New IMLA report: ‘Buy-to-let: under pressure’

06 February 2018

  • Volume of tax and regulatory changes introduced since July 2015 affects investment in buy-to-let, which has fallen steeply from £25 billion in 2015 to £5 billion in 2017
  • Impact of “policy layering” risks deterring landlords from maintaining levels of investment in the Private Rental Sector (PRS), in turn pushing up rents and constricting supply
  • Period of policy consolidation is needed, to assess impact of recent changes, before any further punitive action is contemplated

Net investment in buy-to-let property has fallen by 80% from £25 billion in 2015 to just £5 billion in 2017 due to excessive regulatory intervention on the sector, according to a new report from the Intermediary Mortgage Lenders Association (IMLA).

The 80% slump is a steeper fall than after the financial crisis as recent tax and regulatory changes have caused a downturn in landlords’ activity, according to the report: ‘Buy-to-let: under pressure’. In response, IMLA is calling for a brake to be placed on further policy interventions on the UK’s PRS.

The report notes the positive effect that buy-to-let has had on the PRS. It estimates that between 2000 and 2017, UK buy-to-let landlords invested £289 billion into the sector, meeting rising tenant demand by bringing 1.8 million properties into the rental market. At the same time, real rents have fallen 4.4% across the UK.

However, IMLA reports that new tax and regulatory measures introduced in the last two years , such as a 3% stamp duty surcharge and the removal of mortgage interest tax relief, have deterred some landlords from expanding their portfolios and prompted others to exit the market, with this cumulative effect referred to as ‘policy layering’.

As a result of tax changes, more than a fifth (21%) of landlords have indicated that they plan to reduce the size of their portfolios .

There are currently 4.5 million people relying on the PRS in England alone . Should demand for rental property continue to increase at current rates, driven by a lack of social housing supply and inaccessibility to owner-occupation, IMLA’s report suggests that this will lead to upward pressure on rents, disadvantaging tenants in the sector.

Kate Davies, Executive Director at IMLA, comments

“The raft of regulatory and tax changes that have hit the buy-to-let market in the last year have far-reaching effects that are still yet to be fully realised.

“We know that the majority of people regard owner-occupation as the tenure of choice, but for many this is not an immediate option. We also know that those who would in the past have rented from their local authority or Housing Association now need to rent privately.

“Various interventions by Government have apparently been aimed at encouraging more first-time buyers and making investment in buy-to-let less attractive to existing and potential landlords. But the PRS plays a vital role in our housing supply and it’s essential that a sensible balance is struck, if tenants are not to be disadvantaged by shrinking stock and higher rents.

“We urge the government to reassess the negative impact of the recent far-reaching regulatory changes to buy-to-let investment and begin a period of policy consolidation. Our nation’s PRS investors provide a service that’s vital to the well-being millions of Britons. We cannot risk hurting a sector that does so much for so many.”

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For further information please contact:

Fran Hart / Amy Boekstein, Instinctif Partners
Tel: 0207 427 1400

Notes to Editors

About IMLA

The Intermediary Mortgage Lenders Association (IMLA) is the trade association that represents mortgage lenders who lend to UK consumers and businesses via the broker channel. Its membership unites 39 banks, building societies and specialist lenders, including 16 of the top 20 UK mortgage lenders responsible for almost £180bn of annual lending.

IMLA provides a unique, democratic forum where intermediary lenders can work together with industry, regulators and government on initiatives to support a stable and inclusive mortgage market.

Originally founded in 1988, IMLA has close working relationships with key stakeholders including the Association of Mortgage Intermediaries (AMI), UK Finance (Mortgages) (UKF) and Financial Conduct Authority (FCA).

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