A recent poll conducted by the National Landlords Association saw that more than 300,000 landlords in the UK came into the market either by accident or without the intent do so. From the poll, a number of reasons were given for why these landlords entered the market for buy to let, including the apparent inheritance of a property, and experiencing difficulties in selling the property. According to the research conducted, most of these ‘accidental’ landlords are found in Central London, where there is a current housing boom.
With rent increases showing that London has made its mark as the most expensive city to live in the UK, the problem that these landlords have may only get worse in terms of trying to sell the property they have as well as trying to gain – and keep – tenants willing to pay. And those who gave the reason of career moves which prompts them to let their properties will also be hard hit when the Chancellor George Osborne’s budget reforms come into force in 2017. These reforms detail the removal of claiming more than the basic rate tax equivalent in relief to mortgage interest interest, which will only hurt landlords more. This means that by the year 2020, the tax relief will be reduced to 20%, which may spell the end for some landlords. George Osborne’s budget reforms, in this sense, seem to be directly targeting landlords who are in the buy to let market.
Should this discourage future buy to let investors? Well, it doesn’t seem to be a very good appeal for the market now, but the Chancellor did set out for there to be a rise in the Rent a Room tax relief from £4,250 to £7,500 a year, so there is still some reprieve from this massacre of the reforms. This change may even discourage some from even making that career move which will thrust them into the eye of this financial hurricane, as it were. The clampdown on tax relief seems to spur on only those who are serious in going into this market, and know how to gage property management, rather than novices who believe they can take a risk on the scheme.
But not all landlords are in the same boat, and the ones who genuinely do not want to be in this situation will suffer the price. Whether the chancellor will take that into account and become lenient in some cases is not a guarantee. Nevertheless, landlords need to plan ahead for the next 2 years, and set out any options that they may have to survive in this market. Osborne’s plans only seems to favour those who want to be first time buyers, who have themselves been hit by the economic crisis felt by all.
However these landlords fare in the next couple of years, the buy to let market will most likely see a decrease in landlords taking up the scheme. But hopefully, for the market’s sake, it will not be the ‘be all, end all’.