April Newsletter

The past few weeks have flown by and hit us with plenty of important news that could impact investors and the UK economy. Read on to see which items we consider to be the most interesting and relevant to the auction industry.

Buy-to-Let Market Facing Tougher Scrutiny

As well as the new Stamp Duty Tax rules that came into force this month affecting Buy-to-Let (BTL) investors, property landlords are facing further scrutiny from the Bank of England (BOE). Following the Chancellor of the Exchequer’s announcement in front of the Treasury Select Committee that he would hand more powers over the BTL lending market, the BOE’s Financial Policy Committee (FPC) and the regulation arm the Prudential Regulatory Authority (PRA) have already looked into the market and related their views.

Tougher stress tests in the under-writing process of BTL mortgages are to be introduced in order to ensure the borrowers affordability is tested fully for possible interest rate changes among other issues. These stricter lending criteria, combined with higher tax payments for investors purchasing new property have the potential to limit the 20% growth in buy-to-let loans that some banks are anticipating.

For the property auction business, meanwhile, it could mean that more people are attracted to the sale room in search of a bargain and the lower related taxes and fees that come with a smaller purchase price.

Investors attitude to Government-Backed Tax Schemes

The latest survey on UK investor’s attitude to Government-backed tax schemes by IW Capital suggests that more than half of the top 1% of British tax-payers who pay the top 45% rate of tax would consider using a Government tax scheme to help reduce their tax bill. The Enterprise Investment Scheme (EIS) is a tax efficient way to invest your funds and still receive a good percentage of the returns tax free.

As well as providing a tax efficient investment opportunity, the EIS also benefits the economy as small and medium sized businesses (SMEs) can apply for funding via the scheme which has been up and running since 1994.

So, if you feel like you need to take a step back from the property market, maybe the EIS could be a good option. Then, once you’ve seen your investment grow in a tax efficient way and the new BTL tax rules have bedded in, you could then re-invest some of that those tax efficient returns back into the property market for the longer-term.

Could a drop in city bonus payments provide a fillip for the auction room?While the prospect of higher taxes and stricter lending rules are certainly important changes to think about while you’re considering your Buy-to-Let portfolio, there are other developments that are equally relevant.

Take the latest news that city bonus payments were 10-15% lower this year than in 2015. Not only is this raising concerns about London house prices, it could also result in some investors staying away from property this year as their bonus just isn’t up to it. This climate might make the property auction sale room just a little less crowded than usual at this time of year and mean that those investors who do attend have a better chance of buying the right property at the right price.

It’s worth popping along to your local auction to test this theory out. By doing so there is also the added possibility that you can grow your portfolio while others are taking a breather!

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