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Has the Chancellor driven small landlords out of the market?


The Chancellor’s buy-to-let tax changes could drive smaller landlords from the market and “make the housing crisis worse” for renters, say experts.

Today, George Osborne revealed stamp duty rates for landlords would be 3 percentage points higher than residential purchasers from April. The details are set to be consulted on by the Government.

In the Autumn Statement, he said: “Frankly, people buying a home to let should not be squeezing out families who cannot afford a home to buy.”

This is not the first time the Chancellor has attempted to wrestle back stock for the residential market. In the summer Budget, he announced the tapering down of tax relief for buy-to-let borrowers to the basic rate of tax from April 2017.

Experts warn the combination of both measures could hit tenants and result in landlords with little disposable cash or a small number of properties leaving the sector.

Centre for Economics and Business Research head of macroeconomics Scott Corfe says: “[The combination of both measures] will lead to a reduction in the supply of rental accommodation in the UK, as buy-to-let becomes a more unattractive investment.

“The sale of housing association properties through Right to Buy will also contract rental supply. For those who cannot or are not willing to buy a home, the Chancellor may actually be making the housing crisis worse.”

Precise Mortgages managing director Alan Cleary says: “Some people’s knee jerk reaction that this is the end of the buy-to-let market is well wide of the mark. But this is likely to result in a move towards professional landlords.”

The buy-to-let sector has experienced a strong recovery in recent years. Lending peaked at £45.7bn in 2007 but fell to just £8.6bn two years later. Since then it has grown 218 per cent to £27.4bn in 2014 and is expected to pass £30bn this year.

This has led to concerns among policymakers. As well as introducing new stamp duty rates and cutting tax relief, Osborne has also confirmed the Financial Policy Committee will be given the power to control the sector, although it has not yet been decided what these powers will be.

The Buy to Let Business managing director Ying Tan suggests buy-to-let lending could fall next year as a result of the clampdown by policymakers.

He says: “Put together, the recent measures aimed at buy-to-let make it a very challenging market and if the Government doesn’t want the sector to exist – or exist as big as it is now – then they will keep introducing measures. Will buy-to-let lending fall next year? It’s possible.

Landlords writing on online landlord community Property Tribes say the changes will “send a tsunami” through the buy-to-let sector.

The portal’s co-founder, Vanessa Warwick, says: “This is another blow for landlords, following the Summer Budget 2015 tax changes. There is a clear agenda by the Government to stifle small landlords investing in the private rented sector.

“Landlords are supported by many other businesses such as lettings agents, mortgage brokers, builders, and suppliers of landlord-related products and services, and these too will be affected as the private rented sector will stagnate or even start to shrink.

“Ultimately though, it will be tenants who bear the brunt as choice of rental property decreases and rents rise as a result. The ripples will be felt throughout the property sector and the Conservatives have ensured that they have lost the landlord vote.”



Govt to impose higher stamp duty on buy-to-let

Chancellor George Osborne has announced a raft of measures to help people onto the housing ladder, including increased stamp duty rates for buy-to-let properties. Giving his Autumn Statement today, the Chancellor said he will introduce a new rate of stamp duty which is 3 per cent higher than a residential property of the same price […]

Brokers urge caution on FPC buy-to-let powers

Brokers say the granting of new buy-to-let powers to the financial policy committee has become “inevitable”, but warn any intervention will risk damaging those seeking to rent. Chancellor George Osborne told the Treasury committee last month the Government is “in the process” of granting powers to the FPC to intervene in the buy-to-let market. The Treasury […]


FPC: ‘No immediate cause for action in buy-to-let market’

The Financial Policy Committee says there is “no immediate cause” to take action in the buy-to-let market. However, the Bank of England committee says it is “alert” to the sector’s rapid growth and “potential developments in underwriting standards”. Minutes from the FPC’s meeting this month say: “The FPC judges that there is, at present, no […]


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. If the buy to let sector is hit hard by this there could be a knock on effect on property prices, which seems long overdue. It is ridiculous that young people in parts of the south east need a deposit of £30,000 and a mortgage of £300,000 to buy a two up two down terraced house.

  2. What the measure does is make it slightly more expensive for somebody to buy a property to use for rental vs a permanent home which is the direction of travel for government policy. It could take some demand out of the housing market and increase supply for those who want to buy. I’ve yet to witness any policy that is effective in slowing down the levels of UK house prices which if you view as an asset rather than a home are at irrational levels.

  3. £200,000 property (yes, they do exist, we don’t all live in London thank goodness) rented out at £800 per month = 4.8% yield. After changes, property costs £206,000 with stamp duty increase, so yield = 4.66%. Hardly a game changer?

  4. He has helpfully also noted the exact peak in the residential property market – 31 March 2016. People love deadlines to chase artificial benefits. Afterwards, similar to joint MIRAS in August 1988, prices will start to decline and turn into a rout…. perhaps to gain form the tax he should introduce a Stamp Duty on residential property sales?

  5. I take on board Paul’s point about the new measure not being a game changer but, at least with the other recent (proposed) changes on tax relief and the wear and tear allowance, one can only hope some people will think twice about how legislation can change regarding property as an investment.

  6. For me, the fact that investors get relief from tax payers when investing in property is still the elephant in the room. It creates an uneven playing field and means that tax payers are supporting others to make money for themselves and whilst I am of course aware that we could all could do the same, IMHO any investment sector which has regulators and Governments eyes firmly fixed on it is perhaps not a good place to invest in. Not least given that the fundamentals of the investment seems stretched and the Government has initiatives to help people enter the market!

    Spreading fear as above is a tad disingenuous as it assumes rented property is the only supply out there. If property prices fall, potential tenants may well become house owners who may in turn use builders, mortgage brokers etc etc.

  7. Makes me laugh so hard my sides are hurting. All this will do is push prices up in areas where housing is generally cheaper. For every action there is an equal and opposite reaction and this will be a bad one for those outside Never Land (London & South of England).

    Newport South Wales you can by a three bed semi with drive and garage in a mid range area for £150K and rent at £675pm. You can also purchase a three bed terrace, with drive for £95K and rent at £550 pm. If it had not been for the private sector in many poorer areas of the UK there would not have been anywhere near the available housing to live in, just boarded up streets.

    So all that will happen is the high earners from London and the South will seek/look else where for properties they can buy with their cash. We are already seeing this happening anyway. They will purchase two or three instead of one on the South. The 3% increase really does not make much of a difference outside the fairy tail world of the South of England and London. When I look at London prices do you really think this is going to make housing more affordable, please.

    If you want to reduce rents and make property available in London stop paying £26,000 pa housing allowance. Its that simple, as if a landlord knows he can get £26,000 without a blink of an eye, what do you thing he will do? If you want houses for sale, reduce the benefits to a maximum of £12,000 and watch the rents fall and the housing being sold off. These problems are in London, South England and holiday areas.

  8. Fair point Martin about the move to non SE.
    These measure are about new buy to rent so the existing supply should not be impacted overly in short term.

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