Further to my blog last week one of my main predictions was that as a result of the Buy To Let (BTL) stamp duty changes coming into effect from April 2016 property investment we might expect capital appreciation to remain stagnant, or grow ever so slightly, in London and significantly elsewhere in areas such as Selby, North Yorkshire.
There has been a great deal of discussion as to the reasons for the imposed stamp duty changes, the main being to deter landlords and investors from further investment and encourage first time buyers into the market. This has subsequently created significant debate as to the impact on mortgages & lenders, the private rental sector, housing prices etc.
The general consensus is that the reduction of new & existing landlords investing in the market will mean less supply of rental properties for an inflated population hence driving up average monthly rent. This will inevitably make it even harder for first time buyers to get a foot on the property ladder thereby doing the exact opposite of what the Government originally intended by implementing this change.
As for lending, the Council of Mortgage Lenders (CML) have reported that the BTL sector has contributed heavily to the growth in lending over the last year (as stipulated in the graph below) and they predict that the impending changes will have a detrimental impact on the BTL sector. My concern here is not that investors won’t be persuaded to buy but, due to uncertainty, whether property owners will be willing to sell at an unpredictable time.
Graph above provided courtesy of the CML showing the percentage change in residential lending across the UK over the last two years
From the above two expectations we can surmise therefore as follows:
- Mortgage lenders will provide more competitive lending packages specifically tailored towards first time buyers in anticipation of more first time buyers coming onto the market.
- Buy to let investment will remain prevalent in the first three months of this year and there will be a ‘mad rush’ before April as investors seek to avoid the stamp duty price hike.
Effectively the housing crisis and the constant rise in house prices comes down to two factors, supply & demand. For an ever increasing population we are simply not building enough properties. The Barker review (2004) advised that the government need to be building at least 250,000 homes per year (please see link below for more information).
Despite this the government endeavored to build at least 200,000 new homes across the UK since 2009. However the National House Building Council advised that only 156,140 homes were built last year, an uplift of circa 7% from 2014 and the most it’s been since 2007. Until we are able to meet the demand for new housing, property prices and average monthly rent will only continue to rise.
If the governments intention is that the BTL stamp duty changes will benefit first time buyers, what will a lack of affordable housing and increasing average monthly rent do?
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