UK Buy to Let very much alive
A year since the government's tax and mortgage relief changes came into effect, what impact have they had on UK landlords who placed leverage on their property investments?
John Parker, Business Development Director at Surrenden Invest, shares his views on the UK buy-to-let market in 2018. www.propertyreporter.co.uk
The tax changes are still relatively new so we're still to see exactly what effect it will have on UK landlords and the buy-to-let market in the mid to long term. Key dynamics such as undersupply and rising rental returns across many part of the country remain very strong any added tax expense becomes less of a factor with a long-term strategy. We're yet to see any fall out of real merit from the more traditional investor who may have one or two properties beside their own residential home and think the brunt of the changes will be felt more keenly by the portfolio investor who has 4 or more properties.
In practice, what exactly changed a year ago?
Well, firstly the tax changes; buy-to-let investors began losing the ability to offset mortgage interest from their profits before calculating their tax liability. In 2017, landlords could offset only 75% of their mortgage interest against their profits, falling to 50% this year, 25% in 2019 and eventually to zero in 2020.
This was followed with a stamp duty surcharge of 3% which was introduced on any second property for domestic and overseas buyers. Buying a second home for £200,000 previously cost £1,500 in Stamp Duty, now this is £7,500.
Then, the 'wear and tear allowance' came to an end so we can't offset as much against our tax bills
Finally investors owning four or more properties became classed as portfolio investors, meaning they needed to provide their mortgage lender with much more detailed information as lenders began to look at total income against borrowing across all properties to ensure affordability of loans. New stress tests on buy-to-let mortgages were also introduced where monthly income typically needed to cover 125% of mortgage repayments based on interest rates hitting 5.5%.
How does the UK buy-to-let landscape look to landlords today, are there still opportunities?
There is still a very healthy demand for buy-to-let properties and in many cases demand continues to increase....continue reading more here