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Buy-to-Let Watch: Home truths are uncomfortable


Most experts agree that housing will get increasingly expensive and more people will rent – but that tax changes hinder renting

I was recently on the panel at The Great Buy To Let Debate: an event attended by a couple of hundred industry professionals. Even the regulator was there.

The opening presentation was by Professor David Miles of Imp­erial College London, formerly of the MPC. Some of his conclusions concur with what most of us already believe: housing will become increasingly expensive, more households will rent and tax changes (primarily to income tax relief but also the stamp duty surcharge) hinder renting and are increasingly damaging.

Then we got to the questions. On the panel with us were Paragon’s John Heron, Arla’s David Cox and Mail on Sunday’s Jeff Prestridge. I will sum up the overall sentiment.

Q: Is the new stamp duty surcharge severely damaging the market and should it be repealed?

Heron says it is distorting the whole market, particularly mobility, which will ultimately harm the PRS. He favours a rethink and reform.

Miles says the changes to income tax relief will be more damaging and I agree. He calculated landlords would have to raise rents by 20 to 30 per cent to compensate for the distortions, but conceded they were unlikely to do so.

For me, the bottom line is that the stamp duty surcharge generates income for the Government; it will not be repealed any time soon.

Q: Should there be a total ban on letting agents’ fees to tenants?

The panel and audience consensus was: no, the whole proposal is tokenism and populist. The costs will trickle down to the tenant.

Q: Would longer-term agreements give tenants more security?

Assured shorthold tenancy agreements already support longer-term tenancies up to three years. But they are not being taken up, and we do not know why.

Q: Are the FPC’s powers to control BTL a step too far?

They were proposed before the PRA’s new rules, so to some extent there may be no need for intervention in the near future. With luck, the FPC will wait for any fallout from the tax and PRA changes.

Q: Is Basel right to propose that capital adequacy requirements for BTL be made more onerous?

That is not the point. It is what is decided that is more relevant. The committee is still deliberating.

Q: Will Brexit pose a threat to BTL given economic migrants have previously fuelled demand?

The housing shortage has fuelled demand, not the influx of migrants.

Q: What will housing tenure look like in five years’ time?

We broadly agreed that the PRS will increase market share and homeownership will shrink further.

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David Whittaker is managing director at Mortgages for Business


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