This month's crisis is the buy-to-let boom. George Osborne always likes to be topical - in the July emergency budget, he declared that he will start to scale back, from 2017, the tax relief that those high income tax rate landlords with a mortgage have benefited from. The Daily Mail ran headlines stating it was the end of the private landlord, predicting many landlords to give up on buy-to-let altogether and for us to be inundated with rental properties up for sale when landlords are eventually squeezed from the market.
Even Mr Carney, the Governor of the Bank of England, recently cautioned that the buy-to-let property market could destabilise the whole UK property market. He was concerned landlords who bought with high loan-to-value mortgages could be spooked if there is a property crash; they would panic because of negative equity, sell cheaply, and worsen house price falls.
End of the world then? ... this week, yes probably, but next week .. that's another story!
Before we all go and live like hermits in the Scottish highlands, let me explain to you my perspective on the whole subject.
As I mentioned a few weeks ago, two thirds of buy-to-let properties bought in the last eight years have been bought mortgage free . so they won't be affected by the Chancellor's tax changes. Also, something I feel is often overlooked but very important, is the fact that landlords historically have only been able to normally borrow up to 75% of the value of the rental property. In the last property crash of 2008 property values dropped 18.69% in Stoke on Trent but, even then, when we had the credit crunch and the world's banking sector was on the brink, no landlord would have been in negative equity in Stoke on Trent.
I believe we have a case of 'bad news selling newspapers' and buy-to-let, and the property market as a whole, will carry on relatively intact. It's true reducing tax relief will hit landlords who pay the higher rate of income tax and this may slightly diminish buy-to-let as an investment vehicle, but I doubt people will sell. Many landlords have been lazy with their investments, buying with their heart, not their head. You would never dream of investing in the stock market without doing your homework and talking to people in the know. If you want to make money in the Stoke on Trent property market as a buy-to-let landlord, it's all about having the right property. Then, as you grow, the right portfolio mix to offer a balanced investment will give you both yield and capital growth.
The Stoke on Trent buy-to-let market still offers good investment opportunities to new and old alike. Those who have bought in the last twelve to eighteen months have reaped the benefit from buying in Stoke on Trent because the town offered a combination of reasonable house prices and increasing rents.
Property values have risen by 0.24% in the last eighteen months in Stoke on Trent whilst, looking at rents, in Q2 2015 average rental values for new tenancies were 4.6% higher than Q2 2014, and they rose by 4.2% between Q2 2013 and Q2 2014.I cannot stress enough the importance of doing your homework. One source of information and advice is the Stoke on Trent Property Blog where I have similar articles to this about the Stoke on Trent property market and what I consider to be the best buy-to-let deals around at anyone time in the City, irrespective of which agent it is being marketed by. If you haven't visited and you are interested in the local property market in Stoke on Trent you are missing out! http://stokeontrentproperty.blogspot.co.uk/