The Rental Property Market

The buy-to-let market has been dominated by April’s stamp duty changes. Sales boomed in the run-up to the introduction of the higher rate – figures from HM Revenue & Customs showed that in March, 162,000 properties changed hands, a rise of 77% on a year earlier. Data from the Council of Mortgage Lenders (CML) showed 29,300 mortgages were advanced to landlords that month, more than treble the number in March 2015. Lending landlords fell after that and the numbers have run at just over half those recorded in 2015.

More changes face landlords in 2017 in the form of tougher affordability checks for buy-to-let mortgages and the start of the withdrawal of tax relief on mortgage interest. These new changes to tax relief for landlords could see may buy to let owners forced into a higher tax bracket from April 2017.

According to the National Landlord Association, more than 400,000 landlords could be affected by the changes, which will mean that landlords will no longer be allowed to deduct mortgage interest payments or other loan repayments related to their rental property from their turnover.

While landlord tax breaks may be set to diminish, those in the industry are calling for changes to the controversial 3% surcharge in Stamp Duty Land Tax paid by those making additional property purchases.

Currently 62% of landlords in the UK are experiencing tenant arrears and with rents predicted to rise faster than house prices over the next five years due to landlords coming under pressure to increase rents to offset the tax increases in April 2017, this situation is set to worsen.

Despite the proportion of tenants in arrears having improved since the last recession, Upad, the online lettings agent, is witnessing the problem grow again. Almost 10% of all tenants in the UK fell behind with their rent payments in August 2016 and this forces over 34,000 landlords to issue possession claims between July to September 2016.

Despite this some parts of the country have seen a flood of properties into the market and the balance has tipped in favour of tenants. Simon Rubinsohn, Chief Economist at RICS said it was unlikely investors would completely lose their appetite for buy to let. “You do have to bear in mind the alternatives,” he said. “Also the mentality of the property investment is embedded despite these changes.”

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