New regulations not dampening enthusiasm for buy-to-let
Buy-to-let market remains buoyant, new analysis claims
Analysis by Nationwide shows that the buy-to-let sector is still growing. This is despite recent regulatory efforts by the Government to suppress the private rental sector.
Using data from The Ministry of Housing’s latest English Housing Survey, the analysis shows that 20% of English households are now privately rented. This is a 13% increase since 2007.
Meanwhile, government policies, such as removing tax relief and toughening up the rules surrounding borrowing for buy-to-let properties have been introduced in an effort to bring more housing stock onto the market. (See: www.purplefrogproperty.com/blog/landlord-tax-changes-begin-take-effect-april/ and www.purplefrogproperty.com/blog/tougher-buy-let-mortgage-rules-hit-month/.)
While Nationwide’s numbers suggest these regulatory changes are not having their desired impact, the tax changes are being introduced in steps. The full system will not be in place until 2020, while the 2017-18 tax year only saw a 25% reduction in the relief.
But buy-to-let lending has collapsed
Meanwhile, the changes to mortgage-lending have seen a huge dip in investment. The Intermediary Mortgage Landers Association (IMLA) reports a fall of 80% from 2015, when investment in the sector was worth £25 billion. This toppled to £5 billion in 2017.
Nationwide’s chief economist, Robert Gardner, says:
“It is interesting to note that the private rental market has continued to show steady growth despite a significant slowing in buy to let mortgage lending, suggesting a shift amongst landlords towards cash purchases.”
IMLA’s comment is slightly less rosy. Executive Director of IMLA, says:
“Various interventions by Government have apparently been aimed at encouraging more first-time buyers and making investment in buy-to-let less attractive to existing and potential landlords. But the PRS plays a vital role in our housing supply and it’s essential that a sensible balance is struck, if tenants are not to be disadvantaged by shrinking stock and higher rents.”
While the IMLA’s predictions are dire, the changing situation seems to have little impact on people’s idea that buy-to-let property is a sensible investment.
A growing trend amongst the young
Buy-to-Let Mortgage broker, The Commercial Trust Ltd, has reported that younger people are investing in property over pensions.
The company highlights that since 2015 the two age demographics that are showing year-on-year growth for buy-to-let purchase applications since 2015 are 20-29 year olds and 30-39 year olds.
Changes to how pension pots can be accessed which came about in 2015 saw a brief spurt in applications from investors aged 50 or over. However, since then, the number of applications from this age group has actually decreased, the company report.
So, good news: as a buy-to-let investor, you’re actually getting younger!
Further reading
www.gov.uk/government/2016-17_EHS_Headline_Report.pdf
www.lettingagenttoday.co.uk/private-rental-sector-growing-despite-tax-and-other-issues–nationwide
www.propertyindustryeye.com/dramatic-slump-in-buy-to-let-lending-blamed-on-government-intervention/
www.simplelandlordsinsurance.com/younger-landlords
Are you looking to invest in a buy-to-let property? We’re experts in the student market. Find out if this is the right investment for you. drop me an email at stephen.haigh@purplefrogproperty.com or find out more on our investors page, here: www.purplefrogproperty.com/landlords/sales-and-investments/.