Changes to buy-to-let lending criteria, such as the assessment of loans and the restriction of high loan-to-value buy-to-let mortgages, have led to a reduction in supply for potential landlords. The new portfolio directive, which demands any assessment be made over the whole portfolio for investors who have four or more properties, also prohibits any high gearing on portfolios; which has tainted the rosy way property investment were previously portrayed.
These stringent rules have resulted in investors becoming nervous, which has affected supply.
The changes, coupled with new stamp duty rules on second or additional properties as well as the benefits of having ownership in a limited company structure, mean property investment in a personal name now looks more like a Monday lunch of leftovers than a Sunday roast dinner. The push for structured limited company ownership, which both the government and regulator are firmly behind, allows transparency on payment of taxes from property; something that has not been in place over the past 25 years.
This, along with restrictions on lending from banks, could be construed as control or rent capping. With Brexit on the horizon and uncertainty over businesses, banking, housing and the economy, it would not be impossible for the government and the opposition to have policies in place to show they are willing to affect the way things are going.
Opposition parties have discussed the possibility of official rental controls in the private lettings market. However, if one looks at the current state of lending for property investment, one might think they are already in place.
The regulators' use of directives through enforced recommendations on banks, controlling loans and prohibiting lenders from giving investors what they want, is arguably already some kind of monitor. It remains to be seen if this works, but even so, it is questionable whether it is something you would expect to be associated with a free rental market.
Matthew Yassin is a partner, specialist finance, of Coreco Group
