February 15th, 2017. Ben Lloyd
Could Buy-to-Let Changes See HMOs Surge in Popularity?
This year is set to be a challenging one for buy-to-let (BTL) investors. There will be the introduction of the comprehensive interest coverage ratio (ICR) and affordability tests by the Prudential Regulation Authority (PRA). Then there is the introduction of a stamp duty surcharge and the cuts to BTL tax reliefs.
Will there be far reaching implications and how will the investment landscape change over the coming year? Here are a few of our thoughts.
The World of Buy-to-Let is Changing Around Us
One of the major changes coming in this year are by the PRA which is looking to transform underwriting standards, something that the regulator hopes will put customers in a stronger position and prevent surprises such as changes to interest rates. That’s great news for customers, but will this affect the sentiment among landlords?
There are also the changes to stamp duty which have seen an additional 3% added for BTL investors and the severe reduction in mortgage relief that can be claimed against tax.
It’s unknown what the long-term effects of these changes will be, however with the traditional buy-to-let market in shock, investors may turn elsewhere for a short time. An alternative which has been talked about quite a lot in the industry is HMOs.
We may also see an increase in the number of bridging and development finance loans being taken out as BTL investors look toward developing, converting or refurbishing their current portfolio to maximise on rental incomes rather than buying additional properties.
Converting a property from a single family dwelling to a house of multiple occupants allows you to gain a higher return, however this isn’t something you should jump into lightly. There are more restrictions on HMOs and if you’re not located in a city for students or young professionals you may struggle to find tenants who want to share.
How Can Pure Commercial Finance Help?
Although these changes may seem daunting to the novice investor, we believe BTL will remain an important consideration for the experienced investor. So, with change abundant, we’re endeavouring (even more than usual) to get to know our customers’ real needs and financial status, so we can find you a competitive deal that works for your investment goals.
Our brokers help find finance that is built around your requirements and we really value our relationship with you, the customer, so please get in touch with our team of experienced brokers to discuss your funding options today.
Article By Ben Lloyd
February 15th, 2017
Ben is the Director and Co-Founder of the Pure Group and Managing Director of Pure Property Finance.
Following a career in Barclays, where Ben was in the real estate finance team for 8 years, he decided that the market needed a more forward-thinking type of commercial brokerage so founded Pure Commercial Finance (now Pure Property Finance), the first company within the Pure Group.
Ben has extensive experience across the real estate sector and has participated in over £2bn of real estate transactions during the course of his career.
Ben oversees the general strategy at Pure Group and works with the senior leadership team to drive the Group forward. Ben is also on the Executive Committee of FIBA.See more articles by Ben