14 January 2017
Why solve a problem, when you can make it disappear?
This will be a good year if you’re intending to purchase central London Property, BUT to do so you will need a hefty deposit given the increased rental cover ratios, which are currently being implemented by mortgage lenders.
As if rental yields weren’t low enough already, there is the additional burden of the higher rental cover, typically from 125% they will jump to 140% – 145%. Then you have the tax to be concerned about, as you cannot offset the interest element of the mortgage against the rental income, not at the higher rate of tax anyhow. For basic rate payers there will be no difference.
The increase in rental cover is in response to the new tax regime, which is due to be implemented in phases from this coming year, with full implementation occurring in 2020. This has served to diminish the number of BTL Landlords, according to The Council of Mortgage Lenders applications have dropped from around 6,000 new purchases a month using buy-to-let mortgages, compared with 10,000 – 11,000 last year.
This is a huge drop of 40%. This means there are less buyers in the market therefore arguably more deals to be had, though this then begs the question: how does one define a deal if the market is in a state of flux?
In short, the BTL game can only be played with increased stakes, you need a bigger deposit and you still have the tax issue to worry about.
However, there is an alternative, given the right mechanism you can invest with less money and strip out the issues concerning rental covers and therefore larger deposits, and the tax implications, and still have the benefit of investing in central locations. There are still ways and means of achieving your objective by investing in strong locations, as this is the first mantra of property investment and cannot be broken in any market. There are some extra benefits in investing in this way too.
Too good to be true?
Not so, we will be unveiling the means to achieve this in our seminar on the 25th January 2017. This is our first one of the year, where we will be sharing our strategy and vision for the London property market and the best way to exploit this market, which presents an opportunity which hasn’t existed in recent years.
Please call the office to register for this unique seminar. Spaces are limited, so book your space now to avoid disappointment.
Suresh Vagjiani
