The chancellor’s autumn statement delivered more challenges for everyone involved in residential property investment. Whilst not all of the changes are completely clear, it does seem that from April 2016 stamp duty on residential purchases above £40,000 will be increasing by 3%.
A property purchase for rental purposes at £100,000 for example will from April 16 attract stamp duty on any amount over £40,000. So in this case £60,000 @ 3% or £1800 is not the end of the world but certainly a consideration. A bigger or more expensive property with a purchase price of £250,000 will attract £8,800 stamp duty, rather than £2,500 you pay currently, clearly more of a consideration.
There are a variety of other changes including one that means we now have to pay capital gains tax on the sale of property within 30 days of completion, probably not a massive issue for most people.
An exemption for companies is possible. The government seem to be consulting groups on how to introduce an exemption for those holding more than 15 properties in a company or other structure. It seems like they want to encourage larger professional landlords, following on from the mortgage interest offset changes earlier in the year, so buying in an Ltd company may again prove to be a solution.
Further details can be found here
I was discussing just yesterday about boats resetting their sails when the wind changes. When legal or economic changes take place as they so often have with property investment, we have to change the angle of our sail to continue to prosper. We will go through this cycle many times in our lives and we just need to accept it as being normal.
There are and will always be solutions for those who are willing to learn and adapt. Many won’t adapt and you should see this as your advantage. Competition will inevitably decrease, and as with any business this will mean that your margins will increase. We at Progressive saw this through the credit crunch when 80% of our competition gave up. We persevered and now have much higher margins and sales volumes than before 2008. Playing the long game in business and investing is the single best way I know to achieving extraordinary results. Warren Buffett is a great example of this.
Some Government policy changes responding to public sentiment about the wider housing shortage issue (which these policies won’t materially change) do not change the economics. In addition to the property shortage many people cannot or will not save for a deposit and take out a mortgage, either because they cannot afford it or wish to be more transient, so rental properties will always be required.
People are fickle, so as quick as negative sentiment can move against us it can just as quickly move onto something else and we won’t be the focus of other people’s issues forever. Once bashing landlords becomes boring some will want to have a new group to point the finger at, rather than taking personal responsibility.
I will believe that the chancellor’s George’s building boom will make a difference, or even actually happen, when we see results. So many before him have promised similar and achieved very little in this area, so I predict the shortage will continue and therefore rents will rise even more strongly. You might want to use this extra cash from rents to pay your accountant to run your new Ltd Company.
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