Buy to Let

First-time buyers in London gain edge over buy-to-let landlords

First-time buyers have been boosted by tax and regulatory measures targeting buy-to-let landlords, with new research showing that investor-buyers are less likely to challenge them when competing for a property.

The average first-time buyer in London — until recently, a hotspot for buy-to-let — is today nearly half as likely to find themselves competing with a landlord buyer for a desired property than in 2015.

The research by Countrywide, the estate agency group, found 39 per cent of London first-time buyers came up against a landlord buyer in 2015, but the proportion had fallen to 21 per cent in the first six months of 2017.

Countrywide also found that in July just over one in 10 properties went to a landlord in the capital — the lowest share since January 2010.

Two factors are largely responsible for blunting landlords’ appetite for new purchases. First, a three percentage point stamp duty surcharge on second homes and buy-to-let was introduced in April 2016, significantly raising the transaction costs for those buying in high-value areas.

A second measure came in April this year as tax relief on mortgage interest for buy-to-let began to be phased out, with a potentially serious impact on owners’ rental profits.

Fionnuala Earley, Countrywide chief economist, said landlords now faced a permanent stamp duty disadvantage against first-time buyers, particularly around London where prices were high. “But other changes in taxation also make it more difficult for [investors’] sums to add up,” she said.

Price rises have stalled in the capital, and are showing signs of slowing in many other parts of the country. Nationwide last week found the average UK home price fell by 0.1 per cent between July and August, dragging down the annual average house price growth rate to 2.1 per cent. Prices also fell in the three months between March and May.

While slowing prices and the dousing of landlord demand was encouraging for first-time buyers, Ms Earley said it was a long way from solving the affordability gap in the capital. “Even if prices do fall more sharply in London it’s not going to make up for how much they’ve risen over the past two years, for example,” she added.

In the past, landlord buyers would typically win out when competing with first-time buyers because their deeper pockets allowed them to offer more. But today, even where the two types of buyer offered exactly the same for a property, about 70 per cent of the time the property went to the first-time buyer, Countrywide said.

Ms Earley said there was no way to know why this was the case, but one explanation was that vendors preferred to sell to an owner-occupier rather than an investor or speculative buyer. Another was that the veteran landlord buyer was more likely to adopt tougher negotiation tactics, making it simpler for a seller to go with the first-time buyer.

Leave a Reply

Your email address will not be published. Required fields are marked *

three × three =