If you’ve been reading the papers, it seems the party for buy-to-let landlords is coming to an end.
First, George Osborne in the July budget declared that from 2017 he would scale back mortgage tax and some other reliefs for landlords. The newspapers had a feeding frenzy with sensational headlines such as “Death of buy-to-let” in the Telegraph and The Guardian’s “Osborne drops tax bombshell that will wipe out bulk of buy-to-let profits”. The stories reported that it was the end for the private landlord and predicting many landlords will give up on buy to let altogether with the market becoming inundated with rental properties up for sale as landlords feel squeezed from the market.
And only last week the Bank of England got in the act, with the BBC reporting of the “Bank of England concerns over buy-to-let boom”. Mr Carney, the Governor of the Bank of England, cautioned that the rapid growth in buy to let lending (up 40% since 2008) could destabilise the whole UK property market. He was concerned landlords who bought with high loan to value mortgages could be spooked if there is a property crash, they would panic because of negative equity, sell cheaply, which would worsen house price falls.
So if you believe the papers, it is doomsday for landlords... Well before you all go and sell up while you can, let me explain to you my perspective on the matter and why I believe the Glasgow landlord will be much less affected by the changes.
- Firstly, the Chancellors new tax rules, will not affect all landlords and all areas equally. The Telegraph commented, “The investors worst affected are therefore likely to be those who have bought recently with large mortgages. Low-yielding properties, such as those in London and other parts of the South East, where rents are comparatively low relative to property prices, will also be exposed. That is because rental income is likely to be lower relative to investors’ mortgage costs.”
- Properties in Glasgow are much more affordable with the average price for a flat of around £125,000 and with most landlords only owning one or two properties and having a mortgage of less than 75% of the property value, they will be much less exposed to potential price falls and the risks of negative equity.
- And with Glasgow having some of the highest average rental returns in the country at 7%, Glasgow landlords have more income to cushion any increase in costs that arises from the tax changes.
I believe we have a case of ‘bad news selling newspapers’ and I believe that buy to let, and the Glasgow property market, will carry on relatively intact. It’s true reducing tax relief will hit some landlords and this may slightly diminish buy to let as an investment vehicle. However I doubt that we will see many people selling up.
And as I have commented on before, the fundamentals of the Glasgow property market remain positive for the buy to let investor. Specifically there is strong demand from renters and limited supply of new properties which is driving the growth in rents and property values. These are long term trends which gives me confidence that buy-to-let investors can look forward to attractive growth for many years to come in Glasgow.
Those who have bought in the last twelve to eighteen months have reaped the benefit from buying in Glasgow, because the city offers a combination of reasonable house prices and growing rents. Property values have risen by 7.1% in the last 12 months in Glasgow, whilst average rents are up 4.4%.
If you want to make money in the Glasgow property market as a buy to let landlord, it’s all about having the right property and as you grow, the right portfolio mix to offer a balanced investment that will give you both yield and capital growth.
One source of information and advice is the Glasgow Property Blog where I have similar articles to this about the Glasgow property market and what I consider to be the best buy to let deals around in the City, irrespective of which agent it is on the market with. If you haven’t visited and you are interested in the local property market in Glasgow ... you are missing out!