If you are a property owner or buy to let landlord, one of the important questions is likely to be what the recent general election means for you and your investment.
Certainty and stability …
Probably the best news about the election result – and such a large majority for the new government – is the economic stability it is likely to bring. The commitment is to “getting Brexit done”, there is a deal on the table, and that element of certainty is already lending a boost to the markets.
As far as property prices are concerned, that means some release for the pent-up demand that characterised the housing market while the future of Brexit looked in doubt. Certainty stimulates movement because property owners prefer to be doing something rather than staying put, asserted a story – citing accountants Price Waterhouse Coopers (pwc) – in the Telegraph newspaper on the 13th of December.
… but there are other factors at play
Although markets may be breathing a sigh of relief about the passing shadow of Brexit, that is by no means the only factor affecting property prices.
The property market is fundamentally determined by affordability – what buyers can actually afford to pay. In the recent climate in which house prices have been rising faster than incomes, there are naturally fewer buyers capable of paying those prices.
Furthermore, (as at the time of writing) the imposition of a surcharge on the Stamp Duty Land Tax means that you must pay 3% above the standard rate if you are buying a second home or, more critically for landlords, a buy to let property. In its manifesto, it was also proposed that an additional 3% surcharge would be placed on residential properties bought by both individuals and corporations based overseas.
In recent years, the Bank of England has also looked to cool what it considered to be an overheated buy to let market. It has done so by imposing much tougher affordability rules on mortgages for buy to let property – so dampening the ability of potential landlords to invest.
What it means specifically for landlords
Although landlords might look forward to a revitalised housing market as an impetus for investment – especially since demand continues to outstrip supply – planned legislation will go ahead.
For example, plans for the abolition of Section 21 “no-fault” evictions are still proposed. This forces landlords to rely on the often more long-winded – and expensive – Section 8 eviction and the need to prove a tenant has breached the terms of their tenancy.
And, with effect from the 1st of April 2020, any landlord must also ensure that the energy efficiency rating of any let property must achieve category E or above. It will become illegal to let properties achieving ratings of F or G.
2020 also marks the completion of a revised tax regime which completely removes any tax relief for landlords on the mortgage interest they pay, as a story in the financial pages of the Daily Mail reminded readers on the 13th of December 2019.