The private Buy-to-let landlord has been hit in recent times – some would say unfairly, especially in terms of taxes payable – thanks to George Osborne’s heavy-handed reforms from 2015 onwards to direct more of the financial rewards of investing in residential property, into the Treasury’s coffers. Some would say that he very nearly killed the goose that had been laying the golden egg over the last 20 years – in terms of providing a huge amount of privately rented property at a time when local councils and housing associations were completely incapable of meeting the ever-rising housing needs of the nation.
These tax reforms have naturally deterred some landlords from investing in more properties to let. Others may be wondering whether it is time to exit the marketplace. The most telling question that this raises is:-
Returns on alternative investments are very low, unless you want to put your money at risk. Bank interest paid on deposits is pitifully low and is currently out-stripped by inflation.
We all know the sales market has its up and downs, so the art of residential property investment is about Location, Location and Timing. Investors in the sector generally only lose money if they sell at the wrong point in the cycle. The market is very much ‘off-the boil’ at present and in our view, will remain so until at least next April – after ‘Brexit’ has reached the 29th March 2019 milestone. Uncertainty is the one thing that unsettles most markets – be they property or stocks and shares. So the short answer is ‘No’, this is not the right time to sell your property.
The sensible thing to do is to sit tight – be grateful that your tenant is indirectly funding your mortgage interest payments and other overheads – and wait for capital growth to return.
But will it? London is the most iconic and most desirable capital city in the world, where many people would like to own a property. There is very little available land to build more homes, so demand will always out-strip supply. Property values will therefore continue to rise in the medium to long-term, although there will always be plateaux on the price-growth graph, from time to time.
There are several options open to you:-
a.) If you have a BTL mortgage you could either:
b.) If you do not have a BTL mortgage – and perhaps do not ‘need’ the level of rental income you currently enjoy, you could raise a modest BTL mortgage on the BTL property to provide you with additional finance – again without selling the property.
In spite of the recent turbulence in the Private Rented Sector, investing in Central London property still makes a lot of sense if you have funds which are not ‘working’ for you elsewhere, in terms of a medium-term return. If your existing BTL property is not mortgaged, it will enable you to raise the ‘seed’ capital towards buying a second property to let, and the property you buy will justify its own BTL mortgage – subject as always to careful consideration of the capital costs of purchase and balancing on-going rental income with the outgoings. An experienced letting agent with local market knowledge and a conscientious attitude will be able to guide you in all these respects.
This is also worth discussing with your local letting agent, but in a nutshell: the sales market remains ‘off-the-boil’, asking prices are down and seller’s expectations are becoming more reasonable. You will find there is currently less competition from other buyers (usually the one factor which drives up the price), and that you will be able to pick up a suitable property for less.
As a bonus, the property may already have a tenant in residence – under an assured shorthold tenancy of course – who will stay on during and after the change of ownership. This gives you ‘live’ confirmation of the rental value of the property and instant rental income from the day you assume ownership. No opening void period and no re-furnish/refurb expenditure!
As Lucian Cook, from Savills research department confirmed recently: when the London residential sales market enters a recession, the doldrum period usually lasts about 4 years before the (almost inevitable) recovery begins. The Central London market ‘came off the boil’ in April 2014.
In these days of Brexit uncertainty, the long-awaited recovery in demand and therefore in price growth could well be less than a year away – that is, soon after 29th March 2019.