Tougher times for buy to let market
Published November 7th, 2017
Increased inflation figures and the recent Bank of England interest rate rise could add further anxiety to the buy to let market which is already jittery following recent tax changes.
Graham Bowcock, a partner with property, business and planning firm Berrys in Cheshire, says the buy to let market is getting tougher for a number of reasons and interest rate rises will be a double whammy for investors who can no longer claim full mortgage interest relief.
“We have definitely noticed a falloff in enquiries from buy to let investors and the supply of properties to let is almost non-existent which can only be bad news for tenants,” said Graham
“A few things are combining to make people nervous and people with small portfolios are wondering whether it is worth it,” he said.
There are stamp duty penalties on buying new property, the issue of lack of tax relief on the interest on the borrowed money and tighter lending criteria for those looking to borrow money for rental property.
“Our advice to rental property owners and those thinking of entering the market is to take advice as there may be ways to mitigate the changes,” said Graham.
He believes that larger investors running their buy to let portfolio as a business will probably do better than those with just one or two rentals. For example, operating through a limited company may be more tax efficient, but there can be some extra running costs.
“There are more tenants out there than there are properties and I can only see that situation getting worse,” Graham said.
“The market is forcing rents up and has been for a couple of years, in many areas. We are not getting the turnover of people leaving a tenanted property as tenants are staying put rather than face the challenge of finding somewhere to move to.”
Graham says investors have got to be properly advised. Not only are there tax issues but compliance needs to be well managed to ensure that landlords can recover possession of a property when they need to. Failure to complete certain documentation can make this difficult.
“If you can hold your nerve and act in a business-like manner you can do well but make sure you have the structure right and understand how the sector operates,” Graham advised.
For further advice contact Graham Bowcock at the Northwich office of Berrys on 01606 49200 email email@example.com.