What Will Happen To UK Property Investment?

by Mark Alexander

14:34 PM, 2nd April 2016
About 5 years ago

What Will Happen To UK Property Investment?

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What Will Happen To UK Property Investment?

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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9:59 AM, 9th April 2016
About 5 years ago

Reply to the comment left by "Jonathan Clarke" at "03/04/2016 - 09:13":

Another of the factors that we have to bear in mind is that the government have a strategy with regard to the private rental sector, and that this will underpin all the various pieces of legislation etc which have emerged recently.

Trawling through the internet, to try to find out quite why the government are clamping down on private landlords, revealed the following:

'The Government has underlined its determination to build a bigger and better Private Rented Sector. The core mission of the Taskforce is to kick-start the new private rented sector in the UK. This will provide an abundance of good, small-scale private landlords but it will be characterised by a growing number of large-scale, professionally managed developments, owned and managed by institutional
investors and private sector organisations'
(:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/251147/CM_8730.pdf) (2013)

In other words, it seems that the plan is to have the majority of buy-to-lets in the hands of big businesses, who presumably will get tax relief on financial costs, and can therefore compete on an uneven playing field with private landlords. This is not only worrying for people like myself with a few buy to let properties, but clearly disadvantageous to tenants who will become mere vehicles for the generation of profit.

Mandy Thomson

10:04 AM, 9th April 2016
About 5 years ago

Reply to the comment left by "Mandy Thomson" at "04/04/2016 - 12:39":

Zac Goldsmith's London mayoral manifesto just about says it all - about what his party think of small private landlords ("amateurs") and their policy on the future of the PRS ("large institutional landlords and the expansion of the build-to-rent sector"): https://nlauk.wordpress.com/2016/03/29/zac-attack/

NW Landlord

10:13 AM, 9th April 2016
About 5 years ago

This judicial review has to work

Mandy Thomson

10:15 AM, 9th April 2016
About 5 years ago

Reply to the comment left by "Tricia Forrester" at "09/04/2016 - 09:59":

Exactly. I rent properties in South London. There are currently many flats in the area - both new purpose built, and flats in older converted properties.

The rent for a new one bed flat is on average £100pcm more than for a comparable flat in a converted house (such as mine).

How is this helping tenants?

Simon Wept

15:02 PM, 9th April 2016
About 5 years ago

Reply to the comment left by "Ranjan Bhattacharya" at "02/04/2016 - 18:48":

I'm not sure about death inside the M25.
Recently added a property at a 3.50-4.00 percent yield. On a risk-adjusted medium term investment basis I don't know of a better opportunity.
The property was let even before completion, after 7 days advertising, so demand is still high.
Of course gearing is another matter but prudent gearing can (must in my case) reduce taxation and increase the rate-of-return.
Let me know when it does die because, after 30 years long term residential investment with a CAGR of 10% pa I haven't seen it!

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