- 4th Dec 2015
The Autumn Statement and the Buy-to-let conundrum
The smart money goes where the best returns can be found. And with property prices and rental income on a seemingly continual rise of late, a lot of it has gone into the buy-to-let market. A second property has almost become the investment aim to aspire towards – but that looks set to change. A lot of cash primed for property could be set to take a new direction, if the recent Autumn Statement has the desired effect, that is.
Those would-be property moguls – looking on with envious eyes at the landlords already reaping the rewards – might be ruing a missed opportunity with the upcoming changes announced, but they might also be glad to not have had the chance to take the property plunge just yet.
In addition to withdrawing the ability to offset mortgage interest, the rate of stamp duty paid on the purchase has been hit by a 3% increase. So, in terms of both income generation and capital appreciation, the proposition has certainly taken a hit.
And while the benefits of directly holding property may have been reduced, the corresponding risks have remained quite static. And the risk at the forefront of a landlords mind right now may well be liquidity. Liquidity gives you options. And those aspiring towards that first buy-to-let may well be grateful for that right now.
A share can be sold in a second, a fund in a day, a house in a…ah, well that depends on your solicitors.
So, if the buy-to-let boom is somewhat being deflated – where does the smart money go now?
The problem is, if this was an easy answer, it would have already happened. And when a smart investor doesn’t know the answer with complete certainty, they diversify. Otherwise they’re just guessing.
Diversification is a key principle for any investment portfolio and committing all your savings to the property sector flies directly in the face this. You open yourself up to risks such as void rental periods, negative equity and government intervention at a magnified level.
While the Autumn Statement will clearly be seen as a negative for the buy-to-let investment community, it may well be positive in terms of opening up the idea of investing elsewhere. A diversified investment portfolio can generate both regular income and the opportunity for capital growth – these combined traits are not exclusive to housing. And can be achieved with much less direct involvement. And at a much lower cost.
The key lies in ensuring that exposure to property, and any asset type for that matter, is at the right level for you and your own personal circumstances. This is where a taking professional investment advice can help.
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