory intervention on the private rental sector, according to a new report from the Intermediary Mortgage Lenders Association (IMLA).
The 80% slump is a steeper fall than after the financial crisis, as recent tax and regulatory changes have caused a downturn in landlords’ activity, the report, Buy-to-let: under pressure, says. In response, the IMLA is calling for a brake to be placed on further policy interventions on the UK’s private rental sector.
The study notes the positive effect that buy-to-let has had on the private rental sector. It estimates that, between 2000-17, UK buy-to-let landlords invested £289 billion into the sector, meeting rising tenant demand by bringing 1.8m properties onto the rental market. At the same time, real rents have dropped by an average of 4.4% across the UK.
However, the IMLA reports that new tax and regulatory measures introduced over the past two years, such as the 3% Stamp Duty surcharge and the reduction in mortgage interest tax relief, have deterred some landlords from expanding their portfolios and promoted others to leave the market altogether, with this cumulative effect referred to as “policy layering”.
As a result of the tax changes, more than a fifth (21%) of landlords have indicated that they plan to reduce the size of their portfolios.
There are currently 4.7m people relying on the private rental sector for a home in England alone. Should demand for private rental housing continue to increase at the current rate, driven by a lack of social housing supply and inaccessibility to homeownership, IMLA’s report suggests that this will lead to upward pressure on rent prices, which will disadvantage tenants in the sector.
Kate Davies, the Executive Director of the IMLA, says: “The raft of regulatory and tax changes that have hit the buy-to-let market in the last year have far-reaching effects that are still yet to be fully realised.
“We know that the majority of people regard owner-occupation as the tenure of choice, but, for many, this is not an immediate option. We also know that those who would in the past have rented from their local authority or housing association now need to rent privately.”
She continues: “Various interventions by Government have apparently been aimed at encouraging more first time buyers, and making investment in buy-to-let less attractive to existing and potential landlords. But the private rental sector plays a vital role in our housing supply, and it’s essential that a sensible balance is struck, if tenants are not to be disadvantaged by shrinking stock and higher rents.
“We urge the Government to reassess the impact of the recent far-reaching regulatory changes to buy-to-let investment and allow a period of policy consolidation. Our nation’s private rental sector investors provide a vital service that’s vital to millions of UK tenants. We need to support and protect a sector that does so much for so many.”