Landlords will have to work harder to find areas where property prices are not over inflated with better rental yields, according to buy-to-let lender Foundation Home Loans’ commercial director, Simon Bayley.
He argued that the 3% Stamp Duty surcharge and the MCD will make it harder to profit for some landlords.
Accidental landlords, or those who let their property due to unforeseen circumstances such as being unable to sell, might have problems getting access to a mortgage as they may not pass lenders’ expected affordability tests.
However the amount of choice of funding available, including limited company buy-to-let mortgages, means access to finances ‘is not really going to be the issue’, Bayley said.
He argued that it will come down to making sure sums add up, which has everything to do with the geographical areas in which landlords choose to buy.
“While the moves on restricting tax relief and increasing Stamp Duty will create some barriers to entry, they are not insurmountable and the main consideration for successful investment in 2016 will be the mantra of ‘location, location, location’.
The 3% Stamp Duty premium will apply to second homes and buy-to-lets from 1 April this year and was announced by the Chancellor in his November Autumn Statement.
In the Summer Budget last year, the Chancellor also announced a cut in the tax relief landlords can claim, lowering the maximum from 45% to the 20% base rate. The changes will be phased in from April 2017.
However, the buy-to-let market will continue to be very competitive this year, which can only benefit landlords and their advisers, Bayley said.
