Tory peer warns buy-to-let tax changes could lead to ‘crash’
In an article written on the Conservative Home website, the former shadow chief secretary to the Treasury said that limiting the amount of tax relief available for landlords to 20% will prompt some to sell their properties.
He also argued that the 3% Stamp Duty Land Tax surcharge which will apply to buy-to-lets and second homes from 1 April will put prospective buyers off, leaving an imbalance between supply and demand that could trigger a crash.
Lord Flight wrote: “I suggest, apart from anything else, that now is precisely the wrong time to be attacking the buy-to-let market when the balance of supply and demand is shifting.
“More sellers and less buyers clearly has the ability to create a sharp fall in prices, if not a crash.”
According to research published by Your Move and Reeds Rains, the cut to landlord tax relief due to be phased in from next year has already begun to have an impact on the market, as this was a ‘major factor’ for 50% of landlords looking to sell their properties in November.
Lord Flight argued that it would have been more fair for the 20% tax relief limit to apply to new, and not existing investments. He went on to warn that many tenants’ security will be at risk as landlords may want to evict them in order to be able to sell their property.
“If the government’s thinking is that buy-to-let investment has squeezed younger buyers out of the market, this is misconceived,” he wrote.
“The fundamental problems creating scarcity value have been our nightmare planning arrangements and the hoarding of land with planning permission by developers.
“Furthermore, the new high rates of Stamp Duty are a major ‘disable’ when first-time buyers cannot borrow to finance large Stamp Duty costs,” he added.
Lord Flight said buy-to-lets have provided some three million homes for those not able to afford to purchase a property, particularly in London.
Property website Zoopla has warned that rents may increase as a result of the Stamp Duty surcharge, however BNP Paribas said it expected little national impact, with central London, Manchester and Leeds being affected most.