Not one of the raft of buy to let rule changes being introduced by Chancellor George Osborne - ostensibly to help first time buyers have a ‘more level playing field’ - will actually directly help first timers, according to Savills.
“None of the measures aimed at buy-to-let investors will directly help the prospective first-time buyer overcome the underlying deposit hurdle. Neither will Government schemes eliminate this issue for the bulk of younger households. Therefore, the underlying demand for private rented accommodation is likely to continue to rise” explains Lucian Cooks, Savills’ director of residential research.
But the changes to the private rental sector - particularly phased reductions in mortgage interest tax relief for landlords and a three per cent stamp duty surcharge on buy to let properties from next month - will change investment patterns.
“For those [investors] requiring debt, we believe these measures will mean that future investment will be more targeted at lower-value higher-yielding stock, albeit avoiding markets heavily reliant on welfare payments, given the government’s ongoing austerity agenda” says Cook.
Using data from the Council of Mortgage Lenders he suggests that only 31 per cent of stock in the private rented sector carries a mortgage - indicating the mortgage interest issue may not be as great as some analysts suggest.
Even so, the proposal will hit cash surpluses achieved by landlords. “Our calculations indicate the net cash surplus on the average buy-to-let property will fall from £2,900 to £1,100 over this period. This assumes a property worth £227,400 with a mortgage of £119,700 and generating a gross income yield of 5.0 per cent. Those with greater levels of debt or invested in lower yielding markets will be more affected” says Cook.