Anticipating greater levels of buy-to-let activity in 2020

In a few months’ time, we reach the culmination of the Government’s changes on mortgage interest tax relief; a three-year phased-in process which began in April 2017 and will mean that relief for landlords, holding properties as individuals, will be restricted down to the basic rate of income tax.

There is no doubting that, along with the extra stamp duty charge of 3%, this policy has had a considerable impact on the buy-to-let market. There is good cause and evidence to say it has fundamentally and irretrievably altered it, and there’s no doubting that we’ve seen a move towards professional/portfolio landlords as a result, and the vastly increased use of limited company vehicles in order to secure the full tax relief that is not available if landlords own as individuals.

Such a policy was always going to be momentous and some nay-sayers took it to mean that the buy-to-let sector would be decimated as a result. That’s not been the case by any stretch of the imagination – what has actually happened is that landlords have either bit the bullet or adapted their activities.

Yes, there have been landlords who have sold properties and left the sector, but these properties have tended to be snapped up by other landlords, and while we might not have welcomed such a policy, most have got their heads round the changes and acted accordingly. Hence, the move to limited company buy-to-let – a product area where lenders like Foundation have led the way in terms of providing finance and ensuring the needs of landlord borrowers have been met.

So, April will mark something of a finish line for this policy, unless of course (and I don’t anticipate this will happen at all) the Budget in March contains a further assault, although there’s been no evidence to suggest it will. Indeed, given the result of the General Election, there appears to be a greater chance of this being reined back, along with stamp duty, than there is of taking this up a notch. I fully expect the status quo to be maintained in this area, although never say never.

While that line in the sand is likely to be drawn in April, we shouldn’t think this is the end of intervention in the private rented sector (PRS)/buy-to-let. Let’s be honest, the political winds have been blowing against landlords for some time now, and when the ‘game’ is viewed as a landlord versus first-time buyer one by many politicians, there has been political capital to be gained by introducing policies which favour the latter.

We’re aware that IMLA has called for a moratorium on any further changes to the PRS, and that’s obviously something we support, although I think we might be somewhat naïve to think that will be the case.

What might be more realistic would be perhaps to campaign and support intervention which was actually beneficial – hence, few would argue with the changes being planned for increased standards and testing on the electrical systems of rented properties. Indeed, many landlords/letting agents carry this out already and bringing others up to such standards is good for the tenants, landlords and (dare I say it) the lenders lending on these properties.

Positive measures to make properties safer and to protect tenants can’t really be argued against, but others which appear to dis-incentivise landlords from further investment or their ability to continue providing properties to the PRS, can – and should - be. The UK has a housing market which requires greater levels of supply to the PRS, not less, and this Government – at least on the surface – does appear to get this.

In that sense, buy-to-let should remain a core part of the overall mortgage market – we anticipate greater levels of activity in 2020, and advisers are clearly best poised to deliver the advice required in a market which is undoubtedly more complex and competitive. The good news is that we have a lending market which I believe can provide mortgage finance to the widest possible range of landlords, with the widest range of properties, letting to the most diverse range of tenants.

The market has moved on considerably in the past few years, and 2020 is likely to provide the next stage in its development – if you need any support in growing your buy-to-let business, you know where to come.