Buy-to-let properties have undergone lots of changes over the past few years.
However, they remain one of the most popular investments for Brits. Government legislation introduced since 2017 has not been kind to buy-to-let investors. But could the recent pandemic cause this to change?
Figures discovered in 2018 show that the private rented sector provides homes to over 1/5th of the population, a figure which has almost doubled since 2002.
Over the past 20 years there has been a huge increase in buy-to-let investment. Most of these investors own either one or two properties. This has aided the explosion of private rental sectors growth.
To ensure there wasn’t another crisis like the 2008 crunch there was a review in 2014 called the Mortgage Market Review. This review tightened lending criteria and stress testing. This was followed by the 2015 announcement that private and individual landlords would face increased taxes.
This was introduced in order to make the industry more professional and get rid of outstretched landlords who represented 15% of mortgages in the property sector.
The effects of these changes will be that regardless of tax bracket you can no longer offset any mortgage interest against rental payments collected. Just a 20% tax credit. Also, if you own more than one property you will now have to pay an extra 3% SDLT. This means your capital gains bill could be an increased 10% higher.
Due to these change figures collected in February show that up to 8% of landlords have left the market. Mitigation is possible although it is complicated and provides you with reduced mortgage options. Pre the pandemic this was an impossible never ending, downwards spiral.
However, it now seems highly likely that interest rates will be remaining low for the next decade and more rental properties will be needed.