New Buy-to-Let Legislations – What Are the Implications for Landlords?
08 January 2016 7015 Views
LandlordToday welcomes David Rowand of Cairn Estate Agency with a guest post on implications for landlords from the new buy-to-let legislation.
Landlords across the UK look set to face new lending legislations, as chancellor George Osborne prepares to decide whether or not the Bank of England will have more control over buy-to-let mortgages and lending.
However, as many landlords know, the announcement only follows from a series of stringent changes that moneylenders such as Barclays Mortgages and Godiva (Coventry) have already introduced in recent months.
Pressure on Buy-to-Let Investors?
Landlords across the country are experiencing greater financial pressure – especially given the Chancellor’s decision to raise stamp duty to 3% for people purchasing second properties. Banks and other financial institutions are growing concerned with rising numbers of people investing in buy-to-let property, and have been introducing tighter regulations to minimise risk in lending. Higher interest rates have added pressure – and so too have Barclays’ request that landlords prove their rental yield equals 135% of their mortgage cost (up 10%).
These factors combined have had impact on property investors nationwide. Some property tycoons, such as Ajay Ahuja – whose property portfolio features over 200 properties in total, has been forced to start selling – stating that he will ‘barely break even’ if rates continue to rise.
An End to the Buy-to-Let Market?
Thankfully, these legislations don’t mean that the buy-to-let market is about to crumble. Many landlords with smaller portfolios are confident they can continue to generate good revenue, in spite of the financial changes. Even those with larger property portfolios are anticipated to be able to make good profit – by turning their portfolios into limited companies, which will cut the amount of tax paid.
As mortgage advisor Simon Collins, of John Charcol, states: ‘It’s obvious that what the government is trying to do is to push buy to let into becoming more professional.’ As a result, landlords need to adopt a more flexible approach, in order to continue earning good income.
Confusion Amongst Landlords
The changes announced in the budget have served to confuse a number of landlords across the country – as many as a quarter, according to a recent survey. Property investors are finding it difficult to keep on top of the significant changes, and as a result, are losing confidence in the buy-to-let market.
However, with the right professional advice, it’s relatively easy to understand the changes – and if landlords feel confused, speaking to a specialist estate agent is an advisable step to take.
Making Clever Investments
Ultimately, by investing in the right location, at the right price, it’s still possible to enjoy excellent return on investment. Recent figures show that the best rental yields in the UK are no longer limited to the South, but can increasingly be found in the North and Scotland.
In particular, the cities of Edinburgh, Dundee and Glasgow are buy-to-let hotspots, and still generate good rental yield. Best of all, property prices remain relatively competitive, especially when compared to cities in England, such as London.
Buy-to-let in Scotland – Professional Assistance
If you’re looking to buy-to-let in Scotland, and you want to find out about current legislations regarding your mortgage, arrange to speak to a specialist estate agent, who will be able to explain the recent changes to you. They’ll also be able to help you locate a suitable property to generate good returns, despite the tax changes.
If you’d like to speak to an estate agent in Scotland about buying to let, simply call Cairn Estate Agents today on 0141 270 7878/9.