Prominent Conservative Peer, Lord Flight, has stated that the government campaign could cause the very crisis it is seeking to solve.
Lord Flight, the former Conservative shadow chief secretary to the Treasury, believes that the government campaign on the buy-to-let market could “risk the very crisis” that it is seeking to solve. Indeed, he states that government intervention could artificially shift the equilibrium of the market at a time when it is naturally changing.
He believes that the “sudden attack” of government policies, including additional taxation and regulation on the buy-to-let market, could “create a sharp fall in prices”. He even has gone so far as to state these policies could cause a crash, rather than prevent it.
The main basis of his argument is that the new premium on stamp duties for buy-to-let investors, as well as possible interest rate increases, will increase the costs to investors. This may because a “buy-to-let flight” as investors gain more incentives to sell.
This is in stark contrast to the policy of the government and the Bank of England. Indeed, they recently published a report which stated that the current buy-to-let market could be a bubble and, consequently, one of the biggest threats to the UK economy. Mark Carney has indicated concerns about the long-term viability of the market since mid-2015, and it seems he is influencing the government to take greater action.
The Conservative Peer will find widespread support for his condemnation of the government policies. Only recently it became public that a group of 600 (and growing) landlords have reached their target amount of £50,000 (find the crowd donation here) to fund a judicial review against the policies. They hope that the judicial review will overturn the controversial “Clause 24” of the Finance Bill, in which the government outlined plans to prevent the offsetting of mortgage costs against rental profits before calculating tax. This review will be submitted for the next part of the judicial process in February 2016.
“…of the 330 Conservative MPs, 28% of them own at least one buy-to-let property”
It will be interesting to see where most MPs stand on this issue. In particular, Conservative MPs may begin to vocalise more concern to their government policies against buy-to-let. Indeed, of the 330 Conservative MPs, 28% of them own at least one buy-to-let property.
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