A leading UK property developer has claimed that the government’s plan to professionalise the buy-to-let sector, through tax changes, regulation and the encouragement of institutional investment, is working.
Fewer than one in ten (9.7%) UK private landlords are now actively choosing to invest in property as an individual.
The research by SevenCapital suggests that more than two in five residential landlords (42%) now invest through a limited company, while just under half (48%) are either planning to (30%) or are interested but don’t know how (18.3%).
The survey also revealed that over half (53%) believe that the UK property market will be stronger in 18 months’ time, and some 80% believe the market will be stronger in five years’ time. Of these, just over a quarter (26%) agree that UK house prices will achieve more than 15% growth over the next five years, proving the continued confidence and resilience within the sector.
That’s in spite of numerous changes to the tax relief system imposed on buy-to-let landlords over recent years, with increased stamp duty and the phasing out of mortgage interest tax relief, which has seen an exodus of so-called accidental landlords who are no longer able to make the figures add up to a perceived profitable investment.
“These figures really highlight just how much has changed in terms of how property investors choose to buy and operate in the UK property market these days,” Andy Foote, director at SevenCapital, said.
“Of course, investing as an individual will remain the right path to go down for some people, as investing is very circumstantial – whatever type of investment you choose. However, more and more, we’re seeing investors choosing to buy through a limited company or expressing an interest in how to go about it, which is certainly the case now at SevenCapital.”
He added that, ‘depending on your objectives and your personal situation’, purchasing through a limited company can offer many benefits, including making an investment more tax efficient, as well as shielding investors from some personal liability which can help to protect their other assets.
“What we as a sector need to do now is make sure that the new buy-to-let rules and ways to invest are fully understood by everyone within the sector, enabling investors to make informed and correct decisions for their circumstances,” Foote commented.
“I think we have a duty to educate on all areas, including the pros and cons of investing through a limited company and the process for setting one up.”
He said it is encouraging to see that positivity remains within the market over the long-term – ‘another sign perhaps of the increasing maturity of the sector, with long-term views and a sound understanding of the workings and cyclical patterns of the UK’s property market’.
SevenCapital, which has a number of developments in major cities and key commuter towns, such as Birmingham, Slough, Bracknell and Basingstoke, has released a free guide on ‘The Tax Efficient Way To Invest’, produced in conjunction with property buying platform GetGround. For more information or to download, you can visit sevencapital.com/guides.
SevenCapital polled its own database of property investors and landlords with a total of 300 respondents providing the results.
Anyone seeking to transfer portfolios into limited companies, or to take other tax-efficient measures with their rental properties, is strongly advised to seek expert advice from a regulated tax or finance specialist.