Is this the new Buy to Let Opportunity?

During a busy three year period the Government seems to have tried with varying degrees of success to cool the Housing market by making it more difficult to be a successful Buy to Let investor. The simple idea ( from not so simple people I guess ) seems to have been that if fewer people became Landlords then less property would be sold and a reduction in demand for property would lead to lower property prices.( Fat chance)

So if you are a new Buy to Let investor, or a small existing investor who intends to raise hefty mortgages to build a property portfolio, then there is no doubt they have made it less attractive by reducing the returns you can make from a mortgaged property. In fact from making it more difficult to qualify for a buy to let mortgage, to increasing the amount of tax you pay, it has been a pretty full on attack on this part of the market and these individuals.

As always though, one persons misery becomes another persons opportunity.

The low borrowing rates and the post Brexit fall in the value of Sterling has meant for some investors a golden opportunity has arisen.

If you are a large company with a significant portfolio or a foreign investor benefiting from the exchange rate you probably believe this is a heaven sent opportunity.

As a result we have the Times newspaper highlighting the fact that an increasing proportion of British property is being bought by foreign investors, and that this movement in the property market is no longer just focused in the London area, it now is impacting in the larger cities across the country. They quote one Manchester development where 93% of the units have been purchased by overseas investors, when they say overseas investors of course they include offshore funds and companies and so the numbers may not be a true reflection of the situation. Large U.K. based investors may well own all or part of these offshore companies and so may have effectively benefited from the Governments actions. As often is the case its just the small investors that pay the price of the changes.

Due to the size of the opportunity on offer to these larger types of investors it should be no surprise therefore that the messages on House prices do not reflect a mission accomplished for the Government. After an initial cooling most forecasts now seem to point to a strong recovery in the market for mortgages and House prices. The Daily Express highlighted a report from the Centre for Economics and Business that predicts a 25% increase in house prices over the next 4 years.

Not good reading for the Government, unless of course, if you take a slightly more cynical view, their intention was just to raise more taxes and cooling the market was the excuse used to do this.

It just might be though that another group of potential Buy to Let investors might be facing a significant opportunity. This time a group of small investors may be looking at a golden window for investment that I am sure was not intentionally left open.

This is because the other area of feverish Government activity over the last few years has been pension deregulation. The annuity rates on offer have been stunningly low and given the economic uncertainties of the next few years look unlikely to change. So the new freedoms have meant that many pensioners have taken control of their own pension cash. The problem is though, where can you invest it to get a decent return.

The answer may well be that they should take a look at property and a serious look at the Buy to Let opportunity. These investors have cash, something that will erode as inflation steps up and they need an inflation proof investment that gives a moderate returns in the short term and potentially a sizeable return in the long term. Cash means the mortgage difficulties and the tax changes to interest relief are no longer part of the equation and if the 25% increase in property prices mentioned above comes to fruition it is very difficult to see where an investment would give a better return. All of the normal constraints  still apply of course, the need to research the market, surveying the property  etc. however for once the Government actions may have benefited one small group of small investors.

You can be sure though that having spotted the window of opportunity it will not be long before the government takes action to close it. So if you have the cash and need an investment then it may pay to act soon.