Boris Johnson is being to urged to do more to support investment in the private rented sector, as research shows that a significant number of landlords are exiting the buy-to-let market.
Tax and regulation changes continue to have a negative impact on the buy-to-let market, with many landlords selling their buy-to-let properties.
Mortgage interest relief changes under Section 24, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have hit landlords’ profits over the past couple of years, which largely explains why so many people are exiting the buy-to-let market and thus reducing the supply of much needed private rented stock.
Many prospective tenants now face having to bid against each other, driving up rents in the process as a result of falling supply, caused primarily by the government’s draconian tax changes.
But if Johnson is able to remove all stamp duty and land tax surcharges for buy-to-let landlords, he could reinvigorate the sector – especially in areas with high-value homes where there is not a lot of movement at the moment, according to Neil Cobbold, chief operating officer of PayProp.
He said: “Although this could help the market, a pledge to cut stamp duty alone won’t be enough to counteract losses from Section 24 and bring the leveraged buyer back into the market. However, the emotional impact of some good news from a new government would have a positive impact on the sector.
“By now, the cost of Brexit has been priced into the market. We’ve already gone through enough periods of thinking we were going to leave, so the industry will be indifferent to the October deadline, adopting the attitude that either something will happen or it won’t – it’s out of their control.
“The only parts of the country that could be affected are London and other immigration hotspots, especially if the government wins its Right to Rent appeal in the High Court.”
“Something that would help the industry would be if he overturned Section 24,” he added.
However, Cobbold accepts that it is doubtful that will happen.
He continued: “As we now have such a large private rented sector, it’s too much money for the Treasury to give up.
“If there was one the new Prime Minister could do to change the industry for the better it would be to regulate it properly. The current patchwork of piecemeal legislation burdens professional agents without any real enforcement to deter the small rogue element.
“A new government could, in consultation with the industry, replace it with well thought-out rules and regulations together with a central enforcement body. It would at a stroke help improve the consumer’s view of the industry, weed out the few lettings businesses that give the sector a bad reputation, help cut fraud, and bring about a higher level of professionalism.
“The changes we’d expect to see would be similar to what happened with financial services years ago.”