Suppressing BTL market leaves overall housing market in a ‘precarious position’

The government is putting the overall housing market at risk by “squeezing” the buy-to-let sector with higher stamp duty, new mortgage interest tax and extensive affordability tests for new buy-to-let mortgages, according to a leading expert.

Stuart Law, owner and founder of Assetz Capital, is warning the next government about the risk that is being taken with the buy-to-let market and the consequences it could have on the UK housing market. 

“Currently we find ourselves in a very precarious position when it comes to the housing market,” said Law, who insisted that recent tax, mortgage and legislative changes in the buy-to-let industry have already led to a sharp decline in buy-to-let property transactions and this will lead to “many fewer rental properties coming to the market, pushing up rents”.

Law accepted that one of the main government’s intentions is to free up buy-to-let properties for first-time buyers, but he said that this “isn't the way to go about it best”.

He added: “The new changes will bring to market a lot of cheaper housing for first time buyers for sure but we'll see capital growth slow or even go negative as supply begins to exceed demand for a few years caused by landlords selling their properties. 

“Low or negative house price growth will slow housebuilder activity and suppress GDP growth and renters will suffer the most perhaps as fewer rental properties available will drive rental costs up. 

“The housing markets most likely to be affected by the tighter restrictions on the BTL market will most likely be London and the South East as the new taxes have highest impact there and we are already starting to see a shift out of London for BTL landlord activity and already seeing downward pressure on prices there.”

Looking at the wider picture, the fact that consumer and market confidence is known to be based substantially on the housing market means that any price drops could be at exactly the wrong time, according to Law.

He continued: “As Brexit kicks in, it could lead to catastrophic consequences across the board if it turns out to be a hard Brexit with bad economic consequences and now housing market feel good factor to help counter it.

“The government and Bank of England has put these new measures in place far too early and far too aggressively and would be wise to moderate these plans and let the BTL market continue to grow at a more modest pace whilst putting in place real housing market supply solutions that truly deliver new stock, not the woolly housing papers we have seen to date.

“The problem is that the tough decisions on expanding cities, towns and villages around the country are guaranteed vote losers for any party due to NIMBYism and we unfortunately expect politicians to be more bothered about their own short term success than the real long term success and stability of the country.”

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