Some quarters of the residential landlord community keep calling for the Government to support their property investment efforts with tax incentives.
Commenting on the new Help to Buy scheme announced by George Osborne in his Budget 2013 speech, Landlord Assist managing director Graham Kinnear, a tenant eviction and referencing agent, made the point that there is still a huge supply and demand imbalance in the rental market and this needs to be addressed.
He added: “Boosting house building is one part of the answer but we believe the Chancellor missed a great opportunity to boost the sector by not extending the new scheme to landlords. A lot of people nowadays prefer the flexibility of renting, so allowing landlords to take advantage of the scheme would have made perfect sense by helping to address the shortage that currently exists.”
I believe that this kind of sentiment is wrong or at the very least misplaced.
Buy-to-let is doing very well at the moment. It certainly doesn’t need help from the Government.
In 2012 lending year on year was up 19 per cent on 2011. Last year buy-to-let represented 11.5 per cent of gross mortgage lending. That is less than 1 per cent lower than in 2007 when buy-to-let lending accounted for 12.3 per cent of gross mortgage lending in the UK at of the height of market.
Although I would agree that many people do prefer the flexibility of renting I would have thought that many more would prefer to buy their own home given the opportunity.
The problem is that the opportunity is very restricted. To extend the Help to Buy scheme to property investors is likely to exacerbate the problem and would mostly likely encourage lenders to divert an even greater proportion of funds away from first-time buyers and second steppers because there is more money to be made in buy-to-let than residential mortgages.
There is already a political row brewing over whether Help to Buy will allow some people to purchase second homes. It would be disastrous to add property investors into the mix. It is not up to the Government to ease the environment in which landlords operate to the detriment of those who are already forced to rent when, in days past, they would have bought their own home.
It’s up to the lenders to help landlords. Let’s look at some of the ‘help’ that lenders have given to property investors over the last twelve months. Rates have definitely been coming down as competition heats up. Stress tests are better and there are increased options for:
- Landlords with tenants on benefits
- Home-owners needing to let to buy
- Landlords looking to finance HMOs, student lets, multi-units and semi-commercial properties
- Buy-to-let mortgage products at 80 per cent LTV or more
Product availability too remains strong although actual numbers appear to have dipped slightly. So far this quarter the average number of buy-to-let mortgages on the market is 434, down 10 products on Q4 2012. From our perspective, this looks like a touch of light trimming as lenders get rid of the dead wood and focus on their core offerings.
And to top it all, we have seen more lenders entering the mainstream buy-to-let market. And why not, there is after all, money in them there hills. I think that landlords will just have to face facts. The financial environment has changed. Lending criteria might be stricter but to some extent, it has to be to avoid an even deeper property market quagmire. Let’s focus the help where it is really needed.