The positive figures in the housing market disguise the buy-to-let famine

At first glance, recent HMRC figures showing that one in four properties were sold to investors last quarter seem to confound predictions of a buy-to-let strike. While the figures may seem positive, the housing market is not as resilient as it may first appear.

What may not be immediately apparent is that many of the properties sold last quarter to investors were merely completions of off plan properties. These investors were already committed to buying these properties which have finally been released onto the market after building work was completed. Furthermore, these sales would have been agreed before the referendum and other adverse market influences were felt.

Indeed, the figures for the next quarter may also include many off-plan sales as housebuilders typically offer new build properties to buyers months or even years before completion is due. The true impact of the stamp duty reforms and the referendum will not be felt until Q2 or 2017 and beyond.

Marc von Grundherr, Lettings Director at Benham & Reeves Residential Lettings comments, “These figures bely the true state of the housing market. Having recently returned from a series of property investment seminars in the Far East, I can tell you that investor confidence has fallen off a cliff. No one is buying central London property right now and the only ones who would even consider it are vulture funds and investors aiming to pick up bargains when Sterling plummets in value again, which it invariably will once Article 50 is triggered. UK investors have also stayed away now that changes to mortgage relief and the wear and tear allowance have made buy to let far less profitable.”

While this may sound like welcome new for first time buyers and tenants alike, the opposite is actually true. Without off plan sales, many homebuilders will struggle to secure tiered funding or will scale back on projects. No first time buyer is willing to put down a deposit and then wait months or years to move into their property. The housebuilding industry has long relied on investor purchasers to drive new projects. Without them, supply will inevitably slow, pushing prices further out of reach for first time homebuyers.

Tenants are also likely to see rents rise as landlords exit the market. This comes at a time when rental demand is increasing in the face of uncertainty over the economy. Tenants from the EU, in particular, are opting for longer term rents as few are willing to commit to buying a property. Recent statistics show that 91% of Benham & Reeves Lettings existing tenants renewed their tenancies over the last quarter.