What impact will the next Government have on property investment?

27th April 2015 by Select Property

of May’s General Election, both domestic and overseas property investors will also be closely watching proceedings and the impact any new government will have on their property investment.

Housing and the private rented sector (PRS) are two areas that have been hotly debated on the campaign trail. All of the main parties vying to create a government have their own proposals and ideas, whilst some of the key proposals are mirrored in all manifestos.

So what impact could these policies have?

Below we’ve outlined some of the most talked about pledges and how they might impact on your investment:

New homes

Whether it’s to build 200,000 new homes available at 20% discounts for first-time buyers under 40 (Conservatives), or to build 200,000 each year (Labour), all leaders have spoken at length about the need to build new property for the owner-occupied sector to ensure more of those people that want to get onto the property ladder are able to do so.

However, this should have little impact on a UK buy-to-let investment. This is because there will always be a demand for quality rental accommodation in the PRS. There has been a complete generational shift in Britain, a traditional home-owning nation, and more people now prefer the flexibility that long-term renting provides. For example, 25% of 16 to 34 year olds aim to have 12 jobs in their career, and being tied down to a mortgage would make this restrictive.

Rent caps

Surely a cap on monthly rental rate will impact on your investment? In actuality, what some of the parties are proposing shouldn’t have too much of an effect. That’s because Labour want to introduce a ceiling on rental increases on tenancies that exceed three years, and the Green Party want to simply cap rent increases above inflation levels. As an investor, both of these proposals are unlikely to drive down your monthly returns, rather you might just see a slowdown in your annual yield growth. Furthermore, this will only serve to add more regulation to the PRS.

Mansion tax introduction

Both Labour and the Liberal Democrats want to introduce annual value tax on some of Britain’s most expensive property. If you own a house or apartment worth more than £2 million this ‘mansion’ tax will eat into your yields. However, this should only affect a small number of buy-to-let investors with property in prime locations, such as central London. In fact, it will only place a greater emphasis on regional UK property investment, something that a growing number of investors seeking better returns outside of the UK’s capital are turning to.

Council tax penalties

Nearly all the major parties want to make changes to council tax bands and penalise owners of property that remains empty for years at a time. An empty property is something most buy-to-let investors that want regular monthly returns will work hard to avoid anyway, but finding suitable tenants can be difficult for some landlords, and the threat of additional council tax penalties will only add further pressure to this. Arguably, this policy will only add to the appeal of a fully managed property investment, whereby returns are guaranteed for a fixed amount of years and it’s the responsibility of your provider to ensure that your property doesn’t remain empty.

Did you know?

An investment in student property will not be affected by the outcome of the General Election. This is because it’s completely non-cyclical and separate to the residential and commercial property markets. Already the UK’s best performing asset, any changes to tuition fees (Labour want to reduce them to £6,000 a year, whilst the Green Party want to scrap them completely), will only place a greater emphasis on quality purpose-built student accommodation, as student numbers would likely increase.

The Select Property Group have produced an investment guide on the student property market, the UK’s best performing asset. Analysing the current factors driving the prosperity of the market and providing a forecast for the future, ‘The future of the student property market’ will help you those considering a UK property investment to make an informed choice.

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