IMLA: PRS will grow despite BTL crackdown
The report, entitled ‘Segmenting the UK mortgage market’, also forecasted rent hikes caused by the crackdown – meaning tenants will suffer from the landlord tax changes.
From 2017 to 2020 the amount of buy-to-let tax relief higher rate landlords will be able to claim back will be cut from 45% to 20%.
The report read: “It is difficult to see how the July tax change or the possibility of tighter regulation of the buy-to-let market can reverse the underlying trend towards a larger PRS.
“Although a small number of additional first-time buyers may be able to access the market, in the PRS the result of a less supportive policy environment can only be higher rents, ironically hitting the tenants that politicians say they want to help.
“Any increase in rents that the restriction on interest tax deductibility causes will provide a windfall for corporate and unleveraged landlords as well as lower earning buy-to-let investors.
“For those investors who are in or may be pushed into the higher income tax bracket, further leveraged investment may have to be undertaken in a corporate structure to be viable.”
The report also claimed that 2015 will be a “mirror image” of 2014 with a strong second half of the year.
Peter Williams, executive director for IMLA, said: “The mortgage market is having to navigate some difficult terrain, so it is encouraging to see signs that the lending recovery remains on track after a sharp slowdown this time last year.
“Comparing market segments, first-time buyer volumes have actually held up best over the period from 2007-2014, while buy-to-let has been clawing its way back from a deep recession low as demand for private rental properties has grown.”
He added: “Until there is a broader policy push to tackle the chronic lack of supply, homeowners and renters in both private and social sectors will all remain vulnerable to the effects of the current lack of fully joined-up policy making.
“Current trends also highlight a change in homeowners’ attitudes to property since the recession. While conditions are ripe for greater remortgaging to occur, borrowers have become more cautious and have been choosing to grow the equity in their homes – like safe deposit boxes – rather than using the collateral for other consumption, through further advances.
“This approach presents the option of using housing wealth later in life, through lifetime mortgages and other mechanisms, as additional sources of retirement funding.”