Buy-to-let purchase activity is likely to dip in the next month following a temporary bump in transactions ahead of today’s stamp duty hike for investors and those buying a second home.
Buy-to-let purchase activity is likely to dip in the next month following a temporary bump in transactions ahead of today’s stamp duty hike for investors and those buying a second home.
David Finlay, distribution director of Northview Group, said despite the likely dip he expects the remortgage market in buy-to-let to remain strong and that overall transactions will pick up again towards the end of the second quarter.
He said: "Today's increase to stamp duty on second homes and investment properties has been much anticipated and brokers have had a busy first quarter of the year with buy-to-let purchase business as landlords have looked to beat the 3% rise.
“The fact remains that the private rental sector plays an important role in our housing market, providing homes for millions of people across the UK and it is this demand for rental property that provides a stable foundation for buy-to-let.
“Tax changes provide extra consideration for landlords but buy-to-let is a long term investment with many considerations and, by taking a long term view, we can continue to build a robust market that meets the needs of our customers and the housing needs of our country."
Jeremy Duncombe, director of the Legal & General Mortgage Club, warned however that it was still early to be sure about the effects of the new 3% stamp duty surcharge.
He said: “Whilst the market has been anticipating these changes for some months now, it is still too early to say how these measures will affect the sector. As such, it is crucial that the Chancellor’s amends are allowed to bed-in before any further action is even considered, whether that be by the government or regulatory bodies, to allow us to identify which measures are having the desired effect on the market."
His comments follow the publication earlier this week bythe Prudential Regulation Authority of itsconsultation paper on revised underwriting standards for buy-to-let properties as well as proposals to require lenders to assess landlords' affordability.
Duncombe added: "Whilst on their own these changes can be seen as good housekeeping by the PRA, and many lenders will already have in place similar controls, too many layers of intervention like this could actually inhibit the market."
Meanwhile research published this morning by Paragon Mortgages suggests that landlords are increasingly looking to use limited companies to house their property investments.
Of landlords surveyed, 41% indicated that they are considering moving their portfolio into a limited company following the Chancellor’s decision to limit tax relief available to landlords last year. A further 5% have already established limited companies. For larger landlords with 20 or more properties, 14% are already operating as limited companies, while 63% are considering it.
In terms of portfolio growth, 43% of landlords agreed that the stamp-duty increase will affect their buy-to-let purchasing plans over the next couple of years. This figure rises to 63% for larger landlords with 20 or more properties.
John Heron, director of mortgages at Paragon, said: “Recent government interventions into the buy-to-let market are now beginning to impact landlord sentiment and plans. The fundamental drivers of the market however – tenant demand and yields – remain strong so there are competing dynamics at play.
“It is interesting to see that concern about the impact of changes to stamp-duty and tax relief is greatest among larger landlords. This concern is likely to grow now that the government have confirmed that landlords with larger portfolios will have to pay the increased rate of stamp-duty on buy-to-let purchases.”
