A decline of about 50% within one year in the buy-to-let UK property sales


Landlords are retreating from the market because of tax changes and more stringent lending rules making the council of mortgage lenders to downgrade the projection.

Following a tax and regulatory restriction, landlords have reduced the number of properties they purchase by half within one year and this has led to a leading banking institution to reduce its projection for loans for buy-to-let in 2017 and 2018.

According to the Council of Mortgage Lenders, 2017 experienced a slow start in the buy to let sector, with the number of loans declining faster than anticipated because of landlords retreating from the market owing to key tax changes and lending rules that were more stringent.

First time buyers are now in the driver’s seat due to buy-to-let decline

Based on a number of surveys in the recent past there are pointers showing the real estate market is slowly fading out. However, these restrictions on the buy-to-let turned out to be of benefit to the young generation who were trying to make headway in real estate. First time buyers were largely responsible for the continued purchase of houses, recording about 8% increase within one year to April.

According to CML,buy-to-let home purchasing transactions were almost the half of what it used to be in the past one year and recorded an average of approximately 6,000 transactions monthly over the last year. In April this year, a total of 5,300 landlords purchased houses on mortgage. This number is way below the previous records of 10,300 purchases in February 2016 and 11,800 purchases in July 2015.

This has made CML reduce its projections for mortgage for buy-to-let from £38 billion to be lent in 2017/2018 financial year to £35 billion in 2017 and a projection on £33 billion in 2018.

The lending body cautioned against making further changes in the taxation and rules of lending that would affect the landlords, saying this numbers give more emphasis on keeping off making any more changes to tax and the governing guidelines pending proper assessment and evaluation of the effects of the ones already on board.

There are some landlords claiming that these tax changes being introduced slowly between April 2017 and April 2020 will make no financial sense in letting the properties and this would result in major net losses. Currently, landlords are in a position to withhold interest for mortgage and other charges relating to the financial aspect from the income they collect as rent before they calculate the tax payable. Unfortunately, this tax relief is being reduced to zero 100%. In its place, the rental income together with other sources of income will calculated as one gross total and they will get a “tax credit” valued at 20% of the interest on your mortgage cost to be paid alongside income tax.

Prudential Regulation Authority (PRA) has made a requirement of lenders to impose stress evaluations to fresh lending effective January, giving landlords more financial burden.

According to a spokesman from CML, policymakers and regulators have not shown any concern as far as buy-to-lets slowness is concerned. There are expectations to have a flexible market, as this new rules are implemented.

Chief executive of mortgage brokers SPF Private Clients, Mark Harris stated that it is no wonder that buy-to-let loaning was suppressed, since the sector was still adjusting to tax changes like the decrease in mortgage interest tax benefit, stringent lender protocol and the 3% increase in stamp duty that was effective April 2016.

Landlords are more careful when it comes to either increasing their investments or going the incorporation way.

There are other guidelines to be set by PRA in October posing more challenges to the sector and we can only wait to see how the lenders will handle this.


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