A prominent investment analyst warns that the prospect of multiple tax rises makes this an uncertain time for landlords.
Alice Haine of online investment platform Bestinvest by Evelyn Partners says the market has only just adjusted to the end of the stamp duty tax break in the Spring, with mortgage approvals edging up slightly in September.
But she warns: “Fresh uncertainty around potential property tax reforms appears to be having a dampening effect on market activity. While the run-up to Christmas typically delivers a seasonal slowdown in activity, this year the effect appears to have kicked in earlier, as buyers and sellers adopt a ‘wait and see’ approach ahead of the Chancellor’s fiscal statement on November 26 – which is happening a month later than last year.
“With reports that income tax rises may be introduced, something that also impacts rental income, landlords may be feeling particularly vulnerable.
“One idea floated by the Resolution Foundation, and reportedly under consideration by the Government, is a simultaneous 2 pence cut to NI and 2 pence increase in income tax. Such a move could disproportionately affect landlords, and pensioners, who are largely exempt from NI – allowing the Chancellor to argue that the change would have minimal impact on working people.”
But she adds that there could be a silver lining for buyers – including landlords brave enough to expand their portfolios in the current climate.
“With so many property tax changes in the mix, buyer demand has slowed, but the number of homes up for sale has risen, placing those still hunting for a home in a stronger position. Some sellers, keen to move fast, may not only price their homes more competitively but also be more amenable to negotiation.
“Add in an improving affordability picture, with mortgage rates now more palatable than at the height of the post-pandemic borrowing crisis – following five Bank of England interest rate cuts since August last year – and for some, this could present a buying opportunity.”
Overall, however, Haine insist the picture is uncertain.
“The Bank of England is maintaining a cautious stance on further interest rate cuts for now, with sticky inflation still posing a problem. But if the worst of the recent price rises is now behind us, that could pave the way for further rate reductions.”
This article is taken from Landlord Today