When the Conservative government swept to power on the back of 30 million votes in May, many people thought that the buy-to-let housing market would be one of the very first to prosper. After all, the Tories have a long-standing reputation for empowering private landlords, as they look to drive economic growth through enterprise.
With private rents also expected to increase by 7.5% annually over the course of the next 18 years, we looked set to enter a golden age for buy-to-let investments.
With a capitalist outlook at its core, it seems to think that the Tories have actually taken a dim view of the buy-to-let market in 2016. In fact, they have implemented more stringent regulations and sanctions in a bid to control growth in this sector and create greater balance within the sales-driven property market.
The Issue and the solution: Why and how have the Tories changed the buy-to-let market?
There are several reasons for this, but the most influential is the lack of balance that currently exists within the sales-driven property market. This has created a sellers’ market where price points have grown at a disproportionate rate to earnings, and this simply cannot be sustained for a prolonged period of time. The rise of buy-to-let homes has only exacerbated this issue, contributing to a limited number of properties available for sale, increasing the demand for rental homes and lining the pockets of landlords in the process.
To negate this, the government has stepped in to drive a more regulated marketplace. Firstly, it has announced a stamp duty increase for buy-to-let properties, driving up the cost of purchasing homes for the rental market. The Tories also recently announced that they will erode some of the tax privileges previously afforded to buy-to-let landlords, while the Bank of England (BoE) remains keen to seize power of this marketplace and control precisely how much applicants can borrow. The cumulative impact of these measures will be significant, forcing landlords at the lower end of the market to reconsider their investment plans.
In this respect, entry-level private landlords may be motivated get in touch with Open Property Group to get tips on how sell your home faster in the current climate, as companies they look to reclaim their capital and sink it into a more viable market. After all, lower-end investors lack the financial resources and margin for error available to those active in the luxury property market, while the proposed changes will increase the cost of buy-to-let investment and minimise the returns accessible through affordable real estate.
How will the Market Progress in 2016
While it is easy to see why the government has acted and how the proposed changes will drive growth in the sales-driven market, this comes at a considerable cost. More specifically, it disables a key growth engine that has empowered the UK economy during the last 18 months, creating a shortfall that must be recouped elsewhere.
In addition to this, the manipulation of private sector housing by public bodies always triggers debate, as this is opposed to the core values of a democratic, capitalist economy. This means that the Tories must tread carefully, as they look to maintain a healthy economic balance and drive organic, long-term growth.