With almost £1 trillion in value
The Council of Mortgage Lenders (CML) predicted earlier this year, the buy-to-let property market value will exceed £1trillion in 2015 as it continues to soar towards this level.
Are you a buy-to-let landlord who is already profiting?
Or, are you interested in joining this growing group of investors?
The latest predictions on buy-to-let
In 2014, the overall value of UK residential property wealth was assessed at £4.8 trillion by CML. “Owner occupiers” held £1.8 trillion of this wealth pot, yet surprisingly buy-to-let investors held £990 billion.
This represents a 70% increase in this area of the market since 2007, when the financial crisis set in.
The rise is surprising, as these types of buy-to-let investment loans have only been available since the mid-
nineties so growth in a short space of time has been significant and it continues to be the fastest growing part of the mortgage market.
Against the £990 billion in wealth value, borrowings are relatively small with almost £650 billion buy-to-let properties being completely mortgage free.
Why buy-to-let?
Since an element of confidence in other retirement planning vehicles, such as pensions and savings, declined, more people started to look to bricks and mortar as a way to gain a return on investment to use as an income in retirement.
Doctors and dentists, as high earners, tend to diversify their retirement plans between pensions, property, savings and other investments.
Many choose to work with a financial adviser to get this investment mix right for them, in terms of return on investment and attitude to risk.
Buy-to-let property investment is versatile, in so much that investors can choose to sell the property when sufficient equity has built up, to gain a lump cash sum to either live on, or reinvest. Alternatively, investors can choose to just continue receiving a monthly sum from rental income once financial commitments, such as mortgages have been paid off.
Of course, there is no guarantee that a property investment will receive a return, as the housing market certainly is vulnerable to economic peaks and troughs and it can be a risky business. However, the mindset of many buy-to-let investors is that in the long-term, troughs can be ironed out.
Rising house prices, housing shortage and competitive buy-to-let mortgages are a powerful combination for property investors
Right now, rising house prices across the UK, alongside a serious shortage of accommodation, means that buy-to-let is a popular proposition for investors. Many people, particularly young adults, are still struggling to get onto the property ladder yet still require housing, so the rental market is in full swing.
Buy-to-let mortgages can also be found at competitive rates and some don’t require a high deposit.
Since the pension reform, many pension holders over aged 55, have opted to withdraw from their pension, to act as a deposit investment for a buy-to-let property. There is a tax implication for pension withdrawals over 25%, however, with the right tax planning, tax can be minimized through careful planning around other income streams.
Working with a financial adviser who can look holistically at all options available will ensure that timing is planned around tax and investment efficiency.
Tax benefits of buy-to-let
Generous tax breaks for buy-to-let property investors have also been another key selling point for this type of investment, as if structured correctly, tax can be minimal whilst equity in the property grows.
In the recent 8 July 2015 second Budget, it has been announced that tax breaks are to be capped. This may affect some investors, however others can continue to reap the benefits of this lucrative investment.
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