There have been several governmental and regulatory initiatives impacting landlords and investors over the past 18 months but importantly, 2018 represents the first year in which the impact of these changes will actually be felt in the shape of their tax bill.
There have been several governmental and regulatory initiatives impacting landlords and investors over the past 18 months but importantly, 2018 represents the first year in which the impact of these changes will actually be felt in the shape of their tax bill. Shawbrook has undertaken research demonstrating that the consequences of a shifting tax regime and the PRA-led changes to affordability have perhaps not been fully understood, but when the financial impact crystallises we may well see the property investor community take action.
Rental increases are one response, and we are also likely to see landlords looking more closely at Ltd company structures. What we have already begun to see is a slowdown in momentum – particularly on purchases - as investors consider next steps carefully against the backdrop of recent and continuing political uncertainty. What is perhaps safe to assume is that the political landscape will cause investors across the UK to continue to “wait and see” as opposed to looking at any significant growth plans for 2018.
It is important to mention that the response may vary according to the two newly categorised investor types. Last year we saw the PRA draw a distinction between “portfolio” and “non-portfolio” landlords and these groups are likely to differ in terms of their strategy moving forward. Non-portfolio landlords may well be deterred (depending on their overall level of debt) from expansion in this space, and may look to sell in the first instance if not exit altogether. The larger portfolio landlords will certainly look at their existing investment strategy, but could well seek to take advantage of opportunity to buy given the decreased competition and a slowdown in property values.
As a specialist lender active in the portfolio space, we would encourage investors to be wary of chasing yield to compensate for any decrease in activity or financial performance across their portfolio’s. Some of our most successful customers focus on a particular area of the market, developing experience in one niche prior to looking at other asset classes or regions. They maintain a sustainable approach backed with specialist advice rather than jumping up the risk curve in response to external factors outside of their control. It is important to note that in spite of the impact of any regulatory or government-led change, arguably the biggest challenge remains the fundamental lack of UK housing stock that continues to drive the need for a robust Private Rented Sector.
AboutShawbrook Bank is a specialist savings and lending bank which launched in October 2011. In March 2012 Shawbrook acquired Singers Asset Finance to extend its lending offer to SMEs. This was followed by the acquisition of Centric Commercial Finance in 2014.For SME business customers, Shawbrook offers commercial property finance, asset finance, invoice finance and savings products.For personal customers, Shawbrook offers a range of competitive savings products, secured loans, and unsecured loans through its retail partners. Shawbrook is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Find out more at www.fca.org.uk or www.bankofengland.co.uk/pra