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Buy-to-let market to remain subdued until 2021

The buy-to-let market is expected to remain subdued for the next three years mired by tax changes and tougher mortgage lending standards

Fresh analysis of the BTL market forecasts a continued dampening of the sector until the market stabilises in 2021 and returns to growth in the following two years.

The ‘UK Buy to Let’ report, produced by Shawbrook Bank and compiled by the Centre for Economics and Business Research (CEBR), forecasts BTL market activity up to 2023 and compares this projection with a scenario in which the government’s various policy interventions – mortgage interest tax relief, stamp duty land tax and a tightening of PRA underwriting standards - were not introduced.

This offers an idea of the magnitude of these measures and how they have affected the BTL market and current state-of-play.

The report highlights a marked change in BTL activity following government intervention - the number of BTL mortgage approvals for house purchases dropped in 2016 by 13%, followed by an even steeper fall of 27% in 2017 as the sector adjusts to new regulation.

The Shawbrook report anticipates this transformation will continue until 2021, but will be less severe than the market has experienced in recent years with strong demand in the private rental sector and a ‘core’ of professional landlords countering the effects.

From 2021, moderate growth in the BTL market is anticipated for the years leading up to 2023.

Karen Bennett, ‎managing director for commercial mortgages at Shawbrook Bank, said: “Whilst 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.”

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