What Will Happen To UK Property Investment?

Many UK landlords feel their world has been turned upside down. Not surprising given the shock announcements of having to pay an extra 3% Stamp Duty on purchases as of NOW, that mortgage interest paid out will become increasingly taxed as if it was income (for private landlords only) and that buy-to-let mortgage lending may well become a lot harder to arrange.

But does it mean that buy-to-let is dead?

Well I don’t think so!

There’s a lot of talk of landlords selling up and to an extent I will be doing some of that myself for personal reasons, but not completely. Far from it in fact. I’ve been in this business for 27 years now and whilst it’s time to live a little, I still see property investment as a solid nest egg. My plan is to sell what I need to sell to pay off my most expensive mortgages, increase my liquidity reserves which were all but wiped out due to a historic divorce settlement and for my wife and I to retain around £50,000 each taxable per annum of rental profits. That amount should keep us at just about the 20% tax threshold by 2020, thus absolving us from the effects of clause 24. As you may have heard, we’ve relocated ourselves and all our consultancy practices to Malta and will only pay 15% income tax on worldwide income (the HNW scheme income tax rate here in Malta for ex-pats) and very little CGT on the UK investment properties we will be selling (only on gains post April 2015). We will only be selling properties as and when they become vacant through tenants choosing to move on. We will not be evicting any tenants. That’s another story though!

Sorry, I digressed, back to the point ….

Demand for UK rental accommodation is set to continue to rise but if investment into the sector slows down the inevitable consequence is that rents will rise. Given that people invest into property for rental profits, increasing yields will become more attractive and kickstart investment again. If there are any signs of values falling over the coming years and month, due to lots of landlords deciding to sell up, I suspect property values will soon spring back when rental yields yet become more attractive than any other form of investment again. As values recover the press will no doubt be reporting the rise in property values, this will attract more speculators and the merry-go-round will yet again be turning.

There was an article in The Guardian this weekend suggesting that it will be better to hold off investing further into buy-to-let until 2019. The logic of the author was that changes to tax legislation will get even worse, more landlords will sell up and values will plummet as a result of the number of properties hitting the market. His prediction was that the market is likely to bottom out by 2019.

What are your views?

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