As evidenced by three Fizzy Living schemes falling through as a result of the stamp duty surcharge, government changes are hitting buy-to-let (BTL) investors hard.
Yet the stamp duty additional properties surcharge is only part of the problem. Changes to mortgage interest relief in April and stricter underwriting standards on BTL mortgages are equally concerning. Enquiries from BTL investors have halved in the last year, with many struggling to get finance. Most lenders will now only lend 12 times rental income, which limits the LTV to around 50%.
We and many other developers need BTL to get projects off the ground. We’re not confident that the government will change track and are looking at a number of solutions to assist investors. One solution we are looking at and hope to launch soon is crowdfunding.
Build-to-rent (BTR) will not have the financial muscle to replace the £2trn BTL sector. For-sale developers will always be able to outbid BTR developers for sites and there isn’t the appetite from institutions to commit the sums required.
A very lucrative private rented sector model, however, is student accommodation. We want the government to open it up to young professional non-students by creating a new ‘co-living’ use class.
If it’s given the same tax treatment as student accommodation, it will be exempt from the additional properties surcharge, making it more attractive to those looking to provide affordable private rented accommodation.