Creating alternate income streams away from the 9-5 day job is a sure fire way to ease many a differing financial circumstance. Whether reducing debt burdens, creating a nest egg for the future or working towards becoming financially independent, having something in your personal asset column which brings money into the coffers can only be a good thing. And one area, in particular, which has traditionally been seen as a relatively ësafe betí in terms of investing, has been the property market. In particular, the rental sector.
In recent times the UK rental market has become a sector of particular buoyancy for investment; attracting new buyers and considerable interest from overseas investors. Historic price rises and high demand has meant those investing in buy-to-let properties (the UK term for buying a property specifically to rent out) have generally seen healthy returns on their investment.
However, changes in conditions, particularly around amendments in the tax laws on rental properties have suggested that perhaps there is a move to curtail the excessive growth on buy to let investors, as a means to overcome the shortage of available and affordable homes in comparison to the high demand.
So does this mean that opportunity for a passive income stream in this sector is no longer viable?
In short, NO.
What are the changes?
Back in 2015 UK Chancellor of the Exchequer George Osborne announced that there was going to be some substantial tax changes in the buy-to-let market. What this amounted to was:
- A reduction in the tax relief available to private landlords on their mortgage interest payments
- Increases in Stamp Duty (a land tax payable on the purchase of certain properties) charges on new rental properties
While these changes have given cause to debate in the UK as to whether or not this will restrict opportunities for growth, all evidence seems to suggest that the market will continue to present excellent possibilities for long-term passive income for those who invest wisely.
The tax changes have meant that investors need to re-think the way in which they go about investing in the market. The biggest change has been in forcing landlords to think of their properties very much more as business investments. This has led to the more savvy investor registering their properties as a Limited Company (a small corporation).
While the tax changes affect private property investment, corporate investment is taxed differently. This had led to mortgage lenders seeing something of a surge in corporate mortgages for rental properties, as landlords seek to change their business model and protect their income streams.
The Market remains buoyant
There is a shortage in the UK property market which is in need of being addressed; a reason for these governmental measures. The reality, however, is that this is a long-term issue that simply wonít be resolved overnight, meaning the demand for good quality and affordable rental accommodation is likely to remain high for the foreseeable future.
This situation is likely to be enhanced for new investors in search of earning opportunity with the emergence of other regions away from the traditional London market coming to prominence. Major re-development and investment in cities such as Manchester and Birmingham, with their lower costs of living and rates, is attracting new business growth in these conurbations. Which is leading to major new property developments aimed at the influx of young workers moving for lifestyle and employment reasons.
So Opportunity Still Exists
It ís certainly true that the UK rental market has undergone some changes in the past 12 months, and itís also true that this has largely been in response to a growing shortage of available property to buy. However, if you are in search of opportunities to generate sustainable income, and have enough capital to outlay in the first instance, then investing in the UK rental market still offers the chance for growth and regular earnings. Treating the investments as the business assets they really are and research for suitable locations and the opportunity still exists for long-term sustainable growth.