Budget 2015: The industry reacts
Experts from across the industry have had their say on yesterday's Budget announcement, with George Osborne's move to cut the amount of mortgage tax relief claimed by buy-to-let landlords causing a particular stir.
The chancellor says buy-to-let landlords have a "huge advantage" under the current system, and that the changes will create a "level playing field" between investors and homeowners.
Investors can currently claim tax relief on their monthly interest repayments at the top level of tax that they pay, meaning the wealthiest landlords can claim up to 45%. The change, which will be introduced over four years from next April, will see claims set at the basic rate of tax - currently 20%.
Other property-related announcements in the budget included an increase in tax relief for those who rent our a room in their home, with the long-term level of £4,250 being increased to £7,500 from next year.
The announcements resulted in housebuilding firms suffering a fall in shares, with Barratt down 5.7% and Redrow down 5.2%.
Nicholas Leeming, chairman of national estate agents Jackson-Stops & Staff
"This is a major blow to a sector that is heavily reliant on private investors and who provide a crucial supply of property to the private rental sector."
Jonathan Samuels, CEO of Dragonfly Property Finance
"Will this trigger a mass exodus from buy-to-let? Unlikely. However, it will make prospective landlords weigh up the pros and cons more closely before entering the market. There are concerns that landlords will simply bump up rents to cover the hit. This may well happen in some cases but market forces and the rents people are prepared to pay are likely to offer a degree of resistance.”
Jonathan Hopper, managing director, Garrington Property Finders
"Removing mortgage interest relief for all but basic tax rate landlords could have huge implications for the property market, with many potential investment buyers put off buy-to-let altogether. At a time when rents are rising and the country is crying out for an increase in good quality rental accommodation, the timing of this policy seems questionable and ill-thought out."
Jamie Morrison, private client partner at HW Fisher & Company
“The cut in tax relief on buy-to-let landlords’ mortgage interest payments will cause many landlords increasing pain – which will quickly be passed on to tenants in the form of higher rents. Highly-leveraged landlords could pull out of the market too – reducing the supply of rental properties and ratcheting up rents even further.”
Henry Woodcock, principal mortgage consultant at IRESS
"While this may slow house price growth, it may not be an unqualified success for first-time buyers. For those landlords that remain in the market, they may need to increase rents to cover increased financing costs, and higher rents will make it more difficult for prospective buyers to build their first deposits.”
Lucian Cook, head of Savills UK residential research
"The changes in tax relief for interest payments are likely to slow the growth in the mortgaged buy-to-let sector, which currently accounts for around 1 in 12 transactions. This is likely to provide some comfort to younger generations of aspiring homeowners, though it could reduce some of the choices for those tenants stuck in the private rented sector."
Paul Smee, director general of the Council of Mortgage Lenders
"The phasing is important. We will need to understand whether this will have a behavioural impact on higher-rate buy-to-let landlords, but a four-year timetable does at least reduce the risk of sudden market shocks."