I’ve been discussing a couple of industry articles this week with my team of property tax experts at Optimise Accountants, and we thought it would be useful to highlight some of our thoughts on this blog.
The first of these articles was from property industry organisation NLA, concerning legislation coming into effect which will negatively impact the property investment sector in the UK.
It could be considered by some as a parting gift from the George Osborne administration for buy-to-let property investors, but I’m not entirely sure it will be a welcome present to many of our clients.
The NLA article – which can be read here – highlights the publication of the Prudential Regulation Authority’s expectations on buy-to-let underwriting. There are two sections highlighted which are examined by the NLA piece, and which show how property investors could be hit by heavy taxation.
The Policy statement can be read in full here, and I recommend that any buy-to-let property investors reading this blog should take some time out to read it and understand the potential implications.
Crunching the numbers
The main area of concern – and which shows how George Osborne was operating in some ways – is the focus on gaining additional taxation from already-heavily-burdened buy-to-let property landlords in the UK.
We’ve seen over the last 18 months some of the negative property tax changes, and the economic landscape is still uncertain for some property investors following Brexit and Budget changes.
I believe, however, that Brexit has in fact brought some positive changes already to the buy-to-let property sector. There is a growing requirement for the property investment industry in the UK to be more professional, and my team of property tax experts are seeing a more formal, institutionalised approach from many property investor clients this year.
Formal definitions of ‘professional’ include being ‘skilful, competent and assured’ in a trade, as well as being ‘engaged in a specific activity as a main paid occupation, rather than as so called amateur’.
Buy to Rent
The second industry article which caught my eye, and which I was chatting about with my team of property tax accountants, was this one from The Independent.
According to industry statistics highlighted in the article, August saw a 15% drop in properties across 90 UK towns and cities becoming available for rental purposes. This lack of supply is impacting investors.
With fewer properties being made available for buy-to-let property investors the rental market in the UK is slowing down, which means that tenants are controlling the sector more than previously.ewer
Overall, and looking at both articles with George Osborne’s legacy in mind, I would say that property conditions need to improve.
The private rental sector in the UK used to be a property landlord’s market. It’s now far more about tenants. There is increasing competition on rental prices, buy-to-let property investors are being taxed more heavily, and the smaller operators are being squeezed out of the market.
How do you, as a buy-to-let property investor, survive and thrive in these economic conditions?
Build to Rent
I’ve noted with interest that some of the larger institutionalised property investors are offering additional community services in their properties, such as libraries, gyms and cinemas for their tenants. And, of course, these buy-to-let property investors are also increasing their rents to tenants.
Is it time for you to consider targeting a certain niche market of tenants in your property investment activities? The sector is changing, and savvy investors will continue to build profitable portfolios.
There’s an excellent article here on the rise of Build to Rent, and how property investors can capitalise by offering additional services to tenants. It’s well worth a review to consider additional revenue streams.
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