Taylor Scott International News
The UK property market is set to see a number of impacts as a result of a mini Budget announced in July aimed at stabilising the country’s economy. Perhaps the most controversial announcement by Chancellor of the Exchequer George Osborne was a cut in tax relief on mortgage interest payments for buy to let landlords which some believe will ultimately lead to higher rents. The Chancellor also, as expected, increased the rate at which inheritance tax will be paid on a home to £1 million and increased room rental tax relief to £7,500 per annum. Although phased in from 2017 to 2020, the buy to let tax change will make investment a less attractive proposition for landlords. Indeed, it will discourage investment in the sector which could lead to higher rents and less rental homes available, according to Graham Davidson, managing director of Sequre Property Investment. ‘This is an example of politicians not understanding how the market operates, directly contradicting their apparent goals for an improved private rented sector. Landlords should be free to deduct legitimate costs, just like any other business does,’ he pointed out. Gráinne Gilmore, head of UK residential research at Knight Frank, described it as ‘a significant change in tax status’ for those with a rental portfolio. ‘Those planning to purchase a buy to let property will have to factor these new rules into their calculations, and this could affect the offers they are willing to make,’ she said. 'If the relatively low yield environment seen today, especially in the South of England, is still evident when these changes start to come into force, there could be upward pressure on rents. The need for rental accommodation is strong, and we expect this trend to continue, especially in city centre markets around the UK,’ she added. Jamie Morrison, private client partner at HW Fisher & Company, believes it will lead to higher rents. ‘It will cause many landlords increasing pain which will quickly be passed on to tenants in the form of higher rents. Highly leveraged landlords could pull out of the market too, reducing the supply of rental properties and ratcheting up rents even further,’ he said. According to Russell Quirk, chief executive officer of online estate agent eMoov, landlords are going to be up to 20% worse off as previously enjoyed tax relief rates of up to 45% disappear. ‘Based on the average rent they could be up to £2,000 worse off each year. I can only see the result being an increase in rental prices which in turn further hampers those trying to save to get on the property ladder,’ he explained. Henry Woodcock, Principal Mortgage Consultant at IRESS, pointed out that buy to let has been the key area of growth in the mortgage market and changing its tax treatment is likely to dampen mortgage activity and demand from property investors, which will hit overall lending figures. ‘Equally, we may see a number of landlords leave the… Taylor Scott International
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