The UK buy-to-let market has been hit by a flood of change in recent months that have left this sector in a state of flux. The deluge began with tax relief changes followed by the rise in Stamp Duty for second homes and most recently the Bank of England’s proposals for tighter risk assessments for mortgages.
The changes seem to be the result of universal concern about the future of the UK housing market, which has led to something of a scatter-gun approach in regulation. By midway through 2016 we will have had three significant changes to the buy-to-let market alone.
With a housing market as significant as the UK’s, even small changes can have a massive effect. We have already seen a rush to complete transactions before the latest changes to stamp duty for buy-to-let purchases, and the consultation on underwriting could have a similar effect.
Unfortunately, these layered changes could actually bring about the volatility in the market that the regulator is concerned about. Instead of making this market more stable, these changes are making additional waves before we’ve had a chance to see the impact of previous initiatives. Moreover, there is no guarantee that tightening underwriting rules will actually help to address the current problems we’re seeing in the housing market.
Improving availability of houses in the owner-occupied sector by depressing numbers in the private rented sector is not the same as solving the affordability crisis. With all three changes focused upon the former, we may be jumping out of the frying pan and into the fire. What we need is a period of calm to let the dust settle and take stock of the changes that have already been implemented, allowing them to bed in and have their desired effect. Pushing the pause button on changes to the buy-to-let market right now would be no bad thing.