Given the changes made in the budget, it will be interesting to see what long-term effect this has on the buy-to-let market. The Residential Landlords Association predicts that 1 in 5 landlords in the UK might sell their property freeing up property for first time buyers. However, with the additional increase in stamp duty a survey by the Bank of England has predicted demand for buy-to-let mortgages to grow before April 2016 following a surge at the end of 2015.
Although the most likely scenario is that landlords could be trapped into pushing up rents, having a nasty effect on renters and the rental market. Usually increased rents attracts investors into the property market but as rents are already at record levels, it is difficult to predict what effect the changes will have on the buy to let market.
The government has been careful not apply the interest relief changes to buy to let landlords who operate through a limited company. One possible reason for this is to prevent private landlords from re-mortgaging their rental properties on an increase in the property value, benefiting from the extra mortgage by using the money for personal expenditure and then claiming full tax relief on the increase mortgage interest payments.
One thing that we can see has already happened is that private landlords are moving their property portfolios into limited companies and in turn the mortgage market has responded to this with an increased number of lenders prepared to lend to limited companies.
This strategy needs careful thought and the tax changes are only part of a number of factors that would form part of the decision process. E R Grove are actively looking at ways they can help property investors maximise their income from property investment, so feel free to call us for a chat about these changes.
