House Prices Continue To Defy Brexit Expectations

House prices brexit eu uk

It doesn’t matter what your political persuasions are – if you’re a homeowner, property investor or thinking about buying for the first time, chances are you’re eager to find out how Brexit will impact on the market. The Monetary Policy Committee recently voted to keep the base rate at 0.75% whilst Brexit-related uncertainty continues.

Key figures

Data recently released by Nationwide said only asking prices in London and the South East have been dropping throughout autumn 2018, with Chief Economist Robert Gardner saying annual growth remained stable in September, at 2%. Even in London, the decline seems to be modest, standing at a mere 0.7% and remaining just 3% below the record high of Q1 2017 and over double 2007 levels. Yorkshire and Humberside was the UK’s best performing region, seeing values increase 5.8% year-on-year. The East Midlands wasn’t far behind, with a rise of 4.8%. Wales and Scotland had increases of 3.3% and 3.1% in Q3, with Northern Ireland reaching 4.3%.

“A fairly steady market”

London estate agent Jeremy Leaf described the figures as “good news”, saying they represented a “fairly steady market”. The figures came as a surprise to many after house prices suffered the biggest fall in six years in August 2018. Stock shortages and low mortgage rates were offering considerable support to the market, with many purchasing properties following their summer holidays.

House Prices Continue To Defy Brexit Expectations Aspen Woolf

House prices since the referendum

House prices growth initially slowed down after the 2016 referendum, with BoE governor saying Brexit could slash a third off prices shortly after. Traditionally, growth has always slowed during the post-summer period, though the drop was greater than normal in 2018. Scotland performed better than the other UK nations during the year following the referendum, and there has been considerable growth on Wales and Northern Ireland during the past two-and-a-half years too.

Have house prices really fallen?

Despite decreasing levels of growth, actual house prices haven’t fallen substantially. Falls in value are being interpreted by some as a merely an inevitable market correction following a boom. The market may also seem healthier if we look at transaction figures. According to Which?, the referendum did not cause a sizeable fall in transaction numbers. There was a considerable rise in transactions in early 2016 due to the new 3% stamp duty surcharge for second-home buyers and buy-to-let investors, which resulted in vast numbers of individuals acting quickly in order to beat the change. Following the inevitable crash, transaction numbers slowly began to rise again.

How long are homes taking to sell?

Figures from HMRC tell us there were more sales in December 2018 than the previous December, with 102,330 houses changing hands compared to 98,760. When experts assess the performance of the property market, they often look at how long properties take to sell and how many homes are on the books of estate agents. Rightmove announced in December that properties were taking 70 days to receive offers compared to 67 the year before, with branches having 46 homes on their books as opposed to 43.

House Prices Continue To Defy Brexit Expectations Aspen Woolf

“Avoid rash decisions”

Which? Mortgage Advisers consulted a series of property experts on how to navigate the property market in the run-up to Brexit. The site’s own David Blake advised buyers to avoid jumping into fixed rates and making rash decisions. He said the market was becoming more favourable to buyers and said he expected prices to stabilise in the future even in the event of a short-term drop. At a time of lower mortgage rates, many buyers may be tempted into leaping into a fixed rate option “without considering the alternatives”. He added that there were several flexible products that wouldn’t remove the opportunity to re-mortgage further down the line should rates start to change.

Is now a good time to buy?

Kate Faulkner of propertychecklists.co.uk said those thinking of making a long-term investment should act now and purchase a property. She said some would-be buyers were hesitant to proceed, hoping prices would fall but claimed supply was also falling at the same time. Faulkner encouraged buyers to act now and “mitigate the risks”, saying the market would correct itself a few years down the line even if there was a temporary drop in value, echoing the advice of Blake. Landlords were reassured that reduced stock levels were likely to result in rent rises, though she did advise landlords to gain a rich understanding of their objectives and whether the investment was likely to be of benefit in the short and long-term.

House Prices Continue To Defy Brexit Expectations Aspen Woolf

When the picture is clearer

NAEA Propertymark Chief Executive Mark Hayward acknowledged concerns over Brexit but said a “flurry of activity” could occur once more certainty was available. The National Landlords Association’s Chris Norris expected long-established portfolio landlords to do particularly well during the coming years in spite of concerns about uncertainty and decreasing demand from those coming to live and work in the UK.

“Certainty of demand”

Executive chairman of the Home Builders Federation Stewart Baseley said the new-build market had “remained strong” over recent months and that he expected this to continue following the extension of the Home to Buy Scheme. The “certainty of demand” was allowing builders to plan ahead and boost their output, with record highs of planning permissions being granted by the authorities. He said the industry required skilled labour from overseas if housing targets were to be achieved.

House prices with and without a deal

Capital Economics property economist Hansen Lu predicted prices would rise by 1% in 2019 if a Brexit deal was agreed. Lu said the UK was likely to avoid a house price crash even in the event of a no-deal Brexit. The EY Item Club expected prices to rise by 2% this year in the event of a deal but to fall by 5% if no deal was agreed. Zoopla recently announced that prices were rising by double-digit figures in parts of the North, specifically the cities Manchester, Birmingham, Liverpool and Leeds, with Leicester seeing similar house price rises.

Buy To Let Investors Can Profit From Rising Interest Rates

Buy To Let Investors Can Profit From Rising Interest Rates Aspen Woolf

In the last few decades in the UK, the base interest rates have been on a rollercoaster ride, spiralling to dizzy heights before plummeting to record lows. All of this affects the economy as a whole, with savers and investors responding in kind.

The perspective on interest rates depends on which angle you’re viewing it from. As a general rule, savers like interest rates to be higher while those borrowing money for the purposes of investment profit more when interest rates are low. However, this isn’t always the case.

Buy to let investors are in a unique position of having profited from previously low interest rates and also being poised to benefit from rising rates too. Sounds confusing? Here’s what you need to know about the relationship between interest rates and buy to let investors.

A Brief Summary of Interest Rates

Often referred to as the “base rate”, the interest rate in the UK revolves around the rate at which the Bank of England lends money to other banks. This may not sound like it should affect the consumer but banks pass on any increase in charges. Therefore, the lower the Bank of England sets the base rate, the lower the amount of interest the banks will pass on to their customers.

The Bank of England has the right to change the interest rate; this is decided by the Monetary Policy Committee (MPC) who meet on a monthly basis. If the economy needs to be boosted by greater levels of spending and borrowing, the interest rate may be dropped. Conversely, if there is a risk that inflation could be rocketing, interest rates can be raised to bring spending back under control.

Put briefly, the base interest rate helps to influence the economy of the country and keep finances in balance.

Fluctuating Interest

As described above, the MPC have the responsibility of setting the base rate. Changes to this rate aren’t made lightly as the consequences can be significant.

After the UK made the decision to leave Europe in 2016, the now-famous Brexit vote, the interest rate dropped to an all-time low of 0.25%. Before this, it had been at 0.5% where it had stagnated for the previous seven years.

Buy To Let Investors Can Profit From Rising Interest Rates Aspen Woolf

However, interest rates are not always this low. When the Conservative government wrestled back power in 1979, interest rates climbed to more than 17%. In the 1980s, they once again squeezed the bank balances coming in at more than 14% in 1981 and 1989.

The 1990s and 2000s saw much lower interest rates but the financial crisis in 2007 really hit hard. By 2009 interest rates stood at 0.5% and to date, they’ve barely recovered. Following the historic low of 0.25%, in November 2017 the rates increased to 0.5%. In August 2018 there was another small upward turn to 0.75%, where it sits now in 2019.

Interest rates remain low but experts believe there is likely to be a slow and steady upward trend in the coming years. For savers who have seen poor returns this is welcome news, but what about borrowers looking for mortgages? More specifically, investors with buy to let mortgages?

The Impact on Mortgages

For most borrowers, the news that interest rates are set to climb is not good. Higher interest rates mean that mortgage repayments will be higher, and may not be affordable for all.

However, buy to let investors are in a very different position. Having enjoyed the advantage of being able to purchase properties at extremely low rates in recent years, the potential rise could be welcome news. Of course just like any other purchaser, mortgage rates will be higher for any new house sale but for buy to let investors there are other advantages which outweigh this disadvantage.

Mortgage affordability is based on income and outgoings; in other words, the mortgage company must be satisfied that the individual can afford the repayments. A buyer must usually have a reasonable sum of money for a deposit and be comfortably able to meet the monthly repayment. When interest rates are high, everything costs more…including the mortgage. This may mean that not everyone will qualify for a mortgage, or be able to afford it.

This has the potential to deliver real profit to buy to let investors. In response to the need for more housing, the rental market heats up, with a greater number of people looking to rent rather than buy. Occupancy rates soar, particularly in sought-after areas, helping to maximise the return on the investment. When mortgages aren’t available, renting is the only real alternative which creates lots of competition.

Buy To Let Investors Can Profit From Rising Interest Rates Aspen Woolf

This competition doesn’t only mean that there are no vacancies, it also allows rates to be pushed up. When mortgages increase, rental rates do too. This ensures that any corresponding hike in the buy to let mortgage rate is covered, as well as providing a bit of extra profit. With such demand for good rental properties, prospective tenants willingly pay the higher rates creating a true win/win situation for buy to let investors. Buy to let is still a great investment!

Other Factors to Consider

The resilience in the rental market is one of the biggest benefits for buy to let investors but there are other factors to consider too.

As a serious stream of income, buy to let investments have to be managed very carefully in order to ensure they return a profit. Many investors will therefore choose to protect their monthly outgoings by opting for a fixed rate or capped mortgage. This means that when interest rates climb, there’s no risk of spiralling repayments. At the same time, rental prices can still be increased in line with the market, generating even greater profits.

Although buy to let investors may be looking to expand their portfolio, if they already have a property and mortgage in place, they may be largely unaffected by the rising costs of higher interest rates. In addition, the value of their existing properties will increase, creating a more valuable asset.

Even investors seeking their first buy to let property needn’t be seriously concerned by a rise in interest rates. While they may have to pay more than those who already have their mortgage in position, the high demand for rental properties and the robustness of this market means that a healthy profit is still there for the taking. If you’re considering your first buy to let investment, why not read our guide to ensure you know the details? Guide To Buy To Let pt 1. For advice on your first/next investment, get in touch with the experts at Aspen Woolf who can help you find the perfect investment opportunity.

Property Investment Hotspots 2019

Bradford property investment 2019 aspen woolf

The mantra for 2019 when it comes to property investment seems to be making it Brexit-proof. While we still don’t know the likely outcome and investors may be worried, finding the right regions to put your money into is still as important as ever.

The key factors remain, therefore, when you are seeking a property in England that will give you a strong return. You should be looking at areas which have younger populations, growing job prospects and the prospect of future development. That may mean heading out of London for many investors and looking for bargains in slightly less well-trodden regions that have plenty of potential.

Many of these are currently in the Midlands and in the North West and East. Areas like Bradford, Manchester, Leeds and Liverpool are all certainly worth taking a closer look at. Here we take a look at the best property hotspots for the next 12 months.

Bradford

The North of England is increasingly viewed as a profitable area for investment and in many areas, you can get quickly start to build a really strong portfolio. Bradford is a fairly large town that’s ideally placed just a few miles from Leeds, and is cheaper to invest in than its slightly more “upmarket” neighbour. The area, in general, is starting to undergo significant regeneration which is an important marker for investors. Back in 2018 £75 million was committed to a number of city centre regeneration projects (with a masterplan for 2018-21) in order to attract the “urban entrepreneurs” of the future to the city.

There’s plenty of charm when it comes to the existing building stock too, with many properties that are likely to appeal to professionals who want somewhere low cost but attractive to set up home. Much of the beautiful gothic architecture remains, often converted into affordable apartments that could make for an excellent investment. In fact, Aspen Woolf have a number of such opportunities available in beautiful old buildings that are currently being refurbished.

You can still pick up one bedroom flats for between £40,000 and £60,000 if you select the right location and you can find a lower end terrace for around £70,000 in some areas. The town centre is probably your best choice at the moment and while there are some locations you may not want to buy just yet, these are well worth keeping an eye on as development progresses.

Property Investment Hotspots 2019 Aspen Woolf

Liverpool

From the doldrums of the 80s and early 90s, concerted regeneration and business investment have made Liverpool a pretty good choice when it comes to property investment. It’s a city with a fairly strong, younger population under the age of 30 and property prices have increased by around 25% in the last five years. Areas such as the Waterfront and city centre have been transformed over the last two decades and it remains an attractive location for creative industries such as art and music.

There is a growing young, highly professional workforce occupying the city centre and they’re mostly looking for long-term rentals. With a booming economy, it’s a surprise that house prices still remain some of the lowest in the UK. According to Zoopla, the average price of a property in the city is £173,000 with values rising 24.48% in the last five years.

Leeds

Not far from Bradford is Leeds. It’s a thriving university city that has a significant student population and that alone should make it attractive. There’s a fair amount of gentrification going on here but it’s still not too late to get on board and, if you hunt around, there should be some solid investment opportunities to take advantage of that will give strong returns.

For buy to let landlords who want to invest, there are no less than three universities in the city and there are potentially good yields with even with the average semi-detached prices at a shade just over £200,000. According to Right Move, house values have risen 6% in the last year, which is not bad when most people are worrying about a static market. Combine that with a competitive rental market and you have the best of both worlds.

Manchester

Like its near neighbour Liverpool, Manchester is a great location if you are looking to invest in property. With a population of over a half a million, there’s also a large student market looking for somewhere to stay. The city is home to a sizeable professional population who are also searching for high-quality accommodation. It’s a region that hosts major sporting and cultural events, all of which attract people from not only the North West but from far-flung reaches of the globe.

Often tagged as the London of the North, there has been a lot of investment infrastructure, particularly in areas like Salford Quays and it’s now a really cosmopolitan location that has a lot to offer.

The house prices are changing quickly and the Evening Standard reported last year that values had risen by 34% in the last three years. There are still areas where you can pick up a bargain in the city, particularly in the suburbs. The widening gentrification means you can expect decent returns if you get on board at the right time in the right area.  

Property Investment Hotspots 2019 Aspen Woolf

Birmingham

The Midlands have always been a strong area for property investment and it’s no surprise that Birmingham is near the top when it comes to UK hotspots. With a larger population than most other cities outside of London, property prices have grown by nearly 30% over the last five years.

Like Manchester, you’re looking at another fairly young population with a 65,000 strong student population to boot. The key factor is that the students tend to stay on in Birmingham more than other cities which means there is also a growing and sustainable population of new professionals. The potential for growth with the developing HS2 means that Birmingham is less than an hour and a half away from London.

The average house price according to Zoopla is just a shade over £200,000 but heading out to the suburbs can reveal some better deals. Particularly good buy to let hotspots can be found in areas like Edgbaston, Holloway Head and Erdington.

Nottingham

Finally, not far from Birmingham is Nottingham. This is a city that will also benefit from the development of the HS2 rail link and has a thriving, fairly young professional population. There’s a decent student population too but also families looking to rent in many areas of the city. Still relatively cheap property prices mean that this is a good area to get in at the initial stages of development and which could deliver great dividends if you invest wisely.

The average property price is just over £207,000 with a 28% increase in value over the last 5 years. For rental income and returns, it compares favourably with cities such as Liverpool.

If you are considering buy to let and other investment properties in locations such as Bradford, Leeds, Liverpool and Manchester, contact the professional team at Aspen Wolf to find out how we can help.

Buy To Let Is Still A Great Investment

invest in Liverpool property buildings

There have been many news reports on the supposed decline of the buy-to-let market recently, but there’s plenty of evidence to suggest there are still great investments to be made. A leading property fund manager recently told the media about some of the key UK areas for investments, stating that ‘a good home finds a good tenant’. Read on to learn more about why turning your back on buy-to-let opportunities in 2019 may be big mistake.

Many great reasons to invest

Hearthstone fund manager Alan Collett claims there is still a great deal of money to be made on the buy-to-let market in spite of rising interest rates. Mr Collett, who oversees one of the UK’s few residential property funds, says there are many great reasons for investors to take advantage of the opportunities available to them despite the slower property market, the withdrawal of tax relief on mortgage interest and the way landlords are now paying tax on revenue as opposed to profit after their mortgage costs. A 3% surcharge was added to stamp duty for new purchases in 2016, leaving new investors faced with bigger costs. The automatic wear and tear allowance is also a thing of the past, with the Bank of England launching tougher affordability measures. This means mortgage lenders are now asking landlords to display more substantial rental incomes in order to qualify for the same mortgages. All of this has resulted in many landlords exploring other investment opportunities.

Could rising interest rates cause growth?

Mr Collett said there were still many worthwhile opportunities for investors. He said rising interest rates could cause house price growth due to the way that rates were ‘tied to the economy’ and factors such as income and employment, which have a considerable impact on house prices. He pointed to the fact that earnings have risen with property prices in areas like the North of England and the Midlands. Though the Bank of England’s extreme stress testing suggested a potential 35% reduction in house prices, this has not been mirrored in many other leading independent forecasts, with just one expert predicting an overall fall in house prices of 3%. That was just for 2018, and there were no declines predicted for future years. Mr Collett said the property sector’s well-known defensive qualities would apply even in a post-Brexit crisis and have protected the market in historic catastrophes.

Buy To Let Is Still A Great Investment Aspen Woolf

Other influences on house prices

The investor emphasised the fact that house prices weren’t influenced solely by the health of the economy, citing housing supply and consumer demand as other big factors. The Royal Institute of Chartered Surveyors has said new landlord instructions have fallen following buy-to-let tax changes, with Help to Buy and stamp duty initiatives creating more demand than supply, yet Mr Collett says tenant demand also remains “resilient”. Around a fifth of UK households are paying rent, with this number set to rise in future due to factors like population growth and longer rents. RICS expect rents to rise by almost 2% in the next twelve months, soaring by 15% in the next five years.

Choose the right locations

Investors are encouraged to purchase homes in areas with an active resale market and good rental demand. Mr Collett said his organisation focussed on regional hotspots, assessing data related to rents and house prices as well as factors such as employment opportunities, travel patterns, accessibility and the local economy. Other key factors including types of available housing, availability, rental demand and tenant profiles. Investors can also seek out modern properties with modest maintenance costs. In market towns and small cities, there was a greater emphasis on houses, with flats being the preferred choice in bigger cities. All properties were considered to be potential places to live by Mr Collett’s team.

Main performance concerns and key locations

Mr Collett said remarketing costs and empty properties were two of the biggest concerns when it came to performance. There was a substantial focus on selecting homes attractive to longer-term residents, with tenants remaining in homes for at least two years in many cases. The Midlands was cited as one of the most thriving areas for buy-to-let investment opportunities. After investing in a Nottingham housing development and securing a bulk discount in an area near to services such as schools and transport links, his company was now seeing rents some 10% higher than previously predicted.

Buy To Let Is Still A Great Investment Aspen Woolf

The south-east market

The Colchester area was also cited as an up-and-coming location for investment opportunities, despite the inferior house price growth. Rental demand remains strong in this part of the south-east thanks to factors like the strong local economy and quick London commute. Mr Collett’s team were attracted to a development near Colchester due to its transport links, the wide range of quality amenities and picturesque riverside views. His firm was able to secure a bulk discount of just over 10%, with properties being let out quickly in line with valuations made prior to the purchase.

London investments

Despite reports of falling house prices and rents in London, Mr Collett said the capital remained a highly lucrative location for investors. The London properties held by his firm saw no reduction in value and included studio, one and two-bedroom flats located in Wembley Park. These properties were chosen due to the long-term regeneration work taking place in the area, easy access to quality amenities and outstanding public transport links. He said he intended to keep hold of the vast majority of his firm’s London holdings in order to benefit from strong demand. A pair of flats were sold in order to free up funds for new opportunities. Mr Collett said a large number of opportunities for buyers and sellers were available in spite of some parts of the market becoming “subdued”.

Taking another look

If you have considered exploring other investment opportunities, it may well be time to see what the buy-to-let market has to offer in 2019 before you walk away completely. Your next lucrative buy-to-let investment could be just around the corner. Get in touch with the expert team at Aspen Woolf, who can help you find a great investment opportunity and offer advice on the best way to manage your investment.Whether you’re looking for your first property investment or you already have an established portfolio, check out our Ultimate Guide to Buy To Let Investment.

How Secure Is Buy-To-Let Property Investment?

Is Buy-To-Let A Secure Property Investment Option Aspen Woolf

Investing in buy-to-let properties has traditionally been seen as a simple way of making money. However, this isn’t necessarily the case. In fact, some people who make unwise buy-to-let investments find that they lose money in the long run. This is because there are a number of factors which can influence just how much profit can be made from any given property.

With this in mind, is a buy-to-let investment a secure one?

The Importance Of Research

Obviously, the stock market is a clear comparison – everyone knows that share prices can go up or down – however when it comes to property, some potential investors are under the impression that their investment cannot fail. This is not the case.

Just like stocks and shares, property prices can fluctuate. Some people who invest in property discover that the value of the home increases dramatically over the years thanks to improvements in the local area. Others, on the other hand, find that the area in which they purchased the property takes a downhill turn and becomes less desirable for tenants and buyers alike. This means that research is key to determining which property is the right one in which to make an investment. Aspen Woolf have over 15 years of experience in identifying excellent opportunities within the property investment sector, so instead of going it alone, talk to our advisors to ensure you’re getting excellent advice in the current property market.

The Potential Profit

It comes as no surprise that buy-to-let investments are frequently seen as being extremely secure. After all, property investments can be extremely profitable since they offer two distinct forms of revenue stream. Firstly, investors receive ongoing revenue every month from the property’s rental income. Secondly, when the investor decides to sell their property they receive more profit from the sale.

Today, there is an unprecedented demand for rental properties across most regions. There are ongoing shortfalls in local housing, and this is now paired with the inability for many young people and families to afford a property of their own. Both of these factors mean that if you carry out your research well, it’s possible to invest in a desirable property which will be popular with tenants and command a good rental yield. With infrastructure developments across the UK, such as the HS2, the road to London is becoming faster and more accessible, meaning that properties along the route will be highly prized. Aspen Woolf stay abreast of these changes to ensure we curate the most desirable properties.

For many investors, buy-to-let properties are often viewed as a longer-term investment instead of considering the rental yield. They purchase properties with a view to selling them at the perfect time so they can reap large gains on their capital value. However, if the income earned from rent is put aside, none of the property sale profits will need to be used as a deposit when making your next property investment.

How Secure Is Buy-To-Let Property Investment? Aspen Woolf
Image Credit: Pexels

The Potential Pitfalls Of Buy-To Let Investment

Although there are clearly many benefits to investing in a buy-to-let property, there are a number of potential pitfalls which should be borne in mind before taking the plunge. Potential investors must  acknowledge that no investment can be guaranteed when it comes to offering the expected returns. Although many buy-to-let properties turn out to be very lucrative investments, making more profit than previously imagined, others can end up costing the investor a lot more money than they intended to spend.

There can be a number of factors which can impact on the profitability of any buy-to-let property. While some can be foreseen, others may emerge out of the blue. For example, the recent uncertainty about the implications of Brexit has led to a number of unpredictable property market changes which could have a serious impact on any buy-to-let investment.

Also, for some considerable time, the interest rate has been at a very low level. Investors have been able to reap the benefits of this thanks to cheap mortgages. Unfortunately, however, there has now been a rise in the interest rate, and there is now a distinct possibility that more interest rate rises could follow. This means that landlords must ensure that they are in a secure financial position in order to rise those increases out. Interest rate rises mean that mortgage payments will increase at some point, whether that be immediately or once a fixed rate deal ends, so it’s essential to ensure the rental income of the investment property will cover those payment increases in order to avoid damaging losses.

Changes In The Property Market

When the property market goes through changes, this will impact on the success of any buy-to-let investment. House prices have seen growth, however in some parts of the country this growth has now slowed down. This means any potential property investor must always be vigilant on what this could mean for their property’s value. It’s always important to have a viable exit strategy which should centre around when the best possible price can be obtained for the property. This means that landlords need to decide whether or not they are financially able to wait and hold onto their property until the prices have increased should its value have fallen.

The Danger Of Empty Properties

One problem which a lot of landlords experience is their property lying empty for extended periods. This often comes as an unexpected shock since the rental market is so buoyant in many parts of the country. However, there are a number of reasons why a property can be empty. Sometimes, tenants will end their contract early. Sometimes, work has to be carried out before the property can go back onto the rental market. Other times, there is just a drop locally in demand.

When there is no income from rent for any period of time, landlords have to be certain they can still make their monthly mortgage repayments. If a tenant falls into arrears with their rent, this could also pose a potential problem, with landlords having to cover the mortgage themselves. With this in mind, rental property may not be such a lucrative choice as many investors think.

Overall, a buy-to-let property can be a very profitable investment. However, doing adequate research and keeping a close eye on the property and financial markets is essential for success. A successful landlord will also have a clear contingency plan just in case of an unexpected change.

How Will The Autumn Budget Affect Property Investment?

Property Investors Investment Autumn Budget Finance

If you have read the news lately, it has primarily been dominated by the big ‘B’ of Brexit, however, there has been another big ‘B’ we should be aware of and that is the Autumn 2018 Budget.

By now, you will have heard and read about Chancellor Philip Hammond’s 2018 Budget update. Hammond opened the 2018 Budget, with a confident prediction that it would “open a new chapter in our country’s economic future.” This can leave many people pondering on how it will affect them and their businesses and families.

If you are you wondering exactly how this will directly affect you as a property investor then read on as we will outline the most important changes that you’ll need to know about, from changes to tax bands, important information regarding foreign nationals, changes to stamp duty as well as changes to Capital Gains Tax.  

Tax Bands:

In the Autumn Budget, changes to tax bands were discussed regarding the 2019/2020 year. The personal tax-free allowance where the 40% higher tax is applied will rise from £46,350 to £50,000. Although it may seem small and many landlords were dismayed by the news, we have to be positive as this is still an increase on last year’s figure. Also important to note, is that the threshold for VAT registration will remain unchanged for two years. Read our post to discover if it is worthwhile to invest in property via a limited company rather than as an individual.

Stamp Duty:

In the Autumn Budget, the Government has stated that it will extend first-time buyer’s Stamp Duty relief in England and Northern Ireland to shared ownership properties, regardless of whether the purchaser chose to pay Stamp Duty on the market value of the property. This will even be eligible to be backdated to 22 November 2017, so that all of those who were not previously eligible can claim a refund.

Read about the other Stamp Duty change announced by Prime Minister Theresa May at the beginning of October, to the effect that foreign investors will be subject to higher charges.

How Will The Autumn Budget Affect Property Investment? Aspen Woolf

Foreign Nationals:

In the Autumn Budget, there was an important update regarding non-UK residents and international companies. It is vital to note that all non-UK residents and international companies that are intending on buying and investing in property will also be taxed on indirect disposals of UK land. These rules will apply when a person makes a disposal of an entity that derives 75% or more of its gross asset value from UK land. An exemption will be made available for investors in such entities who hold less than 25% interest.

There will be options available in order to calculate the gain or loss on a disposal using the original acquisition cost of the asset, or by using the value of the asset at commencement of the rules in April 2019.

Another aspect of the Autumn 2018 Budget was that all non-UK resident companies will be charged Corporation Tax rather than Capital Gains Tax on their gains. The Capital Gains Tax charge relating to the Annual Tax on Enveloped Dwellings will be abolished. The legislation will broadly come into effect for disposals from the 6th April 2019.

Capital Gains Tax:

In the Autumn Budget, there were changes regarding Capital Gains Tax. This is especially important information for landlords as the relief that’s been granted reduces Capital Gains Tax on the sale of properties that have previously served as the landlord’s personal residence, but, which are currently being used to let out to tenants as their residential accommodation. This relief sees a maximum exemption of £40,000 per owner.

However, it is important to highlight that from April 2020, this exemption will only be available for landlords who live inside the property with the tenants. There hasn’t been any information regarding single tenants, so we assume that live-in landlords with only a single tenant are not eligible for the lettings relief, meaning that this will only apply towards accommodation with two or more people renting rooms, unless we hear clarification from the Government on this.

Read more about the various taxes property investors face here.

Are you a property owner? Great news, the time period between ceasing to occupy a house and final sale has been reduced from 18 to just 9 months. Though this change does exclude sellers who are disabled and/or who are living in a care home, they will continue to receive the 36-month exemption.

How Will The Autumn Budget Affect Property Investment? Aspen Woolf

Housing News:

In the Autumn Budget, there were some interesting pieces of news regarding the wider housing industry market. Firstly, The Housing Infrastructure Fund will increase by £500 million, bringing the total to a figure of £5.5 billion. There will also be £8.5 million available in order to allocate land for affordable housing. This is great news for property investors looking to expand their portfolios.

Secondly, you may be aware that Sir Oliver Letwin was asked to investigate why it takes house builders such a long time to complete large housing developments after statistics revealed that just over half of the 684,000 homes with planning permission that was granted in July 2016 had actually been completed. The findings of his investigation were that “the idea that housebuilders are behaving like financial investors, speculating over future land values, is not compatible with how they run their businesses. Housebuilders’ profits are generated from selling homes, not from an increase in the value of land” he argues. The Chancellor agreed that the review did not find evidence that major house builders are engaging in land speculation as part of their business model.

Lastly, The Office for Budget Responsibility believes that GDP growth will be 1.6 per cent in 2019, up from previous forecasts of 1.3 per cent; 1.4 per cent in 2020 (up from 1.3 per cent); 1.4 per cent in 2021 (unchanged); 1.5 per cent in 2022 (unchanged); and 1.6 per cent in 2023. This steady growth can only mean good things for property investors.

To conclude, 2019/2020 seems like there will be a positive outcome forecast for property investors with plenty of reliefs including changes to Capital Gains Tax, increased tax bands, more money being delivered into investment funds, as well as Stamp Duty being extended.

Here at Aspen Woolf, we can help you with your property investment journey, whether you’re at the beginning or if you already have a vast portfolio, we have an expert team who are ready to hear from you today.