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By Spencer Gordon, Feb 18 2016 04:07PM

Chancellor George Osborne's imminent 3% stamp duty rise might be good for first time buyers, but what does it mean for property investors?

Jimmy King, board director at Pierce Chartered Accountants, explains: "As of 5 April 2016, the stamp duty rules are changing. Any purchase of a second property costing more than £40,000 will be subject to an additional 3% stamp duty, on top of any stamp duty already to be paid.

In addition, from 2017 onwards, the rules restricting tax relief on mortgage interest will be reduced from 40-45%, ultimately to 20%, squeezing the profits gained from any rental income.

The chancellor introduced these measures to support first time buyers, but what can you do if you want to invest in property for residential letting?

Window of opportunity

From now until April 5 2016 there will be no change in the stamp duty rise, so would-be investors could look at buying property quickly. Advise your agent and the seller that you are looking to complete before April 5 and ensure this is written into your contract.

If you do wish to invest quickly, look for properties with no chain or try buying a property at auction, where you will complete in 28 days.

Since the chancellor’s announcement in the autumn budget, there has been a measurable rise in the sale of one and two bed properties. Indeed The Royal Institution of Chartered Surveyors (RICS) reported an unusually buoyant December and suggests this is in part due to investors rushing to beat the stamp duty change.

However, this has been mirrored by an upward trend in prices – which is beginning to distort the market. You may find that the price you have paid for a property is not retained post April 5 and should take advice when looking to buy.

The benefits of using a company?

There is some hope for property investors, but it’s not a simple solution. Companies will not be subject to the restriction on relief for interest paid on loans to purchase residential properties for letting.

Purchasing property and operating as a landlord through a limited company may therefore be an attractive option post April 5.

Unfortunately, it’s not a perfect solution. If you wish to invest in more property, transferring existing property ownership from yourself to a limited company could incur capital gains tax (CGT); dependent on whether you are sat on profit or not (ie. has the property increased in value from the time you bought it).

For new property purchases post 5 April buying through a limited company should however be considered, but only if you don’t want to make a quick turnaround profit, as in these instances the annual CGT allowance available to individuals will prove very beneficial. If landlords however want to hold properties for long term capital growth operating through a company is now a more attractive option.

Even though this may be a possible solution, it’s a complicated area as access to finance in a limited company can prove more costly and can be very difficult to obtain. This issue may ease if enough people look to limited companies for property ownership as a future solution.

As this area is so complicated and each and every case will be different, investors looking to set up a limited company to buy and manage property should always seek independent financial advice.

Investing in regeneration

There is one area of the market where George Osborne’s increased stamp duty will not apply and that is the purchase of second properties that are worth £40k or less.

Will this mean that the buy-to-let landlord is the new social regenerator, investing in areas where there has been none and boosting up property markets in areas that are flat or still declining? That’s a distinct possibility.

By Spencer Gordon, Sep 2 2015 09:41AM

A survey of 500 landlords suggest the vast majority want to avoid contact with tenants and instead want letting agents to handle property management and complaints.

The results of the survey, conducted last month, show that over 85 per cent of landlords don’t want to deal directly with tenants and almost 90 per cent are unhappy about tenants calling or emailing them directly with problems.

“Many landlords work either full or part-time and need the support of an agent to help them with managing the relationship with the tenant” The report concluded.

“We know from our research that 66 per cent of landlords find managing their properties more stressful than their full, or part time jobs, and dealing with tenant complaints is a top cause of stress.

"Landlords are under a huge amount of pressure with mounting legislative and tax changes. Agents can be a big help for landlords, offering a range of services that help reduce their workload and ensure they are fully compliant with legislation”

By Spencer Gordon, Jun 4 2015 09:31AM

According to new data from the National Association of Estate Agents, a quarter (26%) of house sales were made to first time buyers in April.

It seems first time buyers (FTBs) had some good news in April, as sales to the group jumped from 22% in March to 26% of sales in April. However when looking further ahead, nine in ten (93%) agents do not see FTBs having substantial cut through in the market over the next five years. Further, over half (55%) of agents think that house prices will increase over the next five years, continuing to push FTBs out of the market.

The report also found that in the build up to the General Election, demand in April remained similar to the previous month with 344 house hunters registered per branch (343 in March), whilst supply decreased from last month, with just 43 houses available per member branch (48 in March). In addition to this, three quarters (74%) of agents do not see supply and demand levelling out over the next five years, meaning that more buyers will be squeezed out of the market.

Mark Hayward, managing director, National Association of Estate Agents (NAEA) said: “The market is notoriously tough for first time buyers; house prices continue to increase and lenders have tight and restrictive lending criteria. Whilst this month’s figures are positive and a step in the right direction, I’d like to think that with the help of 200,000 new starter homes and the Help to Buy ISA, FTBs will be given even more help to get their foot on the ladder; however these things may take time to come to fruition.”

Following the result of the General Election, nine in ten (92%) agents think the majority Conservative government is great news for the housing market and out of all the Conservatives’ pledges, three in five (60%) agents believe their plan to build 200,000 new starter homes will benefit consumers the most. Two in five (41%) estate agents believe that the Help to Buy ISA will be the most beneficial, allowing first time buyers (FTBs) to save more successfully for their first home.

By Spencer Gordon, Jun 1 2015 02:03PM

New analysis from MoneySuperMarket has found that mortgage rates for first time buyers are at a three year low.

The comparison website revealed the number of overall mortgage products available to first time buyers is currently 2,776. Thanks, in part, to the Government’s Help to Buy scheme, this figure is double the number of products available in April 2012 when there were only 1,324 first time buyer products on the market. In addition, the average rate on first time buyer mortgages has dropped by one percentage point in the last three years to 3.26 per cent.

With the average loan to value (LTV) required for first time buyers remaining flat over the last three years (79 per cent compared to 78 per cent in April 2012) , those looking to get their first foot on the ladder would need to stump up a hefty deposit of £31,500 on a £150,000 property. However, a five per cent deposit on the same property would cost £7,500 and for those in that situation there is good news.

The number of 95 per cent LTV mortgages available has increased significantly over the last three years. Spurred by a the number of Help to Buy products available, there’s 170 mortgage deals currently on the market available to those with just a five per cent deposit, an increase of 448 per cent since 2012 when only 31 products available. In addition, average rates have decreased by 1.04 percentage points to 4.72 per cent on average.

Kevin Mountford, head of banking at MoneySuperMarket commented: “The increase in the number of first time buyer mortgages, and the corresponding fall in interest rates, can only mean good news for those looking to get a foot on the ladder. Even better, borrowers who can scrape together a 10 or even 15 per cent deposit will find they are able to get their hands on more competitive deals. The introduction of the Government’s Help to Buy ISA which will see the Government provide up to £3,000 towards a first time buyer’s deposit, could also help prospective homeowners get themselves into a new LTV bracket, thus helping them secure a more competitive deal.

For anyone looking to buy their first home, it’s important not to be led by interest rates alone when comparing mortgages. Expensive fees can wipe out the potential benefit of a lower rate so it’s worth doing the sums first to ensure you really are getting a great deal. Whilst mortgage approvals were up seven per cent overall on March, this doesn’t mean that lenders’ criteria is becoming more relaxed. After the introduction of the Mortgage Market Review, borrowers not only need to have a strong credit score, they also need to prove that they can afford the mortgage they’re applying for – not only at its current rate but, if rates should rise in the future”

Finally, also think about whether you want a fixed or variable rate deal. Fixed provides security that your rate won’t change during the term of the deal. Whilst variable rates tend to be cheaper, you need to ensure that you will be able to afford your monthly repayments if and when interest rates do rise.”

By Spencer Gordon, May 13 2015 02:25PM

New research by Natwest Intermediary Solutions has revealed that confidence and optimism in the buy-to-let and new build markets are high amongst brokers.

500 mortgage intermediaries were surveyed by the lender with 58% confirming they had seen an increase in buy-to-let business in the last three months. Only 1 in 20 revealed that they had seen a drop and over a quarter (27%) said that it had remained static.

Looking forward to the next six months, it appears that the market still has room to grow with over half (54%) expecting to do more buy-to-let business than the last six months, with only 4% expecting to do less. A third (32%) are forecasting that their buy-to-let business will remain stable.

Turning to new build, well over half (57%) of brokers were optimistic about the prospects for the sector this year. Around a quarter (25%) were pessimistic with 1 in 6 (17%) saying they were unsure.

Of those that said they had a new build development in their area, the majority (57%) believe they will write more business this year compared to last year. A fifth (21%) said they weren’t sure whilst 16% thought they would do less. A third (32%) of all brokers in the survey said they didn’t have any new build developments in their area.

Graham Felstead, Head of NatWest Intermediary Solutions said: “The buy-to-let and new build sectors have both been touted as growth areas for 2015 and this sentiment has been echoed by the optimism shown by brokers in our survey. We have an appetite to grow our presence in both of these areas of the mortgage market, and have recently refreshed our New Build proposition to offer a more attractive approach to builder’s incentives.

The buy-to-let market is one where we have made great strides in the last couple of years. We have focused specifically on non-professional landlords with small portfolios – an area of the market where there has been significant growth and one that is expected to continue to be buoyant as more people turn to property as a viable investment alternative to traditional pension arrangements.”

Spencer Gordon Estate Agents Southport


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