Well George Osborne,
in his autumn statement last
week, caused Solihull landlords to ask whether buy to let is still a
viable investment option, when he announced that landlords, when buying another
buy to let property from April 2016 will have to pay an additional 3% stamp
duty on top of the current rate. So this means for example, the stamp duty bill
for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from
April next year.
Will property
in Solihull be worth less because potential landlords will not be willing to pay
as much for them? If house builders or existing home-owners don't feel they are going
to get as much for them, then there will be less motivation to build / sell
them... and the person we can blame for this is George himself. Back in
2012, he chose to utilise the British housing market to kick start the UK
economy, with subsidies, funding for lending and ‘Help to Buy’. However, whilst
that helped the Tory’s get back into power in 2015, some say this impressive
growth in the UK property market has been at the expense of pricing out
youngsters wanting to buy their first home.
This,
some say, may be the straw that breaks the camel’s back, as over the next four
years landlords will also slowly lose the ability to offset all their mortgage
interest against tax on rental income, after changes announced in the summer budget.
At the moment, landlords can claim
tax relief on buy to let mortgage monthly interest repayments at the top level
of tax they pay (ie 40% or 45%). However, over the next four years this will
reduced slowly to the basic rate of tax – currently 20%.
Surely this
is the end of Buy to Let in Solihull? Possibly… however before we all
run to hills panicking, let me remind of the situation a year ago.
Stamp Duty rules were changed in December 2014. Prior to
this, landlords were eagerly buying up properties under the ‘old slab style
Stamp Duty’ system. For example, the stamp duty bill on that £285,000 property
was lower on the old slab style duty (pre Dec 2014), at £8,550, yet this wasn’t
a million miles away from the £12,800 stamp duty under this new ruling.
Interestingly though, George Osborne has left a legal loophole in the new
rules, because when it comes to selling up, they can offset purchase costs
against any eventual capital gains tax, including stamp duty.
I believe that total returns from buy to let will continue
to outpace other investments, such as the stock market, gilts, bonds and even
pensions. Also, the best part about investing in property is that it is bricks
and mortar. You can touch it, you can feel it, and it isn't controlled by some
City whiz kid in Canary Wharf... the British understand property and that says
it all!
Buy to let has enough impetus behind it so prospective
landlords will continue to buy even with an increased stamp duty bill. Solihull
landlords will need to be savy about the type of property they buy to ensure
the extra stamp duty costs are mitigated.
Buying a buy to let property is a long term venture. In the past, it
didn't matter what property you bought in Solihull or at what price – you would
always make money. Now with these extra taxes, the adage of ‘any old Solihull
house will make money’ has gone out the window. People wouldn't dream of investing in the
stock market without at least looking in the newspapers or asking for advice
and opinion from experts in their field, the same should apply when investing
in a buy to let property in Solihull?
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