Autumn 2018 Budget Property Opportunities
It's always important to have the longer-term analysis of the residential property market explained clearly
How we select residential property should give the property investor a good handle on riding ‘short-term’ blips potentially affecting yields, versus longer-term real capital growth. Ideally, both may continue to be delivered to produce healthy results. Making wise investments both for ourselves and our partners means reading ahead and the Chancellor's Budget is always a keynote speech in the year which can have great impact.
JaeVee Ltd., are clearly a market leader in this regard. We focus on developments in the Private Rented Sector (PRS), Commercial Conversions, Serviced Accommodation Blocks, HMO Conversions, Student Accommodation, Regeneration Projects, and Planning Gains.
Tax changes in the Autumn 2018 Budget
Philip Hammond's Autumn 2018 Budget got rid of Stamp Duty for first-time buyers of shared ownership homes up to the value of £500,000 and introduced a tax hike for foreign buyers. Some buy-to-let landlords will get a shock when they open their tax bills following the withdrawal of mortgage interest relief on buy-to-let and an increasing tightening of regulations for Landlords regarding Houses of Multiple Occupation (HMO). From 2020 lettings relief will be limited to homes where the landlord lives in the property with the tenant. The mortgage lending criteria for buy-to-let has also got more complex.
The Budget also saw an extension of the Help-to-Buy scheme, and a bow to the Left as he announced a boost to council house building, pledging £500 million for the Housing Infrastructure Fund. This helps build power supplies and roads for new housing. Both moves designed to provide a more targeted benefit to those who need it most. Sixty local authorities pledged to build thousands of homes with immediate effect, under the new rules.
But what about the broader implications of the Autumn 2018 Budget?
As investors, JaeVee welcomes the guaranteed stream of government funding for a further two years for first time buyers. Average forecast first-time buyer prices in an area, reflect huge regional variations in residential property prices, which must be for the good. We expect to see prices cooling in the regions which, in turn, represent a great opportunity to acquire residential property at prices well below market value. Despite an increasing tax burden squeezing the smaller landlords, this means there is now a prime opportunity for real capital growth with targeted demographic and profitable returns for private equity investors.
The Chancellor also pledged several measures to encourage house builders to build, including £653 million for partnerships with nine housing associations; money for neighbourhoods to allocate land for housing which can then be sold to local people at a discount; and £1 billion guarantees for smaller housebuilders from the British Business Bank.
Solid financial planning is required, particularly where investors have borrowed to fund their investments
A growing number of smaller landlords with several properties now incorporate limited companies, known as Special Purpose Vehicles (SPVs) to sidestep some of the new tax rules, this does involve high set up costs, as Stamp Duty (SDLT) is payable when the asset is transferred into the limited company at the higher rate of tax due to the 3% surcharge.
Ironically, at a time when smaller landlords may be deterred from entering the market, those who weather the storm, may well be sitting pretty. It is estimated that one in four properties will be rented by 2021, or 5.79 million homes.
JaeVee are actively seeking various property investments to invest in that meet our stringent criteria. Our Panel of Investors look very closely at all the ramifications of the housing market from short-term Budgetary changes to longer term infrastructure, regional variations, and projected targeted demographic and capital growth. We focus on the following areas in line with these criteria:
Ground up developments
Build To Rent Schemes
However, for those who are new to Buy-to-Let or haven’t yet entered the market and are considering doing so, the advice from those in the know is clear; take professional advice to ensure that the numbers really do stack up both in the short and longer term.
With the most recent market forecast by the Royal Institution of Chartered Surveyors suggesting that rents are likely to increase by up to 3% nationally over the course of the next five years, those landlords who are keen to enter or are already operating but not sure of the way forward, should not be deterred as it’s likely that their investment may pay off.
We are not providing advice on investments nor are we arranging deals in investments.
We do not provide tax or investment advice and any general information is provided to help you make your own informed decisions. Customers are advised to obtain appropriate tax or investment advice where necessary.