A sharp fall in the number of buy to let transactions taking place is raising concerns that recent reforms to the sector could back fire, hurting tenants as well as landlords.
New figures from TwentyCi National Homeowner Audit show that there has been a 25% fall in transactions for properties being bought and sold as buy to let investments compared to 2016.
The decline is a consequence of recent Government changes to the private rented sector which have led many landlords to fear for their financial future.
In April, the phased introduction of Section 24 began, which by 2021 will see the abolition of mortgage interest tax relief on second homes, leaving many landlords facing significantly higher tax bills. Landlords have also been hit recently with a hike in Stamp Duty and a cap on tenants’ deposits that could leave landlords with large repair bills if their tenants damage a property.
The fall in the number of buy to let purchases being made over the past 12 months is contributing to a growing imbalance between supply and demand, which could start to push rents up in parts of the country most affected.
While some commentators have suggested this could be a positive development, as falling buy to led demand could leave more properties available for first time buyers, there are growing concerns that it could ultimately prove counterproductive, with rent rises making it harder for tenants to save for a deposit.
Kate Faulkner, founder of PropertyChecklists.co.uk and consultancy Designs on Property Ltd, said: “It's interesting to see the impact of the government tax hikes on the landlord market. Although it may appear ‘good news' initially that there are fewer buy-to-let investors, this is likely to back fire on tenants as where there is a shortage of rental properties, rents may rise. However, it's also likely to hit the economy which is already slowing.
“A landlord spends thousands checking a property and letting it, supporting all manner of trades and letting experts. A loss of money in this sector will surely impact on earnings, and therefore on economic growth.”
This is not the first time that concerns have been raised about the impact of buy to let reforms on tenants.
In April of this year, as the Section 24 rollout was beginning, David Cox, chief executive of the Association of Residential Letting Agents, said; “The introduction of mortgage interest relief means the market is becoming less and less attractive to investors and it appears some landlords are, as we predicted, choosing to exit the market rather than pay the higher taxes.
“Following the announcement of the ban on letting agent fees, we expect the situation to only get worse for tenants when inevitably the costs are passed onto tenants through higher rents.”
If you're a landlord concerned about debt or the impact of recent Government changes on your finances, contact Landlord Debt Advisory on 0161 222 4311 or online at landlorddebtadvisory.com.