Well George Osborne, in his Autumn statement ,caused Hampstead landlords to ask
whether buy to let is a viable investment option, when he announced that
landlords, when buying another buy to let property from April this year will
have to pay an additional 3% stamp duty on top of the standard rate. So for
example, It means that the stamp duty bill for a £285,000 buy to let home will
rise from the current £4,250 to £12,800 from April.
Some say property in Hampstead will be worth less because potential landlords will not be willing to
pay as much for them, and if house builders or existing homeowners don't feel
they are going to get as much for them , then there is less motivation to build
/ sell them?... and the person we can blame for this is George himself.
Back in 2012, he choose 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.
Others say this is the straw that breaks the camel’s back as
over the next four years Landlords will 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
(i.e 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 Hampstead? Probably.. but before we all run
to hills panicking .. let me give you another thought.
Stamp Duty rules were changed in December 2014. Before then,
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 it isn’t a
million miles away from new £12,800 stamp duty bill. Interestingly though,
George 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 goes
a long way!
Buy to let has enough impetus behind it that prospective
landlords will continue to buy even with a larger stamp duty bill. Hampstead
landlords will need to be savvy with what property they buy to ensure the extra
stamp duty costs are mitigated. Purchasing a buy to let property is a long term
venture. In the past, it didn’t matter what property you bought in Hampstead or
at what price – you would always make money. Now with these extra taxes, the
adage of ‘any old Hampstead house/flat will make money’ has gone out the
window. You wouldn’t dream of investing in the stock market without at least
looking in the newspapers or taking advice and opinion from others, so why
would you take the same advice and opinion about buying a buy to let property
in Hampstead?
If you are looking for an agent with experience that can help you find the right tenant for your property, then contact us to find out how we can get the best out of your investment property. Email me on chris@ashmoreresidential.com or give me a call on 020 7435 0420. Pop in for a chat – we are based on Ashmore Residential, Suite 7, 25-27 Heath Street, London, NW3 6TR. The kettle is always on.
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