Almost a year
since the former Chancellor, George Osborne, in his last Autumn statement back in 2015, caused Hampstead
landlords to ask whether buy to let is a viable investment option. 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 standard rate. So for
example, It meant that the stamp duty bill for a £285,000 buy to let home rose
from £8,550 under the original structure to £12,800 from April of last year.
Some said
that property in Hampstead would be
worth less because potential landlords wont 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 (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 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 Osborne had left some legal
loopholes in the new rules, some of which were little known about. Below is the
list of these.
The tax loopholes buyers are using to beat the stamp duty
hike
- · Parents buying properties for their children can set up trust structures so the child is a beneficiary of a trust, meaning they won’t have to pay the extra tax.
- · Landlords who expected to miss the deadline but didn’t want to abandon the sale were negotiating with sellers to arrange to split the extra tax cost between them.
- · Investors who completed transactions before the April 1st 2016 deadline to beat the tax change were allowing sellers to stay living in the property until they found a new home.
- · Landlords who incorporate properties they already own also have to pay the increased tax. Many are transferring their properties into a limited company now to avoid having to pay the extra 3pc if they do this after April 1.
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. My thoughts on this are simple... for as
long as the house building quota remains insufficient relative to demand,
Private Sector Landlord’s will be taking up the mantle as they have been over
the past 16/17 years.
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.
Don't forget to visit the links below to view back dated deals and Hampstead Property News.
No comments:
Post a Comment