Is the buy-to-let market boom coming to an end?

The Royal Institution of Chartered Surveys (RICS) has reported a decrease in properties on the rental market. Landlords are facing higher taxes and more restrictions. Consequently, many landlords have been forced to sell and new buy-to-let investors are being discouraged from entering the market. A survey on a group of letting agents revealed business from rental properties was the lowest it has been in 20 years.

The law of demand and supply accurately describes this scenario. As the supply of rental property decreases and demand remains the same, prices will rise. This supports the RICS prediction that rent could increase by 2% during 2018, and by up to 15% in the next five years.


What changes are putting Buy-To-Let investors out of business?


  • Increasing property prices have reduced profits on rental properties

  • A 3% increase in Stamp Duty for those buying second homes (a tax which is applicable if you buy a property or land over a certain price in England or Northern Ireland)

  • Abolished ‘’wear and tear’’ allowance for landlords renting furnished homes

  • No more mortgage interest relief

  • Extra restrictions placed on banks to carry out stricter checks on buy-to-let borrowers

  • The recent increase in interest rate by Bank of England (+0.25%) will make buy-to-let mortgages more expensive

These changes have scuppered profits, driving many new landlords to cut their losses and leave the market. More experienced established investors appear to be less influenced by these changes and remain in the market. There not a need for huge concern as the housing market is stable, particularly at the national level. We will however be seeing a redistribution of homeowners, especially in London and the South East which are being affected most by these changes.


Rebalancing the UK housing market


It is estimated 1 in 30 adults are landlords. Roughly 33% of landlords are retirees who invested in property due to poor interest rates. In the UK rent collected from buy-to-let properties is estimated to be £55-65 billion annually, equating to the combined salaries from the financial and insurance industries.

With a thriving buy-to-let market, it is no wonder first-time buyers are finding it increasingly difficult to get onto the property ladder. Government intervention aims to limit the growth of the buy-to-let market, sending this boom into reverse by making market conditions more favourable towards young homeowners.

The tax changes being implemented are having the intended effect and appear to be rebalancing the housing market. In May 2018 we saw the number of first-time buyers was up 8.1% compared to 2017. Conversely, the number of new buy-to-let mortgages fell by 9.8% in the same period. Unfortunately, in situations like these, there will be people who benefit and those who don’t. For tenants who would rather have their own home and mortgage, this is a positive step. However, for those who like the flexibility of renting or who don’t have the means to buy this is disadvantageous.

If you are a landlord struggling with recent changes in the laws, we can help. At More Group, our expert tax accountants can provide clear and practical solutions to try and maximise your wealth while complying with new tax regulations. Services you may find helpful includes: tax returns, non-residential landlords, service charge accounts and custodian trustee services. Note: The information should not be construed as legal or other advice as it designed as an information source only © More Group 2018. All rights reserved.