What will happen to buy to let?

Journalist: Samantha Downes, Currently at the I (business editing some Sundays (freelance) and Mortgage Solutions

ended 07. June 2022

Looking for an opinion led piece on the BTL market. Following PropertyMark's research which showed a larger number of landlords leaving the market altogether. 

Is regulation that overbearing? Or is it a shaking out which might help first time buyers.

This is for Mortgage Solutions 

5 responses from the Newspage community

The regulation for BTL is pretty light touch when it comes to mortgages; the hoops landlords may need to jump through for a Local Authority can vary depending on the council and the area a property is located in. That said, it's not the worry some think it is: the fewer landlords, the more stock for first-time buyers to own. Every time a landlord sells up, another landlord buys it to rent, or it becomes someone's home so in a way it's zero sum.
The biggest issue some of my clients are finding is the silly requirements from Local Authorities, which do nothing to catch rogue landlords. The selective licensing costs introduced by many local councils are passed on to renters, whichever way we cut it. The changes in tax rules are also making some dinner party landlords who are nearing retirement age start looking at offloading properties whilst prices are as high as they have ever been, which in no way benefits first-time buyers as when they sell another landlord simply purchases the property. Giving landlords an incentive such as reducing capital gains or putting a cap in place may allow some landlords to sell properties at a lower price, which could benefit first- time buyers but that is not likely to happen.
Our experience is that landlords are exiting for a few reasons, namely the new tax regime that has cut income, the increased legislation that has raised costs and a housing market that has pushed up house values faster than rents have risen, so the yield isn't as good. These three factors together paint BTL in the least favourable light for over a decade. The Dinner Party landlord of the naughties is also getting to retirement age and will be looking at their options. All of this is a boon to first-time buyers or would be if there wasn't a dozen for each former buy-to -let property hitting the market.
As I am a landlord myself, I have seriously considered exiting the market as the return on investment is not as strong as it once was. This, alongside potential Government focus on energy performance certificates, a lack of support with problem tenants and a failure to regulate poor landlords make this a volatile, combustible situation. As the available properties diminish due to demand, the cost of rent rises accordingly and will force some tenants out into the street at the hands of a few ruthless landlords trying to squeeze a massive profit. How is all of this fair for all involved? The onus is on the Government to do the right thing for all involved. Sadly they don't have a history of doing that.
Speaking with my landlord clients, the view is mixed, but there would be anecdotal evidence to suggest that the tax changes are now starting to be felt in the pocket. It is not the get rich scheme it was perceived to be 10-15 years ago. There is a growing gap between rent and purchase price which is meaning larger deposits.