Daniel Owen-Parr, commercial sales director at specialist lender Together looks at how the buy-to-let sector is responding to recent changes.
Despite the changes that have been introduced to curb the buy-to-let market as part of the Government’s attempt to ‘level the playing field’ for first-time buyers, the sector remains strong.
Last year saw the first of a raft of changes to the sector, with the three per cent increase in stamp duty on additional homes coming into effect. However, recent figures from the Treasury have revealed that this didn’t have the impact that some had anticipated.
One in five of all properties bought in the second half of 2016 was an additional home, with the Government earning 18 per cent more stamp duty from residential property sales than in 2015; highlighting the extent of the continuing popularity of buy-to-let.
Given the strong rental market across the UK, this is unsurprising. With the ongoing shortage of housing and historically low interest rates, some view property as a safe place for their money in the long-term.
However, we are seeing a slight shift in past trends, with investors turning away from the more traditional rental hotspots, such as London, and looking at different regions where the potential profits are higher. The North West, for example, is currently one of the best regions for rental yields.
Manchester is particularly popular due to the size of its rental market, with 26.85% of the housing stock in the city being privately rented, whilst there also are several up-and-coming hotspots in Merseyside and Lancashire.
That said, new landlords need to take note that there are further changes taking place, including the reductions to mortgage tax relief which came into effect in April.
The amount landlords can claim in tax relief was reduced from 100 per cent to 75 per cent at the start of this financial year, and by 2020 will be cut to zero, meaning all finance costs incurred by a landlord will be given a basic rate tax reduction. This will inevitably affect profit margins, although the phasing-in period provides plenty of time to adapt.
However, the resilience shown over the past 12 months should instil confidence in investors that are new to the market. Property remains a popular investment choice for many, and at Together, we saw a 44 per cent increase in lending on our buy-to-let product range in 2016, despite the stamp duty hike.
Whether you’re a first-time landlord or a seasoned property investor, there are still plenty of opportunities, and we can support you by providing the finance you need.
Find out more at www.togethermoney.com.
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