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Our sector expects the worst from Budgets – Young

by: Bob Young, chief executive officer of Fleet Mortgages
  • 24/11/2017
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Our sector expects the worst from Budgets – Young
When it comes to recent Budgets and Autumn Statements, our sector has often come to find that our worst expectations could be exceeded.

It is perhaps unsurprising then that we approached this latest one with a sense of trepidation.

However, despite what you might have read, this Budget was pretty much benign in terms of its overall impact on landlords and the buy-to-let (BTL) sector in general.

You might well add that the damage had been done in previous iterations – particularly around additional property stamp duty, mortgage interest tax relief and the like.

Add in the Prudential Regulation Authority underwriting changes and you’ll understand why we currently have the market we have.

 

Small mercies

Given that the stamp duty changes for first-time buyers were widely trailed, there was some speculation that Philip Hammond might go looking for further stamp duty revenue from landlords and second home owners to compensate. However, that wasn’t the case.

Indeed, the latest figures show the additional property policy has brought in significant revenue for the Treasury – although it remains to be seen how this will hold up, if purchase activity continues to fall back.

In that respect, perhaps we should be grateful for small mercies with this Budget?

With no further measures announced, it does give the sector and its participants some time to deal with the new environment.

And of course you might believe that landlords will have enough on their plate in 2018 anyway, with requirements to meet further energy efficiency standards, plus the ongoing reduction in mortgage interest tax relief.

 

Empty homes tax

Some have argued the new empty homes council tax measures – whereby councils now have the opportunity to levy an extra 100% premium on homes that have been empty for two years for more – is a blow to landlords.

I read from one commentator that this was a “crippling announcement” – to my mind, this was hyperbole in the extreme.

Indeed, if you’re a landlord with a property which has experienced a rental void of two years or more, due to it being empty, I might respectfully suggest that you have bigger problems on your hands than some extra Council Tax to pay.

Perhaps you might need to look at why your property hasn’t rented for 24 months?

Many councils will actually apply a discount to council tax on properties which are empty for a short space of time, and again I would not expect rental void periods to get anywhere near that length.

 

Short-term hit

If this is a policy designed to get larger properties, particularly in London, back into use – especially if they are in the hands of foreign owners – then I suspect it’s not going to be particularly successful, given that such owners will be able to stomach a very small, short-term hit on Council Tax.

In effect therefore, this Budget changes little for both landlords and advisers.

At some point in the future we are likely to get the letting agent fee ban, which is likely to mean a further increase in rents in order to cover the extra cost, but again the industry has been aware of this for some time.

To summarise, when it comes to Budget 2017, for our sector no news is good news.

We can get on with the job in hand and make sure we’re delivering for our clients or borrowers.

BTL activity remains resilient and the increasing professionalisation of the sector will continue and present further opportunities for those who are serious about it and continue to play the long game.

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