Nov

The Future of Buy-to-Let

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2016 will long be remembered as a year of immense political change, with the election of Mr. Donald J. Trump adding to the latest in a string of unexpected results. Shifts like these are not only confined to the political sphere, but are also visible in the property sector through revisions to the buy-to-let market. This year’s 3pc Stamp Duty tax rise stands out, but the announcement that the Bank of England will be given new powers to curb ‘risky’ buy-to-let lending echoes a very similar theme for the market.

So, is the government initiating mini property-revolution?

The logic behind the move…

The Treasury’s reasons for making these changes are related to the huge risk that the buy-to-let market places on our financial system, which would heighten if interest rates were to rise. If rates go up in the future, this will pose a problem for landlords and their future interest repayments. During Chancellor Phillip Hammond’s statement on the new powers gained by the Bank of England’s Financial Policy Committee (FPC), he focused on ensuring the longevity of the buy-to-let market – a positive signal for any stakeholders. He suggests “expanding the number of tools at the Financial Policy Committee’s disposal will ensure that the buy-to-let sector can continue to make an important contribution to our economy”.

The implications…

From a long-term perspective, the Treasury’s decision has been labelled as an attempt to protect the future of the market. This is necessary considering the important role of the buy-to-let market in balancing and broadening the overall housing market. However, the more immediate impact is arguably more destructive to the sector, not to mention the power being transferred to the FPC. These include:

• The ability to restrict the size of the loan relative to the value of the property

• Limit the size of loans relative to the amount of rent landlords receive to cover interest payments

Should the FPC decide to exercise its powers as suggested above, there are fears it will further dampen the outlook for the buy-to-let market. Coupled with an imminent increase in Stamp Duty, Arthur would recommend keeping as up-to-date as possible with any changes over the coming months. The emerging short-term lets market, dominated by companies like Airbnb, are a welcome breath of fresh air for any property portfolio should one wish to diversify. Nevertheless, the increasingly dynamic nature of the property market means it pays off to be clued up, especially considering the possible implications of the FPC’s new powers.

These changes exemplify why it is essential that your management practices, as a landlord, are as slick and efficient as possible. Whether you decide to continue with your existing buy-to-let investments or decide to diversify your portfolio, Arthur can help! Arthur’s property management software enables you to have complete control over all aspects of your portfolio and it’s accessible from your computer, tablet or mobile phone. Arthur brings your landlords, tenants, contractors, agents and owners all under the same interface, making problem solving a breeze. With our system, you can manage your portfolio from anywhere in the world, which is guaranteed to give you a peace of mind as the buy-to-let market undergoes so many radical changes. Arthur provides you with complete flexibility and is excellent for multi-unit properties (no matter what size) such as: student accommodation, blocks of flats and HMOs.

Come and try our 30-day free trial today!

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… LandlordZONE.

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