Mrtgage Slutins: Buy-t-let frums Chris Duckwrth Business Develpment Manager Tgether What is the utlk fr buy-t-let investrs in 2017? Presented 22 nd March 2017
Let s talk abut Market review Stamp duty increase in 2016 Reginal impact Rental yields Pending cuts t mrtgage tax relief Hw investrs are adapting Buying-t-let thrugh limited cmpanies Sme recent cases
Market verview The number f buy-t-let mrtgages has grwn frm 835,900 mrtgages utstanding with a ttal balance f 93.2 billin at the end f 2006, t nearly 1.9 millin mrtgages at the end f 2016, with an aggregate balance f 229 billin* The Gvernment annunced a number f changes that were intended t curb this grwth but the market has prved resilient verall In 2016, Tgether saw a 44% increase in annual lending n prducts in its buy-t-let range Value f buy-t-let lending was up 11% n previus mnth in January 17,but remains 16% lwer than the same time last year, accrding t CML *Cuncil f Mrtgage Lenders 2017
Market verview - cntinued Undersupply f UK husing, cupled with histrically lw interest rates, means buy-t-let prperty remains in demand, despite what has been described as an attack n the sectr including: Stamp duty increase n additinal prperties, intrduced in April 2016 Pending cuts t mrtgage tax relief, t be phased in frm April 2017 Implementatin f the new PRA guidelines n interest cverage ratis (ICRs) Banning f letting fees fr landlrds RICS has predicted a 3.3% annual increase in huse prices fr the next five years
Market verview - cntinued Renters are n the rise, with analysis frm PwC suggesting that by 2025, 7.2m husehlds will be in rented accmmdatin, cmpared with 5.4m in 2015 and 2.3m in 2001 With a rental market that is set t remain buyant, many investrs have been undeterred by the varius changes Others have reviewed their business mdels and their prperty prtflis and simply adapted accrdingly Number f husehlds in rented accmmdatin t cntinue rising
Impact f stamp duty increase in 2016 The Treasury cllected 18% mre stamp duty frm the sale f residential prperty in the secnd half f 2016, cmpared with the same perid in 2015 Tax amunt raised thrugh stamp duty n secnd hmes frm June t December 2016 was 962 millin - 21 per cent f the entire stamp duty tax takings One in five f all hmes bught in secnd half f 2016 was an additinal prperty These figures demnstrate the prprtin f the prperty market still influenced by buy-t-let investrs June 2016 saw recrd lending fr BTL at Tgether, despite the stamp duty increase
Pending cuts t mrtgage tax relief Anther phase f the gvernment s plan t level the playing field and free up huses fr first-time buyers Higher-rate taxpayers hit hardest, and impact varying acrss different regins; fr example in Lndn and the Suth where yields are generally lwer Landlrd wh pays the higher rate f tax, with a 150,000 buy-t-let mrtgage n a prperty wrth 200,000, charging 800 a mnth, will see annual prfit drp frm 2,160 t 960 a year Fur-year phasing in prcess shuld limit immediate impact, as investrs have time t adapt t the changes Cmmencing April 2017 with a fur-year phasing in Resilience shwn frm stamp duty changes instils cnfidence
Reginal impact Recent changes in the buy-t-let sectr will further increase the attractin f certain regins The central Lndn rental market is shwing signs f tpping ut accrding t the Natinal Landlrds Assciatin In the Suth East, the average cst f a hme is 313,000, while the Nrth East is the cheapest regin in the UK, with a hme csting rughly 127,000 Certain regins will be harder hit by the changes, like Lndn, where average prices are highest, nw arund 482K* Savvy investrs are explring alternatives t the mre traditinal regins *Latest figures frm the Office f Natinal Statistics
Rental yields One f the best regins in the cuntry t invest is in the Nrth West f England. Lwer prperty prices, high rental csts and high demand are all in favur f the Nrth West Manchester is a ppular chice, with a signficant rental market. Currently, 26.85% f the husing stck in Manchester is rented privately - way abve the natinal average f 18%* *Invezz investr prtal 2017
Rental yields - cntinued Accrding t Rightmve, sme f the twns ffering particularly gd rental yields include: -Btle, Birkenhead and St Helens in Merseyside -Blackburn, Burnley and Accringtn in Lancashire Btle ffers a yield f 9.3%, Birkenhead is 7.5% and Burnley s yield is 7.2%, while Accringtn is 7.1%, accrding t the prperty website
Buying-t-let thrugh limited cmpanies Applies t all regins Higher tax relief Ptential tax-free dividend (althugh cuts frm April 2018 in what directrs can receive tax-free) Zer incme tax n retained prfit (crpratin tax payable but rate lwer) Optin t release funds via directr s lan BTL applicatins frm cmpanies increased in the first half f 2016, t 30 per cent f all BTL cmpletins, up 18 per cent n the previus year.
Hw investrs are adapting Data frm the UK s largest prperty auctin huse revealed that number f cmmercial buy-t-let investrs has tripled in three years Investrs are in search f higher rental yields and mre stability Tax changes aimed at residential market, hwever ther taxes and charges are applicable t cmmercial prperties
Tgether is a specialist lender, established in 1974, which ffers a brad range f prducts fr hmebuyers and prperty investrs including: shrt-term finance, auctin finance, residential, cmmercial & buy-t-let mrtgages and secured lans Lan bk f 2 billin Annual lending in 2016 just under 1.1 billin Over 500 emplyees
Cmmn sense, flexible lending We cnsider a wide variety f incme types Varying lan amunts available Lending t limited cmpanies and expats as well as UK investrs and landlrds First and secnd charge available All prperty types cnsidered Interest-nly ptins
All prperty types We ll cnsider buy-t-let mrtgages fr: Ex-cuncil hmes, flats and maisnettes High-rise prperties Prperties with pr cmments r lcatins Nn-standard cnstructins
Thank yu T cntact Chris email: chris.duckwrth@tgethermney.cm www.tgethermney.cm @Tgether_Mney