Whilst this may have been fuelled, in part, by the rush to avoid the stamp duty hike that came into effect on 1st April, this is by no means the only factor in the growth we’ve seen.
Much of it is due to the fact that we’re able to deliver funds much more quickly than a mainstream lender, and speed is of the essence when it comes to bagging the best property bargains.
At the auction house, the speed with which a specialist finance provider like us can deliver funds is key to our success, since timescales are notoriously tight, usually with just 28 days or less to complete the purchase, or risk losing the property and the 10% deposit paid on the day.
In one recent example, we completed a buy-to-let loan in just 24 hours! The client needed a £60k loan to fully refurbish a property in his portfolio. The property was not tenanted, due to its condition, and required renovation, so they wanted a specialist buy-to-let lender who would consider the application based on the projected rental income.
The client needed the funds quickly for the work to be carried out, as he had new tenants keen to move into the property, and we were able to deliver the funding within just one day.
Despite the tax changes which have been put in place to restrict the buy-to-let sector, it seems that property experts are already finding ways to deal with the three changes imposed last year: a cut of up to 25 per cent on the tax relief available, a three per cent hike in the stamp duty payable and the loss of the wear and tear allowance.
According to recent reports, many savvy investors are now looking to move their property investments to limited companies, which will allow them to continue to deduct mortgage interest from their tax bill as a business expense.
For higher rate taxpayers, this will reportedly be a huge saving, as they will pay corporation tax which will be reduced to 19% in 2017, then 18% in 2020, instead of income tax.
However, some accountants have pointed out that, although there may be areas that this could deliver savings, it’s not quite as simple as it sounds.
Whilst incorporation will avoid the restriction on mortgage interest relief and mean that capital gains tax is incurred at the lower rate, it will not be an answer to the additional stamp duty. Also, whether or not the business can be transferred tax free into the company may be dependent on how actively the landlord is involved.
There are certainly pros and cons and it’s certainly worth exploring in detail before going to the trouble of setting up a limited company.
Now that the first of the Chancellor’s three changes have come into effect, it will be interesting to see how the buy-to-let market reacts in Q2.
That said, given the current indications, it’s doesn’t look likely to stagnate, but rather that property experts will create new frameworks to take the additional costs into account and explore different ways of working so they can continue to expand their property portfolios.
