Is Vanilla buy-to-let dead for Expats?

May 9, 2019

The last few years have heralded numerous changes in buy-to-let, from regulatory to taxation for both domestic and Expat investors. Further impending changes will create additional challenges for landlords and letting agencies alike, including:
The Tenant Fees Act in force on 1 June, making it illegal to charge all but permitted fees and limiting deposit amounts, leading to rising landlord costs.
Section 21 – the proposal to end the ‘no fault’ tenant eviction grounds and CGT changes for overseas buyers.

Threat or opportunity?

Property Investing Risk vs Reward MatrixThe big talking point is Section 21. It has already been made more difficult to be used by landlords unless certain pre-conditions have been met, like proving a Gas Safety Certificate has been issued to the tenant prior to moving into the rental property, as well as the MCHLG ‘How to Rent’ booklet. So the flexibility of Section 21 has already been constrained.

Section 21 is a victim of its own ‘dubbing’, often referred to as ‘no fault eviction’ to distinguish it from other notices like Section 8 where justification is required. Charities like Shelter have picked up on this and vilified it, and its use, without necessarily understanding the way it is used and applied.

If the changes are made in conjunction with Housing Court Reform and a beefing up of Section 8, then it could make sense. But the Ministry of Justice has limited funds for setting up dedicated fast-track housing specialist courts and it is unclear in what form Section 8 changes might be made.

These regulatory changes may – on the one hand – serve to ‘professionalise’ the role of a landlord, by tightening the procedures, but in so doing putting off the accidental landlords and part-time landlords. So some might exit, creating a buying opportunity for portfolio Landlords and investors. One thing is certain, all of these new regulations have some serious repercussions if they are not fully respected and the new conditions adhered to, so all types of investors and landlords need to sit up and take note.

There is even more reason to think the industry will witness more fallout from all the regulatory changes, given we are only just starting to see the effects of the Section 24 tax changes. There is a time lag as they bite into income, and more landlords will be reviewing their portfolios.

Other changes for Expats and overseas owners of UK property

For overseas investors, the time allowed to pay Capital Gains Tax (CGT) on any profits made on the sale of an asset, has been shortened alongside that of Stamp Duty Land Tax (“SDLT”). SDLT reporting and payment is now 14 days (for both UK and non-UK) form the previous 30 days, following the effective date of transactions on or after 1 March 2019.

There is also a mooted SDLT 1% surcharge for non-residents buying residential property in the UK, which would apply to both purchases by individuals and company entities.

But it is not just vanilla buy-to-let under pressure….

HMO – Houses in Multiple Occupation

Since 1st October 2018 there have been more restrictive regulations around Houses in Multiple Occupation, heralding more restrictive room sizes, as part of the Mandatory and additional Licensing rules. Breach of these conditions can lead to hefty penalties and indeed Section 21 cannot be served unless the HMO house is in order either.

PDR – Permitted Development Rights

Councils, architects, social housing providers and charities are urging the government to reconsider measures that enable homes to be built outside the planning system and review existing measures that allow home builders to bypass the planning process when converting offices or other commercial buildings to residential use. The groups argue that such measures — under which more than 42,000 homes have been built in the past three years — prevent the construction of thousands of affordable homes, which councils would normally require as a condition of planning consent.

What does this mean for you, the Expat investor?

In the early 2000s, having some of your savings in property seemed like a perfectly valid way to invest for the future and build a decent alternative retirement pot. Few expected to see the tax or political tide shift so much. However it is a time to be on top of your game and know what the latest regulations are. These are not just restricted to vanilla buy-to-let, but other forms of property investment too. There are still opportunities in buy-to-let as long as you think carefully and plan ahead. And there are other options in shorter term managed lets which deliver high yields even in the South East. So whatever your chosen property strategy, keep on top of things and revisit what you are doing often.

If you want to talk through your plans and get clarity then please get in contact by telephone +44 (0)1932 849 536 or contact us

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