Landlords looking for U-turn on tax relief/stamp duty to boost activity in buy-to-let market

A majority of landlords believe future government U-turns on the increase in stamp duty payable on additional property and on the phased-in cuts to mortgage interest tax relief, could provide a significant stimulus to both the buy-to-let and private rental sectors.

According to research undertaken by BDRC, on behalf of Foundation Home Loans, of 738 landlords, 51% said both measures needed to be addressed in order to help build greater confidence in the sector. Twenty-two per cent said ‘Remaining in the EU’ would give the biggest boost, while conversely 14% said securing the UK’s withdrawal from the EU would help most.

Landlords were also asked whether, in the current market conditions, they would be choosing now to make their first investment in property. Four in 10 said they would still be willing to invest saying buy-to-let remained a good long-term investment, it provided better returns than other types of investments and they still believed property could deliver capital growth.

Exactly half of those polled said that due to government intervention and regulatory changes, economic uncertainty, and a lack of returns, they would probably choose not to make a first investment decision now. Even with an increase in the costs of running a buy-to-let portfolio, only one in four landlords said they intended to increase rents over the course of the next 12 months, while a majority of landlords believe they are renting out at least one of their properties below market rental value.

Foundation Home Loans director of marketing Jeff Knight said: “It doesn’t seem surprising that the two biggest impacts on landlords over the past five years – stamp duty increases and cuts to mortgage interest tax relief – are seen as the biggest factors holding back the market. Clearly, such measures were always going to have a real influence and they have undoubtedly resulted in a large number of so-called amateur landlords either selling up, or not being able to go ahead and add to portfolios.

“On the flip side of this, we now have a sector which is much more in line with professional and portfolio landlords; utilising limited company vehicles to ensure they retain their tax relief, and where appropriate, adding to their portfolios via these structures. Because of this, the move towards greater levels of limited company business is likely to continue for many landlords, as I expect a u-turn is very unlikely despite fiscal loosening likely to be a strategy adopted in the very near future to stimulate a weakening economy.

“There is a continued appetite to be active in this sector and a recognition of the strong demand for quality properties from tenants. That being the case, and with a perhaps more sympathetic government ear, we might anticipate that demand for mortgage advice and buy-to-let mortgages will continue to grow, although many are clearly worried about the current economic uncertainty and what might happen in a post-Brexit world.”

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