Tax Reforms Lead to Investment Property Sales Declining

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Tax reforms are deterring buy to let investors from expanding their portfolios, according to a new report conducted by the Bank of England.

The Bank of England’s latest report revealed that sales of buy to let properties are beginning to decline. Mortgage lending fell to a four-year low during the final quarter of 2017. The report revealed that a mere 12.7 per cent of mortgages in the fourth quarter of 2017 went to buy to let borrowers. This marks the lowest level since 2013.

The aforementioned figure is down significantly from 14.4 per cent a year earlier. There is also a marked decline from 16.3 per cent recorded during the same period of 2015.

The market has suffered from tax reforms introduced by the government, which included the phasing out of tax relief, a concession clearly valuable to landlords. The additional introduction of the 3 per cent stamp duty surcharge also had a marked effect on the market. Additional restrictions on buy to let lending introduced at the end of September, as required by the Bank of England’s Prudential Regulation Authority, also caused issues for property investors looking to secure finance.

The growing regulatory landscape has led to an influx of landlords being forced to leave the buy to let property market due to the additional strain upon their finances. However, for those truly committed to the buy to let sector, incorporating has become a viable option in order to avoid the brunt of the regulatory issues.

Mark Harris, a representative from SPF Private Clients, spoke out about the impact of the increased regulation on the market. He said: ‘It is more likely to be would-be novice landlords having second thoughts about investing in property as we are seeing experienced investors remain committed to the sector, with a significant proportion incorporating.’

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