A view on the year so far in Lettings

March 17th 2016
By: Mary.Wilkins
A view on the year so far in Lettings

A number of people have said that they are worried that the buy-to-let marketplace will be quiet this year.  There are some important issues to consider but this is the reason why I don’t believe that this will be the case.
1.  Stamp duty increase in April 2016 – The 3% increase in stamp duty for purchases of additional properties is effective from 1 April 2016.

2.  Clause 24 of the 2015 Finance Bill in which the Government introduced plans to prevent landlords off-setting mortgage interest costs against rental profits before calculating tax thus therefore tax being paid on turnover rather than profit is also going to be part of a judicial review mounted by a number of property investors via crowd funding. So again watch this space as to what is going to happen but even if it does go ahead the return from the investment is still likely to be significantly more attractive than leaving money in any building society or bank.

3.  Great way to supplement your pension – with current annuity rates you need to save £500k to receive a pension of between £25-30k so buying a buy-to-let investment offers a favourable rate of return with also being an inheritance to pass on to family unlike most pensions.

4.  You don’t necessarily need cash in the bank – most, or if not all of our clients re-mortgage either their existing residential property or other buy-to-let properties in order to raise a deposit and cover fees with using a buy-to-let mortgage to fund the rest. The rent that is achievable more than covers the extra payments on any re-mortgage that takes place as well as the buy-to-let mortgage meaning there is no impact on day to day cash flow.

5.  It is simple supply and demand economics – with a rising population and an acute shortage of housing the number of new homes being built are nowhere near the number needed to satisfy demand. This in turn will fuel not only house price inflation but rental yields going forward and I cannot see any reason why this is set to change in 2016!

Bernadette Keating
Lettings Director