Landlords can expect better buy to let growth by 2023
Buy to let will rebound to moderate growth in 2023 after several years of decline, according to economists.
A new study says the slowdown in the private rental sector is the result of government efforts to restrict tax relief for investors, while making mortgages harder to source.
Buy to let lender Shawbrook Bank has released a wide-ranging report looking at private rentals in which it concludes that recent policy changes have dragged the market down.
Restricting mortgage interest tax relief has had the most major impact, concluded economists at the Centre for Economics and Business research (CEBR), which drafted the report for the bank.
Tax break changes are phasing in until 2020-21, following which, predicts the report, the market is expected to decline then stabilise before returning to growth in 2023.
The bank’s commercial mortgage managing director Karen Bennett said: “While the series of government and regulatory changes have had a significant impact on the sector, we have seen the impact felt more heavily amongst the “amateur” landlord community which has presented growth opportunities for professional investors.
“Recent political turbulence has had an amplifying effect on investor confidence but positively, the market remains buoyant for those with a long-term strategy who draw upon specialist advice to fully understand the impact of these policy shifts.
“Regulatory change that supports the public interest is not something to be afraid of, and we predict that this high performing asset class will remain a fundamental strength over the long-term provided lenders continue to adapt and change alongside it.”
Mortgage interest tax relief rules introduced from 2017 and due to be fully implemented by 2021 restrict tax relief to 20% for all landlords regardless of their tax rate. Previously, landlords paying income tax at higher rates could claim more relief.
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