The attraction of buy-to-let is waning as far as many people are concerned due to a series of tax changes, with Winkworth warning that a growing number of institutional and individual investors no longer view housing as a solid long-term savings fund route.
Mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have hit landlords’ profits over the past few of years, which partly explains why so many people are exiting the BTL market and thus reducing the supply of much needed private rented stock.
Winkworth says that institutional and individual Investors are investing in multi-use buildings and moving away from buy-to-let as a result of the punitive tax regime against landlords, which have not just pushed a number of BTL landlords out of the PRS, but have also left prospective tenants in some parts of the country with little alternative but to bid against each other, pushing rents up in the process, as a result of falling housing supply.
Adam Stackhouse, head of development and commercial investment at Winkworth, reveals in the latest episode of its Property Exchange podcast on the outlook for commercial property, that people are starting to reject the buy-to-let residential model.
He said: “That’s partly down to the taxation structure in this country. With multi-use buildings, entry costs are lower with a reduced rate of stamp duty. They are very tax efficient during ownership and it’s a lower level of capital gains when you look to sell the property. There are also inheritance tax benefits as well.”
The VAT rating on buildings under construction also needs to be reviewed to speed up regeneration and the conversion into multi-use buildings with retail, office and residential, which is the only way to make these projects viable, suggests Stackhouse.
He tells the podcast: “We need to see the 5% VAT rating extended beyond listed and heritage buildings and applied to a regeneration/benefit to the community type assessment model. Reduced VAT levels may harm the government in the short term but it would speed up the creation of these hybrid buildings and bring renewed energy to city centres.”
With a new government in place next month, Winkworth’s chief executive, Dominic Agace, tells the podcast that he would like to see a reduction in business rates.
He commented: “It seems odd that businesses are incentivised not to have a high street presence. We want to encourage local communities, independent shop owners, and small businesses. They create pleasant environments, which is good for everyone, and we should be supporting them. Expensive business rates deters people from setting up on the high street, which is a shame.”
Rental supply continues to fall across the capital as landlords exit BTL market
Any investment is risk rated, low, medium and high.
PRS was never high risk because the market was allowed to settle. Not anymore, so much interference by local and central government egged on by anti-landlord rhetoric charities = High Risk. PRS was always a safe bet investment and in the main provided a service that most were happy with. A minority few rogues will always dabble, be it landlords or tenants but the relentless demonising of landlords and expenses imposed are beyond reasoning. Take a look at all the the rented properties in the UK (or were!) for decades. Where is the mass of complaints and prosecutions to justify the demonising? It just isn’t there, not even close to being a blip on the horizon. If anything, the problem is the local authorities who have looked the other way for so long, that rogues feel untouchable.
Around 4.4 million households were privately rented in England in 2021.
All these new regulations, licensing etc, and yet when they do go after a landlord, they use legislation that has been there for decades!
Local and central government have created a situation where they now find themselves in housing shortage disaster by listening to antagonist lefties and poor or should I say negligent housing solutions of their own. They are wrecking PRS.
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