Investment in the private rented sector by small-scale buy-to-let landlords is expected to decline over the next three years, before returning to growth after 2023.
That’s according to a recent Centre for Economics and Business Research (CEBR) report commission by Shawbrook Bank and reported in mortgagesolutions.co.uk/news
The buy-to-let mortgage market has seen substantial falls over the last two years. This follows various government policy interventions including the removal of mortgage interest tax relief, a premium on investment property stamp duty land tax, a tightening of underwriting regulations and a plethora of new private tenancy regulations.
The study predicts that growth will return by 2023 but not before the loss of 360,000 mortgage sales to the sector. The results of the study have implications for all those operating in and servicing the sector including landlords, letting agents, brokers and mortgage lenders.
CEBR predict that the sector will continue to lack investment as well as suffering divestment over the next three years, before the market stabilises in 2021, and returns to growth two years after that.
Figures produced in the Shawbrook report show that mortgage sales fell by 13% in 2016 and even more, by 27% in 2017, as the full impact of the government’s regulatory changes were felt.
The report anticipates that the decline over the next three years will be less severe than that experienced over the last two. Continuing strong tenant demand in the private rented sector, and a steady increase in the number of professional landlords taking up the slack, will help counter the ill effects.
Shawbrook thinks that in the absence of the buy-to-let market reforms demand for BTL mortgages would have been sustained for longer, and would have averaged at around 13% of the whole UK mortgage market up to 2023, instead of the likely post-reform era market share of just 7%.
Karen Bennett, managing director for commercial mortgages at Shawbrook has said:
“While the series of government and regulatory changes have had a significant impact on the sector, we have seen the impact felt more heavily among 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.
“Regulatory change that supports the public interest is not something to be afraid of, and we predict that this high performing asset class will remain a fundamental strength over the long-term provided lenders continue to adapt and change alongside it.”