Landlords urged to ‘do the maths’ as buy-to-let market sees last minute homes under the hammer rush
Buy-to-let landlords need to carefully check out the financial pros and cons before rushing to beat the taxman, following reports that auction houses have seen a recent surge in business. This advice comes from John Painter, at the UK200Group of independent charted accountancy and legal firms.
The buy-to-let market has been volatile since chancellor, George Osborne, announced last November that landlords would pay a 3% stamp duty surcharge, with effect from 1st April.
In addition, mortgage interest tax relief changes, due to be phased in from April 2017, will mean thousands of buy-to-let landlords will see their profits significantly reduced from next year.
Whilst some landlords are rushing to the auction rooms to snap up properties before the new stamp duty takes effect, others are looking to the future and are ‘cashing out’ before next year’s tax relief changes erode their profits.
In recent weeks, some London auction houses have reported a 25% upturn in business. This method of buying and selling is particularly popular amongst buy-to-let landlords, due to the low reserve prices and also the speed of completions, which are usually finished within a month. Unlike negotiations with estate agents, deals are legally binding with a hit of the gavel.
John Painter, chair of UK200Group’s Property and Construction Industry Group and partner at CB chartered accountants, said:
“The looming 1 April deadline is causing some buy-to-let landlords to rush off to the auction rooms and panic buy. Equally, some landlords are reaching the decision that soon it will no longer be profitable for them to continue with this type of investment, leading to the temptation to divest and ‘sell at all costs.’
“The UK200Group recognises that the buy-to-let sector is in a state of flux at present. However, it is important for landlords to ‘do the maths’ and work out how the changes will really impact on their property portfolio, rather than responding with a knee-jerk reaction.
“As with all investment decisions, a clear head, a solid business strategy and sound professional advice, will ensure property investors are not left rueing the day they rushed off to auction.”