Landlords opt to buy through companies

[Ricky Bhurji]

George Osbourne's attack on the £60 billion Buy To Let industry has triggered a surge of Landlords buying property through a company in order to safeguard their tax reliefs.

Mortgage applications via a limited company, made through the lender (Moderated),has trebled in Q4 this year - the highest level on record according to its annual report "Buy to Let Britain".

Across the whole market, an average of 5,000 mortgages per month were issued through companies in July, August and September, up from 2,500 a month, one year earlier.

The total rents collected by Landlords surpassed £5bn a month it said.

My view is that in the long term, this will stifle rental property supply in London and Southern England for the long term. This will make borrowing to purchase buy to let property far more difficult in the future and dissuade new entrants to the buy to let business. This could be a massive miscalculation by the Tories - since tax revenue increases are not likely to be that big and it will worsen the housing crisis drammatically.

What are others views on this?

Ricky.

 

[Luke Masters]

Good afternoon Ricky,

I have also been speaking to a number of investors recently, both in current transactions and in the market for more property. I have already experienced a few investors deciding to withdraw from current transactions that involve incomplete chains. I wonder if anybody else has seen this type of activity already?

In many peoples opinion the traditional holy grail of having a good yield and capital appreciation will be be non existent in the majority of the UK from April, however I believe this will in fact fuel rental prices as their will be a lack of new lettable units entering the market driving up the rental prices.

Due to renting becoming more expensive is it completely unfeasible that more people will look to buy with the current favourable mortgage rates which then in turn drive up the value of property, this of course is entirely dependant on whether large numbers of investors look to sell their property because of the tax changes applicable to Buy to Lets.

I'd love to hear other peoples views and hear whether their clients are considering selling or purchasing assets in the approach the the Stamp Duty and the tax changes in 2017, or whether in fact the Conservatives have just locked current investment in the market and reduced the likelihood of new money entering from an investment angle?

Best Wishes,

Luke Masters