In this week's November Budget, the UK Chancellor has left us in no doubt - punish landlords and reward property developers.
Warning: this is a lengthy but important post. If you are at all involved in property investment, or thinking about it, read on.
Building good, renting bad
The UK Chancellor Phillip Hammond this week made it very clear that a key objective of this government is to build houses. And build at a rate last seen in the 1970's. Substantial funding and support is being offered to developers to build the 300,000 annual homes construction targets. We applaud this but we as investors need to adapt - and quickly.
This government strategy includes continued support for corporate "Build to Rent" (B2R) developments, which we believe puts further long-term pressure on small private landlords to compete and make a living.
"Hooray! It's not worse"
Some commentators are suggesting that because no further punitive measures have been placed on Landlords this time round, this is to be celebrated. Unfortunately the reality is, in the last two years so much damage has been done the message to private BTL investors is sadly clear: "you're not welcome".
I'm of course talking about:
- the 3% Stamp Duty surcharge for second homes (primarily affecting buy to let investors trying to grow their businesses);
- the devastating changes to taxation of mortgage interest for private landlords;
- the emergence of trial rent controls (expect this not to go away!);
- the "demonisation" of landlords in the media;
- the growing frustration of Generation Rent desperate to get on the housing ladder.
So it is clearly government policy: we can expect to see the rise of many small and medium-sized property developers, and the decline of small-scale private landlords as they are forced out financially and replaced on the whole by (albeit largely middle-class) first-time buyers.
The problem is that development funding is today still hard to find, and despite government money, this is likely to remain a major bottleneck for getting builders to build. The need for private funding for developers through crowdfunding, property bonds and good old-fashioned joint venture partnerships is going to become more important to the government vision than ever before.
"Whatever your political view on this, it would seen very sensible for property investors to recognise this sea-change quickly and look to either build property, or finance those who do."
Which team would you rather be on - the aided or the persecuted?
It is time for landlords to review their long-term strategies, especially if they do not currently include adding "asset value" by developing, extending or carrying out major refurbishments. For a growing number of property investors, buy-and-hold residential letting is no longer the Holy Grail it used to be, and may never be again.
In the light of government-backed "landlord persecution" some landlords have pledged to sell their portfolios, but may have no clear plans where to invest the profits.
As a business, our focus is set firmly in line with the government camp, at least as far as supporting development is concerned. We support small developers by connecting them with investors large and small through Property Bonds, Crowdfunding, and other collaborative ventures such as student room ownership in new purpose-built student accommodation. We have been doing this for a decade and long before it was fashionable. We believe in wealth creation through property now more than ever.
Here's one example of how investors can profit from great UK property developers today. It's possible to invest in midlands-based Godwin Capital from just £5k and enjoy double-digit fixed annual income through property plus your capital returned in two years. All without the need to lift even a hammer.