Shelter’s Income and expenditure figures highlighted13:57 PM, 4th February 2019
About 3 weeks ago 35
A Standard and Poor’s (S&P) Global report into the effects of Section 24 mortgage interest relief restrictions is predicting over 60% of landlords who purchase property between 2014 and 2016 will make a net loss on those properties by the time the restrictions are fully applied in 2021.
However, S&P only predicted 4% of landlords with property purchase between 2002 to 2016 would make an overall net loss, but that overall profits would be reduced by a fifth.
The report predicts: “If rents cannot be increased 60.4% of the loans originated in 2014, 2015 and 2016 will become loss making by the time the tax changes become fully effective. This figure rises to 62.5% of loans for those buying in the South East and London over this period.”
S&P say landlords face a perfect storm of increased regulation, reduced tax relief and the potential of interest rate rises.
There is also concerned that Section 24 will make landlords even more susceptible to interest rate rises. S&P assess that if the Bank Base Rate were to increase by 1% in 2021 then 6.8% of BTL property would make a net loss and if the rate increased by 2% this figure would rise to 17.8% loss making properties.
Alastair Bigley, credit analyst for S&P said: “The proportions of loss making loans will increase as the tax system becomes less generous between now and 2021.
“We view a fire sale scenario, where large amounts of BTL property is placed for sale, which in turn could affect the wider housing market quickly and disproportionately, as unlikely.
“We believe the phased introduction of the full impact of changes in income tax treatments will give borrowers time to adjust their strategies to the new landscape.”
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