No-one can doubt that it’s going to be an interesting year for landlords. We have yet to see what Brexit will mean to the international market and this, coupled with the tax changes coming into force, could bring further turbulence in the buy-to-let sector. Although the government has put obstacles in the way of rental property investors, the increasing demand for quality rentals because of soaring prices means there are still plenty of good investment opportunities.
As well as the traditional market for families or young professionals, investors are also broadening their buy-to-let portfolios with hotels, student accommodation, care homes or sheltered accommodation. There is increased demand at both ends of the market, with younger people demanding good student accommodation with perks such as free wifi, shared communal space and a gym, while older people are looking for the security that shared accommodation or care homes can bring. These two areas are expected to grow significantly in the next few years.
Obviously, new home-grown markets are worth investigating, as the impact of Brexit on overseas investors or business professionals, particularly in London and the South-East, are still unknown quantities. It remains to be seen if overseas companies will move out of the UK and find a new base within Europe. That said, it is possible that UK property becomes more attractive to overseas landlords, if the forecast currency fluctuations when Article 50 is triggered are actually realised. This could see foreign investors ready to pounce, if the pound weakens.
This year could see more landlords set up limited companies for their portfolios. It is certainly worth considering, because indicators show limited company buy-to-let mortgage rates are falling and it may be possible to borrow more. Lenders like Foundation Home Loans, Paragon, Shawbrook, Precise Mortgages, Kent Reliance, Axis Bank and Interbay are no longer applying a pricing premium on such mortgages, according to an article on the Residential Landlords Association website.
The tax changes being phased in from April could mean some landlords in the higher tax brackets find their business no longer makes a profit. Holding their portfolios in a limited company could be the best option, as it takes them out of the personal tax regime and they become subject to corporation tax instead. Obviously, getting sound financial advice should be taken before making the switch to make sure it is viable for any individual case. It also makes sense to get a quote on an individual buy-to-let, as well as a limited company buy-to-let loan from your mortgage advisor to compare the two. Your accountant or tax advisor can tell you which is the best option for you.
Despite the tax changes and Brexit, buy-to-lets can still be a solid investment, providing a regular income along with future gains as property prices rises. Factor in risks like vacant periods, problem tenants or repairs so there are hopefully no great surprises, and your property portfolio should continue to work hard for you for many years to come.