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Buy-to-let investment plunges 80% after tax changes, says IMLA

Investment in buy-to-let properties has slumped by 80 per cent since 2015 as tax changes have deterred new landlords and made it harder for established investors to remortgage, new research shows.

The analysis by the Intermediary Mortgage Lenders Association shows that net investment in buy-to-let has plunged from £35bn in 2015 to just £5bn last year.

IMLA says that “excessive regulatory intervention” is to blame for the fall which is steeper than that seen during the last financial crisis.

The lending body has called for policymakers to assess the impact of recent changes before considering any further “punitive action”.

IMLA argues that buy-to-let has had a positive effect on the private rented sector and estimates that between 2000 and 2017, landlords invested £289bn into the market.

Its analysis suggests that, after adjusting for inflation, rental costs in real terms have fallen by 4.4 per cent between 2005 and 2017.

But IMLA says the “policy layering” of different measures over the past two years, such as the 3 per cent stamp duty surcharge and the removal of mortgage interest tax relief, have deterred some landlords from expanding their portfolios and prompted others to exit the market.

As a result of tax changes, more than a fifth (21 per cent) of landlords have indicated that they plan to reduce the size of their portfolios.

IMLA predicts that if rental demand continues to increase at current rates due to lack of social housing and the difficulties of getting onto the property ladder it could result in rising rents, which would only put further financial pressure on tenants.

IMLA executive director Kate Davies says: “The raft of regulatory and tax changes that have hit the buy-to-let market in the last year have far-reaching effects that are still yet to be fully realised.

“We know that the majority of people regard owner-occupation as the tenure of choice, but for many this is not an immediate option. We also know that those who would in the past have rented from their local authority or Housing Association now need to rent privately.”

Davies adds: “We urge the government to reassess the impact of the recent far-reaching regulatory changes to buy-to-let investment and allow a period of policy consolidation.

“Our nation’s private rental sector investors provide a vital service that’s vital to millions of UK tenants. We need to support and protect a sector that does so much for so many.”

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  • Brian Hall 7th February 2018 at 11:23 am

    So far we have seen expansion of the buy-to-let sector falter as investing becomes more expensive. We could now see landlords exit as net yields go negative when interest rates rise as they must. This may cause a property price correction which will make the market more accessible to first time buyers. Not before time.