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Investor interest in buy-to-let nosedives

There has been a sharp fall in buy-to-let acquisitions following the hike in stamp duty for investment properties and second homes at the start of this month.

Landlord investors were naturally keen to beat the 1 April stamp duty surcharge deadline for buy-to-let investors and second homeowners which requires that they must pay an additional 3% stamp duty on new purchases.

Some 85% of estate agents reported an increase in the number of buy-to-let investors looking beat the stamp duty changes on second homes in February as demand for housing hit a 12-year high, with an average 463 house hunters registered per member branch, according to the NAEA.

But with the new buy-to-let tax measures now in place, demand for buy-to-let investments has diminished in recent weeks, as illustrated by new research.

The latest survey by Rightmove shows that the number of investors planning to purchase a property for rent has fallen by 27% year-on-year, as the new tax changes aimed at cooling the booming buy-to-let market start to have an impact.

“This waning of interest definitely seems to predict a slowdown in the buy-to-let market, but what’s not yet clear is if this will only turn out to be a short-term pause,” said Sam Mitchell, head of lettings at Rightmove.

“It could be that some investors are waiting until the tax changes have some time to bed in before they review their business and continue to make purchases,” she added. 

The significant increase in the volume of landlords purchasing properties ahead of the stamp duty deadline on 1 April led to a major rise in the number of new rental homes hitting the market in the first quarter of this year, according to the latest Countrywide Lettings Index.

In Q1 2016, the number of new rental homes that came onto the market rose by 22% compared with the corresponding period last year. Yet, tenant growth only increased by 8% during the same period, placing downward pressure on rent growth.

Johnny Morris, research director at Countrywide, commented: “Quite at odds with the intentions of the policy, the first measurable effect of the introduction of the new stamp duty rate has been to increase the number of homes owned by landlords, although this will likely be a temporary affect as we see reduced investor activity in future months.

“The increase in supply of homes to rent from landlords bringing forward purchases seems to have taken the edge off rental growth. A similar increase in tenants looking for a home to rent though would indicate this may not persist. The large number of sharers, and people living with parents means there is a big store of pent up demand in the rental market.”

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    So, we have to wait now to see what will be the truth. 22% is a serious change in the market.


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