February 21st, 2013
As part of new plans to be unveiled during the Liberal Democrats spring party conference, Vince Cable was questioned this week on the news that the party are considering championing a super tax on second property holders. The plan would be to implement an annual charge to those with additional properties to their home above the value of £2 million, including buy to let owners that hold a portfolio above this sum.
The details come in the same week that BM Solutions, a prominent buy to let lender, released results of a survey of 512 landlords that states 84 per cent are looking to their rented properties to add to their retirement income. A much oft stated belief is that most landlords plan to sell on their portfolio in retirement. However, the comments from those surveyed suggested that very few plan to do so.
Towards the end of 2012, current rulings that levy a mansion super tax were altered by the government, partly as a deterrent to prevent foreign investors purchasing homes in the UK under tax loop holes that allowed a lower than normal rate of tax being paid, if the property was purchased via a company. The revised plans contained a clear outline that the tax would not be levied if the property holder could prove that the buildings were used for solely business purposes, which includes those owned by property investors and landlords.
At present it isn’t completely clear how avidly the Lib Dem’s will pursue this plan, and it would seem that the extent they push for a change will be partly influenced by how much weight Labour throw behind the proposition in parliament. Cable’s own view appears to be that the issue could be divisive once discussed in the open forum: “If it's purely a statement of support to the principle of the mansion tax, I'm sure my colleagues would want to support it. But very often in these opposition days they can't resist the temptation to make party political point scoring and dragging other issues in like the 10p rate. If that happens I'm sure we will not. It's up to them to be statesmanlike and sensible in how they approach it.”
Focusing on the current state of the buy to let market, it has been reported on many occasions over the past twelve months that rental yields have remained fairly steady during the period. Although the BM Solutions research states a 0.5 per cent drop to 6.2 per cent in the fourth quarter of 2012, areas such as the East Midlands recorded an average yield of 7.1 per cent. In addition the average number of tenants in arrears reduced to 2.4 per cent from 3.3 per cent in the third quarter. A clear indication that landlords are enjoying success in a sector that many felt was dwindling 1-2 years ago, is that 41 per cent of those surveyed reported tenant arrears, the lowest figures since the second quarter of 2010.
Backing the research results, BM Solutions head of sales Phil Rickards said: “The private rental sector remains an alternative source of long term investment for landlords for later life and this does not look like it is set to change. Whilst rental yields have dipped slightly, they still remain at the high levels we have seen over the past few years.”
Article by: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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