Having long provided mega double-digit returns for investors, investment in buy-to-let has continued to outperform all other assets platforms in recent years, with total annual returns from buy-to-let property hitting 12% in 2015.
Will this continue?
As we know and have blogged about, the Government has introduced a ream of changes to curb the growth of buy-to-let landlords.
Aside from the introduction of the stamp duty surcharge in April and the 10% “wear and tear” tax relief for landlords who rent out furnished homes being abolished, leaving them free to only claim for the amount that they have spent, while mortgage tax relief is set to be phased out from April this year.
So, whilst investing in property has long been perceived to be a safe alternative to the uncertainty of FTSE, for example, is the reality that buy-to-let is now so unattractive? Undoubtedly, some landlords will pass on the new costs onto their tenants but is it so ugly to avoid with a barge pole?
In 2016, the National Landlords Association predicted that as many as 500,000 properties could be offloaded by buy-to-let landlords by early to mid-2017, as they seek to avoid the government’s attack on the private rented sector (PRS). However, as we enter 2017, suggestions are this figure is wide of the mark and won’t be near the predicted figure. Doomsday averted?
With all the changes the Government has introduced, is there a viable alternative? On average, a property post Government tax changes will still offer a 4% yield, whilst investing in stocks could achieve nothing, whilst a savings account brings 0.5%, at best.
We’ve written recently on why buy-to-let investors are setting themselves up at Ltd companies and the benefits this brings. (Link will be inserted). It may seem excessive to some; becoming a business to invest in property but the loophole is being exercised actively.
Recently, we’ve seen the Government announce the building of 14 Garden Villages and Towns across the UK. This is in addition to the “hurry up” given to housebuilders to build more properties. Nevertheless, there is still the feeling that there is – and continue to be so - a housing shortage means landlords can buy up properties and offer them to rent. According to some, the enhanced rents charged to tenants will become the norm.
Yields are foreseen to remain steady in property circles despite the Government’s intervention in 2016 and the changes to mortgage relief in April this year. Property investment is seen as a bastion of UK entrepreneurship and that trend is set to continue. Unfortunately, the changes mean tenants, inevitably, will pick up the bill.
We’ve seen more people turning to us for the mortgages for additional properties and with our unrivalled knowledge and relationships with all the prominent lenders means there is still a tremendous appetite to invest in bricks and mortar.
We are aligned to a number of chartered accountants who would be very well placed to guide and advise on Ltd company status or if you want to discuss mortgage/remortgages options, please call me on 020 3126 4898 or email: email@example.com