In year 2018 there are a few factors which need to be taken into consideration by a landlord , such as the three per cent stamp duty surcharge and a change in tax regulation .
Talk to a seasoned landlord and the chances are that they will moan about the good old days before George Osborne added higher stamp duty on second homes and withdrew higher rate tax relief on mortgage and finance interest.
Few experts are predicting a buy-to-let bonanza in 2018. “The changes in taxation and other rising costs of home ownership are not making it easy to be a landlord,” admits Kate Eales, Head of Lettings at Strutt & Parker. But where Eales does expect to see growth is in so-called build to rent (BTR) properties. This is an emerging sub-market within private residential rented stock, designed specifically for renting rather than for sale and typically owned by investors. In fact, Strutt & Parker’s analysts believe that the UK is ‘on the brink of a large-scale commercially developed, owned and operated BTR sector’.
For more traditional landlords, with a portfolio of older properties, this year has been frustrating following recent tax changes. But if profit margins are tight, that does not necessarily mean that the buy-to-let game is not still worth considering.
The great thing about the buy-to-let sector is its adaptability. If some landlords fall by the wayside, others learn how to weather the bad times and cash in during the good times. And if the 2016 tax changes were a jolt to the system, there is evidence that the buy-to-let sector has absorbed the shock and is starting, albeit slowly, to bounce back.
“Rental values in prime central London fell by 2.5 per cent in the year to October,” says Tom Bill, Head of London Residential at Knight Frank. “We now expect rental values in London as a whole to move from broadly negative to flat in the near term. It looks as if the large spike in new stock that followed the additional rates of stamp duty introduced in April 2016 has been largely absorbed by the market.”
Another factor keeping rents high enough to attract would-be landlords, is the shortage of supply. Paradoxically, because some landlords were discouraged by the 2016 tax changes and slimmed down their portfolios, the ones who have held their nerve have realized that their properties can still command decent rents with demand remaining strong.
The key thing, as always, in the buy-to-let sector is to research the market properly. Asking rents in the capital fell by 3.2 per cent in the year to June 2017, but rose by 1.7 per cent in England and Wales as a whole, according to Savills figures. ‘‘The rental outlook is strongest in regional cities that attract investors from high value sectors such as professional services, technology and finance,” says Lawrence Bowles, Research Associate at Savills. Cities such as Edinburgh, Bristol, Oxford and Cambridge all seem to tick the right boxes.
Property has always been a long game for those prepared to do their research, budget carefully and become hands-on landlords. There are interesting times ahead for savvy investors.