Tax Changes Lead to Fewer Buy to Lets and Higher Rents

Fewer landlords are buying properties to rent with buy-to-let mortgages, according to figures from lenders. Trade body UK Finance says buy-to-let mortgages to purchase a home dropped by 10% during May 2018 compared with May 2017. 

Just 5,500 properties were added to landlord portfolios. The amount borrowed was down, too, with lenders advancing £700 million - a drop of more than 22% on the amount advanced in May last year.

 However, the buy-to-let remortgaging trend is still rising, with landlords completing 14,600 loans during May. This came to a total loan value of £2.3 billion - 15% up on the same time last year. But UK Finance director of mortgages Jackie Bennett believes the worst is still yet to come in the buy-to-let market.

“The mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity,” she said. “Purchases in the buy-to-let market continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.”

Estate agents also consider house sales are in decline - reporting for the 16thmonth in a row that the number of agreed sales is decreasing. But more worryingly, they feel new instructions to rent, buy to let homes have fallen by more than a fifth to 22% - the 21stconsecutive month of decline.

“While it is understandable that the government wanted to provide a lift for first time buyers, this may well come at the cost of higher rents as the appeal of buy to let diminishes because of the changing tax treatment of investment properties,” said Royal Institution for Chartered Surveyors chief economist Simon Rubinsohn.

View Related Handbook Page

Investing in a Property

Investing in a private rented property can be achieved in a variety of ways. Sometimes landlords inherit a property that they then turn over to renting. Sometimes owners of properties become unintentional landlords because they are unable or unwilling to sell a property at the value the market currently dictates.