Lettings News

Is the Traditional Buy-to-Let Market Broken?

Rose Jinks - March 8, 2018

Despite the shortage of housing being experienced across the UK, the Government has made clear its desire to slow down the private buy-to-let market.

Looking at figures from the Bank of England, we can see an increase in new residential mortgage lending in the first half of 2017. However, we are looking at the lowest percentage since the third quarter of 2013 in buy-to-let lending, with a decrease to 12.5% in June 2017.

Due to the increase in Stamp Duty costs and the phasing out of mortgage tax relief, a lot of landlords and investors left the buy-to-let market last year. Estate agents have also reported that they have seen an increase in the selling of property by landlords. Things have indeed been slowing down, resulting in a success for the Government.

Brexit is expected to have its effect on the housing market. With an anticipated reduction of migration from Europe, the demand for properties should lessen respectively. However, this will not necessarily fix the issue of house shortages, as there is still the massive problem of undersupply, alongside the high prices and the restrictions people are facing with mortgages.

In one way or another, we are seeing a shift in the property market. For those in a strong position, this shift will feel minimal. Landlords with a larger portfolio and property investors will be able to cope with tax hikes and other financial increases better than most. Unfortunately, it’s those new to the market, or looking to invest in property, who will struggle.

This could be seen as a very backwards way to treat the market, as it may have adverse effects long-term, essentially leaving us with the opposite problem.

Jatin Ondhia, the CEO of Shojin Property Partners, has commented: “The Government is very misguided, punishing landlords despite the fact that they provide much-needed affordable rental accommodation across our towns and cities.”

He made the point: “All of us in the UK have always loved investing in property and, luckily, crowdfunding is enabling us to continue investing. What’s more, crowdfunding enables investors to be totally hand-off.”

Ondhia also pointed out that many tenants choose to rent due to the flexibility it provides. Those in the process of building careers will wish to move at short notice to relocate elsewhere, or some will find themselves in need downsizing or upsizing. The idea of taking on the responsibility of a mortgage can also be a daunting matter, especially for those already facing student loan repayments.