Showing posts with label 2016. Show all posts
Showing posts with label 2016. Show all posts
Now is a great time to re-mortgage as competitive deals
flood the market. More than half the number of people re-mortgaging in May took
advantage of the great deals currently on offer, according to research from
LMS.
Some 56% of those who re-mortgaged in May reduced their
monthly mortgage payments, with around a third reducing their monthly outgoings
by up to £500.
The study also revealed that the number of people
re-mortgaging to increase the size of their loan rose by 2% to 26%. Meanwhile
the volume of people increasing their loan by more than £10,000 rose 3% to 19%.
Drilling down into the findings, one in five (19%) borrowers
used the cash released from re-mortgaging to spend on home improvements. 7%
opted to pay off other debts and 3% borrowed in order to help their children up
the property ladder.
Andy Knee, Chief Executive of LMS, said: “Increased
competition between lenders, record low rates and rising housing equity have
come together to provide homeowners with a setting that is ripe for re-mortgaging.
The number re-mortgaging hit a seven-year high in April and with over half of
those lowering their mortgage rate and a quarter increasing the size of
their loan in May, it is clear that many savvy borrowers are taking advantage
of the current climate and we expect activity to maintain its momentum.
“We’re also seeing evidence in the market that many re-mortgagors
are opting for a fixed rate to guarantee a set rate for a set period. Locking
in is very competitive right now with huge savings to be made in the long-run
even if it means in the short term they pay a little more. With an uncertain
economic climate, knowing what your mortgage payment will be for five years is
a very seductive offering for many re-mortgagors.”
At Orchard & Shipman we work with highly experienced
financial services partners to offer our landlords the best value and quality
financial products on the market including mortgages, buildings and personal
insurance. If you wish to take advantage of the great mortgage deals currently
on offer or if you want to find out how we could assist you with your financial
needs, then visit http://www.orchard-shipmancorporate.com/services/financial-services/
or contact Orchard & Shipman today.
It
is well known that property prices are continuing to spiral out of control and
there is a genuine lack of affordable housing in the UK. It has affected a
lot of people, none more so than first-time buyers. It has given rise to an
increase in the number of people renting instead of purchasing their first
properties.
According
to new research carried out by landlord
insurance specialists Cover4LetProperty,
28% of UK adults are currently living in privately rented or socially rented
accommodation.
Last
year, accountancy firm PwC remarked that due to homebuyers struggling to raise
a sufficient deposit in order to buy their own place, the volume of homebuyers
will continue to drop in the next decade.
Additionally,
fewer people are qualifying for social housing and thus having to identify
other ways to secure accommodation. This is where the need for private
landlords is becoming increasingly more important. PwC study suggests that in
the next ten years, over half of those over 40 years old will be living in
privately rented accommodation.
By
2025, 7.2 million households will be in rental property, a massive increase on
the current 5.4 million.
Chief
Economist at PwC, John Hawksworth said, ‘a large and sustained increase in
affordable housing supply will be required to meet the needs of a UK population
that is growing relatively rapidly by European standards.’
Everything
points towards a sustained and vital need for privately rented accommodation in
the UK. Even though recent trends in government policy have been to undermine
and diminish the important role landlords play in the market. Landlords will
continue to play this vital role and all evidence appears to suggest that this
role will only grow in importance as demand continues to increase.
Now could be the perfect time for potential investors to invest within the market and look to
purchase properties as demand continues to increase and cannot be matched by
the current supply.
With
tenant demand on the rise, it is important that your property provides exactly
what prospective tenants are looking for and that you’re marketing yourself at
a competitive price for both the home and its location. You can find out
exactly how much that is by speaking to Orchard & Shipman and taking
advantage of our FREE Rental Valuation service. By getting your property
professionally assessed you are putting yourself in the best possible position
to make the most of your investment. Simply call your local Orchard &
Shipman property experts and book yours today.
House
prices in the UK increased by 9% in the year to March 2016, up from 7.6% in the
year to February 2016.
House
price annual inflation was 10.1% in England, 2.1% in Wales, 6.4% in Northern Ireland
but fell by 6.1% in Scotland. The average house price now sits at £292,000,
according to the data from the Office of National Statistics.
The
data also shows that on a seasonally adjusted basis, average house prices
increased by 2.5% between February 2016 and March 2016. Additionally, prices
paid by first time buyers were 9.7% higher on average than in March 2015. Yet
for owner-occupiers prices only increased by 8.7% for the same period.
There
has been plenty of talk surrounding the potential impact the 3% stamp duty
surcharge would have on the UK property market. With some experts stating that
it would only increase the burden on first time buyers, as traditionally,
buy-to-let investors and first time buyers seek the same type of properties.
Looking at the price increases for first time buyers, it is evident that it has
had an impact.
This
goes against Osborne’s objective of reining in the buy to let market to help
ease the burden on first time buyers and take the heat out of the market. Some
investors may have looked to rebalance their portfolios and purchase cheaper
properties that have a lower tax band in order to minimise their outgoings –
directly competing with first time buyers.
Richard
Snook, senior economist at PwC, explained that due to the rush of buy to let
investors trying to complete purchases before the 3% stamp duty surcharge at
the beginning of April it has affected the figures.
‘This
move undoubtedly drove up demand and prices in March and we would expect demand
to soften over the next few months as a result. There are no signs of any
Brexit related slowdown in this month’s figures, although the underlying trends
are masked by the effects of the stamp duty change,’ he said.
Randeesh Sandhu, Chief
Executive Officer of Urban Exposure, the residential development finance
provider, believes that activity within the market is likely to slow down in
the coming months. Mainly in part because of the run up to the EU referendum
with consumers remaining cautious against the possibility of Brexit.
He remarked; ‘However, it
is clear that demand for housing remains strong and any impact of a Brexit is
likely to be a short term trend with activity returning to normal soon after
any decision. Therefore a real focus needs to be given to the housing shortages
the UK faces,’
‘Where there is a real
opportunity, in London and across the UK, is the use of brownfield sites.
Unlocking this land could lead to an estimated 365,731 new homes in London
alone. To capitalise on this opportunity, the new Mayor must review the
planning process, the costs associated with developing on brownfield sites and
look at how to accelerate brownfield site development in order to deliver the
homes that the UK needs,’ he added.
Until the government
tackles the housing crisis that is currently gripping the country, house prices
will continue to rise, first time buyers will continue to struggle to get onto
the property ladder and buy to let investors will continue to be seen as easy
scapegoats. We understand the unfair position landlords are being put in and
believe that not only do landlords offer a much needed service but one that is
vital to the health of the UK property market.
If you have
any queries about how these changes could affect you, please don’t hesitate to
contact Orchard & Shipman today. As a company with 28 years’ of experience
dealing with landlords, our team of experts understand the impact a change in
government policy can have. We’re readily available to guide and advise you
through these sometimes confusing changes in legislation.
It’s no secret that first and even second-time buyers face
significant hurdles to getting onto or climbing up the property ladder. With
average deposit levels in 2015 breaking the £25,000 barrier across the UK, and
the £75,000 level in London, home ownership for younger households has
increasingly looked more like a pipe-dream. Add in the effective requirement
for a couple to both be in the top 25% of earners to afford a London borough
property at a standard 3½x loan to value mortgage multiple, and you can begin
to see the reason behind the continued growth in the rental sector.
The long-term effect of legislative attempts to “take the
heat out” of the buy-to-let sector remain as yet uncertain. None of the
measures targeting buy-to-let appear to significantly assist first-time buyers,
and the predominant issues of deposit level and income-multiple viability
remain for the bulk of younger households. The short-term reality is that the
number of households requiring rented property will continue to grow, and the
prospects for the buy-to-let sector remain optimistic.
Whilst the
sector outlook should provide comfort for portfolio-holders and investors, in
these times of shrinking margins and greater legislative responsibility,
whether you are a multi-property professional investor or a part-time
“accidental” landlord, understanding how
to protect your investment is more important than ever.
It
shouldn’t cost the earth to keep a well maintained property with happy tenants.
The failure to do so however can see projected yields quickly turn into
financial loss. With 28 years of experience of managing investment portfolios
from executive lets right through to social housing, Orchard & Shipman have
some clear advice for first-time or experienced landlords. Get these basics
right and in place every time to protect you, your investment and also your
tenants.
1. Written
Tenancy Agreements
An absolute
must, regardless of whether you are letting your property to a friend,
colleague or a complete stranger. An AST (Assured tenancy Agreement) is the
most widely used type of tenancy in the rental sector, and will assist you in
the return of your property at the end of the term. Your Lettings agent should
be able to provide you with copies of this agreement, and talk you through how
the AST will protect you as a landlord.
2. Deposit
Protection Scheme
Landlords
are now legally obliged to register a deposit with an approved deposit
protection scheme. We register deposits with schemes such as DPS or My
Deposits Scotland for the protection of both tenants and landlords.
3.
Insurance
Landlords
will need to discuss use of their property for private letting, as failing to
declare that your home is now being used in a rental capacity will often
invalidate many policies. If the worst happens and your house burns down during
the tenancy, the financial consequences could be devastating. Also, Landlords
should consider Public Liability insurance to cover for accident or injury that
may arise to anyone being hurt whilst in or around your property.
4. Regular
Visits
Regular
visits to the property can assist in ensuring your property remains in good
order, but this doesn’t mean you need to be popping around once a week for
coffee. At O&S we recommend a visit in Month 3 of a tenancy to check the
condition of the property and discuss any issues with tenants, then followed up
by visits every 3-6 months as appropriate. Remember you will need to give at
least 24 hours’ notice of the visit in writing, and it is good practice to have
a written record of any defects, repairs, or comments from the visit.
5. Safety
requirements
Regardless
of the size, condition, location or rental value of a property there are some
basic safety requirements which you as a landlord must ensure are met. These
include compliance with the respective Gas and Electrical Safety Regulations,
ensuring your property has an Energy Performance Certificate and that all
furniture complies with the relevant Fire Safety Regulations. With the added
complication of the additional regulation and best practice around smoke and
carbon monoxide alarms for rented properties, this can seem like a minefield
for landlords. These responsibilities cannot be ignored or avoided – for advice
on what is applicable to your property, your Letting Agent should be able to
assist.
At Orchard
& Shipman we are more than happy to provide advice, support and guidance on
any of the challenges facing landlords today. All of the above and more are
covered by our Full Property Management Solution, details of which are
available at www.os-residential.com or by calling 0203 301 5993
(England) 0131 516 9799 (Edinburgh) & 0141 428 3263 (Glasgow).
Lee
Richards,
Managing
Director
It's great news for landlords and would-be landlords as
buy to let still makes financial sense even after the stamp duty surcharge. New
figures show new high annual returns for landlords.
New data shows that taking into account both rental
income and capital growth, before outgoings, the average existing landlord in
England and Wales has seen total returns rise to over 12% over the 12 months to
March, making it the fastest annual rate of return for existing landlords seen
since November 2014.
If you look at this in absolute terms it means that the
average landlord in England and Wales has seen a return of over £22,000 over
the last 12 months (before outgoings). If you break this down, the average
capital gain contributed £13,494 while rental income made up £8,641.
The gross yield on a typical rental property in England
and Wales (before taking voids into account) hit 4.9% in March. Average rents
across England and Wales now stand at £791 per month (March 2016), some 3%
higher in comparison to the same point last year.
Leading the way in England and Wales is the East
Midlands, where rents are now 8.5% higher than compared to March last year, now
at £613 per month. This is followed closely by the West Midlands with an
increase of 6.7% and London with an increase of 4.6%.
It is the case across much of England and Wales that
demand outstrips supply and it is increasingly becoming more difficult for
supply from landlords to match the demand from tenants. Thus further enforcing
the vital importance private landlord’s play in the UK housing market.
With tenant demand on the rise, is it important that your
property provides exactly what prospective tenants are looking for and that
you’re marketing yourself at a competitive price for both the home and its
location. You can find out exactly how much that is by speaking to Orchard
& Shipman and taking advantage of our FREE Rental Valuation service. By
getting your property professionally assessed you are putting yourself in the
best possible position to make the most of your investment. Simply call your
local Orchard & Shipman property experts and book yours today.
The surge accounts for a 43% month-on-month increase in
comparison to February. What’s even more astonishing is that mortgage lending
was 59% higher than in March 2015 and is the highest figure seen in the month
since 2007, where lending reached £30.9bn.
Gross mortgage lending in the first quarter of this year
was therefore approximately £62.1bn. This is 39% higher than the first three
months of 2015.
Economist at CML, Mohammad Jamei said, ‘against a
backdrop of a recovering market, the
substantial jump in lending in March was significantly influenced by a late
surge of activity to beat the government’s stamp duty change on second
properties, which came into effect at the start of April. The distortion caused
by this stamp duty change appears to be larger than any previous stamp duty
change we’ve seen.
He also added, ‘As a result, we expect there will be
about 10,000 fewer mortgaged transactions each month in the second quarter of
2016 than would otherwise have been the case, offsetting the increase in
activity seen in March.’ he added.
Jeremy Duncombe, Director, Legal & General Mortgage
Club, commented, ‘whilst these latest figures from the CML may seem to suggest
that more people are securing mortgages, this rise in lending is actually the
result of ever-increasing house prices. The reality is that today’s buyers are
being forced to borrow more to cover the cost of their home, which is artificially
inflating lending figures.’
Duncombe then went on to say, ‘If we want to see lending
grow correctly and help more people afford their dream home, the Government and
the construction industry must work together to alleviate the housing crisis by
building at least 250,000 homes a year.’
John Eastgate, Sales and Marketing Director of
OneSavings Bank, added: “Driven by the changes to Stamp Duty that kicked in
from April, the mortgage market was firing on all cylinders in March as
landlords, brokers and lenders shifted into top gear to complete on purchases.
It is important to note that whilst landlords will have been the driving force
for growth, the new rules also captured many different types of
purchaser. Whatever the cause, the effects of the Stamp Duty changes saw
lenders, brokers and conveyancers burning the midnight oil to keep borrowers
happy and this was reflected in mortgage activity.
He further added, ‘Whether the spike is a one off or not,
the fundamentals of the market remain strong. The benign outlook for interest
rates is supporting the activity while buyer finances are being bolstered by a
strong labour market.’
Responding to the figures, Henry Woodcock at IRESS,
remarked, ‘February’s gross mortgage lending figures were lower than January’s,
so it’s very encouraging to see such a big pick-up in March. The demand for
mortgages has also been driven by continued low borrowing costs, with rates on
two and three year fixed deals at all-time lows. Significant rate rises are
unlikely to materialise any time soon, so we'll continue to see more low
interest rate deals delivered to the market in the coming weeks and months,
which is great news for mortgage customers.’
Henry also added. ‘We may we see a further uptick in
April, however, looking to the next few months, there are a few factors I think
will have a levelling-off effect on gross mortgage lending. The looming EU
referendum may mean borrowers will wait and see the result before proceeding.
The newly introduced stamp duty land tax surcharge, targeted at prospective
private landlords and the Bank of England’s proposed new tighter lending rules
to make it harder for landlords to get a mortgage, is bound to have a dampening
effect on the buy-to-let market. Lastly, while remortgaging appears to be on
the rise, I’d caution that increases may be limited for many interest only
borrowers, as lenders now require credible repayment vehicles to be in place
first.’
At Orchard & Shipman we work with highly experienced
financial services partners to offer our landlords the best value and quality
financial products on the market including mortgages, buildings and personal
insurance. If you want to find out how we could assist you with your financial
needs, then visit http://www.orchard-shipman.com/services/financial-services/
or contact Orchard & Shipman today.
Increasing costs and applying more checks to the buy-to-let
sector is not going to help the wider issue of a declining number of
owner-occupier properties. You only have to look at the facts; the majority
(60%) of lending to the buy-to-let sector is for re-mortgaging and not new
money coming in. The private rental sector plays an increasingly vital and
growing role in the housing market and until the government addresses the issue
of inadequate housing supply, this is not going to change.
While, no one can say with absolute certainty how buy-to-let
investors will react to the changes being introduced, it seems unlikely that
the majority will be put off. When you consider the stamp duty increase, most
investors look for long-term returns over short-term gains. What is more likely
is they will simply set the higher one-off cost/s against years of rental
income and, at the current rate, potential increases in property value.
Others may look down another avenue and look to re-balance their portfolios by purchasing cheaper properties that have lower stamp duty
bands. The issue with this is they then directly compete with first-time buyers
which has always been a point of contention. However, there’s already strong evidence that
the rush to buy property before the April deadline is pushing up house prices.
The additional limiting tax relief on mortgage interest
payments to the basic rate and reducing the relief on wear and tear will
undoubtedly impact on landlords. At the moment, it is too early to say by how
much, though this will vary greatly between investors. Some landlords may look
to combat this by pushing up rent prices, something which the government
cannot have intended. Others may look to set up limited companies in order to
mitigate the impact. Investors will need to take tax advice in order to
identify what will work best for them.
Now a widespread withdrawal from the market by investors
seems highly unlikely. Firstly, according to the Council of Mortgage lenders
only 31% of buy-to-let property actually has a mortgage on it. Secondly, there
is currently a lack of alternatives. Bank returns for savings remain near
non-existent and the stock market brings with it a level of volatility. As long
as there is an inadequate housing supply, prices will continue to rise and
investors will continue to invest into the buy-to-let market for long-term
growth. There is nowhere else where investors can get comparable returns.
If you have any queries about how these changes could affect
you, please don’t hesitate to contact Orchard & Shipman today. As a company
with over 25 years’ experience dealing with private landlords, our team of
experts understand the impact a change in government policy can have. We’re
readily available to guide and advise you through these sometimes confusing
changes in legislation.
The Council of Mortgage Lenders (CML) has warned that new rules being imposed by international regulators could result in mortgages becoming more expensive for homeowners and buy-to-let landlords.
The CML said that the global rules could and are likely to
have ‘unintended and negative consequences’ for buy-to-let borrowers and those
borrowing to finance the purchase of their own home. One major concern is that
the Basel committee on banking supervision – which sets rules to be adopted by
national banking regulators – could require lenders to amass bigger capital
cushions against home loans, the end result being the cost of borrowing rising.
The CML responded to a consultation issued by the committee:
“Proposed changes by international banking regulators to the rules for
assessing credit risk do not reflect the real underlying risk of those assets
and would result in unduly harsh capital treatment of both prime residential
and buy-to-let mortgages.” It also added: “In current market conditions,
mortgage funding is available and attractively priced and UK consumers are
enjoying some of the lowest rates ever. But capital requirements that are
excessive relative to the risk of the underlying assets are likely to affect
the cost and availability of mortgages.”
Additionally, the CML remarked that the new mortgage
regulation in the UK, which contains affordability tests for borrowers, were
being overlooked by the regulators in Switzerland.
Another factor is that the new rules could apply to existing
lending and not just new loans. For instance, there could be implications for
homeowners who want to increase the value of their existing mortgage due to the
way the rules are being drafted. If you were to look at two examples; a loan
worth 81% of the value of a property would require more capital and thus be
more expensive than a loan for 79% of the value of a property.
Ratings agency Moody’s has remarked that the new rules being
introduced by the UK government would make the buy-to-let market and the entire
banking sector safer. Riccardo Rinaldini, an analyst at Moody’s spoke about the
impending 3% stamp duty surcharge, stating that it should help to “temper the
growth” of the buy-to-let sector “This
should reduce the tail risk of a sharp decline in house prices from a
concentrated market sell-off when interest rates eventually rise.” He added: “We consider buy-to-let mortgages to
be inherently riskier than owner-occupied mortgages,” and “If borrowing costs
rise and rental income no longer covers landlords’ interest payments, a broad
based sell-off of BTL properties could fuel a fall in house prices, negatively
affecting all banks and building societies in the UK.”
Around 15% of all outstanding residential loans to
individuals are for buy-to-let properties. The Bank of England has repeatedly
stated that it is closely monitoring the buy-to-let mortgage market and in
December, the Bank said it was scrutinising the terms under which mortgages are
being granted to buy-to-let landlords. As it fears they could be more
vulnerable to a rise in interest rates compared to other borrowers.
Additionally, it has also asked for formal powers in order to rein in the
market.
If you have any queries about how these
changes could affect you, please don’t hesitate to contact Orchard &
Shipman today. As a company with over 25 years’ experience dealing with private
landlords, our team of experts understand the impact a change in government
policy can have. We’re readily available to guide and advise you through these
sometimes confusing changes in legislation.
According to data from e.surv Chartered Surveyors, January saw
over 85,000 house purchase approvals, which was up from December’s total of
just over 70,000.
Not only is this the highest number for nine years, it also
represents an annual increase of over 39%.
The significant increase in January was powered by an increase
in buy-to-let investors as they seek to beat the impending 3% stamp duty
surcharge from April 1st 2016.
Whilst it could be assumed that February may also reflect this
growing trend of increasing mortgage approvals, whether the trend continues
beyond April 1st 2016 is another matter.
Richard Sexton, Director of e.surv remarked about the buy-to-let
market, stating ‘Concerns about the sector’s growth have sparked a wave of
legislation but as stamp duty changes come into effect this April, there’s been
a rush to get buy-to-let loans approved. Many have predicted a narrowing of the
buy-to-let sector but actually what we’re seeing in lending quarters appears to
be the opposite.’
Furthermore, The Scottish Government are intending to introduce
a 3% supplement on Land and Buildings Transaction Tax (LBTT) for property
owners that buy additional homes in Scotland worth £40,000 or more.
Only time will tell concerning what effect/s the impending stamp
duty surcharge will have on the number of mortgage approvals and ultimately,
the buy-to-let market.
At Orchard & Shipman we work with highly experienced
financial services partners to offer our landlords the best value and quality
financial products on the market including mortgages, buildings and personal
insurance. If you want to find out how we could assist you with your financial
needs, then visit http://www.orchard-shipman.com/services/financial-services/ or contact Orchard
& Shipman today.
Richard Lambert told delegates at the Building Societies Association’s
(BSA) annual get together for mortgage professionals that confidence in landlords' business expectations has dramatically fallen by more than
a third over the past year, now sitting at a an all-time low of 43%.
Mr Lambert also outlined how the actions taken by the
Chancellor regarding last year’s Summer Budget and Autumn Statement have led to
the NLA reversing its previous outlook that stated the private rented sector
(PRS) would continue to grow with another million more households over the next
five years.
It now forecasts that if landlords are to follow through
with their intentions then the buy-to-let market could face a huge shake up. The
result being a dramatic sell-off of 500,000 properties in the next 12 months
followed by another 100,000 properties sold each year up until 2021. The end
result will be that the PRS market will be smaller by up to 136,000 properties.
The findings from the latest NLA Quarterly Landlord Panel
survey show for some interesting reading. The proportion of landlords that are
now looking to sell in the next 12 months has more than doubled since July last
year, now standing at 19%.
Additionally, a significant proportion of landlords (28%)
stated that they don’t plan to purchase any more properties and 10% plan to
actually reduce their portfolio.
Mr Lambert remarked “Up to half a million properties could
come onto the market as a result of the Summer Budget and Autumn Statement,
which the Chancellor will no doubt deem a success. But there is no guarantee
that these will be the one or two-bedroom flats or small houses that will
appeal to first time buyers, especially as landlords are more likely to offload
less desirable stock in less desirable areas.”
Only time will tell in order to see what the impact of these
changes announced by the Chancellor will have on the buy-to-let market.
If you have any queries about how these changes could affect
you, please don’t hesitate to contact Orchard & Shipman today. As a company
with over 25 years’ experience dealing with private landlords, our team of
experts understand the impact a change in government policy can have. We’re
readily available to guide and advise you through these sometimes confusing
changes in legislation.
Under right to rent, landlords
are obligated to check the immigration status of tenants to ensure they are legally allowed to
be in England. They also have to report those who are not to the Home Office.
If landlords are found guilty of breaking the rules they face
fines of up to £3000. The Home Office has remarked that the new rules will make
it harder for illegal immigrants to stay in the UK and make it easier to tackle
rogue landlords who house them.
It is also important to remember that landlords in England
must carry out these checks in the 28 day period leading up to the start of the
tenancy. It takes time for the necessary documents to be produced, verified and
copied so keep in mind the deadline in order to avoid falling foul of the
rules. The
checks need to be made using original documents and in the presence of the
holder of that document, or with them available by video link. Landlords are
also required to keep copies of the original documents.
Responsibility
for the checks can be passed onto letting agents. However, you must remember
that this needs to be in the form of a written agreement or otherwise they will
be considered your responsibility.
If
you have any queries about how these changes could affect you, please don’t
hesitate to contact Orchard & Shipman today. As a company with over 25
years’ experience dealing with private landlords, our team of experts
understand the impact a change in government policy can have. We’re readily
available to guide and advise you through these sometimes confusing changes in
legislation.
So for example, this means that the stamp
duty bill for a £285,000 buy-to-let property will rise from the current £4,250
to £12,800 from April next year.
Some say buy-to-let property will be worth
less because potential property investment landlords will not be willing to pay
as much for them. Additionally, if house builders or existing homeowners don’t
feel they are going to get as much for them, then there is less motivation to
build or sell them.
The person we can blame for this is George
himself.
Back in 2012, he chose to utilise the British
housing market to kick-start the UK economy, with subsidies, Funding for
Lending, and Help to Buy. However, whilst this may have helped the Tory’s get
back into power in 2015, some say this impressive growth in the UK property
market has been at the expense of pricing out youngsters wanting to buy their
first home.
Others say this is the straw that broke the
camel’s back, as over the next four years buy-to-let landlords will slowly lose
the ability to offset all their mortgage interest against tax on rental income,
after changes announced in the Summer Budget.
At the moment, property landlords can claim tax
relief on buy-to-let mortgage monthly interest repayments at the top level of
tax they pay (i.e. 40% or 45%). However, over the next four years this will be
reduced slowly to the basic rate of tax – currently 20%. Could this mark the
end of buy-to-let property investment? Possibly – but before we all run to
hills panicking, let us give you another scenario to consider.
Stamp Duty rules were changed in December
2014. Before then, property landlords were eagerly buying up properties under
the ‘old slab style Stamp Duty’ system. For example, the stamp duty bill on
that £285,000 property was lower on the old slab style duty (pre Dec 2014), at
£8,550, yet it isn’t a million miles away from new £12,800 stamp duty bill.
Interestingly though, Osborne has left a
legal loophole in the new rules, because when it comes to selling up, property
investors can offset purchase costs against any eventual capital gains tax,
including stamp duty.
We believe that total returns from buy-to-let
will continue to outpace other investments, such as the stock market, gilts,
bonds, and even pensions. Also, the best part about investing in property is
that it is bricks and mortar. You can touch it, you can feel it, and it isn’t
controlled by some City whiz kid in Canary Wharf. The British understand the
benefits of property investment.
Buy-to-let investment has enough impetus
behind it that prospective property landlords will continue to buy, even with a
larger stamp duty Bill. Investment landlords will need to be savvy with what properties
they buy, to ensure the extra stamp duty costs are mitigated. Buying buy-to-let
property is a long-term venture.
In the past, it didn’t matter what property
you bought or at what price – you would always make money. With these extra
taxes, the adage of ‘any old house will make money’ has gone out the window. You
wouldn’t dream of investing in the stock market without at least looking in the
newspapers or taking advice and opinion from others, so why wouldn’t you take
the same advice and opinion about purchasing a buy-to-let property?
If you have any queries about how these
changes could affect you, please don’t hesitate to contact Orchard &
Shipman today. As a company with over 25 years’ experience dealing with private
landlords, our team of experts understand the impact a change in government
policy can have. We’re readily available to guide and advise you through these
sometimes confusing changes in legislation.
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