Investment Research – Will the upcoming tax changes kill the buy to let market?

What is the biggest concern in UK Buy to Let market in 2016? The answer is obvious: tax changes. 

A great deal of property investors have posted questions relating to tax changes and the buy-to-let housing market to me and my team. In fact, this was the main topic of our recent client seminar we held in Wembley.

So will the stamp duty and mortgage deductibility tax changes kill the buy to let market?

Personally, I think it’s absolute rubbish aimed at creating sensational headlines.

This is not to say that the tax changes are good in any way, they are terrible and its pathetic how the government have stuck their finger up at the hardworking middle class who are trying to secure their pension through property investment. They are successfully turning basic rate tax payers into higher rate ones with their brazen move.

The government are basically stealing your security and deserve to be voted out in a hurry. However this won’t happen until the next election. They have an absolute mandate that we mistakenly gave them and you know what they say “Power corrupts, absolute power corrupts absolutely.” Osborne and his soon to be replaced offsider, (my prediction) Cameron are men corrupted.

STAMP DUTY CHANGES

The stamp duty changes to investors are in line with many countries so there is not much we can do about this. On the brighter side stamp duty is a purchase cost that is added back for capital gains so you will pay an extra 3% but get some of this back when you sell providing you have made a gain. Not much of a conciliation but hey, it’s something. 

Also if you think about it, we got a discount on stamp duty before the last Budget. Now they’ve put it up and the net result is loosely 2% higher. 

MORTGAGE DEDUCTION CHANGES

The mortgage deductibility is the one criminal thing in my books. But as I said in my seminar at the weekend – What other choice do you have? 

Most people are predicting 6-8% growth in 2016 (no-one is predicting negatives) and a greater portion of this capital increase will be stolen in tax to pay for the Conservatives long lunches. But the fact still remains that there is lots of money and investment opportunities in buy-to-let. That won’t change and anyone that gets out because they think they are avoiding the taxes will suffer and regret as is always the case. Investors need to see the opportunities that are in the market.

Average Predicted House Price Rise for 2016

Halifax 4%-6%
Hometack 7%
Henry Pryor 2%
Capital Economics 6%-8%
RICS 6%
Nationwide 3%-6%

and of course, myself, Brett Alegre-Wood 6%

as far as I can see noone is predicting a fall in prices.

MANAGE THE TAX, FIND THE OPPORTUNITY

For me this whole thing is frustrating but it’s more about how you manage your investment cash flow than whether you should sell up or wait until it changes. It won’t.

By waiting you are missing the massive opportunity which is the new build boom that is going to happen over the next 5-10 years.

The new build property boom should be what everyone is focusing on. Whole areas are being regenerated and prices are increasing as a result of so much investment in new housing, including affordable but certainly not limited to it. 

So NO!!! TAX CHANGES WILL NOT KILL THE BUY-TO-LET MARKET

If it were going to then I would be selling up my business, not hiring more. If the government is going to take some more money out of my pocket then fine, I won’t like it and I won’t vote for them but I will just roll with the punches, adjust my strategy, watch my cash flow and make money anyway because that’s how professional investors roll. You adjust your strategy to meet the market and make money anyway. 

Not convinced or ready to get started? Have an initial chat with the team on +44 (0)207 923 6100. We’re happy to talk to you about your options and give you certainty about the direction of the market… up…

Live with passion and fun,

Brett

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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