Buy to Let continues to slow

In recent weeks there have been rumours, originating initially from The Sun , that the Treasury is contemplating a fresh increase in stamp duty land tax (SDLT) on buy-to-let (BTL) properties. The idea comes at a time when SDLT receipts are showing signs of flagging.

In the first three months of 2018/19, SDLT receipts were down nearly 11% on the corresponding period in 2017/18. The latest (June 2018) rolling 12-month figure for SDLT income is £12.569bn against a peak of £13.04bn in January 2018. The Office for Budget Responsibility’s (OBR) projection for SDLT income in this financial year is £12.9bn, virtually unchanged on last year’s outturn. The Chancellor, Mr Hammond, could therefore find tweaking rates attractive, provided the overall result is increased revenue.

Against this background there has been some attention given to figures released yesterday by UK Finance on mortgage lending. These showed that there were 5,400 new BTL home purchase mortgages completed in June, 19.4% fewer than in the same month a year earlier. By value this represented £0.8bn of lending, 11.1% down year-on-year. The press release accompanying the figures noted that “…though the full impact has yet to be felt, tax and regulatory changes continue to bear down on borrowing activity in the buy-to-let purchase market”.

The trend of BTL lending has been heading downwards since the extra 3% SDLT on second properties took effect in April 2016. Many BTL purchases were brought forward to March 2016, when £4.3bn was lent to 29,700 borrowers. However, there has been no recovery from the immediately subsequent drop in sales, as the graph below shows.