Buy-to-let investors 'to sell 500,000 properties' as confidence plummets
02-04-2016
Landlord trade body predicts major sell-off as tax changes cause investors to quit the market
For sale signs outside houses
The private rental sector could see a shrinkage Photo: PA
By James Connington
Landlords will sell 500,000 properties in the next 12 months, according to new research from buy-to-let investor trade body the National Landlords Association (NLA).
It says landlord confidence is at its lowest ebb since the dark days of the banking crisis.
The proportion of landlords looking to sell in the next 12 months has more than doubled since July 2015.
The sudden pessimism follows George Osborne’s double-whammy tax attack on the sector. In his July Budget he announced the removal of landlords' mortgage interest tax relief which, when fully implemented in 2020-21, will mean some landlords pay tax on zero income or even on losses.
And in November he announced that landlords would pay a 3pc stamp duty surcharge, coming in from this April.
Mr Osbornes said the policies were aimed at "creating a level playing field" in Britain's under-supplied property market.
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They come alongside a raft of Help to Buy products intended to make it easier to buy with a smaller deposit.
However, the Chancellor’s plans have been met with significant controversy, even from within his own party.
Part of that controversy stems from the fact that companies holding more than 15 properties look set to avoid many of the penalties.
The matter is also set to be tested in the courts, in a judical review being planned and led by Cherie Blair QC.
Resentment is strongest among smaller landlords, as they do not believe they are part of the problem the policies are designed to tackle.
Additionally, there are groups who will be inadvertently caught out by the stamp duty changes, with cash-poor parents trying to help their children and those with homes abroad facing higher stamp duty charges.
Many also predict that rents will rise as landlords seek to pass on the costs.
The NLA research projects a further sell off of 100,000 properties a year after the initial 500,000, significantly shrinking the private rental sector.
Further research by property crowdfunding platform the House Crowd, released exclusively to the Telegraph today, supports this gloomy sentiment, with 20pc of investors surveyed planning to sell their buy-to-let properties in 2016.
The research also found that nearly half of investors feel the Government is trying to squeeze out smaller landlords while protecting wealthy landlords with many properties.
Richard Lambert, chief executive officer of the NLA said: “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.
“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.”
Mr Lambert added that landlords are more likely to offload less desirable stock, rather than the one or two bedroom properties that will appeal to first time buyers.
“What happens to the people these landlords house if they still can’t buy and there are fewer and fewer properties available to rent?” he said.
Andrew Montlake, director at Coreco, the mortgage broker, said: “Whilst we will undoubtedly see a number of landlords begin to sell up, this looks as if it will be mainly amateur landlords and we have yet to see a massive rush to dump property from our landlord clients.
“I suspect many professional and larger scale landlords will still continue to buy, albeit at a slower more considered pace."
According to Mr Montlake the property market does need to have "some balance restored", and the lessening of competition from landlords "will free up much needed stock for first time buyers".
However, he said: “The Government needs to be careful not to go too far as the private rental sector still plays an important part in the housing market as a whole and a vast reduction in the numbers of available properties to rent can cause as many problems as they try to solve.”