Buy to let crisis – an overview
2022 was a turbulent year for our finances, particularly when it came to property. Those in the industry are hoping that 2023 will see less volatility, and we are already seeing signs of recovery such as lower mortgage rates and a predicted fall in inflation.
Damage has been done however, and one of the biggest casualties has been the buy- to-let market, with commentators describing the situation as at crisis point.
What is happening and why?
The number of buy to let properties is getting smaller. According to HMRC data, the number of UK rental homes available dropped by 116,000 in 2022. It is expected that more landlords will look to sell properties in 2023, because, generally speaking, being a landlord has become more difficult and less profitable.
In recent years we have seen tax measures such as the finance cost restriction, the removal of wear and tear allowance and reforms to Main Residence relief, all of which are likely to increase tax liabilities for landlords. Further cuts to CGT allowances, announced in the 2022 Autumn budget, are likely to accelerate any property disposals.
Additional residential properties also incur a 3% stamp duty surcharge, which may put off potential new landlords from entering the market.
In addition, sweeping reforms to housing laws are set to be introduced in 2023, including the abolition of ‘no-fault’ evictions. Whilst the reforms would be good for tenants, they could make owning a buy to let property more onerous.
For further information on property , please contact Tom Young on 023 8046 1254.