The screw has been tightening on the UK’s buy-to-let landlords since Conservative Chancellor George Osborne announced changes to the tax regime in 2015. Since then, landlords have been pummelled by a volley of tax hikes, from the introduction of the 3% Stamp Duty surcharge on second homes in 2016 to the tapered removal of mortgage interest tax relief which began in 2017. The latest blow, the abolition of Multiple Dwellings Relief from June 1st won’t impact many, but will cost those landlords affected £385m. Buy-to-let landlords are now the only small businesses in the country taxed on their turnover rather than profit. Little wonder that many have quit the market, or are tempted to do so. Since last January, like many borrowers, buy-to-let investors have faced the added burden of higher interest rates, leading many to predict an acceleration in the numbers leaving the market. The National Residential Landlords Association warned in March that one in 10 landlords were likely to quit the sector. While some might sell to other landlords, any loss of rental stock would deepen the existing supply/demand imbalance in the sector, which has resulted in rents hitting record highs, with up to 25 tenants chasing each new rental property that comes to market in some areas. While the numbers of landlords exiting the market may be growing, this should be put into context: 80% of landlords own only one or two properties – representing 61% of the private rental stock. We have not yet seen the predicted mass flight of landlords from the market, largely due to the strength of that demand, combined with landlord resilience. Many are hanging on in there, making marginal or zero profit, hoping for lower interest rates to ease the pressure in future. Some may be taking the opportunity to re-structure and re-finance their businesses, running their rentals as companies and thereby taking advantage of a less punitive tax regime. But this takes time and costs money. So while landlords are by no means leaving the market in droves, the fact that some are selling up should give a clear warning to the next government, which surely must take care to head off any such exodus at the pass to stem the loss of badlyNext Government must Show Landlords Support ‘Early and Clearly’ 06 SUMMER MORTGAGE NEWSLETTER Kate Davies Executive Director Intermediary Mortgage Lenders Association
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