Buy to Let Market Will Remain Strong, Despite Impending Stamp Duty & Tax Changes
2015 was not a great year for landlords, during both the Summer and Autumn budgets legislative changes favoured homeowners over landlords. Many believe that buy to let landlords will be discouraged by the impending changes to high-rate mortgage relief and stamp duty taxes.
Our Lettings Director, Paul Broomham firmly believes landlords have nothing to fear as the market will continue to grow in 2016 and beyond!
During the Summer 2015 budget, George Osbourne announced that landlords would no longer be able to claim tax relief on mortgage interest repayments on their Buy To Let properties. These measures will be introduced gradually from 2017 with tax relief expected to decrease to 20pc by April 2020.
The autumnal budget added to landlords’ dissatisfaction with the announcement Stamp Duty increases. As of April 2016, Buy to Let landlords will have to pay an extra 3% stamp duty charge, adding thousands of pounds to the cost of buy to let properties. Those unfamiliar with these changes should check out our blog on Stamp Duty changeshere.
Paul’s ear is always to the ground and he has picked up on some recent reports showing the future of the buy to let market is not as doomed as one might think!
Paul explains: “Research suggests that by 2025, up to 60% of 20-39 year olds in England will rent their homes compared with 48% in 2013. (Source: The Guardian.) As more and more young adults need somewhere to rent, landlords will be able to absorb the increased stamp duty taxes and lost mortgage relief by increasing rental prices.”
“With the average deposit needed for a property rising faster than wages, more and more young adults will be renting for long periods of time. The rise of long term renters will result in a decline in costly void periods between tenancies. Maximising the profitability of a Buy to Let investment.”
In the South East, the average rental price has increased annually by 4% in 2015 whilst the average house price has increased by 7.3%. (Source: RightMove)
“I believe this increase in rental yield and sales value will ensure Buy to Let landlords still see a healthy return on investment despite the government imposed increases.”
“Commuter towns like Newbury and Hungerford will be the least affected by this change. As house prices in London continue to soar, it’s viability as a Buy to Let investment decreases. Investing in a Buy to Let property in the Berkshire area offers landlords considerable capital gains both in terms of rental yields and the final selling price of the property.”
Although landlords do stand to lose large sums of money when these changes come into play, those with a savvy business head supported by a knowledgeable letting agent will be able to overcome these hikes and benefit from the booming rental market.
For more information or advice on how these changes could impact your current or future investment into property, speak to our expert lettings team.