The latest results from Connells Survey & Valuation has revealed that the valuations of buy-to-let valuations have dipped by 7% in April. As the reduction of landlord’s tax reliefs have come in to effect, the market activity has seen a dip according to Connells’ research.
The research has found that the proportion of buy-to-let valuations stand at 6 percentage points below the five-year average for April. The research has shown that the valuations are even lower than the figures from this time last year, when the surcharge for stamp duty was introduced.
It I thought that the reduction to the buy-to-let valuations has been caused by the new surcharge for stamp duty being introduced alongside the cut to the buy-to-let mortgage tax relief. As of April this year, landlords are only allowed to offset 75% of the mortgage interest payments that have to make against their rental income. Previously landlords have been able to offset 100% of the mortgage interest payments. It is thought that these measures that have brought in by the government are hitting landlords that only have a small portfolio. It could mean that smaller, private landlords who more commonly use buy-to-let mortgages have scaled back their investment. Over the course of the last year, results have shown that buy-to-let valuations have made up less than 10% of the property market activity, a new low.
Despite the negative news about the buy-to-let market, the valuations have only decreased by 1% month on month, which means things aren’t quite as dire as they seem when looking at the five-year average.
While buy-to-let valuations have been declining, buy-to-let remortgaging has seen a 4% increase on the five-year average, meaning that landlords are looking to refinance. Because of the larger tax bills now faced by landlords, they are taking advantage of the lower remortgage rates that are on offer in order to offset their costs. As the buy-to-let tax relief is gradually removed, it is thought that remortgaging will become a more popular option for landlords to try and remain profitable.