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BRIT BUY TO LETS HAVE £18BN TO SPEND OVERSEAS |
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As the British residential market continues to deteriorate, many UK buy-to-let (BTL) investors could liquidize their holdings and invest into other asset classes including overseas property, according to the findings of a new report from international savings group Skandia.
It believes that a combination of the credit crunch, diminishing rental yields and falling property prices will force many of these BTL investors, whose holdings have grown fat after years of double-digit growth, to look elsewhere for a better ROI.
Skandia’s report estimates some £18billion worth of equity is tied up in BTL property across the country and this is expected to be released over the coming months as conditions worsen.
The Association of Mortgage Intermediaries also believes that the need for equity release will rise this year and has just launched a series of road shows to help facilitate this move for traditional mortgage brokers.
“With inflation rising, investors realise the need for strategies that preserve their wealth,” said Nick Poyntz-Wright, chief executive of Skandia UK. “Asset diversification, as well as taking advantage of efficient tax wrappers, is an essential ingredient of any investment strategy whatever the individual’s risk appetite may be.”
The willingness of UK landlords to sell up and buy abroad for better returns was revealed recently by UK lettings specialist Ezylet.co.uk. It found that some 19% would sell their UK property should rates rise further in 2008. In addition to this, Savills Research revealed from its survey of 400 UK BTL investors (owning 2,782 properties valued at £600million) that many would be prepared to buy overseas should pressure on returns increase.
There is also now the added incentive for UK BTL landlords to sell and invest abroad as Capital Gains Tax (CGT) was lowered from a tapering rate of 40% to a flat rate of 18% on sales of assets above £1million and 10% on sales of assets up to £1million, as of April the 6th this year.
“For the overseas property industry the tax changes are likely to be very good news,” said David Anderson, MD of taxation specialist Sykes Anderson. “The French CGT rates for example are at about 16% at its highest and, with a double taxation treaty in place, a UK landlord could look across the channel for better returns more quickly now.”
The Council of Mortgage Lenders (CML) said that there are 938,500 buy to let loans in the UK, collectively worth £108billion.
This record total is a 50-fold increase in value since 1998, when the CML first began to collect data (there were just 29,000 BTL loans then, worth £2billion). BTL loans now account for 10% of all mortgage balances, compared with just 3% five years ago.
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