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Why Has Buy to Let Property Investment Halved in One Year?

The number of buy-to-let properties purchased by landlords has gone down by nearly half in a year, after the industry has undergone both a regulatory and tax clampdown.

The move has motivated the Council of Mortgage Lenders to downgrade its forecasts for buy-to-let lending this year and next.

The CML said that 2017 witnessed a weak start for buy-to-let, with lending applications falling rapidly as landlords left the market due to stricter lending rules and major tax changes.

The information appears in the wake of series of recent indices and surveys suggesting that the housing market is slowing down. The tightening of buy to let conditions may have assisted young people trying to get onto the property ladder. According to the CML, homebuying activity has primarily been driven by first-time buyers, whose numbers have increased by 8% in the 12 months to last April.

The CML, which represents building societies and banks, said that buy-to-let purchases were nearly half of what they were this time last year, averaging approximately 6,000 sales a month over the past 12 months. Last April, the number of landlords acquiring a mortgage was 5,300, down from the 10,300 reported in February the year before.

Consequently, the CML reduced its buy-to-let lending forecast from £38bn being lent this year to £35bn, and reduced the lending forecast down to £33bn in 2018.

The CML advised against any additional changes to lending rules and taxation aimed at landlords. The organisation believes that the latest figures highlight the need to avoid further unsettling of the market, until the impact of the current new rules and tax changes have been assessed properly.


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Many landlords have stated that tax changes being phased in between April 2017 and April 2020 made letting difficult to justify financially and, for some, the result would be a net loss. Landlords can presently deduct finance-related costs such as mortgage interests before computing their tax liability. This interest relief, however, is being reduced to zero, and instead they will receive a tax credit worth 20% of the mortgage interest cost to apply to their income tax.

The Prudential Regulation Authority has, since January, required landlords to apply certain stress tests to new lending requests, which puts additional pressure on their finances.

According to a CML spokesperson, policymakers and regulators have not yet presented concern regarding the sluggishness in the buy-to-let markets. He said that the organisation expects to see the market continue to decline as the implemented measures take effect.

SPF Private Clients chief executive Mark Harris said that he was not surprised that buy-to-let lending was experiencing subdued activity levels, as the sector was still coming to grips with changes such as tougher lending criteria, mortgage interest tax relief, and the 3% increase in stamp duty.

Mr Harris added that landlords are becoming more careful when it comes to growing their portfolios while others are contemplating incorporation. New challenges await with more PRA guidelines scheduled to take effect in October, and lenders have not yet indicated how they plan to deal with these changes.


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