The buy-to-let boom is on its last legs – what happens now?

Is this the beginning of the end for the buy-to-let property market?

An interesting article by James Pickford in the FT yesterday suggests that it might be.

It looks as though a growing number of landlords are throwing in the towel and putting their properties on the market.  

A combination of the end of tax relief, rising stamp duty and the fear of rising interest rates may finally have proved too much for the once-booming buy-to-let market.

So what happens now? Is this enough to crash the housing market – or will it continue to totter along in suspended animation?

The time bomb in the buy-to-let property market has gone off

Growth in the total number of outstanding buy-to-let mortgages is no longer keeping up with growth in the number of new buy-to-let loans being written, says Pickford, quoting analysis by estate agent Savills.

In other words, even although new landlords are arriving on the scene, other buy-to-let loans are being paid off at an increasing rate. As a result, overall growth in the market is slowing. Indeed, the gap between the two measures – new loans taken out vs the overall loans outstanding – hit a ten-year high in the year to June 2017.

In the year to September 2007, the number of new buy-to-let loans – at around 180,000 – almost precisely corresponded to the growth in the number of outstanding loans, The Sunday Times points out. But now the figures show that, while 78,000 new loans were granted in the year to June 2017, the outstanding loans figure grew by only 28,000.

“This strongly suggests some buy-to-let mortgages are being redeemed as investors sell rental properties,” notes Pickford. Savills is quick to point out that this isn’t an “exodus”. But it does suggest that “the combined range of tax measures is causing some people to re-evaluate whether or not buy-to-let is for them”.

We’ve written on several occasions about the time-bomb lurking in the buy-to-let market. In case you didn’t know, landlords get tax relief on the interest they pay on their mortgages. So if you have an interest-only mortgage, you can offset your monthly mortgage payments against your monthly rental income, and only pay tax on the excess.

But that’s changing. George Osborne announced a slow-motion end to this tax relief when he was chancellor a while ago, but it’s only starting to kick in now. That potentially means a much higher tax bill for landlords. And as so often happens with these sorts of changes, they do seem to be taking at least some people by surprise. My colleague Merryn Somerset Webb wrote last month about how these changes could drive house prices lower. This report is some of the first concrete evidence we’ve seen that this is really happening.

It’s hard to see why landlords would want to expand right now

Of course, this is not a surprise. Indeed, it’s hard to see how it could fail to happen. Put simply, the reduction in tax relief means that anyone buying an investment property with a mortgage, now needs the property to generate a higher yield than before in order to turn a profit after tax.

For yields to rise, rents either have to go up or prices have to go down (or a bit of both). Landlords’ pressure groups always argue that anything which increases the costs for landlords will drive rents up. However, this just can’t be true.

I am not casting aspersions on landlords here. But they are just like any other service provider in a relatively free market: they will charge what the market can bear. So logically speaking, the rents that they charge should (on average; clearly, there are outliers) already be as high as they can go, given levels of competition and tenant demand.

Therefore, if rents are already at the highest level possible (or thereabouts), then the only thing that can drive yields up is for prices to go down.  

Now, this might not matter as much if property was currently cheap. If yields were at double-digit levels, people would still be happy to buy into the market at current prices, even if the yield had dipped a bit.

But, of course, that’s not how these things work. A decade of low interest rates and quantitative easing has driven investors into a frenzied “quest for yield”. As a result, people have been diving into property (and everything else) without really worrying too much about the size of the rental income. Yields – particularly in the southeast and London – had already hit rock-bottom levels.  

Bear in mind that published yields don’t generally take into account all of the disasters that can hit landlords. I’ve met quite a few people who’ve rented out properties in the past, and I have to say, it’s not a business that appeals to me.

The number of nightmare tenants is surprisingly high (and I speak as someone whose sympathies tend towards the tenant in most cases). Then there are “voids” – periods where the property is vacant, which can destroy your profits in just a few weeks, depending on how much give is in your yield figure. And then there are your day-to-day repairs – boilers breaking down, plumbers needing to be called, all the rest.

So it’s not necessarily easy money by any stretch of the imagination.

Until now, I suspect, amateur landlords have been willing to hang on to their homes as long as they are covering their costs every year. If the property has ended up costing them money one year, it doesn’t matter – the paper profits they’ve made on the capital gains side more than make up for it. So their “mental accounting” is still biased in favour of ownership.

But it’s going to become ever harder to square that circle. As soon as they fill in their next self-assessment form (or their accountant sends them the bill), some of the most marginal landlords are going to get a nasty shock. Rather than making a few hundred quid, their property may well end up costing them a few thousand pounds.

And all of this is before we start taking account the fear of further interest rate rises, or the more general crackdown on lending requirements for buy-to-let mortgages, or even the 3% added stamp duty that anyone who still fancies getting into the market has to fork out.

The bigger picture still depends on the course of interest rates

This of course still leaves cash buyers. They aren’t affected by the tax relief issue, and they might be willing to suck up the extra stamp duty. However, they are still affected by the fact that yields simply aren’t all that appealing right now.

And they are also affected by the fact that – weighing up the likely direction of interest rates, not to mention the political uncertainty in the UK right now – the environment simply looks pretty ugly for over-priced residential property today.

Could a buy-to-let exodus drive a severe house price crash? I still struggle with that idea. I think for a “proper” property bear market, you would need to see significantly higher interest rates.

But that said, buy-to-let has become a much bigger part of the UK market in the last 20 years or so. And we could also see pockets of “forced” selling (where the landlord effectively has to sell fast in order to get a money-losing asset off their hands before it costs them anymore).

So a crash – probably not. But a bumpy ride and the odd localised bargain? Most definitely.  

  • Andrew Crow

    I don’t think we’re seeing the end of the ‘Buy to Let’ market. I think we’re seeing the shake-out of the money grubbing opportunists.

    And good riddance to them. I hope they take heavy losses. There will always be secure income for responsible landlords. They are meeting an eternal demand for housing and deserve to be fairly rewarded for doing so.

    • Doug

      Not sure that I agree – as a responsible Landlord who is achieving a good yield I find the current changes to Tax and Letting legislation very challenging. I suspect ultimately those that will survive these changes will be landlords operating on the edge or even outside the law which is neither any good for HMRC nor the tenants.

      • Andrew Crow

        You may, I suppose have to reassess what constitutes ‘a good yield'(?)

        I share your doubts about the ability of our legislators to draft a bill that doesn’t suffer from unintended consequences which are likely to make matters worse than the problem they purport to address but that will be as ever because vested interests have lobbied with narrow interest in mind and our lawmakers lack intelligence.

        Sadly for you and your ilk the one thing you can rely on is more (bloody) paperwork.

      • malta123

        I’m inclined to agree with you Doug, I come under the category of landlords who achieve high yields, albeit at the cost of ensuring that my properties are up to date, well maintained and well managed.

        Nonetheless, I’m shocked at the state of some of my competitor’s housing stock but they still manage to let them on a needs must basis where local authority and rental properties are in short supply.

        On a personal and perhaps contrary note, I confess to being a closet socialist, I’d much rather have invested my pension funds elsewhere in another sector, I’m precipitously taking the view that landlords are in for a public flogging.

        I may get out and contribute to the beginning of a housing collapse, that’s if I get out soon enough to capitalise on my investment. Being a responsible landlord doesn’t carry much credit these days. Perhaps I was never cut out to be a landlord, in any event.

    • BarryinWilts

      And how is this going to get rid of rogue Landlords who pack 30+ people into a 3 bed semi, and don’t declare the income and evade tax?

      • Andrew Crow

        It isn’t.

        The only way to even hope to do that is through local government enforcement. That would be costly and the government says we can’t afford to do anything because there is no money tree. So we bat on until we come to our senses.

  • BarryinWilts

    “But they are just like any other service provider in a relatively free market: they will charge what the market can bear. So logically speaking, the rents that they charge should (on average; clearly, there are outliers) already be as high as they can go, given levels of competition and tenant demand. ”

    This shows a fundamental lack of understanding of how the rental market works – it’s not a homogenous market. Let’s make it simple – if the cost of beans goes up which forces up all baked bean retail prices then the buyers of premium brands will either stump up the extra or buy the a cheaper brand, those buying the second tier brands stump up or buy the supermarket own brand, and similarly the buyer os own brands stump up or buy the supermarket “value” brands. The value brand buyers go hungry, because they can’t stump-up and there’s no cheaper brand.
    Same with rental properties people will stump up or move to a smaller/cheaper area, those at the bottom (on benefits) as we are already seeing are becoming homeless.

    • Joe Lee

      Just no! You’d eat cabbage. Perhaps if you used the example of food as a whole instead of beans it would be better… but still no.

      The point is that bean sellers and landlords will charge the maximum price that they can. It’s unrelated to costs. If a bean seller could charge £1000 for beans… he would! Now given that if all other landlords raise their prices then the average landlord could charge more… But this is unrelated to their costs. If the average landlord thought he could raise the price… he already has done it!

      The only equation, so to speak, is the profit that the landlord can make if he is in the market. If he decides to remove himself from the market due to costs then the supply of houses goes down… and the marginal cost of purchasing goes down compared to renting. Which forces the price of rentals down.

      For the record I’m a landlord with an economics degree.

      • BarryinWilts

        I take your comment but you miss the point. Although my analogy isn’t perfect but keeping with my food analogy what would be the effect of introducing a tax of, say, 30% off the selling price? And further assume that net profit margin is small 5-10%

      • Paul Barrett

        Absolute twaddle
        As a LL without an economics degree I can assure you that tenants will pay more rent
        They don’t and won’t have much choice due to insufficient supply
        Tenants can always afford more rent.
        Far more important will be reducing demand from migrants
        The PRS has expanded massively to cope with mass uncontrolled immigration.
        With Brexit this should reduce
        Consequently LL may face increasing voids due to lack of demand.
        The PRS will need to reduce to the new demand levels.
        LL will inevitably need to sell off some properties until demand aligns with supply.
        Migration Watch has confirmed what we all knew but the snowflake media refused to accept that Migration has caused the housing issues
        With the reduction in migration then prices and rents will soften

        • FriarStuck

          Housing benefit and cheap money have been the two biggest props under the rental market.

          Low interest rates + QE caused huge inflation in property prices and therefore capital appreciation, which have offset low, even negative, yields.

          Housing benefit has set a floor on rents. Just look at the LHA rates in a locality, and then try to find a place cheaper to rent (hint you won’t unless the property is about to be bulldozed).

          Monetary policy is tightening and the Conservative government have put the brakes on the previously generous rises in housing benefit.

          Good luck with the lack of supply argument, maybe you’ll find a gullible tenant and convince them to hand over 100% of their income.

          • Paul Barrett

            I have plenty of what you call gullible tenants only too willing to pay my market rents which will be increasing every year more than they would have done due to S24 etc.
            As rental property becomes scarcer my rents will be further increasing.I actually welcome the reduction in the PRS as it means my properties become even more sought after.
            Happy days!!
            Gullible tenants have a choice pay my rents or use the nearest park bench!!

            As for the other economic circumstances
            Well QE was needed to make the economy look viable
            Without QE the UK is bankrupt
            Remove Working Tax Credits from migrants and the jobs aren’t viable
            That is about 3 million EU migrants being supported into poorly paying jobs by the taxpayer.
            HB does not provide a floor to rents
            In case you haven’t noticed LL are increasingly refusing to take on HB tenants as the frozen HB rates are no longer worthwhile for LL who are able to source better paying non-HB tenants.
            So it matters not what the HB rates are LL don’t want them even more so because of UC and its dysfunctional processes.

            The UK economy is bankrupt
            Govt is just maintaining the illusion of one by things like
            etc, etc.

            credit lending is supporting a fake economy
            Without credit there would be no car industry
            People don’t have the money to pay for cars anymore
            Only credit makes car sales viable.

            Without cheap credit there would be a depression.
            People simply don’t have surplus income after their wages have paid for all the regular stuff.

            • FriarStuck

              That’s quite a self contradiction you’ve written there.

              So, you agree that government money has propped up the property market and economy (although you seem unsure that £25 billion a year thrown at the rental market in the form of housing benefit has much effect on prices, “cos you don’t rent to dolies, init”. Clearly all this money just disappears benignly into the economic ether), further that the government is now removing this support, but somehow you’ll be able to continue to charge tenants whatever you like.

              You should put that on your loan applications when your existing debts rollover.

              • TheLandlordWhisperer

                Friar, you really have shot yourself in the foot there. You do realise that your ‘£25bn thrown at the rental market’ fantasy is actually £9bn to the PRS (for 988,000 houses, which local authorities can clearly do without), and 15bn to social housing – which only gets 1.15m houses and doesnt include the billions spent on acquiring the properties or running an army of council employees to manage and maintain them. So presumably, since you think its a £25bn ‘subsidy’ you disagree with council and housing association properties? And think the govt should spend three times the cost on temp accomodation once we landlords have been prevented from providing the 988000 houses that the govt pay for? Interesting.

                • FriarStuck

                  I don’t understand why you keep persisting with the susidise landlords or there will be mass homelessness rubbish, it has no basis in fact.

                  I didn’t allude to the housing benefit implementation because it’s not necessary, nor does it support your argument.

                  If you think that £25 billion a year thrown at property by the government will not affect prices, you’re out of your mind.

                  Further, if you also think that the government reducing spending on property and shelter, will not lead to falling prices, and that landlords can continue to charge what they like, else eviction, and indefinite rental void, I have no words to describe that level of delusion.

                  • TheLandlordWhisperer

                    Because, as you clearly haven’t read or understood from my previous reply, £15bn of that goes into council and HA coffers for social housing. It does nothing to affect the market as this is SOCIAL housing ie truly subsidised. The other £9bn goes to the TENANT as a benefit, which you somehow think means a ‘landlord subsidy’. So you think there shouldn’t be benefits for the poor? Interesting. Again.

                    And every council in the country thinks homelessness is currently rocketing, and in the case of Peterborough they have stated publicly that their additional £5.7m on homelessness bills at the local Travelodge is chiefly because of tax changes for landlords. And yet you think homelessness isn’t caused by landlords evicting? Funny, even Shelter doesn’t agree with you!

                    • FriarStuck

                      Of course social housing affects the market. You think it exists on another planet? And doesn’t affect the actions of people looking for shelter here on planet Earth, i.e. the market

                      I ask you again, do you really think millions of properties will remain empty, with millions of people walking the streets homeless, if the monetary and fiscal system is not rigged to fix the price of shelter?

                      Or will prices fall to reflect what people can actually afford to pay?

                      What’s more likely? Given that never in the history of this country have 2 million been homeless, that the welfare state was only just implemented as we know it after WWII, and that housing benefit wasn’t introduced until 1992?

                    • TheLandlordWhisperer

                      You are proving yourself to be utterly misinformed. There is still a huge and – according to just about every relevant source – growing demand for rental that is set to continue. Plus, everywhere in this country – EVERYWHERE (except maybe Knightsbridge) – is just down the road from somewhere more expensive. Therefore there are always tenants moving to cheaper areas and sustaining that market. If a social tenant who cannot buy gets evicted, they can and are replaced by someone new, possibly from the growing army of people looking for private rent. There is currently nothing like enough houses for the demand so I don’t see most rental properties being empty for very long. Thus the houses do not remain empty, yet the evicted family remains evicted and as has been conclusively proven elsewhere on this board, has nowhere to go. If you think differently, please tell me where the evicted tenants go in a shrinking rental market. I’ve asked you several times but you still dont seem able to answer.

                      You could also explain why you think an HB payment to a council – effectively an internal transfer in the public sector – affects price movements in the private market. Only activity in the private market can do that.

                    • TheLandlordWhisperer

                      Oh, and you’re factually incorrect on HB. It was transferred between departments in 1982, was introduced in its modern form in 1972 but local authorities had been required to provide subsidy payments for both types of rental housing as far back as 1919.

            • murrayzz1

              Sovereign states with fiat currencies cannot be bankrupt. It’s impossible. Saying “without QE the UK is bankrupt” is like saying “without the ability to breathe I am suffocating”. You have got the ability to breathe, so you’re not suffocating. The UK has got the ability to issue currency, so it can never be bankrupt.

              • Paul Barrett

                Isn’t there a point at which so much money printing can cause some issues!!?
                Didn’t something like this occur in the 30’s which if I remember my recent history caused the Second World War!!
                So yes you can print as much money as you want
                I personally don’t want to take a wheelbarrow full of devalued currency to the baker’s to buy a loaf of bread!
                So just printing money is not a solution
                More austerity is required
                Substantially reduce welfare to force the feckless to work.
                Reduce immigration to the tens of thousands.
                As part of a work creation fund it would be useful to utilise a vast number of the 1.5 million feckless unemployed to build council houses.
                That might go some way to addressing the housing problems of British citizens.
                I am not concerned what happens to immigrants they are of no interest to me
                Most shouldn’t even be here
                Only stupid Labour open borders allowed the extremely detrimental mass uncontrolled immigration which has so devastated the housing market.
                But we are where we are.
                Even if Brexit reduces immigration there is a massive backlog of property to be built to cope with the millions who have flooded into the UK
                They show unfortunately little sign of returning to their home countries so we are stuck with them for the foreseeable future.
                They will need housing
                So a massive council house work creation programme is needed
                At least at the end of it we will be left with something to show for it
                Hopefully millions of social homes
                And we do need millions
                About 4 million as of now.
                That will take decades to achieve but you have to start somewhere.
                Hopefully at the end of it there will be a substantially smaller but more resilient PRS with the vast majority having bought or renting social accommodation
                I say this as a LL
                The PRS is not fit to house those that cannot afford private rents
                HB is insufficient to meet the rent required by LL who are evicting those who cannot or refuse to pay the increased rent.
                There needs to be a safety net for those who cannot afford market rents
                Social housing at taxpayer subsidised rents is the only way to manage things

      • murrayzz1

        I’m guessing your economics degree focused on neoclassical economics, which makes the erroneous assumption that the supply curve and demand curve can only intersect at one point.

        This is not true, because demand curves can have any shape at all and there can be multiple equilibrium points. That’s if the market is in equilibrium at all, which is another provably false assumption that neoclassical economics requires in order to make its bizarre models work – and even then they don’t work very well, as the failure to predict the 2008 crisis amply demonstrates, requiring an ever larger array of “exogenous shocks” to account for its multiple failures.

        The idea that the marginal cost of purchase going down compared to renting will cause some people to exit the rental market in favour of buying betrays the kind of highly theoretical thinking unrelated to the real world that is typical of neoclassical economists. The cost of buying is not the limiting factor, because it is already cheaper to buy than it is to rent for literally everyone.

        The reason most people don’t buy is not because they’ve made a choice that renting is better. It’s because they can’t, either because they haven’t got the deposit or because they can’t get the required mortgage.

        Neither of these factors are related to rental levels, so rising rents won’t make anybody decide to buy instead of renting. If anything, by reducing people’s disposable income, rising rents will make it harder for even more people to buy.

        If landlords discover that they cannot make a profit because of rising costs, they will try to push rents higher. If all or most landlords in a particular area do this, tenants will have no choice but to pay higher rents. It’s very likely that this is what will happen as landlords realise how much their cost base is increasing.

        I know this doesn’t fit with your economic models, but that’s because those models are crap and don’t really have anything to do with what happens in the real world.

    • FriarStuck

      I see, it’s the “I’m a landlord and if I can’t charge what I like then people will go homeless” non-sequitur plea to sensibility.

      • BarryinWilts

        That’s not what I said. But Landlords have to charge enough to cover their costs & taxes at the very least, if they can’t then they will sell-up and evict. Increasing local demand further and decrease supply which in it’s own right will push up rents.

        • DemiSapien

          Yes, and cut their losses.

        • FriarStuck

          It’s exactly what you’re saying, although it looks like you fail to understand your own sophistry.

          People looking for a home can either RENT or BUY.

          Landlords selling properties will not exist in a vacuum, with potential tenants wandering the streets homeless, and properties sitting vacant. They’ll be purchased instead.

          Notice has been served on your ivory tower.

          p.s. Give my regards to the Wilsons

          • BarryinWilts

            You really don’t know much about the UK housing market at all do you. The majority of tenants are not in a position to buy (why else would they be renting, except by choice) either because they haven’t a big enough deposit saved or they are not eligible for a mortgage. So please explain how, upon eviction, they will suddenly be able to buy?

            • FriarStuck

              More ivory tower mentality I see.

              What do you think a glut of previous rental properties for sale will do to prices?

              Or do you think landlords will be able to name their price on these too?

              You seem to think that landlords are running some indispensable social service that we cannot do without, when in reality the huge growth in this sector has been caused by nearly two decades of government monetary and fiscal policy that has caused a wall of money to flood into property.

              The monetary and fiscal tide is inexorably turning because the fallout from this previous policy is turning into a monetary, fiscal and social disaster (which many have warned about for years). We also bankrupted the country to bail all of this out in 2008, have run significant fiscal deficits for every single year of this business cycle (even when considered against GDP figures that now include made up numbers for prostitution, drugs, and imputed rents), and there’s no way we can keep doing this without trashing our currency and/or causing a funding crisis for the government.

              Interest rates have been increased (and the USA, the world’s reserve currency are raising rates faster than the UK, which we will have to follow if we don’t want a major sell off of Sterling), and if you care to look at the rates of housing benefit (which put a floor under the entire rental market), they are almost stagnant. There were also significant changes to who and how housing benefit would be provided (I well remember an exodus of layabouts in better areas, in recent years, because they were no longer able to claim).

              In short monetary and fiscal policy is tightening, and the money that flooded into property (and all sorts of other assets) is starting to leave.

              Further, have you any idea the depth of hatred for landlords, and letting agents, by young people?

              Do you not also realise that electoral demographics are also beginning to favour the generations that have been hit hardest by years of rampant property price inflation, and crippling rents?

              And that the 2017 election was almost decided by younger voters?

              And finally that the major political parties in the UK are desperate for younger voters, and are well aware of the problems that just putting a roof over their head causes for young people?

              By all means though, continue to add to your property portfolio if you think that none of this affects you.

              • TheLandlordWhisperer

                So let me get this clear in my head. You think that all the tenants – the social, unemployed, divorced, student, single-mum, benefit tenants – currently in private rented will somehow miraculously be able to buy just because a landlord sells? How come there are landlords selling now but these tenants aren’t buying? Are you seriously suggesting that property prices will fall so far that even those at the bottom of the pile will suddenly all be able to buy?! What an astonishing and wholly deluded assertion. If what you say is true, please explain why homelessness has rocketed these past two years – have you not told these evicted families they should be buying? Wonder why they don’t??

                • FriarStuck

                  You’ve just re-typed and rehashed the “I’m providing a social service, therefore the government must throw money at me”, non-sequitur.

                  You could use that wonky logic for any sort of business. Perhaps if the government subsidised everything, nobody would lose, and we could all be fantastically rich (ask Maduro how he’s getting on with that by the way).

                  Back in reality however, the UK is bankrupt, and the tax payer can longer keep throwing money into stupid schemes that support property prices, allow people to sit around doing nothing whilst subsidising their landlord with their welfare money, and monetary policy that destroys returns on pensions whilst a demographic shift massively increases the retired population in proportion to the working population.

                  The cheap money tap, and government money gravy train are being slowly being stopped, such that landlords, with a backward rationalised sense of their business prowess (rather than realising they just jumped on the band wagon of a 20 year government subsidised bubble and that it’s probably time to get out), are about to find out what a real market is all about, and that is people will pay what they are willing to pay, and the consequences that logically follow, namely if a business can’t cover its costs it has to cease trading or declare bankruptcy.

                  Feel free to keep telling yourself that you are different and none of this applies to you.

                  • TheLandlordWhisperer

                    Apart from the fact that my rents are so comfortably low that I’m pretty secure for… well, forever is my guess. And that actually having financial acumen and business prowess is what has made this course open to me when plenty of others I know who could have done it but were ‘too scared’ to, or ‘didn’t want all the hassle’ (read the article). You sound like someone who clearly doesn’t get it – evidenced by the fact that you, just like the govt, STILL haven’t said where the evicted are going to live. Factor in that this could easily be north of 2m (poorer) people and I’m all ears as to where you think they’re going.

                    • FriarStuck

                      Still persisting with the reprehensible “my business is a special snowflake, subsidise me, or else consequences” argument I see.

                      You’ve also utterly destroyed this argument by elucidating what you see as the consequences.

                      So if the government doesn’t continue throwing money at the property market, 2 million people will be walking the streets homeless, with a similar number of properties remaining vacant and slowly rotting? Because BTL investors won’t accept lower rents, have no financial pressures of their own, or no need to make an income? And can leave their properties empty indefinitely?

                      Or will prices adjust instead. Like they do in every other unsubsidised market.

                      I find your wonky logic rather amusing.

                    • TheLandlordWhisperer

                      There is nothing at all in my businesses that needs subsidising. But I notice you are still avoiding telling everyone where all the evicted families will be going from those landlords that have to evict to attain your BTL-free utopia. You do realise that all local authorities, everywhere, are BEGGING landlords to supply houses, yes? Or do you deny this is the case? And if you admit it IS the case, how are these councils going to cope with 2m more people asking for housing? I’m sure your explanation will be well thought through and make perfect sense.

              • BarryinWilts

                Avoiding answering the questions doesn’t help your case.
                How big is this glut going to be? what is your source for this information? Will this “glut” actually reduce house prices significantly?
                Or ar are you just peddling stories from LaLaLand?
                Where are all these buyers coming from? who’ve suddenly found a deposit and qualify for a mortgage.
                You might want to take into consideration HM Treasury own impact assessment that there “will be no impact on house prices”.

                • FriarStuck

                  House prices are already falling in London. Statistically speaking, London leads the rest of the country when it comes to property prices.

                  So the treasury says everything is going to be fine? You’ve now regressed to the “appeal to authority argument”.

                  If you wish to take fiscal advice from an institution that oversees a one trillion pound (and counting) debt, and that continues to run pro-cyclical fiscal policy that exacerbates the problem, I wish you the very best of luck.

                  • BarryinWilts

                    You are free to challenge my sources which in your mind are rubbish because they don’t fit your groupthink. But yet again you put up no substantiated contrary argument just your own fanciful ramblings.
                    I say again put up or shut up.
                    Where are your numbers to justify a “flood” or “glut”,? How big a flood and over what period of time does it extend in order to see a significant house price drop?
                    Don’t tell me “non-sequitur” which seems to be your standard answer. LOL
                    But then you’re not going to give an answer anyway. How a about another distraction about fuel escalators?

  • Mark Robertson

    It’s not the end of the buy-to-let market, it’s the professionalisation of the buy-to-let market. There will be a period over the next few years where those that are too highly leveraged, or too lazy, will sell out. But that’s not a collapse in the market – that implies that demand has dried up. If anything, demand for good rental property is increasing.

    Yes, there will probably be a fall in the price of some buy-to-let properties in some areas as current investors try to sell. Their issue is that it’s easier to sell “currently tenanted” than it is to take vacant possession and sell on the open market. However, that means the only buyers are other investors. They’re likely to be more professional, and will only pay a price that reflects a decent yield.

    The net result will be to concentrate housing wealth into a smaller circle of people. Those with cash will be in a strong position.

    Yes, property is more expensive as as asset class to service, and it’s more illiquid than other investments. But when the government capped private pensions pots at £1m they created a whole new class of cash-rich property investor. After all, if you’ve maxed out your pension, what else are you going to invest in for capital growth and income with a long-term horizon?

    • Joe Lee

      I agree.

      This article really misses any reference to the (semi costly) avoidance by use of a company.

      • Mark Chase

        You miss the issue of capital gains tax on the transfer of ownership from the individual to the company and that, when the property becomes an asset of the company, the company will have to pay 20% tax on it. At the moment if you can swallow the cost of transfer of ownership, you can loan the company money “interest only” then take the “interest” as your income. Then theres the increased accountancy cost to consider. I am not so sure that the government wont close the share sale and interest only loan loop hole in the future.

    • DemiSapien

      Totally agree here. And this is what always happens in a recessionary environment wealth gets consolidated in the hands of fewer. The few who are strong enough and wealthy enough to just ride it out.

  • AJAX

    The real value of the UK’s market place is almost impossible to ascertain because of its immense distortion by the banks & H.M. Treasury destroying their vaults with debt to inflate & maintain asset bubbles everywhere. The value is certainly far below where it currently is, but what the real value levels are is unknown. If – or when – the deleveraging comes I suspect people are going to be astonished by how precipitous the fall of value will be, & the financial dislocation it will cause. The trigger will be inflation breaking out of the pen that it’s currently held within, nothing else can stop the governments of the 1st World, who are quite clearly willing to run their bankrupted treasuries with ever escalating debt levels into the ground until something physically stops them.

  • Frank

    I am just surprised their at not more Landlords getting out. No one ever seems to mention the loss of the 10% wear and tear allowance.

    • Liz

      Just wait for them to submit their tax returns for Jan 2018-21 since amateur landlords don’t normally understand the background finance of investing in property. Owing the Revenue thousands for holding a depreciating asset is what will cause most to pull the trigger.

      • DemiSapien

        Agreed, many will run when reality hits home. “Oh that nice flat is losing me money even though the rent covers the mortgage”, and thus the cycle spins until all the dead wood is weeded out and bargains can be found. The professionals will have done the FULL calculation and even with 10% rates if they can net 5% they will take it. It is all about confidence really, and likely those tax returns are going to hit hard over next few years eroding it.

      • Paul Barrett

        Totally agree with your contentions
        There are a lot of thick LL with mortgages in their names that haven’t got a clue about S24.
        Only about 400 supported the Judicial Review out of 440000 mortgaged sole trader LL!!!!
        LL who don’t keep on top of what is going on in the industry deserve all that happens to them.
        The problem is that it is the tenants who are affected by such LL ignorance as it is they who end up evicted and homeless.
        Many tenants and LL are in for a shock in the coming years when the rental properties disappear from the market to be bought by downsizers and a few FTB etc.

  • Nicholas Ennos

    Every time there is a house price crash it is preceded by experts saying prices will level out but not crash. Markets do not work this way. Once buy to let investors realise the value of their properties is going down there will be a mad rush to sell them to crystallize their capital gain, i.e. a house price crash.

    • BarryinWilts

      You just like what happened post crash – NOT.

  • Anthony W

    Ingenious argument Barry, but I don’t think it works like beans. As a landlord, I would charge more if anybody would pay a higher rent. The idea I can ‘pass costs on to my tenant’ is daft and I’m always surprised by the regularity this nonsensical argument is trotted out in the press. If I did pass on higher costs, the tenant would leave and nobody would rent the property. If my costs go up, my profit goes down – unless demand (the key thing) enables me to put the rent up. Simple.
    BTW, we are not in for a housing crash quite yet – there is huge pent up demand for homes, so if prices lower a little, then there are plenty of people ready to jump on the ladder.

    • BarryinWilts

      So when the Govt increases fuel duty by 1p/litre the oil do not increase the price at the pumps by that amount because if they could have got 1p/litre more they’d have done so already – mmmmmmmm.

      • Anthony W

        Flats aren’t petrol either. Lots of differences, for example, the supply of petrol is effectively infinite – supply of flats slow changing. Petrol is petrol – flats are big, small, posh, rubbish, north, south. Renters can therefore discriminate in their choice. It is a very different demand dynamic. And anyway, even with petrol, when it is expensive, people do use a bit less or try harder to get cheaper fuel (effectively meaning that some suppliers do in fact try to absorb tax or other costs to an extent).

        • BarryinWilts

          That’s the point – it’s a competitive market. with finite supply. If people can’t afford the higher rent then they’ll move to a smaller property or to a cheaper area, or both.

          • FriarStuck

            You have no point.

            • BarryinWilts

              can’t win the argument so reverts to personal abuse.

              • FriarStuck

                See my other comment, the government abandoned the fuel duty escalator for exactly the reason you are disputing.

                You have no argument.

                • BarryinWilts

                  It’s only oyu who is talking about the fuel duty escalator.
                  Get a grip!

          • TheLandlordWhisperer

            Which in turn sustains/raises the rental prices in those cheaper areas.

          • Mark Chase

            And as a result they put the rents up in the “cheaper areas” We have properties in Kent that have seen a 50% increase in rents over the past 10 years due to people moving out of London and commuting back because they cant afford London rents.

      • FriarStuck

        Actually, facts rebut this non-sequitur.

        The government abandoned the fuel duty escalator because the increases in the price of fuel caused people to reduce the mileage they were driving, and as such the total tax from fuel duty fell.

        • BarryinWilts

          What facts?
          Yet again all you do is try to rubbish others arguments and put forward your own totally unsubstantiated opinions as facts.
          Put up or shut up!!

    • TheLandlordWhisperer

      Well we dont know where you are in the world but the fact is the pro landlords often do leave rents unchanged for years such that they fall behind full market value. They can thus be put up by far larger amounts than normal when necessary (mine up 26% in a year and still way below market value). As for not passing on costs, you couldn’t be in business without doing so. As market conditions change, so rental values change. Everyone my way said rents ‘couldn’t’ get higher than 650/750/850/950… now they’re saying it couldn’t get higher than £1100,1150,1200… Funny how they ‘can’t get any higher’ but then always do!

    • Last of the mohicans

      They could leave and then incur hundreds of pounds more costs to get a new place, maybe best to just take a rent rise and remain in the home you have.

      • Mark Chase

        Yes and as a landlord I have properties well below market rent value for the same reason. I purchased three flats in one block. First was 30K next was 45K last was 68K. Same flat layout, same building. So my rent for the most expensive flat is 25% higher than the rent for the cheapest purchase, but the yield is lower. The cheep flat has had the same pay on the button no problems tenant for 9 years and is still turning 13%. So I left it alone. But now I have remorgd it for 50K and have to pay tax on the interest, I have no choice but to increase the rent, If the tenant leaves, ill re advertise at the 25% mark up to local rents but risk a bad tenant. Its a gamble.

  • Hugh Jarsse

    We know exactly what will happen if the housing market starts to falter; the BoE will cut and if necessary start printing again. This is what the have been teaching us for years – that house prices only go up – why would anyone want to sell? Buy!

  • jorji

    The tax changes don’t really affect cash buyers, who want to buy a property or two with their accumulated wealth, pensions or whatever. Even with all the disadvantages of renting, until interest rates on savings accounts get back to three or four percent (if they ever do), buying a property is still an attractive ‘piggy-bank’ option.

  • Laughing Gravy

    Keep the buy to let and potentially pay tax on a loss , depending on yields and ltv. Sell and get hit for cgt.

    Nobody asks if I do sell where my my tenants will go to?
    Bad credit, out of work, never have been home owners never will. Buy to let landlords provide a service. Many people forget that.

    • Joe Lee

      Agreed! And I think there will always be a market for people who aren’t willing or able for home ownership. HMOs for students / young working professionals for example. And there should be this service for which landlords should be able to profit.

      When the average family earning an average wage can’t buy a house in the UK something needs to be done tho

  • Hugo Terry

    The BTL investment is a long term plan, and a few years of poor growth won’t change that. The cost to buy property is too prohibitive to encourage people to sell on a whim and buy back in later.

    You will only sell if you have somewhere else to put your money and now there are few obvious options, especially if you don’t want to rush piling all your cash into shares.

    The more rented properties which are sold means the fewer choice for tenants which means landlords don’t have to keep quality as high to get tenants. Also means of course that the market will keep rents as reasonable levels. Find me an ambitious University students who doesn’t want a job in London!

    Moneyweek totally missed the property boom in London, which was one if the best investments between 2011 and 2016. Always been anti property but it makes a useful part of any portfolio.

  • DiverPhil

    This is a continuing chestnut from Moneyweek like the collapse of the Euro and the EU, its just a correction, less people less available tenants, we will see where it levels out, it might squeeze a few landlords out.

  • DemiSapien

    I know a number of BTL investors who are sitting on negative equity. If they sell, one example would take a £45K loss on the mortgage straight away. Mortgage cost is £400/month (interest tracker; so rising) and gross rental income is £800/month. So cost is covered provided there is tenant, but there is no possibility of a sale. So the only time the loss would be realised is if rental market collapses. When market forces rates up further, and even if we assume that house prices remain flat or fall slightly, and that is a big if, then those people who could not afford the house still won’t as the mortgage will be higher. So the trend is set for more to rent, but it is a long game as flipping for capital gain is very limited unless in London. Example was Scotland – Ayrshire bought in 2007!

  • TheLandlordWhisperer

    You can see why professional investors laugh at Moneyweek and cancel their subscription. This really is bilge.

    • FriarStuck

      With “professional investors” meaning, BTL chancers that jumped into a government subsidised bubble.

      • TheLandlordWhisperer

        You really are just wrong on so many levels.

      • Mark Chase

        If you see an opportunity and don’t grab it, your not a business man / woman. Doesn’t matter if its a govt subsidy or a growth market. The trick is to be aware of it and in a position to take advantage. I don’t see why BTL investors are any more or less of a chancer than bit coin investors or stock market investors.

        People who waited too long or were late to the party get burnt in all such investments.

  • FriarStuck

    I’m enjoying the comments from landlords, offering defiance at the approaching cliff edge.

    Some of the best so far:

    S24 tax changes = rent rise
    Landlords selling = rent rise
    Brexit = rent rise
    Freeze on housing benefit = rent rise
    Tightening monetary policy = rent rise
    Approaching recession = rent rise
    Falling house prices = rent rise

    I can offer some more advice and comfort for the aspiring and/or seasoned BTL investor out there:

    Global plague and pandemic = rent rise
    World War III = rent rise
    Alien invasion = rent rise
    Zombie apocalypse = rent rise
    Ice age = rent rise
    Eruption of Yellowstone supervolcano = rent rise
    Comet strike = rent rise
    Catastrophic solar flare = rent rise
    Invention of warp drive and colonisation of other planets = rent rise

    • Human_1234567890

      I have to admit those examples were funny. I appreciate that you were probably quite earnest, but they are still funny.
      Another example which you omitted, but is more likely as a world event is nuclear holocaust. Perhaps you have an opinion on whether that would cause a rent rise or not?

  • Paul

    Hi, I’m Paul and I’m looking to meet Landlords with single let properties who would like FREE management and more money in your pocket. So, if you would like more money in your pocket contact us at

    Don’t give up your BTL home see how we can help first!

  • Chodendra Bhagnesh

    Miras was abandoned for homeowners, why not stop mortage interest relief completely for landlords, full stop? Mortgage interst relief has enabled charlatans masquerading as savvy investors, or as people with entrepreneurial acumen, to build a fortune with very little of their own money at stake. Do BTL without mortage interest relief if you have such acumen.

    • Nige

      Nobody has mentioned the fact that house prices were basically pushed up by a shortage created mainly by people from the EEC who often put more than one family into a house (probably skipping around the HMO regs as well).. Yes they could pay higher rents due to multiple incomes but they could also pay higher prices for houses.. I have just sold a house to an Eastern European who said that they don’t intend to stay in the UK as the parity in currencies is leveling out. Money earned in the UK has been drained out of the country to buy houses in their home country for a quarter of the price. This said it is now being reported that with Britexit they are leaving the UK and with the exchange rate for the pound in a poor state they are becoming better off than they expected. So essentially house prices in the UK will fall due to increasing Govt regulation allowing other foreign nationals to mop up. Take London for example where property was bought purely as an investment, never lived in yet as a portfolio investment will not suffer due to the exchange rate if it falls in value.

      • Mark Chase

        And there was me thinking it was loan providers allowing joint incomes, extended multiples over extended periods and interest only mortgages

    • Mark Chase

      I have to say any one who invests and makes a fortune has surely met the criteria of being a savvy investor?

  • Last of the mohicans

    The tax grab was tried in Ireland only lasted a few years and then reversed because of an exodus of landlords, leading to a massive shortage of rental property, just saying.

    • Mark Chase

      Exactly. Its a thuggish tax grab on a soft target and extremely short sighted

  • Mark Chase

    That’s exactly what I did in the last crash

  • BarryinWilts

    I agree with everything that you say, but would add that the buying/selling costs, plus any CGT will probably preclude many from re-entering the market.

    The Governments motives are not just a tax grab, but you do have to ask why there are so many Government incentives going in the direction of the Build-to-Rent corporates?