A prominent figure in property investment is warning that buy to let is the sector facing the biggest challenges in the current housing market - with possibly more pain to come in today’s Autumn Statement.
Stuart Law, chief executive of the Assetz Group of property lending and investment companies, says: “Potentially declining prices will be of interest to buyers who might have given up hope of finding an affordable home over the last few months. But, these gains won’t markedly change the affordability challenges in our housing market as increased mortgage rates are likely to outweigh anticipated price corrections.
“The biggest challenges by far face buy to let landlords who are seeing asset values decline, while the costs of a buy to let mortgage continue to rise, along with property running costs.
“This compounds the financial issues buy to let landlords have been struggling with for years, and we will likely see more come out of the sector, reducing rental stock and driving up rents for people already facing financial hardship.
“Property investors can still turn a profit from the rental sector and provide much needed housing, at lower rents for tenants, but this is now far easier to achieve through alternative investment models, such investing in portfolios of housebuilder loans which provide a stable monthly income, without the costs or stress of bricks and mortar.
“Across the for sale and rental markets, we cannot tackle affordability and access to housing, or boost business growth in the housing sector, if we don’t build more homes.”
Law’s comments come hot on the heels of new data from the government’s Office for National Statistics, showing that average house prices increased by 9.5 per cent over the year to September 2022, down from 13.1 per cent in August. This augurs badly for capital appreciation for landlords in the long term, he suggests.
The annual percentage change slowed this month because UK house prices rose sharply in September 2021, which coincided with changes to Stamp Duty Land Tax. Prices remained broadly unchanged between August and September 2022; this also caused the annual percentage change to slow.
The ONS says the average UK house price was £295,000 at the start of autumn, which is £26,000 higher than this time last year, and unchanged since August. Average house prices increased over the year to £314,000 (9.6 per cent) in England, to £224,000 in Wales (up 12.9 per cent), to £192,000 in Scotland (up 7.3 per cent) and to £176,000 in Northern Ireland (up 10.7 per cent).
Helen Morrissey, a financial expert at business consultancy Hargreaves Lansdown, says the figures show “strong signs of gathering gloom over the UK housing market.”
She particularly suggests that flat prices between August and September this year give a clear indication the cost of living is starting to bite as people continue to tighten their belts in the face of rising costs.
“We can expect to see this continue over the coming months as the heady mix of rising interest rates and the prospect of a deep recession convince people to put off a house move until things look a bit better. This all adds to the tricky dilemma facing would-be house buyers - do they press on with their dream purchase or do they delay in the hope that prices drop?”
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Investing in builder’s loans is not so attractive or autonomous as owning a freehold property. There is the risk of default should the builder go bust and no control over either your money or your asset. Investing in loans is of no interest to me.
You can also invest in property through Assetz Exchange. Works for me interest plus gains on the properties.
I have invested in Assetz Capital and Assetz Exchange for some time now. As I sell off properties this is where my funds are going. Particularly attractive to me as a foreign resident with limited investment opportunities in the UK and income as a retiree, which matches BTL without the worries.
What’s your typical return on this investment if you don’t mind saying?
Richard
Between 5-6% with Exchange
Between 4-7% with Capital depeding on how you invest.
Suits me for retirement income.
The way things re going it’ll be buy to give away
I am already leaving…. I am investing in my family’s happiness 🎉🎉, retirement time.
What rubbish they are all experts of course to see who they can screw next.
It makes no difference if you are buying to let or buying a home for yourself if you were minded to buy with rising interest rates and a falling market you are going to hold off. I see it all too many times before. I seen people buy and market continued to fall £50k more, so others were buying for £50k less on a small 3 bed terraced, it took years to be worth what they paid for it.
At that time we didn’t have swinging taxes or a licensing money drain. Oh we forget there’s war going also. Section 21 being removed affecting all property sales and purchases.
It cannot improve while we have a Housing Secretary that knows nothing about housing bringing in anti- landlord housing laws for private rented sector who house millions but he is oblivious to that fact and continues on a path of destruction. Did he ever pay
Rent he lived in grace-in- favour accommodation supplied by Government at tax payers expense when he wasn’t really entitled, is he a fit and proper person to be making rules for the letting industry, now he is introducing The White Paper he wrote himself to do further damage to housing sector as a whole and the economy, when he goes to the toilet he should take it with him.
Yes Michael he is purely doing this for votes and this will backfire on him like it always does
Jahan, landlords won't vote for him and neither will tenants, most tenants are not silly they know what he is doing is pushing their rent up and decreasing supply
This sounds as it could replace investment in student ghettos as the next timeshare.
I'm happy to keep with my proportion of 80% BTL and 20% short term rentals even although the SNP are already 2 steps ahead of Gove with fixed term tenancies banned and a possibly indefinite rent freeze.
I have however stopped renting to families and now only rent to students who won't stay indefinitely, have solvent and multiple guarantors and I can still put the rent up on every new tenancy agreement.
Market forces will always win, as proven by Theresa May's disastrous energy price cap debacle.
Incidentally the short term rentals are not significantly more profitable than the student rentals when the additional expenses and higher workloads are factored in.
The problem I have letting to working families is they come with 2 kids then multiply like no tomorrow next thing they have 4 / 5 and on benefit, gets twice as demanding and much my damage courtesy of Government making landlords powerless to act.
William Twice is quoting up to 7% yield on these potentially dodgy loans to builders.
I'm grossing £280k rental on a portfolio worth around £4.4 million (up from £250k and £4 million a year ago). Net profits are around £180k for the last year, so still over 4%, plus around 10% capital growth.
Despite the worst efforts of the SNP and their little Green helpers I'm in this for the very long term.
Only about 25% is still in the names of my wife and me, with the bulk in the names of our grown up children, who pay me management fees to keep them below the 46% (or even 62%) marginal tax rates whilst my wife and I try to avoid reaching these rates ourselves.
I would love to transfer some of our rentals to daughters but would be totally screwed by CGT
Hugh
I bought these properties in my kids' names as soon as they were 18 and they originally rented them to their student pals, tax free initially but this began to bite them when their careers took off and they ran out of headroom in pension schemes due to Osborne's penalisation of those prudent enough to put as much as possible into their own pension schemes.
I've often wondered about the possibility of gradually transferring shares in a property to children at £25k per annum to utilise the CGT allowance for a couple but Hunt has just removed that possibility.
The outcome we enjoy was more by luck than judgement, helping me transfer part of my tax liability to my kids before they needed to pay tax and saving me funding them through University out of taxed income.
The CGT and IHT savings are largely accidental but my kids intend to repeat this for my grandkids in time and the bulk of the estate left by my wife and me will go straight to the grandkids to further reduce IHT or at least kick it forward a generation.
Hugh, Most of my property is in a limited company, I sold shares to my children with a capital gain of circa £200k and at the same time sold them RBS shares at a capital loss of circa £200k (I believe RBS has since recovered). A serendipitous occurrence which I used to our mutual advantage.
Robert Brown. I think you will find that among the financial community, Assetz is one of the most highly recommended P2P lenders in the UK, the trust pilot review is excellent. You need to check your facts and do some research before you label a highly reputable company as a dodgy organisation.
I make my recommendation as one of their successful investors of many years standing and gain no benefit from doing so. Their offerings may not suit you but are eminently suitable for my own personal requirements when reinvesting funds from the sale of BTL's..
Are these investments protected by the £85k government guarantee or in any other scheme?
I labeled them potentially dodgy in the same way that I would label the stock market potentially dodgy due to the risk of losing the original investment.
The stock market, however, balances this risk with the opportunity to make significant gains over time, as does BTL.
Lending money to anyone only offers the interest paid as a maximum reward - and even here, there are a number of highly reputable financial institutions offering 4.5% to 5.25% currently in a variety of regular savings and current accounts.
A premium of around 2% from an unregulated unprotected scheme is, in my opinion, not worth the additional risk involved and therefore "potentially dodgy".
In this context, dodgy means risky and unless there are protection schemes in place alternative schemes should be regarded as potentially risky.
PS. I tried to look at your profile to see what previous posts you had but can't access any profile for you. Everyone else has a publicly accessible profile - not sure why your profile isn't accessible?
Hugh,we started to "salami slice" transfers to our kids a few years ago to utilise our CGT allowances. If the house is mortgage free it's quite straightforward and depending on the capital gain, it's surprising how much you can do. Eg if a £300k property has increased to £400k you can transfer 1/4 of the property as the CGT allowance for 2 people is £25k so 1/4 of the gain. In this example that's a £40k saving on IHT in one hit so worth doing. Do it this year while you can. Next year it'll be half that but still a potential £20K saving on IHT, and so on. Once you're in the routine, it's rinse and repeat each year at minimal cost. If CGT allowances go back up in time, just adjust your percentage giveaways. Just make sure you have an annual deed of trust and document it all.
Do you think you’ve done your kids a favour with all this nepotism? It’s nauseating. I remember kids like yours at university, hugely privileged. Those ones were the most entitled spoiled brats who secretly couldn’t stand their egotistical fathers.
You and the guy your arguing with sound as awful as each other. I just can’t understand all this desperation to avoid paying tax while simultaneously teaching our children that everything is easy. God knows we can all afford it to pay into the system. Honestly reading these comments from men like you people makes me realise why people think landlords are horrible greedy people. It’s embarrassing. Why don’t you reduce your rent a bit if you want to reduce your tax bill?
No they are not and since I invest in excess of 85k the government guarantee means nothing to me. But there again why do you keep asking/harrassing me when you can Google it and have every question you have, answered directly.
2 clicks
assetzcapital
assetzexchange
Simple
There is a risk in any investment but it is well balanced in this organisation, debt recovery is excellent and as I stated previously my returns are fine . You are obviously averse to the normal every day risks of investing and should maybe just stick to your bricks and mortar and all the worries that go with it. Again I suggest you research these companies before making your critical comments. If you want absolute security then put your money in the bank and get an historical 0.02% return on your money. After all the choice is yours, best of luck.
My profile is accessible and only shows my name as I have no need to brag about my achievments unlike some.
You are being potentially misleading regarding the £85k limit which does not apply to the total investment of the investor, only to the amount invested in one organisation.
I am not harassing you - simply asking YOU as you volunteered the original recommendation and I think other posters will welcome additional clarity on the original platform without everyone having to do individual research.
I am not risk averse but prefer to control my own risks and ensure the five figure float I retain in easy access accounts earns a decent return, currently between 4.5 and 5.5%, from the likes of Lloyds, Halifax, RBS, NatWest, along with Nationwide, Principality and Yorkshire Building Societies, enjoying multiple £85k Government protections, whilst over 90% of my investments are only protected by my experience and knowledge (often gained by asking awkward questions).
Incidentally your profile still isn't accessible so we can't see what previous posts you have made.
Reading these comments makes me embarrassed to be a landlord. What a bunch of egomaniac men you are. Desperately trying to avoid tax and feeling sorry for your privileged kids who will have to pay tax on being given properties. Jesus Christ. Can you hear yourselves?
Joseph, you are not as embarrassed as me for being a landlord, for provide Ist class accommodation to dozens of Tenants for decades. Now I see we have a born Rouge for a Housing Secretary for levelling Private Housing Sector to the ground.
Removing landlords rights of ownership by removing Section 21, in essence nothing else it can mean. All my Rents are low and Tenant’s very good really. My Rents are well below Market Rents and have been, so I am and have been subsidising Tenants rents for years while at the same time paying tens of thousands tax each year, continuously attacked by legislation, Regulation and local Authorities requirements not least HMO licensing some re-licensed 4 times against my wishes as I do not let Rooms in which case should have been excluded from this Scheme or extortion racket but it was forced upon me. I now find myself pondering to serve Section 21 on all Tenants regardless, if rights to my property are been removed why should I care anymore, whether they are let or vacant or raise to the ground.
Let the NEW Big Fat Boys take over our Business which is the Government’s game Plan for years and don’t kid yourselves its about votes either it will all be taken care of by legislation before being kicked out, as Mr Michael Gove has decided to make all Private letting untenable.
Joseph, why shouldn’t landlords be allowed to pass on their property to their Children I think it should be tax free as well after all the hard work their Parents done and paid taxes all their lives. Do you think it would be better if the Parents were useless and spent their lives on Benefit then they could pass on the benefit forms to their Children tax free.
This is much more than being embarrassed.
All seems senseless.
It is only natural to do the best for your children and hope they do better then you did. We have given most of our assets to our only child, currently 29 years old to help him buy a home. In our wills, my wife and I have left 50% to each other and 50% to our child to ensure that whatever happens if one of us goes, our child will get a good chunk.
It's also only natural and good business sense to keep tax to a minimum legally, I was a 40% tax payer for years, now we have arranged our income in such a way that it is shared between myself and my wife keeping us both just below the 40% threshold I'm certainly not going to apologize for that or feel guilty in any way
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