The Buy to Let collapse


Rent, property taxes, insuranceNew figures have shown that the Buy to Let market has all but collapsed in parts of the country, as changes introduced by the government have started to bite.

Over the past year, the government has increased the Stamp Duty paid by Buy to Let investors, when they purchase a property, by 3%. At the same time, measures have been introduced to cut the tax-relief landlords can claim in respect of interest payments. Finally, new rules will make it harder for many Buy to Let investors to obtain mortgages.

However, it is the increase in Stamp Duty costs which experts believe has had the most immediate impact.

Figures from Haart, an estate agency, have shown that the number of properties sold to Buy to Let landlords in England and Wales, has fallen by 64% over the past 12 months.

It is also clear that fewer people are considering investing in property, with the number of landlords registering to buy properties down by 60% over the past 12 months.

The views of experts seem to be supported by the evidence, which shows a surge in the number of purchases in March, before the change took effect, followed by a sharp fall.

Commenting on the figures, Paul Smith, Haart’s Chief Executive, said: “The scale of decline in buy-to-let in just 12 months is deeply worrying, landlords have clearly pulled out of the market and are unlikely to return any time soon.”

His comments were echoed by other property experts, who have voiced concerns that the changes introduced by the government will force landlords to push up rents.

Good news for first time buyers?

Every coin has two sides and the winners from the Buy to Let changes could be first time buyers.

Those people seeking to get onto the housing ladder for the first time, often find themselves competing with Buy to Let landlords for the same property.

As the interest from Buy to Let investors wains, we may see first time buyers facing less competition in the months to come, putting them in a stronger negotiating position and making it a little easier to get onto the housing ladder. Something many people would argue is positive for the housing market more generally.

Furthermore, if the government’s tax-relief changes prompt a sell off by landlords, we could even see property prices, at least at the lower end of the market, start to fall.

Only time will tell what the true effect of the changes will be; one thing is certain though, Buy to Let landlords won’t be the winners.