The stamp duty surcharge will increase costs for BTL properties but when you look at things over the longer term, will it really make a noticeable difference to the savvy investor?
Recently I was talking to the owner of an estate agency in Lancashire. We discussed the changing fortunes of buy to let investors and the likely impact of government changes on the market in 2016. Up until then I’d not met anyone who felt positive about the 3% surcharge on stamp duty that will be payable on all second homes and investment properties from 1st April this year, but positive he was. As he explained, this change could draw investors from the expensive south to the north, in search of properties that fall beneath the different stamp duty threshold steps in order to keep their initial costs as low as possible.
He may be right, I have heard of some investors looking to cheaper areas. However as one landlord I know discovered, buying property in an area where costs are lower, doesn't guarantee that you make more money.
This landlord had invested in a small town in Lancashire a few of years ago, buying a very stylish new build one bedroom flat. He didn’t know the area and ended up paying more than he should have. He quickly noticed that flats in the same development were being snapped up for less than he'd paid and realistically it will be a few more years before he can sell at the price that he paid let alone make a profit.
With property you need to start making money when you buy so it’s important that you know your area, how much things cost, what they rent for, who your likely tenants will be etc, this need for local knowledge is one of the reasons that over 60% of Londoners invest within 25 miles of home.
The average property value in Enfield is currently £390,000. Before April 1st the stamp duty payable will be £9,500 and after it will be £21,200 which is a difference of £11,700. In the past year prices in the area have increased by 11%, if they continue to increase at this rate then it will take less than 4 months to cover the surcharge.
If you are thinking long term is that £11,700 / 4 months enough to make you invest in an unknown area hundreds of miles away?
At Belvoir Lettings Enfield we don’t sell property, we simply use our experience to advise people as to what might make a good property investment in the Enfield, Haringey and Barnet areas, and how to successfully let their property.