Falling numbers of mortgage approvals for house purchases in the buy-to-let market experienced following the Government crackdown on the sector will continue until 2021, according to the latest analysis.
However forecasts based on data compiled by the Centre for Economics and Business Research (Cebr) have also revealed the market will stabilise after this time and experience growth until 2023.
According to the UK Buy-to-Let Report, produced by Shawbrook Bank and based on the Cebr research, there has been a ‘marked change’ in market activity following the intervention by the Government, which introduced changes to mortgage interest tax relief and stamp duty. It came as the Prudential Regulation Authority brought in tougher underwriting standards.
As a result, Shawbrook revealed, mortgage approvals dropped in 2016 by 13% and then suffered an even greater fall of 27% in 2017 as the sector adjusted to the new regulations.
‘Buoyant’ over the long-term
Shawbrook’s report predicted this alteration was set to continue until 2021 – although it would be less severe than in recent years. It said there would be strong demand in the private rental sector with a ‘core’ of professional landlords countering the effects. From 2021 there will be two years of moderate growth, the report revealed.
Had the Government changes not taken place, Shawbrook said the share of buy-to-let mortgages on the market would have stayed higher for longer and averaged at around 13% between 2018 and 2023. What’s more, 360,000 more buy-to-let mortgages would have been issued.
However, as things currently stand, this share is predicted to be 7%.
Karen Bennett, managing director of commercial mortgages at Shawbrook Bank, said: “Whilst the series of Government and regulatory changes have made a significant impact on the sector, we have seen the impact felt more heavily amongst the amateur landlord community which has presented growth opportunities for professional investors.
“Recent political turbulence has had an amplifying effect on investor confidence but positively, the market remains buoyant for those with a long-term strategy who draw upon specialist advice to fully understand the impact of these policy shifts.
“Regulatory change that supports the public interest is not something to be afraid of, and we predict that this high performing asset class will remain a fundamental strength over the long term provided lenders continue to adapt and change alongside it.”
