Why buy to let is still the best form of investment

Why buy to let is still the best form of investment

As discussed in my last post, 2016 was quite a year for the property market. Despite some uncertainty, the market has proven to be resilient with sales figures and house prices still on the rise.

Buy to let in particular has been a popular subject as a result of market changes recently, but has always consistently proven to provide investors with the best returns when compared to stocks, bonds, ISAs and so on. In fact, only in 2015 was it reported that returns made from property were over 1,000% higher than any other form of investment.

So what does this mean for those looking to take the plunge into property investment in 2017?

Well, looking at the numbers, compared to other investments out there, buy to let still tops the chart, even with recent tax changes and everything else taken into consideration. We at Sequre have piled together a forecast for the next few years. Based on those who bought a property in 2016 at £100,000, it shows the average estimated returns buy to let can still achieve following on from the phased introduction on mortgage tax relief that will begin in April this year. 

*Property value, rent achieved, and service charge increases all based on 4% PA Increase.


Although these are average figures based on estimates, we can see that property can still provide a significant profit. Even after the tax relief levels out at 20% in 2020, returns still continue to increase well into 2023, thanks to the rise in property value and rental income.
But there are other factors that play a part into why buy to let still remains successful. Tenant demand still has a lot to answer for as the private rented sector continues to see a hive of activity.  New schemes and initiatives from the government and other private investment projects also has a part to play. If we look at developer’s launching PRS schemes across the UK and the government’s Northern Powerhouse vision, there’s no telling how far the buy to let market could leap in 2017.

Some may be sceptical, but it’s important to think about how beneficial property investment can be. Many now use it as a means to fund their retirement due to the poor returns from pension annuities. Some use it as inheritance to pass onto their children as the increase in value from the cash invested will rise much higher than it would do in any cash ISA. It’s understandable why some may be cautious about buy to let in the future, but the figures really do speak for themselves. Property has the same amount of risk as any other investment but, when carried out smartly and correctly, the benefits can be monumental.

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Comments

  1. CommercialTrustCommercialTrust30 January 2017 09:18:27

    Hi Graham, Would be interesting to see the above figure calculated against an investment via a Lt Company /SPV structure and if the investor found themselves pushed in to the higher tax bracket. Mortgage affordability is anothe rvery important piece of the jigsaw investor need to look at carefully so that they can evaluate the impact of mortgage choice on their tax bill.

    Reply to this comment
  2. JonahJonah04 July 2017 15:37:23

    Graham: surprised to see you cite the "extra tax liability" as capping out at ?560. It doesn't - the extra tax is exponential, as it is levied on the income (i.e the inflating level of rental income you use in your example). The tax CREDIT caps out at ?560, no question, but the tax payable rises inexorably in your example. Taking a 40% tax payer (or even worse, someone who is a basic rate tax payer but dragged into the higher rate band by this incredibly penal tax) would be paying an EXTRA tax liability of c. ?2500 vs the position before G Osborne imposed this change, per annum. Makes a bit of a dent in the bottom line, approximately halving the "Nett Profit after Deductions"

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