Evidence is stacking up that Brexit and changes to landlord tax are starting to affect the buy to let and could lead to falling house prices in the UK.
Surveyors and estate agents claim a climate of uncertainty is shrouding the market and many expect the number of house sales to drop, according to a sentiment survey from the Royal Institution of Chartered Surveyors (RICS).
Their opinion is backed up by respected ratings agency Standard & Poor’s, which warns house prices would fall if the result of the Brexit referendum on June 23 saw the UK leave the European Union.
Buy to let mortgage trade body the Council of Mortgage Lenders (CML) argues that landlord lending was up 60% in March as investors pushed to complete property purchases before a 3% stamp duty surcharge was introduced on April 1.
Tax changes distorting market
Landlords are also facing tax changes that may impact profits.
From April 6, new wear and tear allowances that restrict the amount landlords can offset against profits.
April 2017 sees the start of phasing out higher and additional rate mortgage finance interest for landlords and a new way to calculate profits that will see many of them pay more tax.
The CML already expects to see fewer landlords buying property until the Brexit vote is settled.
“The latest snapshot of the market for the first quarter of this year was hugely distorted by the rush to beat the stamp duty deadline,” said a CML spokesman.
“It’s likely this distortion will affect the next few months. Our analysis is the rise in stamp duty brought forward between 30,000 and 35,000 transactions.
Estate agents predict falling home values
“As a result, we believe the number of transactions will drop by around 10,000 a month for the next quarter to offset the activity we have seen for March.”
The RICS survey found that more estate agents expect house prices to fall now than at any time since the financial crisis in 2008.
“Uncertainty are part and parcel of elections and we have several coming in London – including the vote for a new mayor and local council polls as well as the referendum,” said a RICS spokesman.
“Our members have seen house prices rise every month for three years running, but say they are starting to fall in some parts of the capital.
“The referendum and tax changes are a damper on the buy to let market in particular.”