Lettings sector will return to growth – but maybe not until 2021…
A new analysis of the buy to let market forecasts more bad news for agents, landlords and investors over the next three years, before the market stabilises in 2021 and returns to growth in the following two years.
The analysis undertaken for the Shawbrook Bank by the Centre for Economics and Business Research forecasts buy to let market activity up to 2023 and compares this projection with a scenario in which the government’s various policy interventions – mortgage interest tax relief, stamp duty land tax and a tightening of PRA underwriting standards – were not introduced.
The bank says this allows analysts to see the magnitude of these measures and how they have affected the buy to let market.
The report confirms that there has been a marked change in buy to let activity following recent government attacks in the shape of fiscal and regulation changes.
For example, the number of BTL mortgage approvals for house purchases dropped in 2016 by 13 per cent but was followed by an even steeper fall of 27 per cent in 2017.
The Shawbrook report anticipates this transformation will continue until 2021, but will be less severe than the market has experienced in recent years with strong demand in the private rental sector and a ‘core’ of professional landlords countering the effects.
From 2021, moderate growth in the BTL market is anticipated for the years leading up to 2023.
In comparison under the no-reform scenario, Shawbrook Bank would have expected the share of BTL mortgages to have stayed higher for longer, averaging at around 13 per cent between 2018 and 2023, compared to just seven per cent under the new scenario analysis.
Commenting on the findings Karen Bennett, managing director for Commercial Mortgages says: “Whilst the government and regulatory changes have had a significant impact on the sector we have seen the impact felt more heavily amongst the amateur landlord community which has presented growth opportunities for professional investors.
“Recent political turbulence has had an amplifying effect on investor confidence but positively, the market remains buoyant for those with a long-term strategy who draw upon specialist advice to fully understand the impact of these policy shifts.”