Buy-to-let tax policies have driven 250000 landlords from sector

May 29, 2021

The stamp duty surcharge and the tailing off of mortgage interest tax relief have driven hundreds of thousands of landlords from the buy to let sector, new data suggests.

Landlords bought a quarter of a million fewer homes in the last five years, according to data from Hamptons International.

April 1 marked the five-year anniversary of the introduction of an additional 3% stamp duty surcharge on the purchase of second homes. The agency’s monthly lettings index suggests that this surcharge, along with the tapering of mortgage interest tax relief – phased in from 2017 – has had an impact on the number of landlords exiting – and entering – the market.

Hamptons research calculates that the combined policies have led to landlord’s buying 250,000 fewer homes in the last five years with the more expensive regions of the South and London feeling the brunt.

The rental sector in 2021 is 7% smaller than its 2017 peak, Hampton’s research showed.

But, while there is no doubt these tax changes have subdued the buy-to-let market, other initiatives aimed at getting first time buyers on the ladder, such as Help to Buy and the removal of stamp duty, have seen more tenants move from renting to homeownership.

Fewer landlords, or course, means reduced stock and this is being played out in rents, which are currently rising at six times the rate of inflation.

Aneisha Beveridge, head of research at Hamptons, said: “The tax changes introduced from 2016 onwards have undoubtedly taken the heat out of the buy-to-let market. Landlord purchases have dropped and consequently the rental sector is 7% smaller than it was at its peak in 2017.

“Even without the tax changes, we still think the rental sector would be slightly smaller today than it was in 2017.
“Growth in the sector was slowing in the lead up to 2015 and the lure of Government support measures such as Help to Buy and the removal of stamp duty have seen more first-time buyers (would-be tenants) become homeowners.

“But the longer-term impact of fewer rental homes is driving rental growth now, with rents rising six times faster than inflation.

“Tenants face half the choice they had two years ago and each new instruction has brought a deluge of enquiries within hours of homes going onto the market.

“While the current stamp duty holiday has boosted investor purchases a little, we are yet to see these flow into new instructions and improve choice for tenants.”

The opinions and views expressed in the above articles are those of the author only and are for guidance purposes only. The authors disclaim any liability for reliance upon those opinions and would encourage readers to rely upon more than one source before making a decision based on the information.