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

Author

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  • Li, Heng Ying

    (Warwick Universuty)

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.

Suggested Citation

  • Li, Heng Ying, 2024. "Is buy-to-let still worthwhile? Estimating the impact of residential landlord tax reform on prices and demand of buy-to-let properties," Warwick-Monash Economics Student Papers 68, Warwick Monash Economics Student Papers.
    • Handle: RePEc:wrk:wrkesp:68
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/wmesp/manage/68_-_hengying_li.pdf
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    References listed on IDEAS

    as
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    2. Jonathan Roth, 2022. "Pretest with Caution: Event-Study Estimates after Testing for Parallel Trends," American Economic Review: Insights, American Economic Association, vol. 4(3), pages 305-322, September.
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    More about this item

    Keywords

    house price ; policy JEL classifications: C55 ; R31 ; R38;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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