The buy-to-let investors’ election manifesto

Press release: April 2005

The buy-to-let investors’ election manifesto

How will the nation’s buy-to-let investors fair this election?  Mortgages for Business, one of the country’s leading buy-to-let mortgage brokerages, examines the manifestos of the three leading parties.

Property is one of the key issues in the forthcoming general election with campaigning focusing on the need to provide affordable housing after eight years of sustained property price rises.  First time buyers and the need for social housing are high priorities for all major parties.

However, with over half a million buy-to-let mortgages now outstanding and numerous unencumbered properties owned by landlords up and down the country, how will the manifesto pledges of the three major parties affect investors?

Labour

Manifesto pledge: £60,000 homes for key workers

There are concerns that the £60,000 figure is unrealistic and fails to take into account the need to build additional infrastructure on surplus government land.  David Whittaker, managing director of Mortgages for Business, comments: “It appears that the government may not have included this infrastructure cost in their calculations. It is also likely there would be little impact on residential asset appreciation and rental demand as this only represents a marginalised sector of the marketplace.”

Manifesto pledge: one million new homes by 2009

According to the Barker Report published in early 2004, 250,000 new properties must be built each year for 10 years to clear the current backlog of housing demand.  This pledge will only create a standstill situation.  David Whittaker comments: “Strong demand for property will remain and residential asset appreciation levels will not be significantly affected over a sustained period.”

Conservative

Manifesto pledge: resist John Prescott’s housebuilding targets

Any shortfalls in housing stock, particularly in South East, will in the long term continue to drive substantial residential asset appreciation.  Due to various socio-economic factors, such as the rise of the single person household, the need for    increased housing stock continues to grow and as housing appreciation is driven the basic principles of supply and demand, we believe this policy is likely to further drive up house prices.

Manifesto pledge: Examine proposals to force owners of empty properties to use them for residential occupancy.

Landlords have failed in the past to develop current residential stock because the tax implications of doing so.  It is currently more tax efficient to develop off-plan than to redevelop vacant properties.  David Whittaker comments: “If the Conservatives plan to introduce this policy they must address the need to incentivise private landlords to carry out the required development of unoccupied property and this means addressing the tax imbalance.”

Liberal Democrats

Manifesto pledge: Allocate land for 100,000 new homes in the first year. Land sold to developers through community auctions allowing people to enjoy the uplift in value.

100,000 new homes represents, according the 2004 Barker Report, less than half the requirement of new housing stock each year.  This undersupply of housing stock will continue to drive house prices upwards.

Manifesto pledge: Curb second-homeowners, plus new homes reserved for local people

“The buy-to-let market currently represents just 6% of residential housing in the UK.   Whilst these measures appear to be aimed at curbing portfolio growth, they are likely to affect the wider housing market.  The Liberal Democrats appear to be taking direct action against the growing buy-to-let market,” says David Whittaker.

The Housing Bill 2004

The main political intervention affecting buy-to-let investors has been the introduction of The Housing Bill 2004. The bill requires all landlords of HMOs (houses of multiple occupancy) to obtain a license issued by local authorities effectively treating this property type in the same manner as a hostel.

Furthermore, private landlords are increasingly being held responsible for the behaviour of their tenants even to the extent of anti-social behaviour outside the confines of the property.  David Whittaker comments: “This has been a major issue for investors.  There has seen intensive lobbying against the bill by property investment associations such as ARLA (Association of Residential Letting Agents) and the NFRL (National Federation of Residential Landlords) and it will be interesting to see if the Conservatives’ drive to cut regulation will include this recently introduced piece of Labour legislation.”

Economic issues

It is however the wider economic factors rather than individual property issues that are likely to have the biggest impact on buy-to-let investors as David Whittaker explains: “The key issue for buy-to-let investors remains the stability the economy and need for interest rates to remain low.  The main issue for many buy-to-let investors seeking finance has been the ability to meet the rent-to-interest cover calculation (in most cases rent needs to be 30% higher than the monthly mortgage payment).  Further interest rate rises are likely to exacerbate this interest cover problem further and limit the ability of investors to make further purchases.”

“Without economic stability, demand for housing will drop and property prices will fall.  This has to be the biggest single threat to buy-to-let investors,” concluded David Whittaker.

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Mortgages for Business

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors.  Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

Case studies

Mortgages for Business has a number of case studies of investors in residential and commercial property.  For more information please contact Matt Baldwin on the number below.

For further information contact:

Matt Baldwin, Coast Communications

Tel: 01233 721597 or 07930 439739

Email: matt@coastcommunications.co.uk

Jonathan Moore, Mortgages for Business

Tel: 01732 471619

Email: jonathanm@mortgagesforbusiness.co.uk