No one can deny the success that countless landlords up and down the country have had with their buy-to-let property portfolios in recent years. In fact, a recent report from property experts Savills stated that landlords have raked in an astonishing £180 billion since 2009 in capital gains alone!
Low interest rates have seen the property market open up to those who may have otherwise been unable to choose this field as a viable investment opportunity. Couple this with the ever-increasing demand that has fuelled both house prices and rental charges to rise and it’s easy to see why property investment has become so popular over the last decade or so.
However, good things rarely last forever, and many people are now wondering for just how long the buy-to-let market will remain successful. It would seem that the future does indeed still look bright for those who have already taken the leap and created a property portfolio. But, for those who are considering entering into what many now see as a saturated market, there are one or two considerations they would be wise to pay close attention to before they invest:
Changes in taxation
George Osborne announced in his July budget that there would be changes made to the amount of tax relief that will be available to landlords from 2017. The move, which will be phased in over a four-year period, will see the relief capped at 20% as opposed to the current ruling that allows you to deduct all financial costs related to your property from your taxable income.
Stamp duty is set to change for purchases of buy-to-let property as well as second homes too. This is due to come into force in April 2016, and estate agents and solicitors are already seeing an increase in activity as prospective landlords hurry to beat the deadline that will cause the duty on such properties to rise by 3% across the board.
Another measure introduced is the removal of the 10% charge for wear and tear for those renting out furnished properties. This was always seen as a great way to build a sink fund for landlords as they could claim the full amount even if they hadn’t made any repairs on the property in that 12-month period.
Many analysts believe that the UK property market is bordering on entering a bubble, which inevitably leads to a correction at some point in the not too distant future. That being said, this does not look set to happen any time soon, as the demand for property still remains so high in much of the country.
Rises of 2% in both 2016 and 2017 are expected. This will mark a slowdown, but will still give those in the property market reasonable returns – even if they may not be as strong as they have been in recent years.
Despite London and the southeast leading the way in terms of capital growth, many of the better rental returns are still to be found further afield. Places such as Glasgow have returned far higher yields, thanks largely to the lower house prices available there.
As with overall house prices, rental yields are expected to continue to rise in 2016, with some analysts stating that they envisage increases of around 4% when compared to the previous years figures.
So, the short-term prospects for the buy-to-let market look good at the moment and the previous worries over rising interest rates have also been quashed somewhat, thanks to inflation slipping back into negative territory recently. Nevertheless, canny investors would still be wise to factor in some rises into their calculations in order to give themselves a buffer should these predictions fail to materialise.
If you enjoyed this blog post then perhaps you would like to read “Don’t Miss Out on Attractive Stamp Duty Rates For Buy To Let“?
Feature image credit: Keith Williamson via Flickr.