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Landlords' plans will change in wake of tax relief cut

Wednesday’s budget proved a grim viewing for those who have worked in the rental sector for some time and watched the rise of the buy-to-let landlord.

With the Private Rental Sector (PRS) now accounting for more of the housing market than at any time in history, buy-to-let landlords have gone some way to changing the face of the UK market.

However, the Chancellor has now cut the amount of tax relief they can claim on mortgage interest payments in a move to 'level (the) playing field' between investors and home owners.


For many landlords – myself included – we were looking at freeing up some of our pension cash (recently available to us as part of another Government policy) to invest in the residential property market. But many of those plans may now change.

The Chancellor seems to believe that buy-to-let investors now hold too much of the total mortgage market – at 15% - and that tax relief gave them an unfair advantage over other home buyers. I can only disagree.

At times during the recession, buy-to-let investors were the only ones confident enough to enter a market that was decimated by economic uncertainty.  They created a supply of available properties at a time when few else would.  

The Government believes that more than £600m can be raised over the coming years to justify its decision to level this playing field but I rather suspect that this will also lead to increases in rents as landlords seek to offset pressure on yields that are already low as it is.

In the south of England where Sotheby’s International Realty predominantly operates, we are seeing a highly competitive market where families are competing for a limited supply of rental housing stock suitable for their space requirements.  

If landlords are struggling to make their sums add up as the rate of introduction comes into play between 2017 and 2020, then they are invariably going to pass this cost on.  

The demand for rental accommodation particularly in areas commutable to the Capital remains in place and this will be another case of the Government pulling one economic level of taxation with another unexpected and potentially detrimental effect.  

*John Fisher is Head of Lettings at Sotheby’s International Realty 

  • Simon Shinerock

    I have already written on this subject and flagged up this among other threats to the PRS. Of all the changes he could have made, for example changing the way buy to let mortgages are granted and adopting the restrictive European mode, this is the least destructive and most egalitarian, on the surface at least. That doesn't mean I agree with it, I don't, I also suspect it may be the thin end of the wedge. My theory is the real agenda is to encourage institutional build to let as a way of conquering the housing shortage. I think a big reason institutions have held back is competition from private landlords. By restricting tax relief to the basic rate for individuals but leaving companies free to borrow without restrictions Osbourne has given companies and institutions a big advantage in the market. My concern is that if not enough landlords bail out the institutions will use their influence to hobble private landlords even further. It's a great shame that what has clearly been a godsend to landlords, tenants and the market is now facing ruin for the sake of dubious political objectives, or worse, maybe as a result of insider cronyism. Time will tell if this change blunts people's appetite to buy to let, the question however remains, what other way do they have to achieve financial security and freedom? In reality it is the low interest rates more than anything that underpins the market, today's rates have fallen to the lowest ever, take those away and then there will be a rout.


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