The buy-to-let market has been described as a slow motion train crash with a landlord exodus and much higher rents.
Charles Curran, principal at Maskells Estate Agents in London, said landlords will quit the market en masse as regulatory, mortgage and tax changes kick in.
He is forecasting that “high” numbers of rental properties will be disposed of between April 2018 and 2019 as the first and second tranches of capping of mortgage interest relief come into effect.
He also says that an increase in capital charges for banks under Basel will push mortgage rates up.
As a result of the exodus, rents will jump dramatically in 2018/19, and house prices will be depressed by the potential addition of 163,000 homes on the market.
Curran said: “The buy-to-let market has provided so much of the rental stock the country depends on, but the Government’s tinkering could lead to a sell-off.
“This situation does seem akin to a slow motion train crash. BTL landlords with mortgages are standing on the track in a game of chicken with a regulatory locomotive, hoping to time their exit as best as possible.
“This high-risk game will almost undoubtedly leave casualties.”
Comments (5)
Savills use 12 noughts – as in 6 for a million, 9 for a billion and therefore 12 for a trillion! £60bn is the annual growth in the B2L sector attributable to new entrants ie 4.6% growth in numbers of dwellings.
For ‘tinkering’ read ‘attack with an automatic assault rifle’.
Like in the silent movies when the heroine strapped to the lines is about to get sliced in three there’s a chance she could be saved. It’s unlikely the train can be stopped but there’s a set of rusty points a few yards up the line that can be thrown and the train diverted!
Good agency is about good advice to clients; amateur landlords with poor advice will be the casualties but that’s been on the cards since before George Osborne became chancellor. The winners and losers in all of this will be decided by the advice offered and the advice heeded.
Mr Currans’ prediction of much higher rents and lower prices can only lead to higher annual rental yields for B2L investors – this when all other asset classes are predicted to stay in the doldrums at best! Great news also for the existing 70% of landlords who do not have a mortgage plus those with a corporate wrapper.
The 163,000 ‘ potential additional homes on the market’ – approx value £4 billion- also predicted by Mr Curran represents 3% of the UK’s £1.3 trillion B2L investment stock (source Savills) in volume and just 0.3% in value and the B2L sector is growing at some £60 billion plus annually.
So no ‘slow motion train crash’ !
However I do agree that Ozzy’s naked tax grab from one of the UK’s few viable asset classes will lead to rent increases.
Sorry but I am struggling with your numbers; are you using long or short scale ‘billion’; 9 noughts or 12?, If short scale 1 billion, 163,000 properties @ £272,000 average (R4 transaction average index) is 4.43 and 10 noughts so £44.3 billion.
Then the maths gets more confusing; if the average property price used remains constant 3% of volume has to be 3% of value doesn’t it? where does the division by 100 come in?
You’ve lost me with the £60 billion growth. What is that? rent, capital appreciation or new entrants to the sector? I am sure you’re right but your/someone’s decimal point is hopping about like Frogger. I don’t think it’s mine I got a new battery for my fx-361 magic box of number just the other month.