Many home owners look to invest in the property market in the buy-to-let sphere as a profitable financial venture. Whilst buy-to-let and the renting market is a lucrative and profitable way to make money, it can be a gamble. Here’s some advice for those who are thinking of investing in the property market:
The current state of the market
The UK housing market is in the middle of a boom. House prices have been steadily increasing for the past decade and with no predicted economic changes in the near future, this looks set to continue to increase even further over the next decade. The National Association of Estate Agents have even gone as far as to predict that house prices could rise by up to 50% over the next ten years. However, this boom has led to young people, especially first time buyers, being priced out of the market with there being too much of a high demand for housing and not enough affordable housing available.
Stamp duty tax
As a result, and in an attempt to combat the problem, the government have introduced a stamp duty tax on buy-to-let property’s in a bid to prevent people from buying second homes and buy-to-let properties so that there is more housing available for young people. This 3% increase comes into effect in April and has prompted many potential landlords to start buying their second property now before they have to pay the extra fees.
So, when is a good time to buy?
Now is a really good time to buy to beat the introduction of the tax if you’re wanting to invest however you need to be in a very financially stable position to ensure the sale goes through completely before April. The plans to introduce the tax could result in house prices being slightly higher than normal at the minute as investors begin to flood the market before the tax is introduced.
Where should I buy?
If you’re wanting to invest in a buy-to-let in a desirable area such as London, now is a really great time to buy. House prices in the capital tend to always increase in value year on year and if the predictions are right in ten years’ time you could benefit from having made a substantial amount on your property. Despite this, it’s probably not worth investing in a property in an area that has less potential. For example many landlord’s in areas of the north east look to be hit hard by the stamp duty tax as rent prices are already very low in the area and how prices increase little year on year.
The best thing to do if you’re thinking on investing is do research. Research the best and most profitable locations in which to buy a new buy-to-let home and do the calculations to see if with the next stamp duty tax being introduced would it still be worth pursuing your property investment venture.