Monday 06 Nov 2017
The recent changes in the buy-to-let market has required many property investors to evaluate their current portfolio and future plans.
For decades now we’ve witnessed the usual spiral between Government and property investors – the former reacts to a current issue or market problem while the latter keeps abreast of regulations while seeking the next ‘big thing’. Soon the former will catch-up again, by which time the latter will have moved on again.
The buy-to-let market has seen its greatest ever upheaval, with the three percent increase in stamp-duty charges on additional property purchases and the targeting of landlords with tax changes whereby relief will be gradually cut to 20 percent. Above this the new Prudential Regulatory Authority (PRA) guidance came into effect which aims to strengthen buy-to-let underwriting standards by insisting on a minimum level of stress testing to ensure loans remain affordable when rates rise, and as of October 1 this takes into account the entire property portfolio.
But do we think property investors are taking this lying down? Not a bit of it, to use a boxing analogy they are already prepared for the next round. Many ‘volumetric’ or ‘portfolio’ buy-to-let landlords have already started making enquiries or are transacting as Limited Companies, as this allows several tax breaks which may instigate an upfront cost but can reap far stronger mid to long term profits.
At Crystal Specialist Finance enquiries for Limited Company buy-to-lets have increased by 26% in July to September 2017 compared to the same period last year, while applications for these loans have gone up by 50% over the same timescale.
But to me the story has a key second strand which will become far more prominent over the next 12 months - Development Finance. Over the same quarter three comparison period, we have witnessed enquiries rising by 36% and applications have more than doubled during that time. These applications range from the tens-of-thousands to the multi-million pound, multi property deals but of course the final endgame is nearly always the same – sell. Our own increase in Development Finance activity is being mirrored by lenders, with more-and-more products available from main high-street banks to challenger banks to specialist niche lenders, better rates and terms and a better mutual agreement on the time and stipulations to release the next payment.
Indeed, many of the applications we are now completing strike little resemblance from those five years ago. Life, and more pertinently property investors, always find a way!