Friday 4 December 2015

Is this the end for buy to let in Solihull?



 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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