Buy-to-let
The Institution of Directors (IOD) is calling for the Government to end mortgage interest tax relief on buy-to-let properties.
However, Nigel Terrington, chief executive of the Paragon Group believes that the IOD are missing the vital point that buy-to-let is a business activity in exactly the same the way as investment in commercial property.
He said: Businesses making investments are entitled to offset their interest expenses against tax. Buy-to-let should be no different the interest on any borrowings is a straightforward business expense, not a tax relief.
The IODs contention that buy-to-let receives favourable tax treatment compared to other financial assets also misses the point that landlords must pay hefty stamp duty when they buy property, far more than the levies on buying shares, for example. And of course, they pay capital gains tax on any profits when they come to sell.
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Paul Diggory, President of the Chartered Institute of Housing, has recently condoned the view that BTL investors have priced out first-time buyers and caused the affordable housing crisis and has recommended to removal of the existing tax relief available for BTL investors, which allows them to offset this against their rental income tax returns.
Stuart law, chief executive of Assetz stated that this view is simplistic and blinkered.
He said: To suggest that buy-to-let landlords have caused house prices to go up and that they should now be victimised, singled out from other businesses, is a simplistic and blinkered view not something we would expect to be hearing from the President of a professional body, which purports to maximise the contribution that housing professionals make to the well-being of communities.
Given the recent surge in rentals, as reported by the RICS, it appears that supply/demand for rented property is finely balanced, moving towards a clear state where demand outstrips supply. A sudden large-scale termination of tenancies and a withdrawal of housing stock from the rental market, a likely consequence of introducing such punishing tax changes, would lead to an almost immediate rise in rents, as landlords look to recover their tax losses through rental increases.
Past surveys from the Association of Residential Letting Agents (ARLA) have shown that typical BTL investors purchase properties for the long-term, usually between 18-20 years.
Spokesperson for ARLA, Malcolm Harris, said: ARLA survey after ARLA survey have confirmed that buy-to-let investors are typically in their 40s looking for their retirement, they are helping to re-finance the private rented sector. We dont buy into the argument that the buy-to-let sector is pricing out first-time buyers.
