A buy to let property in London is going to be “very difficult to make viable” in the near future unless purchasers borrow at a high 60 per cent loan-to-value, a mortgage chief is warning.
Martin Stewart, managing director of mortgage broker London Money, says buy to let everywhere is going to become particularly difficult in the next few years as mortgage interest tax relief is pared back as a result of George Osborne’s fiscal reforms.
Until this change “tax relief on mortgage interest payments was one of the more attractive aspects of buy to let, particularly to those looking at property investments as an alternative to pensions” Stewart writes in a blog.
However, he says the reform may indirectly improve the robustness of the capital’s private rental sector.
“The upshot of this is that the rental sector will eventually become a market of well capitalised, sensible and prudent landlords helping to keep a much needed private rental market ticking over” he writes.
But he warns that without very substantial deposits, buy to let may become significantly less attractive to many putting their money into London.
“It’s likely that the ‘new normal’ will see individuals approaching their accountants long before they start peering into estate agents’ windows ... buy to let may have lost some of its lustre. What we can do is discuss possible alternatives to buying an investment property or ways to finance what they hope to buy” he writes.
“Remember, too, that when Osborne talks about austerity what he really means is that the train has run out of gravy; so don’t expect a helping hand from him along the way.”
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Totally agree, but unfortunately not many people have the courage to come out and say this. The good news is that there are plenty of places outside London that still offer scope - lower prices, better yields and good rental prospects too. (Look ooop north for starters!)
What absolute nonsense. So buying property to rent out is suddenly not viable? Why do literally 1000s of people do it then? A massive sweeping generalisation if ever there was one.
Yes. It's suddenly not viable when the rules change to make it so. 1000s of people HAVE done it, but would struggle to continue to do it under the new rules.
If buy to let wasn't viable before Brexit where are we now? What are the odds on a drop in capital values and rents? Who would jump into the market today when they could adopt a wait and see strategy? The market is going south!
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