Are the Middle Class Being Priced Out of Buy-to-Let?

By
Lucie Finan | Thu, Feb 09, 2017 @ 03:06 PM

Tags: Lettings, Tax, Property Investment, Buy to Let, Buy to Let Mortgages

shutterstock_199870805.jpg

This April sees the start of a new financial year, and with it huge changes to regulation around the buy-to-let market. Thanks to increases in Stamp Duty taxation and the phased reduction of mortgage interest relief, it looks like the new budget is set to squeeze landlords with even more levies. A number of voices in the market have identified this as the end of the buy-to-let for middle class investors, so will this leave rental property in the hands of only the very wealthy?

When the buy-to-let scheme was first introduced in the mid-nineties, it was seen as a workable alternative to putting money into a savings account to build up a pension pot. Especially since the global economic crisis of 2007, people have lost trust in banks, and the property market has presented a more stable place to build savings.

For a number of years, there was a great opportunity for ordinary people to create an additional income stream, as many people who might not have had prior experience found themselves within the landlord market.

Now with these changes to taxation, and people within the market being squeezed even further through taxation, it’s likely that we’ll see less people inclined to become landlords as the cost is becoming greater than the potential return on investment that you’d expect to see in rental income. This comes as a blow for those who may have been inclined to try and enter the market themselves as demand for rental property has increased.

It could be argued that a watershed moment in the fate for buy-to-let came when the UK’s biggest landlord, Fergus Wilson, chose to sell up his buy-to-let portfolio saying that the scheme’s days are numbered. When a name so synonymous within the industry states that he has lost confidence in the sustainability of the market, will we see ripples throughout the market as investors choose to take their money elsewhere?

It is worth noting that the market isn’t entirely sewn up just yet, as banks are still offering mortgage advice on how to best enter the market. We may see a rush of investors trying to put their money into the market before the tax changes are implemented in April. But when that change in the rules is implemented in only a few months’ time, will the property market be closed off to those who have anything other than high amounts of disposable income?

You can minimise the impact of the upcoming tax changes through saving money spent on advertising and tenancy set-up by using Upad.

Upad Newsletter

Subscribe to our email newsletter for useful tips and property news.

Call 0333 240 1220