Shawbrook BTL report shows magnitude of government intervention

by Property 118

10:16 AM, 20th August 2018
About 4 weeks ago

Shawbrook BTL report shows magnitude of government intervention

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Shawbrook BTL report shows magnitude of government intervention

A new analysis of the BTL market by Shawbrook Bank forecasts a continued dampening of the sector over the next three years, before the market stabilises in 2021 and returns to growth in the following two years.

The UK Buy to Let’ report, produced by Shawbrook Bank and compiled by the Centre for Economics and Business Research (CEBR) forecasts BTL 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. This gives an idea of the magnitude of these measures and how they have affected the BTL market and current state-of-play.

The report highlights a marked change in BTL activity following Government intervention – the number of BTL mortgage approvals for house purchases dropped in 2016 by 13%, followed by an even steeper fall of 27% in 2017 as the sector adjusts to new regulation.

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% between 2018 and 2023, compared to 7% under the new scenario analysis. Furthermore, the analysis estimates that 360,000 more BTL mortgages would have been issued if the changes to the tax system and underwriting process had not occurred.

Commenting on the findings Karen Bennett, ‎Managing Director for Commercial Mortgages says: “Whilst the series of 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. 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.”

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Comments

Appalled Landlord

14:55 PM, 21st August 2018
About 4 weeks ago

What regulatory change does Ms Bennett believe supports the public interest?

Michael Barnes

17:01 PM, 21st August 2018
About 4 weeks ago

I don't know what confidence to lace in the report, as it includes "Prior to April 2017, Buy-to-let landlords were able to
deduct the full cost of mortgage interest payments
from their tax bill", which is, of course, untrue.

Appalled Landlord

11:12 AM, 28th August 2018
About 3 weeks ago

Reply to the comment left by Michael Barnes at 21/08/2018 - 17:01
Hi Michael

Good point. It even compounds the error in the next paragraph: “From April 2017, Buy-to-let landlords can no longer deduct the full cost of their mortgage interest payments from their tax bill”

As we all know, mortgage interest was deducted from receipts in the calculation of taxable profit, not from the tax bill, just like every other type of enterprise in the country.

Ed Howker wrote “MIRAS remains for buy-to-let landlords who deduct mortgage interest payments from their tax bills” in the Foreword to the flawed report by David Kingman who claims credit for Section 24.
https://www.property118.com/landlord-tax-grab-source-document-exposed/

However, you would expect the Centre for Economics and Business Research and the Managing Director of Shawbrook Commercial Mortgages to know better.


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