Buy to Let an option in 2017?

Is Buy to Let still an option in 2017?

Is buy-to-let still an option in 2017?
The buy-to-let market has proved extremely lucrative over the years, but has seen very big changes over recent times, to the point where some investors are deciding to put their money behind alternative ventures. Buy-to-let has been linked to economic uncertainty and been affected by various changes in legislation, though a recent study suggested that 63% of landlords will still recommend buy-to-let.
Falling house prices
House prices are starting to drop in the aftermath of the Brexit referendum. Sale prices dropped by 0.2% in May, 0.4% in April and 0.3% in March, with a number of property market experts expecting further declines. Many agents are reporting seeing properties languishing on the market for longer and longer, with this pattern being particular evident in the capital. The effects of economic unpredictably and Brexit are being felt elsewhere around the country, but not as strongly as in London. Nonetheless, some regions are still reaching record highs when it comes to house prices.
An ever-growing rental sector
Whilst some predict there will be another boom for house prices in the near future, others expect prices to continue falling, especially when schemes such as Help to Buy and cheaper mortgages are considered. However, the rental sector is expected to continue growing over the next five-year period despite lowered buying prices.
Buy-to-let and tax
It’s wise to spend a substantial amount of time thinking about the tax implications of buy-to-let if you are thinking of investing. Some see the Housing White Paper as favouring super-rich investors over small landlords, who the Government is relying on to help deliver its house-building aims. Buy-to-let landlords can no longer offset their interest bill against tax, which means outgoings could rise substantially. Letting agent fees are also being banned, which could force landlords to increase rents or at least add to their outgoings significantly. The controversial decision to vote down Labour’s proposal to make private sector homes “fit for human habitation” may be appealing to landlords and could help them save maintenance costs. However, there has been a great deal of discussion about the safety of rental properties following the Grenfell Tower tragedy and pressure for legislation to be changed is growing.
Weathering the economic storm
Your own circumstances, needs and goals are all significant factors to consider when deciding whether to enter the buy-to-let market. Nonetheless, it’s worth remembering that the private sector is set to expand even further over coming years, with one survey suggesting 25% of Brits will be renting their homes by 2021. If you’re seeking long-term benefits and are prepared to wait until this period of economic uncertainty has passed to reap big rewards, buy-to-let could still be a very lucrative option.
The limited company option
Many investors are choosing to buy through limited companies. There are many good reasons for doing this, including the fact that your profits will be liable for Corporation Tax rather than Income Tax. This option can be extremely flexible too due to the way dividend payouts can be timed strategically or distributed to basic rate-paying family members. You could also leave the profits inside the company for your next investment, if you have or are building a property portfolio.
To find out more about investing in buy-to-let and acquiring a property through a limited company, contact HS Lawyers today.