Is Manchester Buy To Let Property A Good Investment?

Manchester city buildings skyline

Manchester is a key economic area and one of the most high-profile cities in Europe. The city is home to the UK’s second-largest city and regional economy and is also a key area of the Northern Powerhouse. The city has benefitted from the devolution of power and is able to choose some of its own budgets and spending. This has made it free to develop policies designed to attract investment from overseas.

Constant large-scale investment

The city is also known for its thriving media scene, musical history and footballing heritage. Investment continues to transform the city for the better, with new facilities springing up all the time and its skyline constantly evolving. The European Structural Funds programme delivered approximately £366 million to the city, enabling it to create jobs, invest in businesses and fund education. The city is also regarded as one of Europe’s most impressive tech hubs and is noted for its exceptional transport links, leisure facilities and affordable properties, with growing numbers of people relocating from south-east England and overseas to take advantage of its many benefits.

Key growth generators

One of the main generators of recent growth is the Greater Manchester City Deal. This fund is largely centred upon what’s known as an ‘earn back’ scheme. This has enabled the region to recoup extra tax revenue from gross value added (GVA) increases from infrastructure development. The deal has created an apprenticeship and skills hub, raised the number of opportunities offered by the Business Growth Hub and enabled the city to attract further inward investment. It has also established a housing fund enabling further property developments and made billions available for investment. The impact of the scheme is predicted to deliver £1 billion each year to the city by 2025. Money from the Regional Growth Fund (RGF) has helped create almost 6,000 jobs, despite the original target being just 3,700. The Manchester Enterprise Zone, The Corridor, One St. Peter’s Square and Manchester Central also provide further clear evidence of the region’s continued extraordinary growth.

Is Manchester Buy To Let Property A Good Investment? Aspen Woolf

Career and leisure opportunities

The City of Manchester is generally regarded as the heart of the North West. It offers outstanding career opportunities in areas like law and finance, public service and the media. It is also home to 100,000 students and frequently plays host to some of the biggest and most prestigious names in entertainment. Amazon is currently setting up a base in the city, whilst a new GCHQ office is also set to open soon.

Other key attractions

The city’s colleges and universities have produced 25 Nobel Prize winners, with the Manchester Arena being the largest indoor concert venue in Europe. The city is also home to a huge range of cinemas, art galleries, boutiques and independent shops and is within a short drive of some of the UK’s most picturesque scenery, including the Peak District, Lake District and Yorkshire Dales. Manchester Airport was named the UK’s best at the 2015 Globe Travel Awards, with the city producing 3.5% of the nation’s GVA. Its ever-evolving economy has enabled the city to weather the storm even during some of the most troubled economic times.

Greater rental yields

Rents are also on the rise due to the growing demand for accommodation across the city. In fact, rental costs had soared by 30% over a four-year period, according to research carried out by the Manchester Evening News. The Manchester City Council area was the joint-most expensive area to rent a Greater Manchester home in between Oct 2017-Sept 2018, with figures standing at £775 per month on average, with Trafford sharing first place.

Residential and commercial property expansion

More and more property investors priced out of areas like London are now looking to Manchester to help them achieve their targets. New facilities including bars, restaurants, shops and leisure venues are constantly appearing on the streets of Manchester, which is also eclipsing many of its big-name rivals when it comes to house price growth. Research undertaken by Hometrack found that prices had grown by 6.6% on average year-on-year. The average price for a Manchester property stood at £168,900.

Is Manchester Buy To Let Property A Good Investment? Aspen Woolf

Growth outside the city

Growth is also being seen in other areas of Greater Manchester miles away from the city. Bury was showing the second quickest level of growth at 20%, with Salford rents increasing by 18%. Bolton has a rise of 17%, whilst Stockport experienced a 13% rise. Investors drawn to the area don’t have to miss out if they are unable to take advantage of opportunities in the Manchester City Council area. Greater Manchester is home to some 2.5 million residents, with a large number of these seeing substantial house price growth. Many of these areas offer quick and easy access to the city centre, making them ideal for commuters in rented properties. Each of the ten Greater Manchester boroughs have their own decision-making powers and is part of the Greater Manchester Combined Authority led by mayor Andy Burnham.

More buy-to-let options

Investors seeking buy-to-let property opportunities in the M1 postal area can expect to enjoy yields of around 5%. Suburbs just a few miles outside of the city centre like Levenshulme are home to a large number of affordable buy-to-let properties offering yields of around 5-6%. Yields of approximately 4% are on offer when you buy in the more sought-after, leafy locations of Chorlton and Didsbury. Castlefield and New Islington are a short walk away from the city centre and play host to state-of-the-art luxury accommodation. Student-friendly areas including Fallowfield and Rusholme offer quick links to the big Oxford Road universities. Conventional M14 homes can deliver yields of more than 7%, but you could see a return of at least 12% by investing in a house of multiple occupancy (HMO). Ensure you do your research, and your buy-to-let portfolio could bring you fantastic rewards; check out our tips for investing in the buy to let market whether you’re an old hand or just starting out.

If you are looking for new areas to invest in property and are seeking exciting locations that are well and truly on the rise, Manchester and its surrounding towns and cities may well deliver the generous yields that you desire. For our top picks for investment in Manchester, visit this page.

Rental Properties Still In High Demand

piggy bank houses

The housing and property market has changed dramatically over the last couple of decades, as any investor will tell you. First-time buyers in many areas of the country are finding it increasingly difficult to get on the housing ladder.

For those with money to invest, the buy to let market is still doing well. This is in spite of tax increases, the removal of tax benefits, and changes to what landlords and letting agents can charge. Not only does buy to let provide a stable, long-term investment with a strong return when you come to sell the property but you also benefit from increased revenue from regular rent payments.

Why It’s So Difficult to Buy

Chronic underinvestment in the housing market over decades has led to a supply shortage, there’s no doubt about that. On 13th March, Chancellor Philip Hammond outlined a revamp of the Affordable Homes Guarantee Scheme, putting aside £3 billion to support buying 30,000 properties for housing associations across England.

While some in the housing sector welcomed the initiative, many have pointed out that it still falls woefully short of what is required. According to the latest government figures, affordable housing to buy or rent may be growing but it still forms a small part of the actual market and is doing little to relieve the pressure.

The high cost of mortgages and getting together the initial deposit for a home is putting off a lot of potential first-time buyers who now see renting as a better or the only option on the table. Of course, there is the option for shared ownership, something that has been increasing in popularity over the last few years. But, in many parts of the country, that still leaves purchasers trying to find enormous deposits and having to manage untenable mortgages.

According to The Guardian recently:

“Currently a shared ownership two-bed flat in London is on sale for £985,000 at full market value, with the buyer taking a 25% share and expected to find £2,469 a month in mortgage and rent repayments.”

Rental Properties Still In High Demand Aspen Woolf

It’s no wonder, therefore, that so many people have given up the ghost and decided to rent. In the UK, we tend to take the notion of owning our home a lot more seriously than in Europe where renting is seen as a good option and where many people treat it as the norm. The problem is that the availability of affordable rental accommodation is also a huge issue.

The Price to Earnings Ratio is Widening

One of the main indicators of affordability is the price to earnings ratio. A recent review by Lloyd’s Bank found that this is increasing relentlessly and now presents a significant barrier in being able to afford a first home in many parts of the UK. The average home in a city now costs seven times more than the average yearly earnings.

Lloyd’s produced a list of the least and most affordable cities in which to buy a home. Oxford, for example, is the least affordable with the average home costing 11.5 times your annual salary. That compares to 10.5 times the annual wage for London and Cambridge. Even if you move further out to the South, in places like Southampton you are looking at 8.9 times the average earnings.

There is a significant north-south divide. Stirling, Londonderry and Bradford are the most affordable buys with prices between 4 and 4.5 times the average annual salary.

Wage Inflation Isn’t Keeping Up

It’s simplistic to say that stagnating wage inflation is playing a significant role in the number of people able to buy their own home. The truth is that house prices have been outgrowing salaries for at least the last couple of decades. After the 2007 financial crash, property prices recovered better than our annual salaries.

How Brexit is going to affect all this, of course, is anyone’s guess, particularly in light of recent events and the political turmoil it has caused. The truth is that, while wages fail to keep up, the issue of affordability is going to become an increasingly important factor in getting new blood onto the housing market.

The Rise and Rise of the Rental Market?

For those who find that affordability is out of their range, the only other option is to rent. According to a recent report by the Resolution Foundation, a third of millennials could well spend their entire lives renting rather than owning their home.

Rental Properties Still In High Demand Aspen Woolf

The creation of ‘generation rent’ may mean that we need to change our approach to owning that home. The report noted that there are some 1.8 million families with children who now rent rather than have a mortgage. Rents are on the increase which may make the housing crisis even worse in the future and many tenants have nothing left at the end of the month and are unable to even save for a deposit.

A shortage of rental properties coming onto the market are also having an impact and that could raise affordability because of supply and demand issues. Indeed, this is already happening in many parts of the UK, particularly in city regions.

The Need for More Buy to Let Investments

When the Government decided to bring in higher taxes for second homes and change the rules on what tenants could be charged for, many buy to let landlords complained that it was going to damage the rental industry. The truth has turned out to be a little different.

The rental market is widening and demand is increasing. Those investors who want to consider buy to let options are still likely to be in a pretty good place if they purchase a rental property. Several factors are contributing to this.

  • Enough affordable housing is not being built – certainly not the 300,000 new homes that were promised by the Government each year.
  • First-time buyers are finding it difficult to get a foothold on the housing market in many parts of the country, despite incentives such as Help to Buy.
  • Those who own their home already are increasingly reluctant to move up and create space in the market because of the high costs involved.

More and more people are seeing the possibilities of residential property as a long-term, profitable investment. There is a shortage of rental properties at the moment that could see an increase of around 15% in rent levels over the next five years if demand continues to outstrip supply. There’s no doubt that buy to let landlords still have a pivotal role to play in the affordable housing market for some time to come.

If you’re considering adding buy-to-let properties to your portfolio, or as a first time investment, brush up on your knowledge by reading our Ultimate Guide To Buy To Let. For expert advice and first-class investment opportunities, get in touch with the team at Aspen Woolf today, our property investment specialists are always pleased to help.

Best Property Types to Invest In

confused person looking at property types

Finding the best property to invest in is tricky. Of course, you could simply pick something based on the yearly returns you’ll see… But that’s not the be-all-and-end-all of investing in property. That’s what this post is all about: not just what kind of returns you can expect, but what makes a property truly worth investing in.

Let’s start by looking at the best types of property to invest in, and what sets them apart.

HMOs/Houses in Multiple Occupation

According to official UK government guidance an HMO, or a house in multiple occupation, is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. These properties are common around cities like London and Manchester, where there are students and young professionals that need relatively cheap housing near centres of employment/education.

HMOs offer the best yield of any property type. According to research conducted by Platinum Property Partners, HMOs offered a 12.4% gross yield on average between 2010 and 2014. That was far more than the 5% average yield from regular buy-to-lets during the same period.

However, there are two problems you’ll encounter if you invest in an HMO. First, you’ll have to get an HMO licence. Not every HMO needs one, and requirements differ between local councils. HMO licence cost varies too, from between £500 to £1000 or more, and licences can be valid for just one year, or up to five.

Besides that, there’s simply more work involved. With more people in the same living space, there’s more of a chance that your property will be damaged and require expensive repairs. This can significantly cut into your return. And since HMOs are often student accommodation, this adds more problems into the mix: late payments are more likely, and students are less reliable tenants, often moving on with little notice. So while a well-managed HMO offers excellent returns, they require more detailed management.

Best Property Types to Invest In Aspen Woolf

Apartments

Apartments are a good ‘halfway house’ between HMOs and buy to let houses. While your yield isn’t quite as high, apartments typically attract more stable and securely employed tenants. This is great news for a number of reasons:

  • There will be less of a difference between your gross and net yield, since you don’t need a licence, and there’s less chance of missed rent payments
  • Your property is less likely to become damaged, since your tenants are more likely to be young professionals and families who want to keep the property in good condition
  • There are new build apartments hitting the market up and down the country, many of which offer buy to let investors first access
  • Since apartments typically cost less than houses, you won’t be hit with as much capital gains tax if you should choose to cash in on your investment

All that being said, investing in any kind of British land or property has its benefits. The U.K. has a growing population, and the current shortage of new build properties keeps prices inflated. As such, house and land prices will only continue to grow. We offer a mix of apartments, HMOs and houses—we’ve no shortage of buy to let properties for sale.

Where to Invest in Property

Just as important is where you actually choose to invest. The UK housing market as a whole has offered excellent returns for several decades, a trend which is likely to continue into the near and medium term. However, even if the market does dip in certain parts of the country, it’s likely to continue growing at a healthy pace elsewhere. Let’s take a look at the best places in the UK to invest in property!

Buy to Let Investment Manchester

Manchester is England’s second city, and is rapidly growing. Near the city centre and the Media City hub, dozens of new blocks of flats are being built. The majority of these are being marketed for buy to let investors. Why? Because Manchester is seeing upper-single-digit growth figures in property prices. While London and the southeast generally have stagnated somewhat, this has been offset by growth in the north and in Manchester in particular. Not only that, but an influx of people trying to escape London house prices has pushed up prices here significantly.

Best Property Types to Invest In Aspen Woolf
No.1 Trafford Wharf, an investment opportunity in Manchester from Aspen Woolf

Not only that, but the satellite towns around the city—which form Greater Manchester—have seen similar levels of growth. Here, the price of terraced and semi-detached houses has grown far faster than in the southeast. Other northern towns like Leeds and Sheffield have seen similar revivals.

View property investment opportunities in Manchester from Aspen Woolf.

Buy to Let Properties Birmingham

Don’t let anybody from Birmingham hear you call Manchester the U.K.’s second city! Birmingham definitely has a claim to the ‘crown’. For starters, it’s the second most populous city in the U.K., with well over a million people, and about 3 million in the surrounding urban area. This kind of demand for property means that prices grow steadily here.

Not only that, but Birmingham’s population is growing steadily. The city is one of the areas of the U.K. that new immigrants feel most comfortable, which is rocket fuel for local house prices! Investing now, as the population continues to grow, is a smart move.

Buy to Let Properties London

The London property market grew at practically exponential rates over the last few decades. While that growth has slowed down, London remains a fantastic place to invest. As easily the largest financial hub in Europe, and a population centre, it’s highly unlikely that the market will fall from the heights it’s attained.

View available property investment opportunities from Aspen Woolf in London.

But no matter where you choose, the U.K. property market is an excellent choice for investment, with an eye to building wealth. At Aspen Woolf, our award-winning independent advice has been trusted for over a decade—much to our clients’ satisfaction. So contact us online, or talk to one of our experts at +44(0) 203 176 0060 today!

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.

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.

Foreign Investors to Pay Higher Stamp Duty on UK Purchases

Property website showing higher prices for investors from abroad

Investors from abroad who are looking to buy properties in the UK will be hit with higher charges in the form of stamp duty according to the current government. The change was announced by Prime Minister Theresa May at the beginning of October and is a response that is designed to address the current housing crisis.

It’s generally believed that foreign investors looking to buy a property in areas like London are driving up house prices, something that is putting them out of reach of many UK citizens. The market in the Capital may be currently experiencing a dip, but the average cost of a semi-detached property is still over £580,000, way beyond the means of many first time buyers.

While May cited the new tax as a way of creating a more level playing field, the building industry reacted by saying that it would put the brakes on an already stalling house market. That’s because fewer new properties would be built with less investment coming in from overseas, something which many developers depend on.

What is the Stamp Duty Increase?

The increase will be 1% but could rise to 3% later. If it comes into effect, it is expected to raise tens of millions for the UK government. That means, of course, for each property, an overseas entity or individual will pay more. The details have yet to be thrashed out, however, and a date has not yet been set for when it will come into effect.

There will be a consultation period during which interested bodies, including those from the building industry, will be able to put their points of view across.

Why has the Government Announced It?

There has long been a feeling that the current government in the UK has been swamped by the Brexit issue, with many domestic changes and policies getting lost in the drama and turmoil of leaving the EU. The announcement came as the Conservative government was about to start their party conference at the end of September.

Foreign Investors to Pay Higher Stamp Duty on UK Purchases Aspen Woolf

A number of factors have driven the proposed increase in stamp duty. Two years ago the stamp duty rate for second home buyers was increased in an attempt to give more opportunity to first time buyers who now pay no tax below a certain threshold.

In other countries, levies on foreign investors have already been introduced, including in Australia and Canada. The UK government seems to be following the same model in the hope that it will make the market more equitable for local home buyers.

There’s also an increasing crisis of homelessness in the UK’s capital city. It’s estimated that the tax levy will deliver £40 million that could be invested in providing homes and accommodation to this neglected section of society. If the government then decided to boost the stamp duty to 3% later, it would potentially bring £120 million to the chancery.

The major reason is equity. According to Theresa May:

“It cannot be right that it is as easy for individuals who don’t live in the UK, as well as foreign-based companies, to buy homes as hardworking British residents. For too many people the dream of home ownership has become all too distant and the indignity of rough sleeping remains all too real.”

What Does It Mean for Foreign Property Investors?

While the proposed change to stamp duty was broadly welcomed in political circles, the actual impact on the long-term housing market is uncertain. With Brexit looming large, by the time the consultation takes place, we could even be looking at a change of government and a major change of opinion.

Foreign Investors to Pay Higher Stamp Duty on UK Purchases Aspen Woolf

The Labour opposition’s approach to overseas property speculators say could well be a lot harsher. While putting in measures to collect more tax from companies that do business in the UK, they’re also planning to ensure that overseas property investment becomes less attractive across the board. That political socialism may well have much bigger consequences for those who choose to buy properties in the UK.

The major issue for foreign investors is not necessarily the extra cost in purchasing a property either but the potential impact it could have on the housing market. If builders are no longer getting foreign investment coming in, they may cut their own activity and put up fewer houses, flats, and offices. That could, in turn, put property prices at a premium for overseas cash investors – especially in lucrative areas like London – as well as local buyers.

The big issue is whether it will actually work to make the housing market more viable for local residents. The building industry and developers, in particular, understand that the overseas market provides an important source of funding. At the same time, the government announced that they would remove the cap on how much local councils can borrow to build new housing – that may balance the equation but it’s by no means assured.

There’s also no guarantee that lifting the cost of buying a property will bring the prices of homes down within reach of national home buyers. While the extra money raised by a 1% increase would be welcome, £40 million is still a drop in the ocean when put against the growing housing crisis and homelessness and what it actually takes to solve this problem.

For the moment, overseas property investors will have to wait and see when it comes to the stamp duty increase. The consultation is expected to be completed and delivered by the end of January 2019. In the recent budget, Chancellor Phillip Hammond also appeared to climb down from a future 3% hike in the stamp duty.

Before the consultation, however, you might expect to see a flurry of purchases by overseas investors attempting to get ahead of the game. If that sounds like you, or you’d like some further information about investing in property in the UK, our team can advise you on the most lucrative investments.