Osborne's buy to let tax hikes 'will knock 20% off house prices': Experts warn changes will deliver 'major shock' to London's property market
06-18-2016
• Total of buy-to-let properties bought in London could halve after changes
• Slump in the capital would damage prices across England and Wales
• Property prices expected to fall this summer for the first time since 2012
By Dan Hyde and Paul Thomas For Daily Mail
George Osborne’s tax increases for landlords will cripple the London property market next year – causing house prices to fall across the country, a report has warned.
The number of buy-to-let properties bought in London could halve as the changes come in, delivering a ‘major shock’ to the capital’s housing market, which is propped up by an army of investors.
It could see house prices fall by as much as 20 per cent if the market slips back to the level it was three years ago, said the report by Deutsche Bank.
George Osborne’s tax increases for landlords will cripple the London property market next year – causing house prices to fall across the country, a report has warned
Last night experts warned that a slump in London might damage prices across England and Wales.
Henry Pryor, an independent property expert, said: ‘George Osborne’s buy-to-let tax changes will almost certainly push down house prices across the country – not just in swanky SW1 postcodes in London.’
The Royal Institution of Chartered Surveyors predicts average house prices will fall this summer for the first time since 2012.
Chief economist Simon Rubinsohn said: ‘The feedback we are getting is that the tax changes on buy-to-let is having a negative impact on mood in the market. It’s not beyond the realms of plausibility that we will see a slowdown.’
House prices are already rising more slowly than in December 2014, when the Chancellor made his first changes to property taxes.
Before then, property prices were rising at 8.5 per cent a year, according to Nationwide Building Society’s house price index.
But by May this year growth had slowed to 4.7 per cent. In some areas, such as the South West, prices are now falling, and Deutsche Bank predicts the situation will get worse in London over the next 12 months.
The number of buy-to-let properties bought in London could halve as the Chancellor's changes come in, delivering a ‘major shock’ to the capital’s housing market, which is propped up by an army of investors
In April the Treasury hit landlords with an extra 3 per cent stamp duty on new properties. This added an extra £45,000 in tax to buy a £1.5million home, pushing the stamp duty bill from £93,750 to £138,750.
The changes led to 45,000 buy-to-let loans being granted across the UK in March as landlords rushed to beat the changes. Deutsche Bank predicts there will be half as many buy-to-let buyers in future due to the extra costs.
And next year landlords will be hit a second time. Higher earners are being stripped of a tax break that lets them deduct the cost of their mortgage interest from what they owe HM Revenue & Customs each year. The changes will be phased in between 2017 and 2021.
Deutsche Bank said investors could expect returns to fall to between ‘0 – 0.5 per cent’, and predicts that around 35 per cent of landlords in London would sell up as a result. Around four in ten London homes are owned by landlords.
Oliver Reiff, co-author of the report, said: ‘You also have to bear in mind that because of new mortgage regulations in the pipeline, many landlords may not be able to take out as much debt as before.
‘This is likely to see fewer landlords buying properties, which will be a shock to the London market.’