GEORGE OSBORNE’S tax on landlords will potentially destroy the private rental sector in the UK, leave lots of middle income landlords bankrupt and a small number of large portfolio owning super rich landlords that can charge what they like to tenants.
It’s a nightmare for landlords, tenants, mortgage lenders and the construction industry. Not to mention it will mean less demand for landlord insurance that will increase prices.
I’ll take each one of those catastrophes at a time:
1: Landlords with one or two properties will be hit hardest. This isn’t a tax on the rich; it’s one on common people who have houses instead of pensions. Their entire turnover is now taxable, forcing them into the top rate tax bracket and turning small profits per month into hefty losses. They will be forced to raise prices, sell up or move to another country to be a tax exile. The fact is they cannot afford to sell due to mortgage redemption figures and capital gains tax, so will need to wait until out of terms. Expect a large scale sell off and less stock in the rental market. Wealthy landlords that own the properties will have less competition and rising prices to make them even wealthier.
2: Tenants will need to pay more to stay in the property or face eviction as the landlord either sells or adapts the house to become a house of mass occupation to increase income to cover the new tax cost. Tenants will have less choice and will pay more.
3: Mortgage lenders that have depended on buy to let sales for the last decade will see application plummet and need to make money from other financial activities. Mortgages are now taxable for landlords, so they will drop in popularity like a stone, the new landlords will be buying property outright.
4: The construction industry has seen as much as one in 10 of all new properties built being sold to landlords in the last decade. This new tax could see their businesses face a 10% drop overnight. That’s why they fell on the stock market when the budget was announced then…the construction industry is about to be hit by a lack of demand.
The upshot of all the above is a rental market dominated by large wealthy landlords who will go with the flow of less supply and more demand and increase prices for tenants. The only winners here are the wealthy individuals or businesses that rent out property.
The only good news is that The Property Insurer will continue to offer the very best landlord insurance possible in the UK at the lowest price, doing what it can to reduce costs for landlords before they are taxed out of the market.