Landlords buying new houses and flats with cash has hit a record level in the UK, with 61% of such purchases made in January, new figures reveal. The cash splurge, up from 59% the previous January and 41% in 2007, comes as rents around the UK are on the rise practically everywhere, except London.
The mortgage-free buys snapped up at the start of the year by cash-rich landlords expanding their property portfolios were mostly in the north of England (70%),a report by property services firm Countrywide found.
That compares with London and further to the southeast of England, where landlords are more likely to opt for mortgages, the firm said. That may not be surprising, however, given the often vast differences in property prices between the two regions: far cheaper in the north and typicallymuch more expensive down south.
Indeed, the survey found that the majority of landlords making property purchases for cash in January, at 65%, were buying homes worth under £125,000. Countrywide, which sold £19 billion in property in 2015 and has 74,500 properties under management, said incoming tax changes that will affect landlords with mortgages was one reason for the cash purchases.
“On average, landlords sell a home once every 17 years, meaning as prices have increased, a significant amount of wealth has built up in the sector,” research director Johnny Morris said. “This is now fuelling cash purchases. With the forthcoming tapering of tax relief on mortgage interest payments, landlords have less of an incentive to borrow, suggesting more cash activity in 2017.”
Announced by the previous government in the Summer Budget of 2015 and coming into effect on April 6, theRestricting Finance Cost Relief for Individual Landlords measure will be staggered over four years, starting next month. It’s designed to make taxation fairer, the government says, by restricting the amount of relief landlords can enjoy on finance costs (generally mortgage interest) associated with residential properties. That translates as: wealthier landlords will no longer be able to benefit from tax advantages compared to those who are less well off.
Under the new system, every year for the next four years, the following restrictions on tax relief will apply: 75% of finance costs, 50%, 25% and finally 0%. Despite the change and the potential among landlords for lower profits, many in the industry are upbeat about the future.A new study shows that 83% of landlords surveyed were not worried about the new tax structure and would continue with their investments.
Meanwhile, in more good news for landlords amid the tax changes and ongoing uncertainty over Brexit, landlords all over the country — except for London — were enjoying higher rents in January. Rents generally rose by 2.6% around the UK at the beginning of 2017, the Countrywide survey also found, representing the fastest leap in two years. In the capital, rents for the month were 2.7% lower than the previous year and 36% of landlords upped their rents with new tenants; a rise of 27% compared to the same month a year earlier.
One thing many people making money from residential properties are increasingly doing is letting someone else do all the work. As landlords’ property portfolios expand, running them can be a challenge. A good landlord agent in Hammersmith, for example, can take care of time-consuming tasks like locating suitable tenants and making sure they pay — andhaving them evicted if necessary.
With the tax changes about to come in, a professional letting agent may well be able to help landlords make even more out of their investments. As they secure reliable tenants, negotiate rent increases and carry out cost-effective repairs and maintenance, landlords have more stability in existing properties, giving them confidence to branch out further.
Article Courtesy of: Horton and Garton