Londoners mostly positive about buy-to-let investments

A new survey has revealed Londoners are mostly positive about the possibilities of buy-to-let as an investment with 82 per cent believing it would be a good investment.

The survey, which was carried out by Perrys Chartered Accountants and covered the whole of the UK, also revealed that uncertainty due to Brexit (33 per cent) and increased tax and stamp duty rates (38 per cent) were the main reasons why Londoners are put off investing.

 
Unsurprisingly, the most likely type of property a Londoner would consider for a rental investment would be a flat or apartment, with 46 per cent of respondents picking this option, a higher number than any other region with only Scotland coming close. 30 per cent would choose a two-bedroom house and 17 per cent a house with three bedrooms or more. However, only 4 per cent would choose a one-bedroom house, probably reflecting the better value for money which a flat or apartment would achieve. 
 
There’s no doubt that stamp duty is a major issue, as although it is zero for properties under GBP125,000 (for those who do not own any other property), a prospective purchaser is unlikely to find anything in this price bracket in London. Other reasons cited fear that there wouldn’t be enough return on investment from a rental property (15 per cent), and 14 per cent stating that difficulties obtaining a mortgage would probably be an issue.
 
The largest factor influencing Londoners in a decision to buy a rental property would be a reduction in stamp duty and other relevant taxes, with 43 per cent of respondents citing this as their biggest encouragement, a higher proportion than anywhere else in the country. 30 per cent mentioned a better choice of mortgage products as being an inducement, with 26 per cent more likely to consider an alternative to the traditional rental market such as Airbnb.
 
45 per cent of Londoners thought a buy-to-let property could be utilised as a pension, which is fewer than respondents in all other areas of the country other than Northern Ireland, which could be explained again by the higher proportion of younger people concentrated in the London area. 32 per cent would like to use buy-to-let income as a replacement for their current income, while just 24 per cent saw it as an inheritance for their family.
 
Donna McCreadie, who is a buy-to-let tax specialist at Perrys, says: “Buy-to-let is still a solid long term investment despite what current market indications and the drop off in purchases might suggest. It’s interesting that the younger generation still sees it as a way to plan financially for the future. However, there are many things to consider before jumping in, including stamp duty charges, how income tax might be affected and what the return on the investment is likely to be.

“Investing in a property is a long term plan rather than a quick fix to financial freedom so it’s important to gather as much information as possible and speak to a professional tax specialist and mortgage advisor before making a commitment.”