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The Budget: How Property Investors Could Be Affected

The Chancellor George Osborne Prepares To Give His Budget To Parliament

While not the main focus of the election, the recently announced budget will have implications for UK property investors. Our experts look at the opportunities and risks in this new financial climate.

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Introduction
As the dust begins to settle on another election battle, it’s time to adjust our focus once more away from the all the political banter and hoopla. It’s time to take stock of the cards that have been dealt to us, draw up conclusions and formulate our own personal strategic business plans taking us forward into the future.

With David Cameron now looking to make waves and strengthen the nation’s economy, inevitably some of us will consider ourselves to have drawn the short straw. And whilst there isn’t a lot an individual can do to change this, it’s important that our financial issues are considered carefully and with forward thinking. It is important to understand how all the changes in policy will affect us all in the Student Property development industry.

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The Banker has called “What’s in the Box?”
With Chancellor George Osbourne currently being rounded on by many involved in the industry, the figures point towards tenants facing an impact on their finances. After slashing tax relief for private landlords from 40% to 20% by April 2022, the Government, who have been trying to boost homeownership, now say that the changes will only affect 1 in every 5 private landlords.

With the national living wage increasing to £9 per hour by 2020, it’s the scrapping of student maintenance grants which have caught the headlines. Tax relief currently based on the rate of income an individual makes have been kept in the shadows somewhat, with many investors falling into the top tax bracket. Mr Osbourne claims that such relief is costing the nation £63 billion a year. In a speech it was said that Buy-To-Let (BTL) landlords have a huge advantage in the market and this needed to be evened out.

Whilst our new Conservative government begin a new term with immediate effect, it won’t be until April 2016’s budget that we will find out for sure how the changes will affect us. As always, there will be surprises both good and bad, but with April and the appearance of the Chancellors red box still over 6 months away, it’s time to take stock and assess the potential investments before the big day.

One thing is for sure, investment in Student accommodation will continue and regardless of the party in charge, the market is alive. Tailoring the potential financial gains and losses to an individual’s requirements could be key to success.

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Hitting Students in the Pocket?
With the scrapping of Student Grants, it will be interesting to see how this will affect the thousands of students out there. With their pockets inevitably being hit and available funding being taken away, what will be the effect on the property developer with rooms to fill?

With many critics eager to voice their opinions on the opportunities for students and the financial fair play for those with families on incomes of less than £25,000, it’s inevitable that their decisions on whether or not to take on the financial baggage that comes with a university education will be affected.

Students are now graduating with a mountain of debts, many of which are just unavoidable. What we have observed previously, however, is that increased competition for jobs continues to enhance the importance of attaining a good degree, regardless of the cost. As an investor and potential landlord, the opportunities will, therefore, still be out there, with a focus on foreign students arriving with potentially more affluent bank accounts and available funds for accommodation, as well as domestic students more aware of the importance of success during their university career.

An Even Playing Field
With BTL landlords facing cuts in the amount of tax relief they can claim, the prospects look un-favourable for them, with the pendulum now swinging back towards the home owner.

The current system gives landlords the chance to take advantage of the marketplace, with a monopoly being created whereby the wealthiest find the rewards easiest to attain. As the playing field evens up a little, it’s claimed the only real loser will again be the students, who will seemingly be forced to foot the bill for higher taxes. As this is due to start from April 2017, the immediate impact might not be obvious, but it seems inevitable to most that rental prices will go up.

In it to Win it
For those willing to invest in purpose built student accommodation (PBSA), the future looks promising. It very much appears to be a more rewarding way forward, with smaller cash investments looking likely to be more profitable.

Inheritance tax figures have changed quite significantly, with the figure of £650,000 being raised rather substantially to £1 million. For those who were worried about exceeding their limits this news has come as a timely break, giving them breathing space and time to adjust their financial strategies if and when required. This also gives the individual the opportunity to expand and improve their investments knowing that they have further opportunities to commit and further their portfolio of properties.

In a boost for foreign investors, the increase in personal allowance from £10,600 to £11,000 will enable them to potentially earn more before being required to pay UK tax. This could encourage them, with a more prominent and larger influx of foreign students travelling to the UK to study to invest further.

– See more at: http://www.emergingproperty.co.uk

Paul

The author Paul