Several changes by the government have restricted the growth of the buy-to-let property market, but experts predict that the market will stabilise with investment opportunities still available.
A number of government measures have slowed down the boom in the buy-to-let market, says a WhatMortgage.co.uk article from August 2016. For a start, there has been a 3% increase in the stamp duty for second homes, and tax relief reductions on mortgage interest payments have hit landlords who are on higher tax rates. New rules covering health and safety are creating additional costs too.
The managing director of the Association of Residential Letting Agents, David Cox, commented:
“We have to factor in that landlords in the private rented sector are not making huge returns on investment. Gross yields across the country are less than 5% on average, while net yields are around 2%.”
Cox said that many landlords will probably increase rents to cover their additional costs, thus meaning tenants pay more.
Despite rising costs, property experts predict that the market will stabilise. Cox said:
“There are changes coming, but as long as landlords are not too heavily leveraged they should be able to weather the storm.
“The market will stabilise. The property market has slowed quite dramatically in the last few months over uncertainty surrounding the referendum, but this always happens around election times.”