The recent Autumn statement from the chancellor delivered more challenges for all of us involved in residential property investment.
Whilst not all of the changes are completely clear, it does seem that from April 2016 stamp duty on residential purchases above £40,000 will be increasing by 3%.
For example, the purchase of a house for rental at £100,000 will from April 16 attract stamp duty @ 3% or £3000, not the end of the world but certainly a consideration. A bigger property (which you might buy for HMO purposes) with a purchase price of £250,000 will attract £8,800 stamp duty rather than £2,500 you pay currently, clearly more of a consideration.
There are a variety of other changes including one that means we now have to pay Capital Gains Tax (CGT) on the sale of property within 30 days of completion, probably not a massive issue for most people.
There does, however, seem to be (which we are currently assessing) an exemption for companies – The government seem to be consulting groups on how to introduce an exemption for those holding more than 15 properties in a company or other structure.
Whilst not completely clear at the moment, it does seem as though they want to encourage larger professional landlords (as they seemed to suggest with the mortgage interest offset changes earlier in the year), so buying in a Ltd company may again prove to be a solution.
For the geeks out there that want the detail, a lot of the fine print is in this document:
I had a discussion with someone about boats resetting their sails when the wind changes. When legal or economic changes take place (as they did with the credit crunch a few years ago and lots of other times over the hundreds of years that property investment has been a favored investment tool) we have to change the angle of our sail to continue to prosper.
We will go through this cycle many times in our lives and we just need to accept it as being normal.
There are and will always be solutions for those who are willing to learn and adapt. Lots won’t adapt and you should see this as your advantage as competition will inevitably decrease, and as with any business this will mean that your margins will increase.
Progressive saw this through the credit crunch when 80% of our competition gave up. We persevered and now have much higher margins and sales volumes than before 2008. Playing the long game in business and investing is the single best way I know to achieving extraordinary results. Warren Buffett is a great example of this.
Some Government policy changes which are responding to public sentiment about a wider issue of a lack of housing (which these policies won’t materially change) don’t change the economics.
There are not enough properties for the people that live in this country, many of the people in this country can’t afford to buy as they can’t or won’t save for a deposit and pay a mortgage (or want to be more transient/rent for other reasons) so they need to live in rental properties.
As quick as negative sentiment can move against us it can move onto something else just as quickly, people are fickle like that. We won’t be the focus of other people’s issues forever, rather than taking personal responsibility some will want to have a new group to point the finger at as landlord bashing becomes boring. How long this will take I don’t think anyone knows.
I will believe that George’s building boom is actually going to happen/make a difference when we see results (as so many of them before him have promised similar and achieved very little in this area) so I predict the shortage will continue and therefore rents will rise even more strongly.
You might want to use this extra cash from rents to pay your accountant to run your new Ltd company