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Are UK buy to let investments now useless for expats and non-residents
| Published: | 15 May at 6 PM |
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Recent news that the pension shock and other budget announcements have cooled London’s soaring house prices are sowing seeds of concern amongst expat buy-to-let investors.
The killer news was that, from April 2015, non-residents and expats will no longer be able to rely on a loophole which has exempted them from capital gains tax on property sale profits. In addition, expats planning to draw down their entire pension fund at maturity and invest it in UK property are now having to think again as regards expected returns.
Given that property values are increasing by somewhere between six and eight per cent per annum, number crunching is revealing that by-to-lets are not the pot of gold they once were. It seems that projected yields versus property prices are now unbalanced for all but those willing to buy bargains in poor condition and use extra capital to do them up before renting.
Land Registry figures show the average UK property price at £170,000, with figures from rental management agencies showing a gross annual yield of 5.2 per cent from a basic buy-to-let property. Obviously, the figures don’t take into account agents’ fees, maintenance costs, insurances, replacements, times without tenants and estimated costs of disputes.
If the property wasn’t a full cash purchase, mortgage costs also need to be factored in. Working on a rental base of, say, £736 per month, letting agents charges average 15-20 per cent of the monthly amount and repairs and maintenance average 10 per cent, not allowing for major expenses such as a central heating boiler breakdown or replacement.
Insurance costs vary according the property itself, its condition and its location, and can be high in areas with increased violent crime and burglary rates. Landlord licensing and registration costs apply in some areas, and the intention of the government to levy capital gains tax on all property which is not the owner’s main home seems to be the last straw for would-be buy-to-let expat investors.
The killer news was that, from April 2015, non-residents and expats will no longer be able to rely on a loophole which has exempted them from capital gains tax on property sale profits. In addition, expats planning to draw down their entire pension fund at maturity and invest it in UK property are now having to think again as regards expected returns.
Given that property values are increasing by somewhere between six and eight per cent per annum, number crunching is revealing that by-to-lets are not the pot of gold they once were. It seems that projected yields versus property prices are now unbalanced for all but those willing to buy bargains in poor condition and use extra capital to do them up before renting.
Land Registry figures show the average UK property price at £170,000, with figures from rental management agencies showing a gross annual yield of 5.2 per cent from a basic buy-to-let property. Obviously, the figures don’t take into account agents’ fees, maintenance costs, insurances, replacements, times without tenants and estimated costs of disputes.
If the property wasn’t a full cash purchase, mortgage costs also need to be factored in. Working on a rental base of, say, £736 per month, letting agents charges average 15-20 per cent of the monthly amount and repairs and maintenance average 10 per cent, not allowing for major expenses such as a central heating boiler breakdown or replacement.
Insurance costs vary according the property itself, its condition and its location, and can be high in areas with increased violent crime and burglary rates. Landlord licensing and registration costs apply in some areas, and the intention of the government to levy capital gains tax on all property which is not the owner’s main home seems to be the last straw for would-be buy-to-let expat investors.
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