3rd February 2016
Landlords are planning to sell-off 500,000 in the next year followed by a further 100,000 each year until 2021, in response to tax changes on buy-to-let properties, the National Landlords Association (NLA) has warned.
From April this year, the Government is introducing a 3% additional stamp duty charge for people buying second homes or buy-to-let properties. From April next year, it is slashing the tax relief available on mortgage interest for buy-to-let landlords. The relief will gradually be reduced down to the basic rate of 20% by the 2020/21 tax year.
Landlords’ confidence in the buy-to-let (BTL) sector has collapsed to an all-time low and is now “worse than levels witnessed during the financial crash”, Richard Lambert, chief executive of the NLA told the Building Societies Association’s (BSA) annual meeting of mortgage professionals yesterday. Confidence in landlords’ business expectations has tumbled by more than a third over the past year– down from 67% to an all-time low of 43%.
The current level of confidence in the BTL sector is now 5% lower than levels witnessed after the financial crash in 2007.
Lambert outlined how the actions taken by the Chancellor in last year’s Summer Budget and Autumn Statements has led the NLA to reverse its previous prediction of the continued growth of the private rented sector by another million more households over the next five years.
It now forecasts that, if landlords follow through on their intentions, there will be a dramatic sell-off of 500,000 properties in the next 12 months, followed by another 100,000 sold each year to 2021.The net effect will be that the sector will be smaller by up to 136,000 properties.
He presented findings from the latest NLA Quarterly Landlord Panel survey, which showed:
The proportion of landlords looking to sell in next 12 months has more than doubled since July 2015 (up from seven% to 19%).
Over the next few years – 28% of landlords don’t plan to purchase any more properties, 10% plan to reduce their portfolio, and five% plan to sell up completely.
Lambert said: “Two speeches from the Chancellor in 2015 have led to a crisis in confidence greater than when all but a few BTL products were immediately withdrawn from the market following the 2007 financial crash.
“Up to half a million properties could come onto the market as a result of the Summer Budget and Autumn Statement, which the Chancellor will no doubt deem a success.
“But there is no guarantee that these will be the one or two-bedroom flats or small houses that will appeal to first time buyers, especially as landlords are more likely to offload less desirable stock in less desirable areas.
“We’ve always said that Mr Osborne is blinded to the impact of his decisions by his commitment to homeownership. He may have intended to focus on the small-scale part-time investor, but it’s the larger and more professional landlords who will be hit worst by cuts to mortgage tax relief and increases to stamp duty, and who appear most likely to leave the sector.
“What happens to the people these landlords house if they still can’t buy and there are fewer and fewer properties available to rent?”