Is buy-to-let still worthwhile? Estimating the impact of residential landlord tax reform on prices and demand of buy-to-let properties

Heng Ying Li
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Heng Ying Li: Warwick Universuty

Warwick-Monash Economics Student Papers from Warwick Monash Economics Student Papers

Abstract: This study examines the changes in buy-to-let property prices and their transaction shares before and after the implementation of Section 24 of the Finance (No. 2) Act 2015, a residential landlord tax reform. A novel data set of 7,318,913 property transactions spanning from October 2013 to December 2021 is constructed from 53.27GB of raw data. The data is organised into two sub-samples: one with all transactions and one with only new properties. Difference-in-differences and Logit are used to investigate price change and buy-to-let likelihood. In general, the results show that, after the reform, buy-to-let prices did not fall compared to non-buy-to-let prices but rather climbed slightly. Due to additional limitations, the results should primarily be considered descriptive. Only the new-build property sub-sample passes the common trend test, and the models used cannot adequately account for other concurrent events like COVID-19 and the increase in stamp duty.

Keywords: house price; policy JEL classifications: C55; R31; R38 (search for similar items in EconPapers)
Date: 2024
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