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Bob Young: Why the political agenda for buy-to-let?

Bob Young Fleet 2014

What are the buy-to-let measures meant to achieve and has anyone truly thought through their consequences?

We are well into March and predictions for the buy-to-let sector after the end of the month are coming thick and fast.

The Government’s various measures have apparently been designed to level the playing field between landlords and first-time buyers – the ‘fear’ being that the buy-to-let sector is becoming too big and therefore poses a risk to financial stability.

This view was expressed again recently by deputy governor of the Bank of England Sir Jon Cunliffe, who said that, if a large number of buy-to-let landlords were to up and sell at the same time, house prices could fall sharply.

This point of view got me thinking. If the Bank does fear this situation, why is the Government introducing measures that – some commentators believe – might hasten landlords’ exit from the sector and – presumably, following Sir Jon’s logic – produce a flood of properties onto the market, which would cause house prices to fall in the manner outlined?

A recent survey by the National Landlords Association suggested the Government’s measures against landlords might lead to over 500,000 investment properties being put up for sale by their owners.

I am not convinced the figure will be anywhere near this. Indeed, I believe most landlords will hang on to their properties, work within the new measures and, if they are looking to grow their portfolios, be increasingly likely to do so through tax-efficient vehicles such as limited companies.

But once again it seems odd to have a political agenda being pushed against landlords that may deliver the kind of ‘doomsday scenario’ envisaged by Cunliffe and his Bank and regulatory colleagues.

It leaves you wondering what the end goal of these measures actually is. What are they intended to achieve and has anyone truly thought through their consequences?

At the moment, clear answers are definitely not discernable.

Bob Young is chief executive officer of Fleet Mortgages

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  • Samantha Cox 25th March 2016 at 3:22 pm

    I may be naive, but I do not think this is an attack on the btl market as such, it is an attempt to control house prices. Obviously not in all areas, but certainly in London and the South East, people who already own property, and see regular impressive growth, release their equity and buy more property thus continuing to drive the prices higher. In short only those that already own property can afford to buy more. It seems quite obvious to me that this circle cannot continue. Therefore this intervention is to make this option less attractive. If there is less property being bought by investors, and more property available house prices should stabilise, and there might be more available for those who do not yet own property. Or at least I believe that is the idea!

  • Chris Hulme 23rd March 2016 at 7:37 pm

    We should remember that btl is an investment asset and as with any investment you weigh up the risks, taxation, longevity and return appropriate to your personal aims and goals. Changes such as the latest attacks on btl as an investment may just persuade some landlords to divest and look towards other assets classes (possibly commercial property if this suits) but this won’t be en-mass. It will be measured and considered probably over several tax years for larger portfolios.
    Yes, the changes are I’ll conceived and not properly thought out but the market will take them in its stride and react as it sees fit which may or at not be in line with the thinking of the policy makers expectations. Time will tell.

  • Brian Hall 23rd March 2016 at 10:33 am

    I should have thought the strategy is obvious; to encourage homeownership by reining in the buy-to-let sector and incentivising the return of rental properties to the private ownership, while moving the market to greater affordability while, hopefully, avoiding a precipitous home price correction. But if push comes to shove and a property price correction is required, then so be it.