Valuations for buy to let investment deals fell to just 7 per cent of market activity in April following the reduction to landlord’s mortgage tax relief.
The latest research from Connells Survey and Valuation found that the proportion of buy to let valuation is 6 percentage points lower than the five year average for April. This places buy to let valuation activity at a beneath that of April last year when the stamp duty surcharge was first announced.
The new stamp duty surcharge is generally considered the driving factor in the decline in buy to let mortgage valuations, coupled with the cut to buy to let mortgage tax relief. From April, landlords have only been able to offset 75 per cent of mortgage interest payments against rental income. This is down from 100 per cent in March.
The decline in buy-to-let valuations has likely been driven by the stamp duty surcharge and the cut to buy-to-let mortgage tax relief. As of April, landlords can only offset 75% of mortgage interest payments against rental income – down from 100% in March.
Corporate services director of Connells Survey & Valuation, John Bagshawe, said: ‘The Government’s anti-landlord policies have been hitting smaller players. Over the last year, buy-to-let valuations have made up less than 10 per cent of market activity, representing a new low in April. This could suggest that smaller, private landlords, who typically use buy-to-let mortgages, have not been investing on the same scale as previously seen. Buy-to-let used to be seen as a viable way to gain additional income or to fund retirements, but the gradual removal of buy to let mortgage tax relief will make it much harder for the man on the street to invest. Having said that, buy-to-let valuations only fell 1 per cent month-on-month and so the comparison with the five-year average doesn’t always tell the whole story.’
However, despite valuations seeing decline, buy to let remortgaging is up 4 per cent on the five-year average for April, as landlords increasingly look towards refinancing. Buy to let remortgaging is now responsible for 11 per cent of total market valuations, a more significant proportion than buy to let purchasing.
John Bagshaw continued: ‘With bigger tax bills, landlords will start to feel the squeeze. To offset some of the rising costs, landlords have been taking advantage of the lower remortgage rates on offer. As buy to let tax relief gradually disappears, remortgaging looks set to be an increasingly popular option with landlords as a way of retaining profitability.’