Have you noticed this month’s crisis in England is the buy to let boom with George Osborne once again hitting the headlines, in the July emergency budget he dropped a bomb shell that from 2017, the tax relief that those high income tax rate landlords with a mortgage benefitted from will be lost.
Many of the newspapers ran headlines declaring that it was the end of the road for the private landlords, predicting many landlords will give up on buy to let and the market would be flooded with rental properties up for sale as landlords gave up on the property market.
The Governor of the Bank of England , Mr Carney has recently made a cautionary note that the buy to let property market could destabilise the whole UK property market. His concern is that landlords who bought with high loan to value mortgages would panic if there is a property crash because of negative equity. Trying to recoup their losses they would sell cheaply, this is turn would cause house price falls.
More bad news to hit the headlines, with BBC News Magazine running an article : 24 things that Jeremy Corbyn believes ….
Rent controls should be re-introduced, linking private rents to local earnings, and more council houses should be built. He also believes that council tenants’ right to buy their homes should be extended to private sector renters.
So is this the end for landlords..hardly…..Jeremy Corbyn has yet to be elected!!
I was speaking to Rob Hall of Hall & Co Mortgages, my friendly broker, I asked him if Landlords needed to start panicking and pulling their hair out. His view and I hasten to say his view is that he personally is seeing more BTL applications than FTB or House Movers and he thinks the rental market is still strong as mortgages are so low, that the tax cut news has not had any negative impact to date. As the rates are so low more and more clients are looking at the long term and with the 5 year fixed rates landlords have a great option, this will allow for any increases in the base rate.
Two thirds of buy to let properties purchased in the last 8 years have been bought mortgage free meaning that these landlords won’t be affected by George Osbornes tax changes. Also historically landlords have only been able to borrow up to 75% loan to value of the rental property.
I believe that landlords and the buy to let market will carry on, yes, reducing tax relief will hit landlords who are in the 40% tax bracket and their investments may not be as lucrative as in the golden years, but I doubt they will all sell. There is still money to be made in the Tamworth property market as a buy to let landlord , it’s all about buying with their head and not their heart and having the right property portfolio mix that will give both a yield and capital growth. A balanced investment!