Arthur looks into the changes to landlord taxes over the last year and assesses the best investments by region in the marketplace
Want to expand your property portfolio? It has now become more difficult to break out of single property ownership or add to your portfolio thanks to changes to taxes landlords will now pay for secondary homes.
The number of mortgages taken out by landlords buying new properties plummeted by 85% in April. The cause being the change in stamp duty laws, making it more difficult to expand. Figures from the Council of Mortgage Lenders (CML) showed 4,200 buy-to-let loans were taken out for purchases during April, worth £600m. The decline is exaggerated due to unusual circumstances, as many chose to borrow money to purchase properties before the new rules surrounding landlord taxes came into place.This caused a considerable spike in March, with 28,700 loans for buy-to-let being purchased. By doing this, landlords avoided paying a 3% surcharge on the purchase of any residential property that was not their main home. The CML itself confirmed that this was their official view, saying:
“The stamp duty changes on second properties that came into effect on April 1st resulted in activity across the market being brought forward into March causing an expected slowdown in April’s lending figures in the aftermath.”
There is no need to despair, markets remain strong
Landlord taxes are beginning to bite, but the market remains positive due to the continued prospects for investors, both new and current. This is down to the total returns statistic of a record £142.1 bn. over the last year, an increase of 23% from the previous year. Therefore,it is clear that the new taxes have not prevented the continuing prospects of the market as a whole. However, there has been a fall in relative yield as a result of property rises, due to the fact that rent rates have not risen at the same level as property value.
Where to buy?
The best regions for investment last year were the North-West and South-East. The North-West say yields of almost 7%, pushing returns to 12.5%. While it has the joint lowest yield, the South-East continues to rely on property price increasing, boosting returns to almost 15%. The same can be said of the East, boasting almost identical statistics. However, it is of course London which leads the way with returns of almost 18%.
Despite the apparent slowdown in the quantity of landlord mortgages taken out in April, there is no need for concern. The market remains a vibrant place for investment, especially in the South and North-West of England. The figures from June will hopefully confirm that April was an abnormal month brought about by the governments changes to landlord mortgages.
The Guardian, 15/06/2016
The Telegraph, 15/06/2016
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