Impact of New Budget Changes on Property Investment

The announcement of George Osborne’s budget in July seems to be a double sided coin for Britain’s property industry. The announcement that the government will be cutting the tax relief that private landlords get on their mortgage payments seems like an attempt to help first time buyers, but according to property experts it seems like this decision could have a detrimental effect across the whole property market. The announcement of the raise in the threshold for inheritance tax however means that most honest, working people will see their hard work paying off in their legacy.

Private Landlords


Photo Credit: Kate Ter Haar via Flickr

The expected rise in interest rates coupled with the cut in tax relief could prove to be crippling to private landlords who could find themselves up to 20% worse off – that could be £2000 a year based on average rents. Many private landlords have invested in property due to the economic instability of pensions or that their savings weren’t earning them any interest, and unfortunately it seems like these are the people who will suffer the most.

Obviously, those who could afford to buy properties in cash will see almost no difference, except maybe a rise the properties to buy (to let) as existing or potential landlords get put off.


leaves on wall

Photo Credit: Seth Sawyers via Flickr

The rental business is just like any other business. If costs rise, so do prices. Landlords aren’t going to just swallow the deficit that they will be making; it’s likely that this will be passed on to the renters. A new poll by the letting agents, Rentify has found that 56% landlords are intending on raising rent prices to cover the deficit, so those who are already paying high rental prices will end up even more out of pocket.

Britain’s rental market is already struggling with too much demand and not enough supply, and with the potential for private landlords to sell up and get out due to these budget changes it looks like it is only going to get worse – another reason why rent prices are due to rocket.

Another significant difference that the changes could make is in the quality of rental homes. With less money, landlords may spend less on the upkeep of their properties or buy cheaper properties in the first place, creating a shift in the rental marketplace.

First Time Buyers

first time buyers

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According to George Osborne, the tax relief changes were designed to help younger people get onto the property ladder. However, he seems to have over-looked an important point – that these first time buyers are usually the ones that are renting. So with a rise in rental prices, it will be difficult for them to save.

Inheritance Tax

Whilst the change in the inheritance tax threshold has been welcomed by most, some industry experts are worried that there will be a fall in down-sizing. As older people down-size their properties, there is a continual replenishing of the housing stock, and as people are now more likely to pass their properties on to their families this could cause a blockage in the availability of houses to buy.

Whilst not all bad news, it seems like there were some fundamental aspects which were overlooked in the July budget changes. The over-riding problem in Britain’s property industry is that there is a shortage of affordable housing and it seems like these changes aren’t going to aid the cause.

Feature image credit: Birmingham News Room via Flickr

If you enjoyed this blog post then perhaps you’d like to read “A Guide To Buy-To-Let Investments“?