14 tax changes in four years will hurt buy to let market warns KPMG
No fewer than 14 different tax changes targeted mostly at the buy to let sector will damage the market in 2016 according to leading business consultancy KPMG.
Dermot Callinan, head of private clients at KPMG, says the changes – implemented or announced over the past four years – combine to make the economics of the sector “less and less attractive.”
He says that experience so far suggests that the majority of individual landlords have opted to pay the higher taxes than invest differently.
He adds that in the short term this may stay the same, with a possible rush to invest in rental properties before the additional three per cent stamp duty comes in on buy to let and second home properties above £40,000 in April.
“However, following its implementation and on top of a number of other measures phased in from 2017 onwards such as landlords facing a restriction in their ability to offset mortgage interest, it will be interesting to see whether buy to let investors opt to keep property portfolios or sell up ahead of the further changes coming in to force” he cautions.
“If large numbers of landlords take the decision to sell leading to a significant amount of second hand stock being put up for sale, this will certainly have an impact on the housing market and could also cause problems for some developers reliant on investors to maintain the current rate of sale.”
Added to this, Callinan warns that if fewer buy to let properties are available thereby creating a squeeze on the market, there is also the risk that these changes could result in high rental rates as landlords seek to compensate for increased costs.
“While a number of the tax changes have been highlighted as major revenue raisers for the government, the thinking behind them is also to deter some from investing property in order to leave more opportunities for owner-occupiers to get onto the housing ladder. Whether these changes achieve the Government’s policy aims remains to be seen, but these measures may well dampen demand for the kind of properties that are marketed as buy to let investments in the medium to long-term.”