UK property investors say new regulations will force them out of buy-to-let in 2016

UK property investors say new regulations will force them out of buy-to-let in 2016

12:14 PM, 10th February 2016, About 9 years ago 3

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Research by The House Crowd shows that buy-to-let investors are predicting a stormy ride in 2016, with nearly three quarters (72%) reporting that legal changes to the sector this year will have a negative effect on their investments. A fifth of investors plan to sell their buy-to-let properties in 2016.  UK property investors say new regulations will force them out of buy-to-let in 2016

Previously viewing their investments as a solid base for sensible financial plans for the future, property investors are concerned that they are being increasingly targeted by legal changes like the Mortgage Credit Directive and increase in stamp duty on buy-to-let properties, coming into force this March and April respectively.

The survey of property investors reveals:

  • Half say their plans for a secure retirement are now at risk
  • A third say it will now be harder to support children and grandchildren to get on the property ladder, or to contribute to university fees
  • Over a third (38%) think landlords should look at newer, smarter ways of investing in property

It appears to be investors with a smaller number of properties that are feeling the pinch. Nearly half (43%) feel that the government is trying to squeeze out smaller landlords, protecting wealthy landlords with many properties.

Frazer Fearnhead, founder and CEO of The House Crowd, said: “Property investment has long been viewed as a sensible way for the shrewd small investor to save for the future, making life a bit more comfortable and paving the way for a financially secure retirement. However, these new regulations are putting increasing pressure on those who own perhaps two or three properties, making it very difficult for smaller landlords to remain in the buy-to-let sector. I’d encourage investors to look at newer options to help them remain in the game, like property crowdfunding – there is another way.”

The House Crowd is a property crowdfunding platform that solves some of the common problems often faced when investing in a property as an individual. With investment from just £1,000, individuals can invest in property companies (SPVs) to share in any income and capital uplift. Crowdfunding allows investors to pool resources with those other like-minded investors, spreading risk and earning great returns.

The House Crowd was launched in 2012, and has recently received investment at a valuation of £20m. The company has set a target to receive £100m from investors in the next financial year.

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Sam Wong

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22:51 PM, 13th February 2016, About 9 years ago

I am probably a little slow but I really cant see what the big deal is.

Interest offset restriction :
* Most small landlords who own 1, 2 or 3 BTL properties probably wont get anywhere near the 40% income tax threshold if they are highly geared. If they are not highly geared, the effect will likely be minimal.
* For those landlords who are significantly affected, incorporate - in Northern Ireland and wait for them to declare 15% corporation tax.
* For everybody, ask your accountant 'when is interest an interest' ? Try Islamic banking where interest is 'haram' or something similar where the interest is not called an interest. Before long, the more savvy lenders will come up with products to overcome the problem.

3% SDLT premium :
* Spread over a 10 year period, 3% is negligible.
* Find a good accountant to send this into 'cost n expenditure' rather than capitalise - I dont know if this is allowable but if not, this can be set off against future gains.
*Set off against increased rent which everybody seems to predict will be going through the roof. Can you find a more lucrative biz to park your funds ? What an opportunity !
If 3% is going to stop you from being a BTL landlord, then this game is not for you.

10% wear and tear allowance :
* An encouragement to upgrade ? And more frequently ?

All GO has done is create another complication to overcome and opportunities to increase our returns. Judging by the increase in transaction volume to beat the deadline, plenty BTL landlords seem to think GO's attacks are no big deal. Lets celebrate.

Alison King

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0:14 AM, 14th February 2016, About 9 years ago

I would think most small landlords with 1, 2 or 3 properties are probably in the 40% tax bracket from their other income already, or at least close to it, and that's why the tax changes have an impact. In any case, it's not the effect on individuals so much as the blatant discrimination between private individual residential landlords and other types of landlord and other business sectors that is wrong.
In contrast I don't think the SDLT is that big a deal. It can be reclaimed against capital gains on sale in any case. So how mad is it to exclude large corporates from that and compound the sense of unfairness?
The wear and tear allowance was impractical anyway. Tenant A moves from house A to house B with half the furniture and then leaves and tenant B has all their own stuff and everything has to go into costly storage except the sofa and the walnut table that end up in house C and try explaining all that on the tax return.
Islamic banking tends to be more expensive than mortgages.
Incorporation entails a lot of extra costs such as CGT on transfer, more expensive mortgages and extra accounting costs. Fine for new purchases, difficult for an existing portfolio.

However, landlords are a resourceful lot and making people feel threatened is a great way to galvanise them into coming up with new strategies. It's amazing how interesting formerly boring things like tax, pensions, SIPPs, investments and all manner of property classes have become in recent months as they juggle with one another to provide new combinations of solutions. I just got a big tax rebate for past business mileage that I would never have known I was entitled to were it not for my sudden interest in all matters tax, thanks to GO giving me reason to have to understand it all.
Crowdfunding is the least appealing option for those who see property as a business and not just as an investment. For some, the pleasure is in the management; researching the properties, the purchase process, liaison with conveyancers, agents, insurers, builders, councils, the commitment and imagination it takes to convert a wreck into a lovely family home, advertising and interviewing the tenants; the human relationship, the tenant management activities, the never-ending maintenance, the relationship with subcontractors and then there is the free 24 hour on-call service and sometimes just being a kind voice on the end of the phone to reassure a tenant in times of distress. How anyone can argue it's "just an investment" defeats me. It's a demanding but rewarding business and I don't mean that in bland financial terms.

Si G

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13:18 PM, 23rd February 2017, About 7 years ago

Reply to the comment left by "sam " at "13/02/2016 - 22:51":

Hello Sam, hope you don't mind does anyone know if the 3% sdlt applies to only individuals or also to ltd purchases im asking on behalf of a friend who wants to enter this market but is concerned by a plethora of recent regulation, he also mentioned something about combined value up to £140,000 exempt, any clarification would be welcome.

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