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Landlords facing tax increases

One of the biggest life events to provoke a conversation about protection is when people buy a house and take out a mortgage.

This has been a constant for a long time in the UK.

Residential mortgages are a big catalyst for people taking out some form of protection cover.

Sometimes though, advisers find it a bit more difficult to position the idea of protection to landlords because the protection need is not quite as obvious.

People who purchase properties which they intend to rent out typically use buy-to-let interest only mortgages.

Often, their long term expectation is that property prices will increase and they will eventually cash in by selling them.

In the meantime, the rental income will fund the monthly mortgage payments and will also provide them with additional income.

Many landlords see the value of a property portfolio as a crucial part of their retirement planning.

However, in 2017, we saw the implementation of some new tax rules that meant over the next four years, the amount of mortgage interest which could be offset from rental profit reduces.

In this current tax year (2019/2020), landlords can offset 25 per cent of their mortgage interest from their rental profit.

From April 2020, this reduces to zero.

There is a tax credit relief available based on basic rate tax, but landlords will have to pay income tax on all of the rental income they receive meaning that many of them will pay more tax.

This new tax rule is going to change the landscape of the buy-to-let market.

How it normally works

For example, let’s say a landlord has five properties in their buy-to-let portfolio.

The properties are worth about £700,000 in total, but there are 5 lots of £100,000 interest-only mortgages, a total of £500,000.

Let’s say the interest rate on each buy-to-let mortgage is 3 per cent.

The total interest-only mortgage payments each month would be £1,249 or £14,988 each year.

Let’s say the income received on each property is £600 each month – in total this is £3,000 each month or £36,000 a year.

Clearly we can see that despite the large amount of mortgage debt and mortgage payments that need to be paid; the rental income will fund these mortgage payments and still yield a generous profit to the landlord.

A private landlord would typically complete a tax return each year and on it they would detail the income from their property portfolio and then detail all of their expenditures such as management fees and repairs, along with other expenses including the mortgage interest.

Income tax on the rental income profit is then charged at the normal rate of income tax.

But as you can guess, from April 2020, many private landlords with buy-to-let mortgages will simply pay more income tax on their rental income.

What if interest rates go up?

We know that we have been experiencing record-low interest rates for the past decade but inevitably, at some point, they are going to go up.

With this same example, let’s say the interest charged on those buy-to-let properties goes up to 6 per cent. I would imagine most people reading this would have experienced paying something close to that rate at some point in the past.

In my example scenario, the mortgage interest payments would increase to £2,501 each month or £30,012 each year.

This scenario looks a lot less attractive for a landlord.

If they can not offset interest-only mortgage payments from their rental income profit; this will result in significantly lower returns and then they will inevitably have to consider alternative options.

How will landlords adapt?

Let’s say a landlord runs their property business through a company rather than as a private venture; would these new tax changes I mentioned above apply? The answer is no.

If a company owns the property portfolio then the tax which is paid on the profit of the business is corporation tax.

At the moment, the corporation tax rate is 19 per cent but this is going to drop to 17 per cent in the next tax year (2019/2020) making the idea of holding properties within a limited company or specifically a SPV (Special Purpose Vehicle) quite attractive.

This is because a lot less tax will need to be paid which means a much greater net profit.

I must caveat that any landlords who do decide to move their private property portfolio across to a SPV would need to take proper advice because there are lots of implications to consider including stamp duty, lending criteria for new mortgages and various other considerations.

That said, at face value, it feels like these tax changes will nudge many landlords to move across to this type of model going forward.

Partners in business

Let’s look at a scenario where landlords set up a business to hold their property portfolio.

What are the protection opportunities that could arise for situations where people work together on a property venture?

Let’s say three skilled tradesmen get together with the idea of setting up a rental business.

They set up an SPV and they each invest £50k of their own money to buy their first property from an auction.

They buy the property with the cash they have pooled together with the intention of renovating it and putting it on the rental market.

Bob is a builder, Eric is an electrician and Paul is a plumber.

They do all the necessary work themselves and when the property is complete, they put it on the rental market.

The value of the property has increased, so they mortgage it and using those funds, they return to the property auctions to find their second property.

Their plan is to carry on doing this and build up their property empire.

Opportunities for Protection conversations?

What are the immediate protection opportunities up for discussion?

Control – Each partner will have a shareholding in the business to the value of how much they invested, so there is a question of how they keep control of their business if one of them dies or gets sick.

How would the surviving business owners feel if someone came into the business that they did not want to work with, because they had inherited their deceased business partner’s shares?

What if this new person has no useful skills but wants a say in how the business is being run?

Would the surviving business partners like to have control of their own destiny?

The answer to fix this problem is simple business protection.

This could be life insurance or critical illness cover, which would provide the necessary funds to allow the remaining shareholders the ability to purchase the shares of the other shareholder who might have died or been diagnosed with a critical illness.

Part of this solution would include a legal agreement which is designed to protect both parties – the business but also the family of the deceased or sick director.

Key people? – A scenario like this also suggests that all three business owners are key people.

If they perform duties which are essential to the running of the business, then sickness or death of one of them could affect profitability.

The answer to this problem is simple protection cover for each key person.

This could be life cover, critical illness cover or income protection; all of which are designed to allow the business the funds to protect their profits and perhaps bring someone into the business to perform the duties of their sick or deceased business partner.

Debts? – Another problem is those mortgages.

Simple loan protection in the shape of life cover or critical illness cover could be used to repay part or all of those debts – just like normal mortgage protection.

I also mentioned the initial funds that each partner put into the business when they set it up.

Each of those £50,000 deposits which were used to buy the first property are directors’ loans to the business.

In the event of the death of one of the business owners, how quickly would the family want that money back?

It is payable immediately, but it would be a problem if the surviving business owners did not have that kind of money available and they would not be in a position to pay it back.

Would this result in the surviving business owners needing to sell one of their properties to release equity? How will this affect things?

Future prospects

I think that over the next few years we’re going to see more landlords moving across to the SPV business model purely for tax reasons but this will open up a whole world of protection opportunities with buy-to-let landlords who have often been a tough nut to crack.

The trick for advisers is to not over complicate your process. Keep it simple and keep things clear.

Build your conversation around two key points: what is the problem and how do we fix it?

Problem: what specifically is the problem? What would happen if? What would the effect be?
Solution: what is the solution to fix this problem?
It does not need to be complicated, but this is another example of where proper financial advice is crucial for your clients.

By Vincent O’Connor

Source: FT Adviser

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Professional landlords increasingly comprise the core investors in the PRS

Paragon revealed a sharp increase in specialist landlord business, up from 79% to 89% of buy-to-let mortgage completions as it reported full year results today.

Specialist business also increased from 88% to 91% of the buy-to-let pipeline, as Paragon’s strategy of focusing on landlords operating in corporate structures and with larger portfolios delivered positive results.

Buy-to-let lending overall was stable year-on-year at £1.480 billion compared to £1.495 billion in 2018, with a 17% increase in the pipeline of business in progress at year end to £912 million.

John Heron, Managing Director of Mortgages at Paragon, said:

“Paragon’s deep expertise in buy-to-let means we are now one of a small number of specialist lenders offering solutions for the more complex requirements of the professional portfolio landlord community..

“Following tax and regulatory changes, professional landlords increasingly comprise the core investors in the UK’s private rented sector and we continue to support them and our intermediaries with enhanced service and tailored products specially designed to meet their needs.”

“Paragon’s results show a 9% increase in total new lending across the Group to £2.5 billion, along with an expansion in the net interest margin to 2.29% (2018: 2.21%) and a 5% increase in underlying profit before tax to £164 million (2018: £157 million)”

Source: Property 118

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Tax changes blamed for rise in repossessions

The tax shake up that abolished mortgage interest tax relief for landlords has been touted as a factor behind the rise in the number of buy-to-let properties being repossessed.

Latest figures from trade body UK Finance showed 800 buy-to-let mortgaged properties were taken into possession in the third quarter of 2019 — 40 per cent up year-on-year.

The total had risen gradually since the end of last year, from 550 in the last three months of 2018 to 590 in Q1 2019 and 640 last quarter.

At the start of this year, the Intermediary Mortgage Lenders Association warned there could be a “watershed” moment during 2019 as landlords begin to feel the effects of the tax shake up.

The changes to mortgage interest relief have been phased into the system since April 2017.

Before 2017, landlords could deduct all mortgage interest payments from their tax bills. This meant they were taxed on their profits, not their turnover, so reduced the overall bill.

But the rule changes meant tax relief on mortgage interest was phased out and instead landlords receive a tax-credit based on 20 per cent of the interest payments.

Based on a property yielding £950 in rent and a £600 mortgage per month, the landlord’s income could drop by about 57 per cent after the rule changes, as the shown in the table:

Tax yearProportion of mortgage interest landlords can deduct from their tax billsTax billPost-tax and mortgage rental income
Prior to April 2017100%£1,680£2,520
2017-1875%£2,040£2,160
2018-1950%£2,400£1,800
2019-2025%£2,760£1,440
From April 20200%£3,120£1,080

Source: Which

David Smith, policy director for the Residential Landlords Association, said: “We said at the time people would be blindsided [by the tax changes].

“Some landlords would have been unaware of the tax changes until they felt them and by that point, they were halfway through an even more challenging tax year.”

Mr Smith thought the government had failed at speaking directly to landlords about the changes, adding he was “massively concerned” about the future of the buy-to-let market.

Dan White, director at Champion Hall and White, agreed. He said: “This may well be the effects of lack of preparation, knowledge and understanding of the tax changes which could well be a result of higher tax bills which were not budgeted by landlords.”

Mr White also said landlords looking to exit the market could be struggling the sell in a stifled property space, resulting in unoccupied properties, arrears and more repossessions.

L&C Mortgages’ director of communications David Hollingworth said it was crucial landlords took advantage of the competitive mortgage rates on offer to manage their costs as well as possible as the changes to tax relief were “feeding through”, while Nick Morrey, product technical manager at John Charcol, said some landlords had probably “thrown in the towel” over the tax changes.

Alan Lakey, director at Highclere Financial, said the market had experienced a “vile mix” of changes which were a “recipe for repossessions”.

Other changes to the buy-to-let space included a 3 per cent stamp duty surcharge for second homes and more stringent affordability testing from the Bank of England.

Martin Stewart, director of the Money Group, said: “I would suggest this a very worrying trend, not only for buy-to-let but for the wider lending environment.

“The good ship UK has been taking on debt for the past ten years and with the seas about to get choppy, I just hope there are enough lifeboats for everyone.”

The Treasury declined to comment due to pre-election restrictions but has previously said the rationale for the policy was that the previous tax system had supported landlords “over and above” ordinary homeowners.

In the Summer Budget of 2015, when the rules were announced, the Treasury stated the ability to deduct mortgage interest costs put investing in rental property “at an advantage”.

By Imogen Tew

Source: FT Advised

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Buy To Let Repossessions Up In The UK

The number of buy to let repossessions of investment properties in the UK rose substantially in the third quarter of 2019.

Figures released this week from banking trade body UK Finance revealed a 40 per cent rise in buy to let repossessions on last year.

Around 800 buy to let repossessions were carried out in the third quarter of 2019, compared to 570 in the same quarter of the previous year.

However, there were 4,550 buy to let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the third quarter of 2019, five per cent fewer than in the same quarter of the previous year.

The number of buy to let investors in arrears of between 5 per cent and 7.5 per cent of the outstanding balance also fell by 21 per cent over the year.

In contrast, the number of buy to let investors in arrears of between 7.5 and 10 per cent grew by 9 per cent, while the number in arrears of over 10 per cent dropped just 1 per cent, according to the UK Finance figures.

However, the banking trade body has stated that it believes the large increase in buy to let repossessions due partly to a ‘backlog of historic cases’.

Rules were changed two years ago by the city regulator on how lenders have to calculate how much a borrower owes each month if they fall into arrears. This has led to lenders reviewing a large number of cases on an individual basis and applying for buy to let repossessions ‘only when all other options have been exhausted’ according to UK Finance.

However, David Smith of the Residential Landlords Association (RLA) said: ‘Repossessions for mortgage arrears take place for many different reasons.

‘Mortgage interest relief changes, which are now almost fully implemented, the increasing cost of regulation and the ever-increasing time to repossess a property are all major factors.’

‘Since most repossessions of this kind lead to tenants being evicted it is vital that the next government actively supports the majority of landlords doing a good job to provide the homes to rent the country needs.’

Source: Residential Landlord

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Property market rebounds as buy-to-let purchases slide

Mortgage lending grew by 4.6 per cent to £21.4bn year-on-year in September, driven by an energetic remortgage sector, while buy-to-let (BTL) cooled, according to UK Finance data.

In the new loans market, the volume of first-time buyer mortgages grew 1.6 per cent to 291,000 in September 2019 over the same month in 2018. The value was up five per cent to £5.1bn, the banking trade body revealed.

The volume of homemover mortgages rose 1.8 per cent to 29,050 and value grew 5.4 per cent to £6.6bn.

In remortgages, the volume of loans with additional borrowing was up 5.9 per cent to 17,740 and value increase 5.1 per cent to £3.3bn, with the average additional amount borrowed was £50,000.

Remortgages with no additional borrowing grew eight per cent to 19,140 by volume and 9.4 per cent to £3.4bn by value.

However, the BTL sector dragged behind. The number of purchase mortgages dropped 3.5 per cent to 5,500 and the value was down 11.1 per cent to £800m.

BTL remortgages were flat at 12,900 by volume and by value at £2.2bn.

Strong set of figures

Industry watchers welcomed the generally positive picture.

Nick Chadbourne, chief executive at LMS, the conveyancing provider, said: “We’re starting to see a shift in the balance of power within this market. Lower rates on two-year deals have sparked competition between lenders, aiming to turn the heads of remortgagers. Our recent data shows that although five-year fixes remain the most popular product, purchases of two-year deals have surged.”

John Phillips, national operations director at broker Just Mortgages, said: “This is a strong set of figures, with both new loans and especially remortgages showing a big improvement on the same time last year.

“The eight per cent rise in pound-for-pound remortgages in particular is a welcome reversal of recent trends, where the increased prevalence of longer-term fixes has been driving down volumes.

“This is somewhat offset by the quite steep fall in new BTL mortgages – more than 11 per cent by value. There have been a number of changes to regulations in recent years, not to mention the impact of the stamp duty surcharge for BTL. It would not be surprising if this was deterring landlords from expanding their portfolios and putting new entrants off altogether,” Phillips added.

Written by: Liz Bury

Source: Your Money

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Landlords fear election could ‘end’ buy-to-let

Landlords are fearful the buy-to-let sector will be used as a political football in the upcoming election, with politicians competing with pledges that could “end the market”.

A number of mortgage brokers said they have been contacted by their landlord clients with concerns about a Labour majority government and its potential ‘right to buy’ scheme.

The right to buy scheme replicates the scheme introduced by the Thatcher government which allowed social housing tenants to buy their homes at a discounted price.

Under the Labour proposal, the government would set a discounted price for private property, likely based on how long the tenant had lived there.

Dan White, director at Champion Hall & White, said: “I’ve had people call me about the scheme and I do think landlords will opt to exit the market.

“I think this could be catastrophic for the housing market and an outrageous ruling. Enforcing a right to buy would seriously damage the integrity of the property market and encourage the wrong message.”

Mark Bailey, director of property asset manager Landwood, warned a right to buy scheme could result in a negative outcome for renters if landlords chose to sell up and rental supply diminishes.

He said: “If politicians of any leaning are serious about fixing the housing crisis then this ridiculous policy is not the way to go about it.

“The solution is to build more social housing, more starter homes and get more people on the property ladder and reduce the number of renters that way.”

Sarah Drakard, IFA at Cruze Financial Solutions, said landlords thought they would be “even more attacked” under a Labour government than they already are.

She said: “Landlords already feel quite hard done by and hit by government policies over the past few years, but many think a Labour government would potentially bring changes that would make being a landlord no longer viable economically.”

The buy-to-let market grew rapidly after the financial crisis but its growth has since stalled after a number of tax and regulatory changes introduced by the Conservative government hit landlords’ pockets.

How the rules changed:
An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

Chris Sykes, a mortgage broker at Private Finance, said his landlord clients were concerned the election would mean “something else” would happen which would mean “the end of the buy-to-let market”.

He said: “I think landlords are generally worried and concerned as to whether their investment will end up being a financial asset or a burden.

“It used to be more of a safe investment but now it’s become less attractive and if any further political changes come in, it will become even less so.”

David Hollingworth, director of communications at L&C Mortgages, agreed, adding that anything that put a further squeeze on landlords could ultimately cause prospective investors to rethink their plans or ultimately see existing landlords considering scaling back or exit.

By Imogen Tew

Source: FT Adviser

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FACT Report Shows Buy To Let Mortgage Market Stable

The buy to let mortgage market is stable according to the latest FACT (Financial Adviser Confidence Tracking) report from Paragon.

The FACT report, based on interviews with 201 mortgage intermediaries, revealed a slowdown in overall mortgage business during Q3 2019, but stability in the buy to let market.

The average number of mortgages introduced per office in Q3 2019 was 21.9, down 3 per cent from 22.5 in the second quarter and the lowest figures since Q2 2017. The average number of mortgages introduced per adviser also fell, down from 7.9 to 7.4.

Despite this slowdown, the FACT report showed that the buy to let market has remained relatively stable since a notable decline in 2016 and comprised 17 per cent of mortgages introduced in the quarter, up 2 per cent from 15 per cent in Q2 2019.

Remortgaging was again the principal type of borrowing amongst homeowners, accounting for 46 per cent of mortgages introduced in Q3 and maintaining the disparity that has been widening at modest pace over the last five years. Elsewhere, next time buyers accounted for 18 per cent of new business, down from 19 per cent in the previous quarter, and first-time buyers fell from 18 per cent to 16 per cent.

In terms of buy to let business completed in Q3 2019, first-time landlords grew from 11 per cent to 13 per cent and remortgaging climbed from 52 per cent to 55 per cent. However, the proportion of landlords raising finance for portfolio extension was smaller, down from 23 per cent of business in the second quarter to 20 per cent.

Looking ahead, the FACT report showed intermediaries forecast a 2 per cent pick-up in overall business over the next 12 months and a 1 per cent increase in buy to let.

John Heron, Director of Mortgages at Paragon, said: ‘After a number of years of instability and negative sentiment in the buy to let market, it’s encouraging to see mortgage intermediaries forecasting increased buy to let business over the next 12 months. However, the market overall has been constrained by the current Brexit uncertainty and it remains difficult to see exactly when this will end.’

The FACT Index score, designed to establish advisers’ overall confidence in the mortgage market is 97.8 for Q3, down 11.2 compared with six months ago and the lowest score recorded since Q1 2017.

Source: Residential Landlord

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Buy-to-let purchases through limited companies on the rise

Almost two-thirds of landlords plan to make their next purchase within a limited company vehicle, Foundation Home Loans has found.

This is up from 55% of those surveyed in the second quarter of 2019.

Jeff Knight (pictured), director of marketing at Foundation Home Loans, said: “The rise in limited company usage by landlords shows no sign of tailing off, particularly as we have a more professional landlord community who recognise the benefits of using such a vehicle.

“It’s therefore perhaps no surprise to see a growing number of landlords signaling their intention to make their next purchase through a limited company, and as a lender it’s incredibly important that our product range reflects this, and we can offer advisers and their portfolio landlord clients access to quality products, an excellent underwriting process and a high level of overall service that taps into the needs of limited company borrowers.

“There has also been a notable uptick in limited company remortgaging at Foundation, and whether these are larger portfolio landlords or not, it’s quite apparent where the market has moved to and the growing need for limited company expertise.”

Previously, landlords with larger portfolios of 11 plus properties were more likely to say they would purchase in a limited company, but now landlords with smaller portfolios are equally likely to use the strategy.

Some 62% of those with one to 10 properties said they would purchase via a limited company next, while 65% of those with 11 plus properties would do the same.

Of those landlords who said they would purchase via other methods, 26% said they would purchase as an individual, up from 24%.

Some 8% said it would depend on the circumstances at the time, down from 13% while 6% said they would purchase in the name of a partner or spouse, a drop from 10%.

The rest said they would either purchase via another means or they didn’t know.

The research also revealed a potential step-change in the type of properties landlords were adding to portfolios and where they were likely to concentrate in the future.

HMOs continue to generate the highest rental yield for landlords at 6.5%, with 20% of landlords now having an HMO property within their portfolio.

HMOs are particularly popular in Wales where 31% of landlords have at least one. This was followed by the East Midlands at 26%.

By Michael Lloyd

Source: Mortgage Introducer

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More business opportunities to be had in BTL

Whilst mortgage advisers deal with the bulk of buy-to-let business there is still a considerable amount of lending being placed directly with lenders, recent research by Foundation Home Loans has revealed.

The latest landlord research for Q3 showed that 73% of landlords carried out their most recent mortgage via an adviser and 19% went direct to a lender.

Jeff Knight (pictured) director of marketing at Foundation Home Loans, said: “In the increasingly complex and competitive world of buy-to-let mortgage lending, it seems somewhat surprising to hear that nearly 20% of landlords went direct to a lender for their latest mortgage, and 23% plan to go direct when they next remortgage.

“However comfortable you are with the market – and there are many portfolio landlords who might feel able to sort their own finances out – there is still the potential to miss out on a quality deal with benefits that only a mortgage adviser would be able to access, but as a landlord going direct you would not.

“That should surely be the message that advisers – and the wider industry – need to take to landlord borrowers because things do change very quickly, rates and criteria are shifting on a daily basis, and a landlord that thinks they’ve got the right mortgage for them, might actually be very far way from that outcome by not using an adviser.

“Once again, we collectively need to extol the value of quality advice, not just in a one-off transaction but across a borrower’s whole portfolio, because there are clearly huge benefits for portfolio landlords to take advice and to secure a much better financial position because of this.”

Nearly a third (31%) of landlords said they plan to remortgage at least one of their properties over the next 12 months.

Some 65% of those said they would expect to use an adviser and 23% would go direct to a lender.

Most landlords (48%) had followed a recommendation when choosing their adviser whilst 11% chose an adviser through an internet search and 9% chose through their membership of a landlord body.

HMOs continue to generate the highest rental yield for landlords at 6.5%, with 20% of landlords now having an HMO property within their portfolio.

Knight added: “It’s perhaps less surprising to see more landlords opting to put HMOs and multi-unit blocks within their portfolio, especially as the necessity of securing strong rental yield from properties has never been greater.

“As a lender active in the HMO space, we know how different they can be to other types of properties, and with last year’s licensing rules now in full effect it’s important that advisers are able to impart these types of details so the landlord knows their full responsibilities.

“We often have a situation where the criteria, income and mortgage requirements are different for HMO lending, and therefore advisers who want to be at the top of their game in this space should work with like-minded lenders, and ensure they are able to get the best deals for their HMO landlord clients.”

By Michael Lloyd

Source: Mortgage Introducer

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Revealed! The best buy-to-let locations for 2020

Thinking of buy-to-let investing but unsure where to look? Handily, SevenCapital has revealed what it says are the 10 most attractive places for investors in 2020. It comes as no surprise that the North of England dominates the list.

Top 10 Best Buy-To-Let Locations (alphabetical order)

TownAverage Property PricePrice Growth Since 2014Average Rental Yield
Birmingham£190,09119.40%4.92%
Cardiff£193,30014%4.89%
Leeds£169,24717.04%5.07%
Leicester£166,08323.92%5.16%
Liverpool£134,96312.45%5.82%
London£717,73113.61%4.85%
Manchester£229,12922.09%4.77%
Nottingham£160,52219%5.44%
Oxford£348,34511%4.25%
Sheffield£142,21019.50%5.87%

The property investment firm says “if you’re looking to achieve high rental yields in the UK, typically the further north you go, the higher the yield,” led by Liverpool and Sheffield, where average yields sit above 5.8%. SevenCapital even notes that yields in some parts of these cities can rise to between 7% and 8%.

Slick cities
So what makes them brilliant investment destinations? According to SevenCapital…

  • Regeneration is the story for Liverpool, with £14bn worth of projects in progress, or in the pipeline, creating a place packed with “exciting developments, exceptional career opportunities and rising tenant demand.”
  • Nottingham’s central location in the UK, terrific infrastructure and good social and shopping scene makes it a hit with professionals and students.
  • Cardiff is expected to be the fastest-growing British city over the next 20 years, helped by massive regeneration that has brought industries, such as the financial, creative, life science and manufacturing sectors, to life.
  • Brexit might be hampering the London market right now, but it’s expected to expand again once a deal is reached. Apparently “as one of the major financial destinations in the world, it’s nigh-on impossible for London to experience prolonged declines.”
  • Oxford is one of the strongest economies in the country, underpinned by its “exceptional employment opportunities and a world-famous education sector.”
  • One of the fastest-growing population in the UK — expanding at seven times the pace of London — makes Leeds an attractive place for buy-to-let investment.
  • Property prices in Sheffield are among the lowest in major British cities, allowing investors to ‘lock in’ stronger yields should forecasted growth transpire.
  • “Chronic supply and demand issues” makes Leicester a top place for buy-to-let investors with plenty of regeneration projects coming to life.
  • Manchester is “one of the most exciting places to live and work in the UK” and is experiencing the same ripple effect as London has over the past decade, with growth spreading out from the city centre to areas such as Salford, Stockport and Bolton.
  • An exploding population means Birmingham should need 100,000+ homes over the next 10 years, and for 2020, rampant development ahead of the 2022 Commonwealth Games is expected.

Careful now

There’s plenty for both prospective and existing landlords to chew over for the year ahead then. But before taking the plunge, investors need to remember that a combination of soaring costs and rising tax liabilities have smashed returns for buy-to-let participants in recent years.

I still believe that those wanting to grab a slice of the property sector would be much better served, therefore, by buying stock in one of the country’s listed housebuilders. Why? A combination of booming dividend yields and some ultra-low earnings multiples at current share prices. It’s why I own shares in Taylor Wimpey and Barratt Developments.

There’s an abundance of other ways to play bricks-and-mortar investment, however. Owners of big logistics centres like Clipper Logistics and Warehouse REIT, firms that are great plays on e-commerce. Alternatively, firms like Empiric Student Property are great ways to play the booming student accommodation market. What’s great about these stocks is that they also offer up dividend yields north of 5%.

By Royston Wild

Source: Yahoo Finance UK