Investors adopt new strategies
A couple of months have passed since the introduction of the new Stamp Duty surcharge and it seems that property investors are not deterred. Some are pressing forward with buy-to-let as there is high demand for rental properties still. Others are changing their strategy, investing in properties to sell-on and make a quick profit, known as “flipping”.
Factoring in the new costs
Auction houses around the country are reporting that their property auctions are still attracting high volumes of investors, undeterred by the flurry of new rules on buy-to-let.
Allsops recently held an event in central London which attracted between 1,500 and 2,000 hopeful investors, a huge turnout, and, with some unexpectedly high bids too.
“Property is a tangible asset which people understand. Prices are going up and the demand is strong. It makes sense for anyone who isn’t an investment expert to put their money into property” Richard Adamson, Allsops
Some property investors who still have intentions for buy-to-let are factoring in the extra costs when making their offers, both for private sales and at auction.
The 3 percent stamp duty on second homes, the decrease in available tax relief on mortgage interest from 2017, and even the no-longer “wear & tear allowance” all play a part in how much profit can be made from buy-to-let property investment.
Some cash-rich investors can avoid the issue with the mortgage interest deduction by paying for the property in cash – although this isn’t a luxury available to everyone.
Other investors appear to be looking outside of London for better value, and even seeking out properties under the £125k starting threshold, so there is only 3 percent to pay.
Changing tactics – let’s flip instead!
Whilst the rental market is still showing high demand and high rental yields, some property investors are admitting that the new rules on buy-to-let property taxes are affecting their buying decisions.
Whilst the 3 percent stamp duty applies to all second homes regardless if the property will be let or sold, as it is quantifiable, buyers can calculate exactly how much their costs will be and factor this in – either in their offer price, or in their plan for letting or selling in the longer term.
To this effect many investors are turning to property “flipping’, choosing houses that need some refurbishment and can then be sold on for a profit several months later.
For some investors it may be possible to avoid the stamp duty land tax surcharge in cases where they don’t own another property.
Either way, it seems that the investment property market isn’t going to slow up as expected. Getting the right finance for your transaction is important also to keep costs as low as possible.
Need a mortgage? Speak to Chris
Dental & Medical Financial Services help doctors and dentists to find the best rate mortgages for their homes and investments. Call Chris for bespoke advice.
Tel: 01403 780 770