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Given the many regulatory changes that occurred in the buy-to-let (BTL) sector during 2017, it probably doesn't come as such a big surprise that investment in BTL property is down. Yet the whopping 80% decrease reported by the Intermediary Mortgage Lenders Association (IMLA) might still come as a bit of a shock.
Their figures show that net investment in BTL reduced from £25 billion in 2015 to just £5 billion in 2017, which is a bigger fall than that seen after the financial crisis. What's more, Kate Davies, executive director at the IMLA, pointed out that "The raft of regulatory and tax changes that have hit the buy-to-let market in the last year have far-reaching effects that are still yet to be fully realised." So, we may not have reached rock bottom yet.
Indeed, 21% of landlords have already indicated that they plan to reduce the size of their portfolios as a result of the tax changes, with many others feeling deterred from expanding and some even considering exiting the market altogether. If even some of those who are thinking about it step out of the sector, this will certainly have an impact on tenants as well.
"Various interventions by Government have apparently been aimed at encouraging more first-time buyers and making investment in buy-to-let less attractive to existing and potential landlords," said Kate. "But the private rental sector plays a vital role in our housing supply and it's essential that a sensible balance is struck, if tenants are not to be disadvantaged by shrinking stock and higher rents."
If you're a landlord who's considering changing your buy-to-let portfolio, start by making sure your buy-to-let mortgage is up to scratch. The IMLA warned that some borrowers may become BTL mortgage prisoners if they're not careful, as the removal of interest tax deduction may lead some to fail their lenders' affordability assessment.
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