The Housing Market in 2025: A Game of Two Halves… and a Tale of Two Londons

 

If you told me in January that by summer I’d be fighting to get viewings on well-presented, well-priced flats… I’d have laughed you out of the room.

But here we are.

The first half of this year and the second have been two entirely different worlds — and if you’re a seller right now, you need to hear this.

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Q1: The Golden Quarter

Coming back from the Christmas break, the market was electric.
I launched six properties on Boxing Day. By mid-January, five had sales memorandums in place. Solicitors were instructed, deals were moving, and most completed before the stamp duty deadline.

Homes didn’t just sell. They flew.
Buyers were motivated, serious, and ready to transact. Even ex-rental flats from landlords looking to exit the buy-to-let game moved quickly — a quick clean, good presentation, and they were gone.

It felt like the market had momentum. And then…

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Q2: The Brakes Slam On

By February, you could feel it. The energy had shifted.
Stamp duty changes were looming, and first-time buyers — the heartbeat of the housing chain — stepped away.

I kept listing properties, pricing them to sell, presenting them beautifully… and nothing happened.
Not tired, unmodernised flats — I’m talking about high-quality, move-in-ready homes. Still, the buyers didn’t come.

March? Quiet.
April? Worse.
By June, Rightmove reported a 41% drop in first-time buyer demand.

When first-time buyers disappear, the entire chain suffers:

• Second-time buyers can’t move without them.

• Chains collapse before they start.

• Properties sit on the market, gathering digital dust.

The only homes that still move? The unicorns — perfect location, perfect presentation, perfect price. Everything else? Stuck.

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Prime London: A Different Kind of Stuck

And it’s not just South London feeling it.
I network a lot in Chelsea, and the mood there is flat — and I don’t mean apartment flat.

When you’ve got a £5M, £8M house, you go with the big boys — Savills, Knight Frank, Strutt & Parker. But even they are struggling. Viewings are scarce. Offers are rarer still.

Here’s the thing: if you ask someone to take 10% off £5M, that’s half a million pounds. They’re not desperate to sell, so they won’t. They’ll sit tight until the market comes back.

And that’s why Land Registry will show average prices “falling” — because the only sales happening are at the lower end.
The £10M penthouses? They’re not selling at £7M. They’re not selling at all.

Flats are getting cheaper because they have to move. Houses are “holding value” — but only because they’re not transacting.

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The Wealth Drain

Meanwhile, rich overseas owners are packing up.
Dubai. Cyprus. Anywhere but the UK.

Why? Because the UK has turned into a hunting ground for the wealthy. Tax after tax, regulation after regulation — the political message is clear: you’re a target.

And here’s the uncomfortable truth: if Prime Central London isn’t attracting wealth, investment, and confidence, the knock-on effect ripples across the whole housing market.

If the top end isn’t moving, where does the money flow from?
Will the magic printing press start whirring again? Or will we have to face the music?

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What Sellers Need to Know Now

Whether you’re in Streatham or Sloane Square, the same core truth applies: the game has changed.

If you’re selling now:

1. Be realistic on price — this is not the market for wishful thinking.

2. Fix flaws before listing — buyers have options, and they’re picky.

3. Understand timing — your property might take months, not weeks, to find the right buyer.

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Your Move

This isn’t doom and gloom for the sake of it. It’s reality.
Markets recover — but the winners are the ones who adapt early.

So if you’ve been trying to sell, or you’re thinking about it, ask yourself: is your home a unicorn in today’s market? Or does it need a strategy shift to stand out?

I’d love to hear from you — whether you’re selling in South London, Chelsea, or anywhere in between.
What are you seeing out there? Is it the same story for you?

Let’s talk in the comments.

South London Property Market Stagnant as Stock Levels Surge

A new report has found that the south London property market is stagnant, with stock levels surging by 15% since the start of the year.

What? A slow down? But London prices only go UP!

Well here it is: the research, conducted by the House Buyer Bureau, found that there are now over 720,000 homes listed for sale in England, marking a 9% increase on the same time last year.

Rutland is the county with the most oversaturated property market, with a 26% increase in for sale stock levels compared with the start of the year. Herefordshire, Wiltshire, Dorset, and Somerset are also seeing significant increases in stock levels.

On an annual basis, the Isle of Wight has seen the largest increase in for sale stock, up 27%. Shropshire has seen stock levels increase by 25% year on year, with Lincolnshire, Herefordshire, Cornwall, Devon, Staffordshire, Worcestershire, North Yorkshire, and Nottinghamshire also ranking within the top 10. The only city bucking the trend is Bristol, where available for sale stock has fallen by 9% since the start of this year and sits some 21% below the second quarter of 2022.

What does that mean for London?

As an experienced estate agent in south London, I can tell you that this is a clear sign that the market is slowing down. Buyers are becoming more cautious, and sellers are having to lower their asking prices in order to attract offers. Does this translate to south London? Yes it does to some extent, because nationwide sentiment does have an effect on the market locally. London behaves same, same, but different. Pricing is key.

Is It Time to Sell?

If you're thinking of selling your home in south London, now may be a good time to do so. With more homes on the market than ever before, you're more likely to get a good price for your property.

Of course, there are some factors to consider before making a decision. The cost of living is rising, and interest rates are expected to increase in the coming months. This could make it more expensive to borrow money to buy a new home.

Ultimately, the decision of whether or not to sell your home is a personal one. However, if you're considering it, now may be the time to act.

If you're thinking of selling your home in south London, it's important to get professional advice from an estate agent who can help you price your property realistically and market it effectively and above all PRICE IT RIGHT! A new report from Zoopla has found that sellers are accepting bigger discounts on their asking prices in order to achieve a sale.

DISCOUNTS!

The report found that 42% of sellers have accepted discounts of 5% or more, while another 15% have accepted discounts of over 10%. This is the highest level of discounts since 2018.

The report also found that the average discount to asking price has increased to 3.8%. This is up from 3.4% in the previous quarter.

The increase in discounts is being driven by a number of factors, including rising mortgage rates and a slowdown in demand. Mortgage rates have been rising steadily in recent months, making it more expensive for buyers to borrow money. This has reduced the amount of money that buyers have available to spend on a home, and has led to more sellers being forced to lower their asking prices.

The slowdown in demand is also contributing to the increase in discounts. The number of buyers in the market has fallen by 14% in the past year. This is due to a number of factors, including the cost of living crisis and the uncertainty surrounding the UK economy.

The increase in discounts is good news for buyers, but it is bad news for sellers. Sellers who are hoping to get a high price for their home may need to be prepared to wait longer for a buyer, or to accept a lower offer.

However, the report also found that those buyers who are still in the market are committed to moving home. Sales agreed are running 8% above the five-year average, suggesting that there is still demand for homes, even in a slowing market.

Overall, the report suggests that the UK housing market is in a state of flux. Rising mortgage rates and a slowdown in demand are putting downward pressure on prices, but there is still demand for homes from those who are able and willing to buy.

If you are looking for an agent with pro-active marketing and 20 years of industry experience to get you the best result look no further! Drop me a line and let's get the ball rolling. Drop me a follow on instagram also to see the latest videos. Have you used my online valuation tool yet? Give it a go!

The merits of a periodic tenancy during a COVID Crisis

Well this is a short topic - there’s none!

As my colleague investor discovered when a portfolio he purchased (literally just a week before this all kicked off), statutory periodic tenancies allow a month’s notice from the tenants’ side, so basically it’s left him with a load of empty rooms which he can’t view during the notice period, and likely voids after this lockdown we find ourselves in.

You may need to refer to my previous video slamming periodic tenancies; personally I would never allow a tenant to go periodic because I want to retain control of when my properties might come back to the market. After all, I want the best returns. I want the easiest life, so I choose to let my properties during the peak (in terms of demand and hence price) of the year.

So what happened In this instance? A lot of these properties were let on a multi-let (room-by-room) basis, and as it happened they were initially let on a fixed term which had since expired, so they were are “holding over” on a month-by-month basis. Nightmare scenario for my friend since he received notice for about 6 rooms in various houses. All of these were young (younger than 25) professionals in Clapham and surrounds who found it a wise decision to move back home to their parents. I can’t blame them really, they have to work from home anyway, so their parents’ place is likely to be more spacious and since we can’t go out and see our friends or have to travel in to work it’s a great cost-saving exercise.

What about fixed term tenancies?
Well erm my stance (pro-fixed term) isn’t fool proof. I for one have a few multi-lets where some overseas nationals have returned home because they have no job at all, nor a prospect of finding a job in the foreseeable. I’m talking baristas, cleaners, labourers, retail employees. Thankfully this presents a very small percentage of my portfolio.

What does this mean for the market - bigger picture?
Well for one, all these professionals that have moved home - when life gets back to normal and people need to go back to the office on a daily basis all they will need to move back. Perhaps this will create an even higher level of demand this summer, especially the earlier part? That said a further, and longer-term, gap has been created by the lower skilled demographic, leading to less people in the market overall. However... these two types of tenants are unlikely to be chasing the same (type/priced) property.

So if you are renting out cheap and cheerful to the lower skilled you may well struggle - to get people in for one and secondly at the price that you want; even though historically I’ve found the cheaper it is the quicker it goes, regardless of quality. I think once people in first white collar jobs return the demand in that segment will settle back to normal. As for demand right this second - well it’s lockdown, people just aren’t moving at all really, not even viewing unless they’re absolutely desperate. Longer term, I foresee a significant decrease in demand for the lower end stuff due to the exodus of young, lesser skilled immigrants. This will pick up when the economy starts moving again; when will that be? The building/cleaning trade, retail etc - this will all take time to get going again. People aren’t going to be spending £3 on a coffee that frivolously in times of “austerity.” The word “recession” has already been mentioned on social media frequently, and let’s face it, it’s here - even though a recession is defined as a fall in GDP for two successive quarters.

So what will actually happen is anyone’s guess - I’m sure however we’re going to see demand come back this summer, to what extent is uncertain.

Do stay tuned for property investment tips/tricks and updates and by all means do check out the DownToSouthLondon YouTube Channel for entertaining and informative videos to help you invest with confidence! I also offer coaching on a one-to-one basis so if you are looking to get into property investing and require personal guidance then head on over to www.jeroenhoppe.com.

Comparing returns on your investments - Savings, ISAs or property?

Wow it's been a whirlwind of a month. Those of you following me on LinkedIn and Facebook will no doubt have kept abreast of the various property meetings I've been going to. I've discussed at length people's strategies when it comes to getting good returns, and I must say that there is a very wide range of investments returns that people are happy with (all dependant on the risk involved).

One key thing that came up is that none of the people I spoke to considered the "rate of payback" on their investment. By and large all of them worked on the presumption that having assets was the most preferable strategy - this is why they came to talk to me in the first place, primarily because of my asset-heavy investment strategy. My desired period of holding a property is of course, forever!

Let's however consider a few things. I had mentioned in a previous post that there are various options when investing in property - it doesn't have to be by purchasing assets per se; these are, in London, often prohibitively expensive so that strategy doesn't suit everyone. However let's assume for the sake of comparison that there is £120,000 to invest and that the risk profile of the investor is OK with using leverage to increase returns.

I've made a few assumptions of course:

1. The investor is happy to purchase an HMO style property such as one of the ones I've purchased in the last few years (refer to previous articles to read more).

2. The investor is not remortgaging at the end of the initial term to release more capital (doing so will dramatically increase returns but it gives rise to too many variables and falls outside the scope of this article).

3. I've assumed that the 15 years AFTER the Savills 5 year forecast on which I relied is a bit more optimistic (not much though) at 5% per 5 years growth. I think we can all agree that normality will return to the UK housing market after the politicians have cleared up their Brexit mess (according to Savills this will take 5 years) so my predictions should be conservative.

4. I have not factored in any increase in rents over the period. Naturally this would be by at least the rate of inflation, and in London I foresee a 5-10% year on year increase in areas of good demand. Therefore returns in reality could (and probably will be) greater than I've put on paper.

5. The Return on Capital Employed figure I use for my investments is 20% so our hypothetical property investor gets this as well. That's return on money in the deal after all expenses, so invest £120k, get £24k net before tax.

6. The rental income starts coming in at month 6, assuming some building work, refurbishment and some void for getting it dressed. Again, in practice this is much quicker but let's be conservative.

Now - returns in residential property that I propose are dictated by two things: rental income and capital growth. The latter of which can only be realised upon sale, but it can also be leveraged by drawing down some of the equity by means of remortgaging. As mentioned let's keep it slightly more simplistic: Investor parks £120k in a property and pays for a managing agent to do the repairs/maintenance/running around so it's by and large as passive as putting the money in a savings account (well, as close to that as property will get).

So the numbers: Here is what Savills says will happen with capital values over the next 5 years. They don't have a crystal ball, but let's assume by and large they are right.

Source:https://www.savills.co.uk/insight-and-opinion/research-consultancy/residential-market-forecasts.aspx

Here you have it... comparing some other forms of (perhaps shorter term) property-based investments you can see that a buy to let property really outstrips any sort of investment.

Key takeaway though is that the penultimate row of the table shows that if you hang on to the property and you do not dispose of it or refinance your return on capital will never quite reach your target of 20% per annum - especially the first year where you had significant outlay/costs and you only started receiving rent after 6 months, thereby cutting your returns in half for that year. This all changes drastically of course if you refinance after your initial term, which in the current climate I would probably recommend to be 5 years. Although the market may have only risen 4.5% on average the fact that you bought cheap and added value will raise the property's value to a point where it becomes worthwhile to extract some capital. This capital extraction means that your returns will go up in this investment, and although it won't be enough (on its own) to purchase another property you can diversify and use another investment vehicle to get better returns overall.

So.... is buy to let for you? Perhaps. Bear in mind it's a long game - it's not as passive as putting money in the bank, no - but under the right circumstances you can make healthy returns - very healthy when leveraging. If you are interested in talking further then please reach out via email and start the conversation. I have helped dozens of clients over the years and demonstrated that great returns are possible in South London - what are you waiting for? 

Video Series Episode 8/30 - 5 Steps to Successfully LAUNCH YOUR PROPERTY!

Right, so you've purchased a new property and you're getting it ready for the market top to bottom. You want to be able to sell or let this bad boy as quick as you can, so I'm going to give you a 5 step, fool proof method of launching the property on to the market so that you have a successful back to back transaction lined up - purchase, refurb/redevelopment and exit, be it let or sale.

1. Grow the demand. It's out there, just make yourself visible. Nobody wants want they don't know about. So here's what we're going to do. We're going to take our floor plan and our vision for the property and we're going to get CGIs done in order to inspire your audience and to show them what you're all about.

2. Do a video of your CGI as well, have an artist do all this for you on a platform like Fiverr.com or PPH. It will set you back £100. What will a week's void cost you? You are creating waves. You are creating a product that people would be proud of. How can someone show their friend their house down the pub? With these amazing CGIs that's how! People want to show off their latest purchase don't they? They want to show off your (maybe now their) property!

3. Start talking about the property with local agents once you've done the CGIs. They will have people in mind already, whether they are making it up to get your business or not. The good ones will already be matching applicants in their head! The best thing is when you get THEM hooked on your product and they start offering you "one-off" viewings without signing a contract... you know they're serious about getting a buyer/tenant in there with no commitment from you at that point, a WIN for you!

4. Take the marketing material you've collated yourself, picture, videos, a lovely breakdown of all the love, blood sweat and tears you put into the project and make your own marketing brochure. Even go as far as to make your own website for the development or refurbishment if you really want to go all out!

5. Turn your launch day into an event. You will have already created SO MUCH DEMAND by all of the above that success at a big launch day is inevitable. The agents have been talking to applicants already. Your fellow investors may even have mentioned it to their friends, family, tenants even. You will have an abundance of activity on the launch day, all the more reason for people to commit on the day!

If you like this video please like, comment and share and join the Clapham Property Blog community on Facebook, LinkedIn and Youtube. If you prefer old fashioned email just drop me a line or come and meet me in person at the Clapham Property Meet!

Video Series 6/30 - How chicken shops can help you identify a great investment area!

So what do chicken shops have to do with the price of fish??

Find out more in this video:

If you like this video please like, comment and share and join the Clapham Property Blog community on Facebook, LinkedIn and Youtube. If you prefer old fashioned email just drop me a line or come and meet me in person at the Clapham Property Meet!

How to add value to your Buy To Let in Clapham Day 1 - Curb Appeal!

This morning I was rather inspired to do a little mini series on lettings. A lot of investors overlook the simple things when letting their property, so I thought I would offer some value to their investments with 30 tips in 30 days. Here goes!

Day 1 - Curb Appeal

I actually recorded a video LIVE to put myself on the spot to give you some added value on my thoughts. Watch the 4min video here: (go easy, it was filmed live!)

If you don't have time to watch the video just keep reading:

Often times curb appeal is overlooked. Landlord are often too focused on the bottom line and more often than not the inside is where the money is spent, not the outside. I think this is a missed opportunity. There will be times where the front of the property is very important - tenants are waiting around, they may look on Google Streetview to check it out beforehand and there will invariably be an external photo of the property on your agent's RightMove and Zoopla advert. Do you want to turn off would-be tenants before they walk through the door? No. Invest in curb appeal, if nothing else to get them in a good mood as they walk through the (freshly painted) front door. Curb appeal counts, it's part of the overall package. They will think that if you are scrimping on the exterior, "what else are you scrimping on?" 

A green front door works miracles - see video for example. Green is "GO" in marketing speak, so it sets the right tone straight away.

Windows are key - are they in good condition? Painted? Or falling to pieces? Be honest with yourself here... Even a window cleaner before viewings start could be a big lift to the exterior.

Fence? Falling down or neatly pointed, which would give the right impression? You know the answer, don't you!

So in a nutshell the next time you start marketing your property think about the curb appeal. Would you want to step in? Is the exterior inviting you to walk inside? Think like a would-be tenant and be honest!

As always, if you are keen to start investing, or start doing something a bit more interesting with your current portfolio... Start the conversation on email. I'd love to meet you in person of course at this month's Clapham Property Meet, so do come along. Click here for tickets and more info.

Yields are attractive in South London - if you invest right!

I'm hearing a lot of my investor clients say "I'm thinking of investing my money up North for better yields." I think it's an interesting point of view of course, basing your investing mindset on a gross figure. It is true, of course, that there is an inverse relationship between gross yield and capital growth. Often times investors that are new to me me have been used to very little cash flow and, as often with period property, spates of repairs further eating into their rental profits. So, they've got masses of equity tied up in these properties and no way forward. They think that buying with gross yield in mind is the way forward.

What can I do?

If you, like most of my new clients, are stuck with lots of equity and little option to release it for further investment, then it's time to review your portfolio. What can you do to enhance the cash flow? I had a call from a fellow investor who had several properties geared at only 30%! He was very astute and was on top of his mortgages, but due to the rental stress test he was unable to release any more equity. You see, the annual rent was exactly 145% of his interest payment. That's where the problem lied, the rent was too low. Having judged the current rent vs the market rent I saw it was far below the norm. Dated? Perhaps. After a site visit I saw some improvements that could be made to this particular property in order to increase the rent the landlord could achieve. We are currently drawing up plans in order to reconfigure this property to add another bedroom, adding another 33% to the rent, even if we don't update things as we go along. We will of course. This client, once the project is finished, will end up with an extra bedroom and a 50% rent increase! As a result more money can be released upon refinance for reinvestment.

So rather than taking what (relatively) little money he had up North, where it would be more difficult to manage, would cost hours of travel to even get to purchase stage and would invariably appreciate less than a London property, he is able to raise another £100k and has added another £75k to the value of his current property. This gives him enough money to embark on another project with me. I am currently looking to source him another property where we can add value like we have done with his own property. He will refinance the project once complete, leaving him with a net return after all costs of 10-15%, or a gross yield of around 7%. a London property appreciates say 5% per year on average over the long term, so you are looking at a 12% gross yield, or about 20% return on capital employed if you were to sell the property after say 10-15 years. On your doorstep as opposed to 300 miles away.

How to buck the trend

By sourcing viable projects for my investor clients where we are able to add value - both capital appreciation and rental - they benefit from the long term wealth this brings. They end up with property within zones 2-3 London. This should prove:

1. A more liquid asset should it come time to sell

2. A more desirable asset, commanding a higher price (as a property in London always will)

3. Benefit from high rental demand as London has a bigger and more diverse economy than any other place in the UK. Both price and and the demand from tenants will be high so less voids

4. Closer to home and therefore easier to manage should they choose to self-manage

5. A high yielding property AND the benefit of capital appreciation in London

Would you like to own more property within London? Use the resources available to you? Don't know where to start? Start the conversation today on email or come down to the Clapham Property Meet this month and meet me in person. There is so much I can do for you if you want to get started or help your property investing along. I can source a property for you, manage the refurbishment and help you dress the property for the best rental returns. I have nearly 15 years experience in the South London property market. I invest locally myself, and I'm a firm believer that good, safe, sustainable returns are on your doorstep. Let me show you.

5 helpful tips on getting the best out of your refurbishment in Clapham

Any astute investor will know that one of the ways to make a profit from property is to add value by improving the property. Often times investors will look to significantly improve the property before they offer it back to the market for rent. After all, there should be some "sweat money" factored into the purchase price. So if you are buying right a £400,000 should be worth significantly more than £420,000 if you are looking to spend £20,000 on improvements.

So here's 5 improvements that will add the most value to your next refurbishment (weigh up the costs vs the extra you will achieve in rent though, each project is different):

1. Redecoration - nobody wants a tired looking property. The attraction of shiny new builds is real for tenants. The kitchens, bathrooms and all the finishes are brand new. They however do not present the best investments for landlords. If you are looking for better returns a simple coat of paint with perhaps a feature wall thrown in will work miracles. Go ahead and match some of the soft furnishings too, you'll see what difference it makes in rent. Here's an example of a bedroom I did recently. See how just adding a neutral coat of paint and tying the curtains with a simple touch light gives it a slight edge? 

2. Square footage. Can you add or re-purpose the space? This is key really. An investor client of mine recently purchased a house and by going into the loft he was able to add another two bedrooms and a bathroom (and achieve an extra £20,000 in rent). The result was that the loft alone yielded a 40% return on his money! If the floor space can't be increased can it be repurposed? For example I am creating an open-plan living/kitchen in one of my latest additions. This will add another bedroom to the property and thus increasing the overall rent by roughly 1/3. The kitchen was due to be replaced anyway, so my only additional cost will be plumbing and a letter to the freeholder for permission.

3. Kitchens and bathrooms. These are absolutely crucial for successful letting. With kitchens and bathrooms available at rock bottom prices these days there is absolutely no reason your property should not have nice, modern kitchens and bathrooms. If you would like me to help you get the very best in discounts then do get in touch. Here is a picture of the next kitchen going into one of my properties and I sourced this for under £1000 (add £800 for all the appliances).

4. Flooring. old, tired carpets are a no-no in any property, let alone if you are looking to attract professional tenants to your newly acquired property. Durability is the key of course, but it's got to look good. No point therefore in going for the cheapest, thinnest carpets - this is an investment. Have you considered something more hard wearing for communal areas and limiting carpets to the bedrooms? Wood or tiles work miracles in hallways and living rooms (or tiling that looks like wood, I'm trialling this myself so stay tuned for more on this to see how it works out - I'm optimistic). You should be aiming for £15psqm. Cheap doesn't equal nice though, so beware to choose something nice.

5. Your builder. This is key to your overall success. Having a good relationship with your builder is key. After all, it's him doing all the hard work, not you. Draw up a schedule of works - everything that you want doing. Write it down and even have it to hand to give to him at the quote stage. This will make things easier as nothing can be forgotten! Furthermore payment terms are to be laid down in writing. X% in advance if he is sourcing materials, but labour can be done weekly in arrears. Remember to allow time for him to fix any snagging, and define a time period. For example if you are supplying the materials and it's a 4 week job expect to pay him 25% each week bar the last week where you hold back 10% for a period of say 2 weeks in case of any "snags," or things that come up after he's walked out the door. If there is a particular element you are not happy with, reduce the payment accordingly, but do not withhold all the money - after all 90% of it will be done to satisfaction.

If you are looking to purchase a property with letting in mind and you would like an expert opinion then by all means get in touch. Perhaps there is an angle that you haven't thought of that could yield you better returns. Just start the conversation via email. You can also have a look at some of my recent projects here and here. Are you interested in having me source high yielding investments for you? Manage your refurbishment projects? Help you get the very best trade discounts? It's time you got in touch.

Lenders are tightening up and here's what it means for investors in South London.

Well it's been another busy month in property investing. Everyone is getting ready to tackle 2017, and by now very well underway to taking action to achieve their goals. If you are looking to invest further in property using good old-fashioned buy to let, be wary though as there are a few things to take note of...

Increased Taxes

I've discussed it before but I'll mention is again - the dreaded Section 24 (of income) tax means that you will be paying the taxman FIRST and then deducting your rental income costs. Brief example:

Old system:

£30,000 Rental profits after repairs

£20,000 Mortgage/loan interest

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£10,000 profit so tax bill based on 40% income tax = £4,000

New system:

£30,000 Rental profits after repairs

£30,000 Taxable income, 40% income tax = £12,000

£20,000 Mortgage/loan interest turns into a 20% credit = £4,000

So your tax bill is now £12,000-£4,000 =£8,000!!!! Point to note is that this will be phased in over the next 4 years, so in this example your net income will go down by £1,000 if you do nothing.

That's a whopping increase. Just to put these numbers into perspective it's probably your average owner of two flats in South London receiving a rental of £1800pcm each with a few repairs/improvements thrown in, with loans of about £400,000 on each paying about 3% interest. Could that be you?? Prepare to make less NET profit with your rental portfolio. But you're not alone. In fact, a lot of people did the same as you, kept hold of a flat as they climbed the ladder. Riding the wave of capital appreciation is now resulting in a crash landing. So seek advice and take action. One solution is to incorporate a limited company "newly poor landlord holdings limited" and transfer the flats into that portfolio. Problems arise however when you factor in Capital Gains Tax and Stamp duty, so it's likely that those costs will outweigh any savings for a long, long time (although you may be able to claim reliefs to put off the tax though). Plus of course that you need to pay 20% corporation tax on the profits and further taxes when you take the money out of the limited company. All food for thought and there is no "one-size-fits-all" solution. Seek professional advice.

Rental Stress Tests

Banks have, over the last month tightened up a little bit on lending. Whereas in the distant past a rental coverage of 125% of the interest payment would suffice (i.e. the rent was 125% of the mortgage payment), they changed it to 125% at a stress rate of 5% but now they have gone as far as to ask for 145% cover at 5% and sometimes even 5.5%. Why? Linked to the point above it's simply because taxes are on the increase and mainstream buy to let lenders are covering themselves, adding in several more layers of protection to make sure that payments are met.

So what's next for landlords in Clapham?

I remain unconvinced that incorporating and transferring the existing portfolio will be the best solution. If you are in Liverpool, Leeds, Sunderland, the outer Hebrides where property prices perhaps have not moved very much then CGT will be minimal, as will SDLT, Incorporating is the right thing because your rental income will be taxed at 20% (Corporation Tax) instead of 40-45% (depending on your income tax bracket). I will take a wild guess and assume that if you're reading this you will be in a good, stable job, enjoy what you are doing and are simply investing on the side. Very wise of course. But if you are looking to invest further I would certainly do it in a limited company going forward. It's a very straightforward process and shouldn't take more time than thinking of a name for a limited company and a few pounds to register it at Companies House. You can, of course, file your accounts and so forth yourself but if you are going through the trouble of reducing your taxes you will want to ensure you get the most benefits you can. I have a brilliant accountant of course, and she ensures I get all the tax breaks I can. If you'd like her details just drop me an email and I'll introduce you, no problem. Going forward I'd highly recommend seeking out a whole of market broker to enable you to get hold of some of the best deals from lenders that don't deal with the general public such as Kent Reliance, Precise and Paragon.

If you are a landlord and/or investor looking to maximise your portfolio profits then get in touch. I offer a range of things from portfolio reviews to site visits to give practical advice tailored to your property. Start the conversation by email.

Links for further reading on the matter:

The Property Reporter

MortgageIntroducer.com

Mortgagefinancegazette

The Telegraph