Real examples of the BTL (Buy-to-Let) tax changes (aka section 24). Here’s a video explaining the changes and some examples of what the effects can look like…
Tag: buy to let
Buy-to-let mortgages-Part 3-How to pick a mortgage product
There are so many mortgage products to choose from and it can sometimes be difficult to choose the right one. Some have lower interest rates and a higher arrangement fee and others have higher interest rates and lower or no arrangement fee. There’s a very simple way to work out which product is the cheapest, which you can discover in this short video.
An article about SEX and PROPERTY… what’s not to like?
Market Summary – House Prices
With so much movement in the UK and global markets, what’s been happening to the house prices in Bournemouth & Poole? As one would expect, my research indicates that not all towns and districts within the UK have performed the same and the results for the BH postcodes make positive reading, but only for certain property types. It’s important to understand your market to enable you to refine your buying criteria, especially when capital growth forecasting forms part of your wider goals.
Value Change:
Bournemouth – Last 5 years
All property types: ↑17.15%
Detached: ↑22.14%
Semi-detached: ↑13.68%
Terraced: ↑13.56%
Flats: ↑15.76%
Bournemouth – Last 12 months
All property types: ↓00.58%
Detached: ↑03.51%
Semi-detached: ↑00.77%
Terraced: ↓04.43%
Flats: ↓01.23%
Poole – Last 5 years
All property types: ↑16.79%
Detached: ↑21.66%
Semi-detached: ↑15.82%
Terraced: ↑15.42%
Flats: ↑13.96%
Poole – Last 12 months
All property types: ↓01.16%
Detached: ↑03.79%
Semi-detached: ↓03.71%
Terraced: ↓01.04%
Flats: ↓03.28%
This research shows that there’s been a healthy capital growth for all property types over the last five years. Over this period the average house price in Bournemouth has increased by circa £44,000 and by £52,000 in Poole. But during the last 12 months, the figures show that BH has experienced a marginal fall in values across most property types. Detached houses are the only property type in Bournemouth and Poole that has continued to show a positive growth over what appears to be a sluggish 12 months for property prices generally.
Conclusion
I put these results down to various contributing factors.
1) Landlords leaving the market due to Section 24.
2) Reduced demand from Buy-to-Let investors due to higher SDLT.
3) Help-to-Buy incentives enabling home buyers to purchase at higher values.
4) Uncertainty due to Brexit which has made buyers more cautious and make lower offers to buffer a potential decline in prices.
What is still abundantly clear is that property has always and still continues to perform well over the long term. I don’t think it makes financial sense to make a knee jerk reaction; like selling an asset, because of micro movements. If your property portfolio is unencumbered or leveraged debt from a buy-to-let mortgage is serviceable, then the odd downward movement in prices doesn’t justify a good reason to sell. Many of the landlords that have exited the market over the past 18 months have had good reason to do so, which has had nothing to do with Brexit or fears of a market crash. There are many landlords that can’t service their leveraged debt and they have begun to feel the pinch of Section 24 as we enter the third phase of these tax changes.
Section 24 has triggered an increase in market appraisals (aka valuations) for landlords considering a sale of their asset/s. Many still aren’t sure whether it’ll affect them or not and in most cases, landlords will see no change to their bottom line. I would urge anyone to seek the appropriate financial advice from a qualified accountant and/or property tax specialist before making any decisions. If you’d like a copy of a spreadsheet that could give you some swift answers then please don’t hesitate to ask me for a template. Here’s a link to a video I made a while ago which gives some examples of these tax changes: Watch My Video About Section 24
Houses
There were more detached houses purchased over the last 12 months than any other property type in the Poole Borough. Circa 1600 detached houses were purchased in Poole and Bournemouth over the past 12 months, compared to 750 semi’s and 492 terrace homes. This would indicate that there is no shortage in demand for larger family homes and where demand exceeds supply, prices will continue to rise.
Are we buying more detached homes because we’re having more sex?
My extended research established that people are “doing it” more in Bournemouth than ever before. The number of births has been rising since the mid 70’s when 1000 or so births per year were the average. We’re now popping out circa 2200 babies per year in Bournemouth, an increase of 220%! Perhaps people were more interested in Led Zeppelin, David Bowie and Pink Floyd back then, rather than having children? Haven’t the residents of Bournemouth been watching Game Of Thrones in the evenings? But in all seriousness, my findings indicate that it could have more to do with Tax Credits than anything else. Yes, that’s right, it appears that we started to breed significantly more when changes occurred to child tax credits in the early 2000’s. By 2003 the rate of child benefit for the first child increased by 25.3 per cent and the rate for subsequent children by 3.1 per cent in real terms. We were delivering around 1500 births per year between 1985 and 2003 on the old system, but then the average number of births saw a spike when the new child tax credits came in. The number of births in Bournemouth went up by circa 116 year on year until 2009, where we began to average out at circa 2200 births per year.
I’d hate to think that people are having more children because of the current tax system, but the facts would back up this theory. It’s certainly not doing any harm to the prices of detached houses, but I can’t help but think, is it for love or money?