The rolling back of mortgage interest relief is just days away but campaigners are still having a stab at raising the unfairness of the changes dubbed the tenant tax.
An “awareness week” – so far little publicised – is being run by the Tenant Tax coalition with a website calling on supporters to contact their MP. It also provides a calculator so landlords can work out how much their costs will increase by in the coming years.
Highlighting why lettings agents should be concerned, a message on the Tenant Tax website warns: “With rents increasing, it is likely that rent arrears will rise too.
“However, the longer-term consequences are likely to put many agents out of business.
“In the first instance landlords will perhaps question whether they can afford to continue paying the agent’s fees and consider taking the properties under their own management.
“Many landlords will be forced to sell their properties or they may be repossessed, leaving the agent with much reduced stock, and therefore income.”
The website also warns that activity could fall in the sales sector, adding: “Estate agents will initially be affected by the serious downturn in the buy-to-let market.
“Currently 15% of mortgage approvals are for buy-to-let and this market is set to disappear. That will lead to the house builders scaling back production, thus there will be far fewer new-builds to market.”
There hasn’t been any major publicity and no press releases have been issued for the ‘awareness’ campaign but you can view a video interview by Vanessa Warwick of Property Tribes with the campaign founder Steve Bolton.
Meanwhile, ARLA Propertymark has raised its head above the parapet to highlight the latest change to face the private rental sector (PRS).
David Cox, chief executive of ARLA Propertymark, said: “It has been a year since the Government inflated Stamp Duty costs for landlords to 3%, and it has already made the Treasury £1.3bn.
“That is more than changes to mortgage interest relief are expected to make in its first three years. This will only further squeeze the sector and make buy-to-let a less attractive investment for landlords.
“Our monthly PRS report shows that since the Stamp Duty reforms came into effect last April, letting agents have seen the supply of rental stock decrease. In February, 44% saw supply fall as a direct result, while only 9% saw it increase.”
He also warned that the impending letting agent fee ban will make buy-to-let investment less attractive as costs are passed on through “inflated agents’ fees which landlords pay”.
Cox added: “A quarter of landlords are expected to stop increasing their portfolios as a result and a fifth plan to sell some of their properties.
“We’re facing a severe housing shortage at the moment, and if the supply of rental stock falls any lower relative to demand for housing, we’ll find ourselves in the midst of a real crisis.”
Even lenders are predicting a decline in activity. The Council of Mortgage Lenders (CML) said remortgaging rather than purchase lending is currently boosting buy-to-let activity.
An article on the CML website said: “Over a relatively short period, we have seen the introduction of a raft of fiscal and regulatory measures that bear down on landlords and buy-to-let lending.
“The combined effects have resulted in a significant reduction in new property purchases by landlords, which can be clearly seen from our data. Some of the measures have also encouraged landlords to sell existing rental properties.
“It is still too early to predict long-term effects of all these measures on the balance of tenure. But we may already be beginning to see the reversal of a long period of expansion of the private rented sector.”
The article also highlights its own research from last June showing that a net 5% of landlords expected to reduce their holdings over the next year, with the proportion rising to 11% over the next five years. Just over one-third said that higher taxes were a motivating factor.
However, separate research among 200 landlords by Paragon Mortgages suggests there isn’t yet a rush to the exit.
The lender’s PRS Trends Report for the first quarter of 2017 shows landlords are taking on less mortgage debt, with the average loan-to-value decreasing by 2% to 35% since the end of 2016.
Two thirds of landlords now have borrowings of less than half the value of their investment property portfolios and average gearing has dropped from 42% in the second quarter of 2012.
However, the survey found no evidence yet of a large-scale sell-off.
The size of the average portfolio is 13 properties, unchanged from the end of 2016, while 46% of landlords believe tenant demand will increase over the next 12 months.
John Heron, managing director of Paragon Mortgages, said: “Average gearing is low and getting lower, and this long-term de-leveraging demonstrates just how financially conservative buy-to-let landlords are.
“Looking ahead, it’s realistic to expect this downward drift in gearing to continue as the Prudential Regulation Authority’s new buy-to-let underwriting standards take effect.
“Our report indicates a resilient sector but as the mortgage interest rate tax changes filter through between now and 2021, landlord confidence may be eroded further which could well result in a reduction in the supply of property to the sector and, in turn, higher rents.”