David Sullivan, Managing Partner
With the private rental market growing massively in the UK due to the very real lack of affordable housing and the very high costs of getting onto the housing ladder, the Bank of England has its concerns about whether there is the potential that the increase in buy to let mortgages could fuel another housing bubble that would eventually have to burst.
Since 2008, lending in the buy to let market has gone up by more than 40 per cent and whilst they have decided not to intervene, they have suggested that there may be some tightening of the underwriting of mortgages in this area to try to stem the flow. In the same period of seven years, since 2008, the number of owners taking mortgages out on property they are going to live in has only increased by 2 per cent.
If there was another crash in the housing market, buy to let property owners are more likely to try to offload their properties, driving prices even further down due to the fact that buy to lets make up nearly one sixth of all the housing stock in the UK market. The same would happen if prices were to rise and the same effect would happen in reverse.
However, the fears over a buy to let boom are nothing new – a quick search on the internet shows pieces being written about this subject going back to last summer and the Bank of England has been grappling with boom and bust many times in its 300 year history.
When you throw in the recent pension reforms leaving people with the option to pull all their money down and invest it into a house to let, this could also be helping to push these issues into the forefront.
However, some changes to the tax relief that landlords have historically been able to claim, may mean that these types of investment are becoming less attractive. It remains to be seen whether the buy to let market will continue to “boom” as predicted or if the changes that George Osborne has made will have a big impact. Either way, carefully researching your investment property, the area you are looking to buy in and instructing the right solicitor for your deal should help to ensure that if you do buy to let, you will make a return on your investment.
For more information about this article or any aspect of our business and personal legal solutions, just give David Sullivan a call on +44 (0) 28 9077 4500 (there is no charge for initial telephone discussions).
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