The lettings agency chain Winkworth says the attraction of buy to let is waning for both institutional and individual investors.

This is because of mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the three per cent stamp duty surcharge. 

Winkworth says that institutional and individual Investors – once besotted with the residential sector – are increasingly investing in multi-use buildings.

Adam Stackhouse, head of development and commercial investment at Winkworth, says the trend is down in part to taxation: “With multi-use buildings, entry costs are lower with a reduced rate of stamp duty. They are very tax efficient during ownership and it’s a lower level of capital gains when you look to sell the property. There are also inheritance tax benefits as well.”

He says the VAT rating on buildings under construction also needs to be reviewed to accelerate regeneration of areas and specifically help conversions into multi-use buildings with the necessary combination of retail, office and residential uses.

He continues: “We need to see the five per cent VAT rating extended beyond listed and heritage buildings and applied to a regeneration/benefit to the community type assessment model. Reduced VAT levels may harm the government in the short term but it would speed up the creation of these hybrid buildings and bring renewed energy to city centres.”

Winkworth says that the current tax burden – particularly business rates – means businesses are effectively incentivised not to have a high street presence, leading to issues surrounding the appeal and long term viability of high streets.

Just last week Foxtons warned that rental supply was plummeting, partly down to landlords exiting the sector. The result was soaring rent levels.

It says rents were up 23 per cent in the year to date compared with the same period of 2021. Central London produced the highest average weekly rent at £627, a 33 per cent increase on 2021. Supply continued to be unseasonably low, with new listings decreasing 40 per cent on last year.