I think it’s fair to say that no-one working within the buy-to-let market anticipated the end to the year we have had. From a business point of view, everyone at Fleet Mortgages has been incredibly positive about what has happened during 2015 and, even with the Autumn Statement announcement, this positivity has not wavered. If anything, given our focus, skills and specialism, the changes announced seem to solidify the selection of our lending model, the sectors we are involved in and the borrowers we cater for.
Let’s begin with some of the more hysterical reaction to the Autumn Statement. I’ve said previously that it’s become quite clear that, in the scoring of political points, the Government has looked to make an example of the buy-to-let sector in general and smaller landlords specifically. We are not in the Chancellor’s good books however this is not the end of days for buy-to-let investing, buy-to-let has not been killed off, neither is it the final nail in the buy-to-let coffin.
I have every certainty that existing landlords, and prospective ones, will be able to look at these new costs, coupled with the other changes announced, and take a dispassionate view which weighs up all their options, and rather importantly, do the maths in order to work out which investments work, and which don’t.
Clearly, post-1st April the upfront costs of buying an investment property are going to increase however let’s not forget this can be claimed back as part of the CGT calculations when that property is sold in the future, and of course landlords also have the ability to purchase within a limited company vehicle, and move existing ‘personal’ properties into this structure, however as we know this also has costs attached to it.
At the moment, it’s very difficult to comment too much on the use of limited companies in order to become exempt from the stamp duty increases. As we all know, George Osborne suggested that only those holding 15 or more properties might secure this benefit, and this would certainly continue to move the market more in favour of the professional, full-time landlord. However, as I write, the consultation paper on this very point has yet to be issued and I suspect, when it is, there will be serious pressure upon the government to drop this number. We may even get to a point where all limited companies are exempt but this may well be wishful thinking. Until we have more detail from the consultation this is simply up in the air.
For advisers and landlords though now is an important time. Because time is not exactly in plentiful supply. It will not take a genius to work out that those landlords wishing to purchase before the deadline will need to get their skates on if they are to complete by the 31st March. We’ve already heard comments from conveyancing specialists about the potential for ‘mayhem’ around this time, as it coincides with the busy Easter period, so we can see how this might play out.
Perhaps therefore – and I appreciate it might not be the first job on the list over the Christmas holidays – landlords/investors could use some of that time to work out where they want to go with their portfolios and how these changes will affect them. This means liaising with accountants and solicitors as well, so that early in January (preferably before) they can get the ball rolling in terms of actioning what needs to be done.
Certainly, from our perspective, we are already seeing a pick-up in, firstly general interest, but specifically in terms of our limited company product range. We of course will be working flat out to ensure that those new purchases are completed within the desired timeframe but the message has to be for all stakeholders that the sooner you can start along that path, the better.
While this might be something of an uncertain time we are absolutely confident that the demand and interest in buy-to-let will not just remain strong, but will grow. History will tell us how these changes created a new ‘normal’ but I believe the huge desire to invest in UK property is not going to change. The way we go about doing this may shift to reflect the changes but evolution in the market was always going to happen. Now is certainly the time to remain positive and to support all those clients who will want to act over the next few months.
Finally, as this is my last article of 2015 may I finally wish you all a very Merry Christmas and a prosperous New Year.
Bob Young is chief executive officer of Fleet Mortgages