Williams Thompson Solicitors

Will 2016 see the but-to-let bubble burst?

This is heresy to some estate and letting agents and those heavily invested in such properties will deny the possibility of a downturn. But that is the nature of investment bubbles.

Christchurch and Highcliffe are no exception to the buy-to-let phenomena. Whilst more up-market properties may take time to sell, those at the lower end are being snapped up as they go on the market. My conveyancing solicitor colleagues are amazed how many purchasers of such properties are now older would-be landlords.

Investment bubbles arise when people invest large sums because others are doing so without the experience or knowledge of what is really involved. Whilst buy-to-let sounds easy, in truth it’s hard work. Finding tenants, dealing with property issues and coping with bad tenants is tough.

Further, the Government now sees landlords as an easy untapped tax target. First there are the new tax rules coming into effect in 2017 which reduce tax relief on mortgage payments- a new rule that is little understood but will have a significant effect on landlord’s incomes.

More immediate is the stamp duty hike from April 2016. This is much easier to understand as it means the payment of several thousands pounds more if the purchase is after 1st April. My conveyancing from anxious potential purchasers desperate to proceed quickly. The last time a significant stamp duty change occurred there was a market spike and house prices fell soon after.

There are only so many good tenants out there looking to rent and whether it be over supply. The effect of adverse tax rules or the long anticipated interest rate increase that causes the bubble to burst, my fear is that 2016 could be the year that sees it happen.

If you are thinking about investing yourself, my advice is to proceed with caution.

Peter Watson-Lee

Christchurch Chamber of Trade and Commerce

 

www.williamsthompson.co.uk This e-mail address is being protected from spambots. You need JavaScript enabled to view it 01202 484242

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