So far, the chancellor’s tax relief and stamp duty changes have not made any difference to landlords’ behaviour. The sector is still going strong and despite dire warnings, there does not appear to have been a mass property sell-off from landlords. However, credit ratings agency, Fitch, is warning that within two years, the cracks will start to show.
Changes Will Affect Landlord Behaviour
Fitch says the UK PRS is currently in a strong position, with low arrears and voids, combined with a shortage of new housing stock. Despite this, the agency says the recent changes will soon start to affect landlord behaviour and the PRS is unlikely to be as healthy within two years.
According to a report Fitch has made to its investors: “Industry surveys suggest that existing landlords are less likely to add new properties when the tax changes take effect, and some may look to sell. Our gross new mortgage lending forecasts for UK incorporate the potential for the announced changes to slow the growth in BTL origination.”
Bank of England PRS Proposal could Curb Landlords
Fitch is also concerned about a recent proposal put forward by the Bank of England to ‘rein in’ landlord lending, in an effort to control potential instability in the sector.
“The proposal does not set limits on loan-to-value, debt-to-income, or interest coverage ratios [but] if these were adopted, this could make BTL less attractive for landlords if rental yields do not rise sufficiently to offset the impact of such affordability rules,” Fitch says.
