Buy-to-let  

Buy-to-let experts point out flaws in government policy

Buy-to-let experts point out flaws in government policy

Experts from the buy-to-let industry have rounded on the government’s changes to stamp duty at a panel debate hosted by Paragon Mortgages.

The 3 per cent additional stamp duty for second properties, which was introduced on 1 April 2016, was introduced by the previous Conservative government led by David Cameron and then-chancellor George Osborne.

But David Cox, managing director of the Association of Residential Letting Agents (Arla), said the “policy was doomed to failure from the beginning” in response to a question from the audience about whether the tax severely damaged the buy-to-let market.

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John Heron, managing director at Paragon Mortgages, pointed out housing transactions had dropped to a level not seen since the 1960s following the introduction of the new stamp duty rules.

He said the taxation change had caused a constraint on supply to the private rented sector, which would lead to higher rents being charged to tenants and called to “reform it now”.

David Miles, professor of financial economics at Imperial College London, suggested the arguments put forward by the government for raising stamp duty for second homes were “bogus and mistaken”.

The 'Paragon great buy-to-let market debate 2017' panel also discussed the incoming changes to personal income tax relief for landlords, which will take effect from 1 April 2017, and mean the amount of tax relief landlords are able to receive on residential property finance costs will be restricted to the basic rate.

Mr Miles predicted a private landlord affected by both taxation changes might need rent to be between 20 to 30 per cent more to get the same rate of return.

He added it was “hard to see this as a set of changes that will help aspiring homeowners” and forecast it was plausible “house prices may continue to edge up” rather than fall back.

Jeff Prestridge, a regular columnist for Financial Adviser and personal finance editor at the Mail on Sunday, was also on the panel and called the tax reforms “yet another attack by the Conservative government on people’s ability to build long-term wealth”.

But Matthew Bird, independent financial planner at Seer Green Financial Planning, who was not at the debate observed: "The market appears to have dampened, which has given first-time buyers more opportunity to purchase.

"I would say activity in the first-time buyer market has remained strong where buy-to-let has weakened. If more people are buying there will be less renting which should mean that from a demand/supply perspective rent prices should remain roughly constant."

To read more about the tax changes affecting the buy-to-let market and earn 60 minutes structured CPD, click here

eleanor.duncan@ft.com