Investment News: Autumn Report 2015 – The good and bad news for Buy to Let Investors

Investment News – Brett Alegre-Wood looks at the pro’s and con’s of the Autumn Statement and how George Osbourne has turned his back on voters to give a free ride to Corporate UK.

If pathetic pensions weren’t enough the monkey at number 11 has dug the knife into millions of ordinary people with his latest attack on small Buy to Let investors.

If you’d like to get a copy of the Stamp Duty Calculator that shows the comparison between the old and new dating back to the 1st December 2014 changes then simple download Stamp Duty Calculator here.

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Here’s the transcript of the video.

So today I’m going to go through the Autumn Report 2015, some quite surprising things in there. And actually, for me, disappointing.

I think the Tories, conservatives, had the opportunity to do a lot of good, but what they’ve actually done, I think, is really targeted certain sectors and giving other ones a real hand up. And I actually don’t think they’re supporting the common person, the average person.

Big business, huge wins and huge potential things. It seems they’ve been come off scot-free of this. But yeah, we’ll talk through. It’s not all bad news, and that’s one of the important things. The economy is doing well, the GDP is looking good and is considered to be continuing to grow good. Interest rates are looking to stay quite low.

Certainly Mike Carney come out and said he thinks 2017. Increasing supply, so there’s a lot of focus on building more homes at the lower end of the spectrum so people can get on the housing there, and certainly a lot of support for that. And a lot more buyers will be in the market because of that, because they’re getting 20% discounts and starter homes and all these shared ownership and these sort of schemes.

On a real positive, for what I do certainly, is that new build is going to boom. Everything is focused on building more properties.

So as a builder myself, and as a real estate agent and all the things that I do, actually that’s right because we are focused on new build and we’ve always been focused on new build. So from us, that’s a fantastic thing because the more building you get, the more the economy gets stimulated, more jobs there are, and that’s a really positive thing. Now that’s the positives if you like.

The negatives? Well, unfortunately, there’s a 3% additional stamp duty on buy-to-lets. So the normal stamp duty is there, plus a 3% on addition to that, which is pretty hefty. And that starts from the 1st of April next year.

There’s no exact guidance right now, but it’s looking like, effectively, if you exchange or complete after the 1st of April 2016 you will definitely pay the new amount. But somewhere between 12:00 on Wednesday night, and actually then, if you’ve exchanged before then you should be okay. If you haven’t, then it looks like you’re going to be paying the fee. That’s if the completion takes place after that day. If it takes place before that, no problems.

So let’s just have a look at some of the things. So basically UK economy. So what they’re talking about is about 2.4%. But I thought this was an interesting chart because what we’re talking about is here, the various countries. And you’ll the see the UK has actually come out the best of all the G20 countries. And it really has, there’s no doubt about that, that’s been quite good.

Thank goodness we’re not in the euro because that would have sort dragged us down and really weighed heavily upon. But the reality is we’re doing quite well as a country coming out of the recession. And really the recession is over and has been for quite some time, but now is the time really. And if you look at this, we’ve had 11 quarters of growth. We had one drop there, growth, one drop there.

And so actually technically the recession finished really 2009. So it’s been gone a long time. But it’s the carryover that’s really still affecting us. And certainly if you’re out in the towns and country places in the UK, you’re still probably feeling it. Businesses still haven’t recovered, they still haven’t got back on their feet.

And that’s why this stuff is so positive that’s coming out now about building new homes and really stimulating that economy. Because that is the way to do it, build more properties.

I’ve been saying this for years, obviously they’re starting to listen to it. So we’ve got money spent, we encourage house builders to construct starter homes.

Starter homes pretty much mean that people get a 20% discount on what the normal retail rate would be. And there’s a lot of stimulant for that to happen. And there’s shared ownership, there’s pretty much everything, every aspect of new homes aimed at people getting on a ladder. Not so much high-end homes and things like that, although there is a London supplement.

So people who live in London will also benefit and be able to get on a home. So if you’re sitting there wondering whether now is the time to do it, definitely do it. Get in as soon as possible. Because what we’ve got now, the way we are in the market and where the cycle is going is going to be going up. So that’s good news for us and it’s good news if you get the ladder.

Housing budget doubled to $2 billion, 400,000 affordable homes to be built by the end of the decade. So that’s quite a lot. If they could pull this off, which I don’t think they will be able to, not at those numbers. They’re just not planning and there’s a whole range of reasons why. It’s all great to say this, but if they’re not going to do the basic things they need to, to get things happening, it just ain’t going to happen, it’s going to be restricting. And certainly we’re already seeing local councils put restrictions on, or try and put things and opt out things that mean more houses would be built.

So really it’s good news, but the one negative is that George Osborne seems to have this in his head that frankly people buying a home should not be squeezing out families who can’t afford to buy a home. Now what he’s talking about is buy-to-let investors. Now I think this is really misguided, I think this is going to cause a whole generation of people to have a really crappy pension and crappy retirement. Because he’s focused on getting people on the ladder.

Actually, with the schemes that are there, it’s not that hard to get on the ladder. Now you may be sitting there going, “Well, yes it is, Brett.” But actually if you get 5%…and it’s always, for me, if you can’t find 5%, then you’re not ready to buy a home.

So 5% and you’ve been able to get on a home for a while. All the schemes they’re doing now are just going to add to that. But what he’s also done is, which is a real kick in the teeth, is hit the buy-to-lets. So what’s happened is the new stamp duty rates are basically 40,000 and below you don’t pay any stamp duty, but you will pay the additional if it’s a buy-to-let. The interesting thing is try and find me a £40,000 home that doesn’t need £20,000 work on it.

But anyway, 125, you’re going to pay 3%. 5%, 8%, 13%, 15% above 1.5 million. So for most people, they’re looking in that sort of 5% to 8% mark. And remember, this is 3% across the whole lot. So it’s basically you’re paying the 2% or the 5% or whichever it is, so you pay 2% on this much, 5% on the additional bit, the 3% is on the total amount.

So it’s the old calculation, plus 3% on top of the whole amount is how you calculate this. Now the interesting thing is one of the things that…and this is why I say corporates have actually done quite well. Because the government is saying, look, if you’re owning any more that 15 residential properties, they’ll consult whether it’s appropriate to charge the 3%. In other words, big business, huge win.

The small buy-to-let landlord, which is most of our clients that we deal with, he’s targeting you directly. Basically what he’s saying is you’re the reason for pushing up prices and why people can’t afford. Not that they’re freaking useless at their policies and that there’s been years of misuse and these pensions don’t work and all this. It’s almost like, “Buy-to-let investors, you’re the problem.” So far from the truth.

So what we’re starting to see is these things coming out, annihilation of buy-to-let in politics. And basically what it’s talking about is how, yeah, attack the little guy, give the big guy free rein. Yeah.

My take on this is this, look, it is an attack. Annihilation? I don’t think it’s that serious. And actually I think it is an added cost. So make no mistake, the cost of doing business, the cost of doing buy-to-let business is 3% more expensive.

However, it’s not an expense. You have to pay it upfront, but you will get to, as long as you make money when you sell, take that money back. So you will get that as off the capital gain. So in some ways you’re paying it, but you will get it back. So there’s that consideration, which not many people are talking about.

Look, it’s another big hit at the top end. So if you’re buying the £1 million-plus stuff, 3% on total amount on top of the 12% already. So that markup, which was already a bit shaky, actually is probably going to become more shaky now.

My take on this whole thing is look, yes, it’s 3% stamp duty. It hurts, there’s no doubt about that. I’m not going to deny that. But the reality is if you’re looking at sort of 6% to 12% growth per year now, which I think is what we’re looking at, so really you’re looking between 1 month or 3 months to 12 months that’s costing you in growth. So if you look at it that way, you still need to build. So the question is, “What else have you got?

What else you got to invest in?” Nothing else out there is as simple, as easy, as certain at making you money. And this is not going to change this.

So it’s not like, “Oh, now we’ll stop doing annihilating buy-to-let and we’re going to go do the next thing.” There is no the next thing. This is still, by far, the best investment you can make, and the most certain and the least time-consuming effort. So that’s the reality. And plus, remember, you’re going to have so many new homes built, which is going to be driving up prices anyway. More people jumping on the ladder. So actually that’s good. So the 3% will probably be absorbed in the grand scheme of things.

Does it hurt? Yes, it’s going to hurt when you first buy, so you’ve got to add that in. But you actually should see the benefit of the growth because of this buy-to-let boom and because it’s a buy-to-let boom, the new build housing boom that is going to happen. And even if they don’t meet the marks, even if they get halfway, it’s still going to be fantastic. So yeah, it’s a good and bad, if you like. And really it hasn’t added any certainty to the market, there was already a lot of changes.

And I think really, my personal opinion is, don’t vote for this idiot. George Osborne really… I won’t be voting for him in the next election. Because as far as I’m concerned they were going down one track, and now they’ve totally written off the people that voted for them. So in some ways would it have been worse under Labour? Who knows now? Because some of the things they’re doing.

But for me, it comes down to this: power corrupts, absolute power corrupts absolutely. And the interesting thing is, because they’ve had such a mandate from the election where effectively Labour and the rest of the parties fell a bit, they’re just doing whatever they want now, whatever they want. So really we need to be sending a message to them that that’s not appropriate, that they need to consider the people that put them into the place.

Anyway, guys, have a great day.

Live with passion and fun,

Brett Alegre-Wood

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