The “continuing attack” on buy-to-let landlords is set to result in investors withdrawing from the sector, an increase in repossessions and a drop in the levels of rental properties on offer, North East experts have warned.
The buy-to-let sector has been hit by a series of changes in the recent past, including the new Stamp Duty Land Tax provisions and abolition of the wear and tear allowance. However, the Spring Budget contained yet more bad news, with buy-to-let landlords being excluded from a reduction in Capital Gains Tax on investments.
In what has in recent years been a thriving sector in the North East – with investors from across the world investing in buy-to-let properties, especially in student properties – experts now fear the market will contract, with repossessions increasing and rental income stagnating.
Mark Walton, managing director of regional buy-to-let specialist Walton Robinson, said: “Buy-to-let investors are rightly feeling there is a continuing attack on this sector, which has previously been thriving. In the North East over the past few years, residential property investment has been a big growth area and a huge positive for the economy, but now the outlook gives us cause for great concern.
“We believe the levels of rental properties will drop, as the market now gives competitive advantage to first-time buyers through the Stamp Duty changes, and landlords will be taxed more on the rental income they receive, which for some will result in them losing money. We have no doubt repossessions will increase.
“Landlords able to retain or buy additional investment properties will see competition reduce and rents rise, which will help to ease the pain of higher taxation. But the pain will happen before the gain.
“Our advice would be that landlords looking to leave the market should do so before all the tax changes take full effect, and anyone looking to enter the market needs to fully understand the tax implications and should take expert advice if in any doubt whatsoever. The results of not fully appreciating what you are taking on could be very costly.”
Paul Docherty, director at Newcastle chartered accountants Stephenson Coates, added: “The changes to the buy-to-let sector will definitely impact the sector. The latest – which is the cut in the rate at which Capital Gains Tax is levied for those who sell investments such as shares, but not for buy-to-let landlords – is seen as another attack on buy-to-let landlords and second homeowners.
“It had been hoped that the Chancellor may abandon his plans to increase Stamp Duty as it may lead to some landlords quitting the sector. The tax rise may also reduce the supply of rental properties and push up rents. In addition, the higher transaction costs may deter foreign investors and this appears to be a short-sighted policy within the property market.”
If you are a buy-to-let investor worried about the various changes which have been made to the sector in recent months, please get in touch to discuss your concerns with one of our friendly and knowledgeable team members.