The frustrations vented over the looming buy-to-let tax hike has sadly been all too predictable.
In the latest twist to what have been daily headlines, the Royal Institution of Chartered Surveyors say buy-to-let landlords are “piling into” the UK market in advance of the tax rise.
The RICS said December was “unusually high” – sparking fears it could lead to a slump in the market following a bunfight in the first quarter of this year to secure properties.
The gloomy forecast is just one of a number of headlines which, while they are not the death knell for buy-to-let, seem to think there are at least a few nails being hammered onto its coffin.
Some reports suggest as many as 200,000 landlords are primed to leave the market. That’s one in ten of current landlords. Given that they own on average 2.5 homes, the idea is this should bring around half a million properties on to the market.
Further research by the National Landlords Association suggests the change the chancellor’s changes to tax relief will increase rents by between by as much as £113 a month. The biggest impact will supposedly be seen in London.
But there are some sensible views out there.
Azad Zangana, senior economist at Schroders, sums it up well by saying: “In a rising market, those using property as an investment will not worry about such a small additional cost.”
This view is underlined by interest rates all set to remain low for the foreseeable, as underlined by Mark Carney.
I would go further to say that while there is no doubt the new tax hike laws represent a challenge it is not a challenge which is unsurmountable.
It is not a challenge that will see off serious property investors. Moreover it is not a challenge which should deter buy-to-let entrepreneurs from moving into or continuing to focus on the world of buy-to-let.
London is often wheeled out as an example of where George Osborne’s but-to-let tax rise will hit more.
But London is not a good example. The market in the capital has been off-the-scale for years. We are talking about a city where a first-time buyer home is upwards of £400,000. The average rent for a studio is £2,300 in central London.
The trick will be to look north, and to areas like Manchester. Manchester has enjoyed £8.2bn of investment in the last ten years. It has also topped CBRE’s regional property league and attracted investors like myself. The attraction is hard to ignore – there a number of homes ready to be bought for under the £125,000 limit for stamp duty.
Manchester has a phenomenal job growth as a result of the 300 or so companies housed in Media City. It provides investors with a strong cash flow.
Half of the properties I and my property buying partner Simon Paul purchased in Manchester last year were below £40,000, the others were at least 30% below market value. This means George’s stamp-duty rise would not have been an issue.
But in property investment, we know that there can be a certain amount of luck, but more importantly, it requires research, the boldness to act on that research and the confidence to trust your vision. That is the further challenge – and I would hope it is one buy-to-let entrepreneur’s will take up. The key is not to get angry, but to get smart.
The tax hike gauntlet can certainly be taken up in other ways and the new measures can be mitigated against.
Companies that own fifteen or more properties, it looks like, will be exempt from the new stamp duty laws. So there is a value in volume, and running this as a business, which it should be anyway.
So will there be 500,000 buy-to-let properties on the market in the coming months? Will landlords flee the market? I find that hard to believe.
Not even the tax law changes will compromise that cash-flow. Yes, London is an exception. Landlords might pull out of properties in the capital, but one home in London can buy six in the UK’s Northern Powerhouse. Which is precisely what they’ll be doing – avoiding stamp duty and making more profit in the process.
They should take confidence in opportunities in cities like Manchester or indeed Birmingham, which has overtaken London as one of the top 10 European cities to invest in.
The real trick for investors is to take what they are doing more seriously. Fortune will favour the brave, particularly the brave who back up decisions with solid research and strategies.
*Marco Robinson is a bestselling author & award winning entrepreneur.
Marco won the People's Choice I-Property Best Real Estate Investor, 2015 and is the author of the forthcoming book The Financial Freedom Guarantee.