Buy-to-let valuations dipped to 7% of market activity in April following reduction to mortgage tax relief.
According to the latest research from Connells Survey & Valuation, the proportion of buy-to-let valuations is 6 percentage points below the five year average for April.
Buy-to-let valuation activity is even lower than it was in April last year – when the stamp duty surcharge was introduced.
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, Connells said.
As of April, landlords can only offset 75% of mortgage interest payments against rental income – down from 100% in March.
John Bagshaw, corporate services director of Connells Survey & Valuation, 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% 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,” he said.
“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% month-on-month and so the comparison with the five year average doesn’t always tell the whole story.”
Separate figures from the Council of Mortgage Lenders show that the number of loans for buy-to-let house purchase advanced in March has plummeted 78% in the past year, with 6,500 loans handed out.
However, this drop can mainly be attributed to the rush by landlords to beat the stamp duty deadline last spring.
While buy-to-let valuations have declined as a proportion of market activity, buy-to-let remortgaging is four percentage points higher than the five year average for April, as landlords look to refinance.
Buy-to-let remortgaging is now responsible for 11% of total valuations in the market – a greater proportion of valuations than buy-to-let purchasing.
The proportion of first-time buyer valuations has increased to 34% in April, up from 32% in March.
“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.”
“First-time buyer activity has sustained the market, as buy-to-let borrowing has declined. It’s encouraging to see first-time buyer valuations pick up again in spring. First-time buyers have been responsible for more than 30% of valuation activity for over 12 months, as more aspiring homeowners get their first foot on the ladder. It remains incredibly difficult to save for a deposit, but the lower cost of borrowing, combined with less competition from landlords, has meant more first-time buyers have been able to purchase a home.”
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