"While, for instance, the availability of the stamp duty ‘holiday‘ will be clearly welcome news for landlords, they will still go through their normal process, research and due diligence before making their decision."
What we do however tend to find in the buy-to-let sector, specifically when it comes to purchasing but also refinancing, is a much more motivated borrower demographic.
By that I mean landlord clients, on the whole, do not simply enter the market, ‘take soundings‘ when it comes to adding to their portfolios, and quickly decide it is not to their liking.
Potential residential clients can, in my experience, be much more inclined to do this – for instance, they read that prices are on the up, decide that now might be a good time to sell and move on, only to realise that their property is nowhere near the value they put on it, or the type of property they want to buy is more than they anticipated.
Or, and this is a point that gets overlooked, some people simply like viewing properties and are quite willing to spend their free time doing this, without necessarily having any real motivation to follow through with a transaction.
Landlords tend not to have such an approach, which means that by the time they’ve engaged with their mortgage adviser they have a very good feel for what they want to do, and the next step is to ascertain what their finances look like to do this, what they need to do, and what is available to them.
So while, for instance, the availability of the stamp duty ‘holiday‘ will be clearly welcome news for landlords, they will still go through their normal process, research and due diligence before making their decision.
That doesn’t, of course, mean that landlords won’t recognise the potental tax saving they can make here, and perhaps be looking to bring forward a purchase in order to maximise it, but it will still need to be a purchase which works on its own merits alongside the saving.
In a sense we potentially have two competing forces at play here – clearly, the stamp duty saving available is positive, but there’s also indicators that house prices have pushed on again since lockdown and landlords will be conscious that they don’t want to be overpaying for property, especially if the wider macro-economic impacts of Covid-19 are to be more negative in the near future.
That said, there should also be an understanding amongst landlords of the longer-term potential for property asset valuations, especially given the post-Brexit environment we will have from next year, and (fingers crossed) the deal that should be achieved.
Now I’m aware that a lot of media commentators are suggesting ‘No Deal‘ is increasingly likely, however I prefer to take the point of Savvas Savouri, chief economist and partner at UK hedge fund manager, Toscafund Asset Management, who believes a deal is perhaps more important for the Eurozone than the UK and therefore believes there is a lot to be gained from making a deal, regardless of whether brinkmanship takes negotiations right to the wire.
Sav believes a deal will be done and also believes that the UK will continue to see a growth in population – large numbers of EU citizens have the right to live/return to the UK despite Brexit, plus overseas students will return in increasing numbers – and that, coupled with a growth in employment and a requirement to house all these individuals, and with housing supply continuing to lag behind demand, that will mean we’ll continue to see a growth in demand for the PRS and an increase in property asset values.
Again, when it comes to timeframe, we’re not talking over 12-18 months, but the far longer-term scenarios that landlords active in the sector will be planning for. Which may well provide another motivation for landlords, particularly professional ones, to act over the course of the months ahead.
Advisers therefore have the opportunity to engage with these motivated landlords and to work with them to ensure they can get the properties they want, at the prices they wish to pay, and also make the stamp duty saving which comes with a limited timescale.
If you can be pivotal in helping them achieve this, you’re likely to have a client for life who recognises the benefits of advice and what it can allow them to achieve in the property market. That is not to be sniffed at and should ensure advisers are fully motivated themselves to deliver in the buy-to-let advice arena.
