A prominent buying agent active in prime central London says the capital’s high end buy to let market will become less attractive to investors as a result of Chancellor George Osborne’s proposed mortgage interest relief cuts.
The tax proposal, outlined by Osborne back in the July Budget, means mortgage interest tax relief for buy to let owners will be restricted to the basic rate of income tax, currently 20 per cent, even if they themselves pay the higher 40 or 45 per cent tax rates. Osborne says the relief, which will address "unfairnesses in property taxation", will be phased out from 2017.
But now Camilla Dell of Black Brick buying agency is warning that while London has recently been considered extremely attractive in terms of buy to let investment opportunities - fuelled by demand from tenants who cannot afford the high property prices - things are changing.
The tax reform “is likely to make it less attractive to borrow to purchase buy-to-let properties” she says - which ironically may lead to reduced competition and capital values of such properties.
On the central London sales market - suffering in recent months - Dell says: “The low price of oil is weighing on many overseas buyers’ ability to spend, while a strong UK currency is making London property more expensive for those who are using Dollars or Euros to buy. The effects of the Chancellor’s changes to stamp duty are still being felt on sales of more expensive homes.”