Is the Government killing off buy-to-let?

From the end of mortgage interest relief to extra Stamp Duty surcharges, there is plenty to suggest the Government is trying to kill off the buy-to-let sector.

That was one of the key themes of this week’s ARLA conference as housing minister Brandon Lewis told the crowd he wanted a buy-to-let sector that is more professional.

Does that come at the expense of smaller landlords and lettings agents?

Mr Lewis spoke of the importance of institutional investment in the sector through the build to rent fund and insisted that any new legislation or regulation was there to cut out rogue landlords.

But tell that to Betsy Dillner, director of campaign group Generation Rent.

An audible gasp emerged in the conference centre during a panel debate when she said her landlord had put up her rent up 12%.

It later turned out that her landlord was an institutional firm rather than a rogue.

ARLA vice-president warned on the same panel that we are dealing with a “different animal” when it comes to institutions.

But that is where the government focus as well as the incoming money seems to be.

More than £30bn has been invested in the private rental sector through the Build to Rent fund, according to the British Property Federation.

According to a report released last week by DAC Beachcroft, 30,000 private rental units were granted planning permission in the last year.

In London alone, the research company Molior, recorded the completion of just over 5,300 private rental units and a further 8,900 under construction in 2015.

The private rented sector now accounts for 15 per cent of all private housebuilding in London, according to the report and around a quarter of the new units are believed to be directly backed by institutional investment.

For example, Legal and General Capital in partnership with Dutch pension fund manager PGGM, have recently launched a £600 million build to rent fund seeking to provide over 3,000 homes across the UK.

So you could still benefit if you have a pension invested with one of these firms.

But is this bad news for smaller developers and those landlords who may want to buy up housing stock.

Andrew Boulton, author of the DAC Beachcroft report told EYE it could potentially shut out the smaller landlords particularly when it come to the extra stamp duty charges.

He said: “Smaller investors have tighter margins.

“The institutional investors are looking at a bigger investment to start with and they have more firepower.”

As well as the firepower they also have more purchasing power, which is a worry particularly when the National Landlords Association says members are looking to sell 500,000 properties. She said: “It is new investors buying these units though, not first-time buyers (as intended by the government.”

But ARLA managing director David Cox insists there is room for everyone and doesn’t seem worried, he explains: “I don’t see institutional as a threat. There is a big shortage of housing stock. Even if institutional landlords build 100,000 a year extra, we would still be 150,000 short.”

One reader, Mark Connelly, puts the changes in a more stark light, commenting: “Finally a government minister admits why the changes were made. ‘We want more institutional money.’ Everything else is window dressing.

“It merely serves to screw many thousands who were encouraged by this same government to invest for their retirement and who chose BTL as the vehicle.”

The market does still seem to be alive for smaller players. Mortgage rates are at record lows and prices and transactions jumped in March as landlords looked to beat the stamp duty hike, but the proof will be in the pudding in the coming months if the sector can cope with the extra costs or gives up and leaves it to the institutions.