The Government and Bank of England seem to have used every weapon in their armoury to quell the appetite of buy-to-let landlords snapping up residential properties. They are determined to stop what they see as a root cause of inflated house prices and lack of available residential property for first time buyers.
Both the Residential Landlords Association (RLA) and the Association of Residential Letting Agents (ARLA) have voiced their dismay at what they regard as a series of measures that will further damage the residential rentals market.
There are fears that the additional stamp duty land tax (SDLT) premium of 3% on top of normal stamp duty rates for second homes will deter private buy-to-let landlords from investing. In addition, there are concerns that the phasing out of mortgage interest relief, which begins in 2017, will push rents to unaffordable levels.
One proposal, put forward by the Bank of England, is to tighten up the rules for new landlords hoping to obtain a buy-to-let mortgage. This would require residential rental income to cover mortgage outgoings, thus applying the brakes on the number of buy-to-let mortgages approved.
In an effort to beat the system there was a rush to purchase property in advance of the new stamp duty land tax being implemented.
Alan Stewart, director; Head of Residential Lettings; Management at Kent chartered surveyors Caxtons said: "The Government and the Bank of England are introducing new initiatives in an effort to slow the buy-to-let market and realign the residential property market. But it seems there is little anyone can do to quell the enthusiasm of buyers in this sector.
"Following an earlier change to restrictions on the use of pension funds, many new landlords are liberating funds to purchase what they consider to be a reliable long-term investment and interim income stream for their retirement."
Alan continued: "Saving for a reasonable deposit makes it difficult for first-time buyers to get on to the property ladder. The Government's attempts to cool the market suggests they believe buy-to-let landlords and first time buyers are chasing the same properties – and that generally, landlords win. Ergo there is a supply and demand issue that is proving difficult to resolve.
"Then there is a lack of affordable housing stock right across the country but more specifically in overcrowded conurbations, particularly in London and the South East. Would-be first-time buyers thus have little alternative than to rent. This, in turn, feeds the demand for rental property, which results in higher rents."
The Bank of England is concerned that if there were another financial downturn, second homeowners would offload properties en masse in order to realise their assets, thereby causing a housing crash similar to that experienced in the last recession.
The expectation is that the combination of a stamp duty increase, withdrawal of mortgage interest relief and a tightening up of mortgage approvals will all contribute to a slow down in the buy-to-let market, resulting in more affordable first-time property prices.
But while there is such disparity between house prices and income there is little or no hope of a change in the need for landlords and more rental properties. Only a balance in supply and demand will level the playing field.
Flood Re, the insurance fund developed to provide cost effective home insurance for residential properties in high flood risk areas, came in to effect at the beginning of the month.
It is anticipated that the scheme, funded through a levy (approximately £10.50 per policy) on all home insurance policy holders, will provide cheaper insurance and lower excess limits, and a solution for properties vulnerable to flooding.
Up to 500,000 households will benefit from the introduction of the scheme, which applies to private home owners but excludes certain properties such as blocks of flats and buy-to-let.
Insurers had to carry the burden of flood-related damage claims in the extreme floods of 2007 and 2015, which pushed up the cost of premiums. It is anticipated that this fund will underwrite some of the most at-risk properties that home-owners have found difficult to afford to insure, if not impossible.
Owners of high flood-risk properties will still obtain their property insurance through their usual insurer or broker and it is expected that they will now have access to a greater choice of companies and therefore more competitive prices.
There will be a fixed price for flood cover, based on the Council Tax Band that the property attracts. However, only properties built before 1st January 2009 are eligible to participate in the scheme.
Disquiet amongst commercial and buy-to-let owners rumbles on, as their properties are exempt from the scheme. This unrest is likely to continue until a solution is found that does not exclude SMEs and landlords from prohibitively expensive property insurance policies.
Flood Re was devised in consultation with the government and will be accountable to government henceforth, but is owned and operated by the insurance industry.
While some insurers are absent from the scheme - possibly due to systems glitches or finalising outstanding issues - many companies are now 'signed-up' and affordable choice is plentiful for those who are at risk of flooding.
The 2016 budget created a flare-up in government, but was there a stir in the property sector? Contrary to some rumours, there was no U-turn on stamp duty for purchasers of buy-to-let or second homes, and thus the 3% surcharge looks like it is here to stay.
One announcement that brought a smile to smaller investors was the announcement of new rates for commercial stamp duty land tax (SDLT).
George Osborne made his statement, saying that there would be 'big tax cuts for small firms'.
Charlotte Bland, Associate Director, Commercial Management and Investment said: 'The announced changes came into effect on property purchases completed on or after 17th March 2016 and it is true that this measure favours small investors, individuals, personal pension schemes and small / medium size property companies.
"Less SDLT will be due than before as long as the price of the property in question is below £1.05m.
"Prior to the announcement, on a commercial property purchase of £300,000, the stamp duty would have amounted to £9,000. Now it will be £4,500 – a real reduction of 50%.
"As with residential SDLT there is a rising scale of duty applied depending upon the purchase price which will now be applicable on "slices" of the value. On commercial property below £150,000 no stamp duty will be payable; on the next £100,000 of the purchase price the rate will be 2%; and a top rate of 5% will be due on any amount over £250,000"
This may attract more, smaller investors to the commercial property market, especially in light of the additional duty that residential buy-to-let investors will incur, coupled with the impending withdrawal of tax relief on mortgage interest rates.
Charlotte continued, "While commercial investments may be subject to more risk than residential property, on the plus side, relative returns are higher."
Also, the changes will now mean that an investor will achieve a higher return on any commercial investment purchased below £1.05m due to the reduced stamp duty they will now pay. The downside is that this change may lead to an increase in the value of properties for sale, as the market naturally re-adjusts and any saving on costs will be negated by increases prices.
Another downside of this change to SDLT is that purchases over £1m will be adversely affected and property price will be a deciding factor when calculating net returns. Larger investors – such as Pension Funds – will be disadvantaged with the stamp duty on a £10m property purchase increasing from £400,000 to £489,500.
However, the Chancellor assured his audience that only '9% of buyers would pay more than before, while the tax bills of 90% of purchasers would be cut or stay the same.'