Although the value of any investment might of course go down as well as up, investment in property in the UK in recent years has proved sound.
This has led to buy to let investment – where the property is purchased with the express purpose of generating a steady stream of income from rents as the principal return on the investment.
The financial viability of such ventures, of course, depends upon the income from rents exceeding the cost of purchasing and owning the property. Recent changes in the UK tax regime with respect to such investment have had the effect of increasing those operating costs and, so, reducing the commercial viability of buying to let.
According to the website LandlordZone on the 22nd of August 2016,rents in the UK private rental sector have continued to rise, suggesting that investment in regular buy to let accommodation remains an attractive proposition.
What landlords have to face, however, are the changes which begin to be phased in with effect from 2017, with respect to their tax liabilities. Essentially, owners of buy to let property will no longer qualify for tax relief on the interest paid on their mortgages.
Whilst private sector rents may continue to increase, therefore, the operating costs represented in servicing a mortgage may make investment in regular buy to let property less viable.
An important exception
An important exception to these changes in the tax regime applies to mortgages used for the purchase of holiday lets – including holiday let mortgages for expats.
Provided the investment is made on a commercial basis – where income from rent is intended to exceed the cost of owning and maintaining the accommodation – and that the premises are furnished when let, tax relief is still granted on the mortgage interest paid.
The tax authorities consider furnished holiday lets to be furnished to a standard suitable for everyday accommodation and available for short-term lets of no longer than 31 days at a time, for at least 210 days of the year. For the remainder of that period, the property may be let on longer leases, occupied by the owner and his family as a second or holiday home, or simply left unoccupied.
The expat dimension
The only potential fly in the ointment is that a holiday let mortgage may be difficult to arrange, since many regular lenders seem averse to granting such loans. That difficulty may be compounded if you are an expat.
There are specialist mortgage brokers, however, with the expertise and experience to secure holiday let mortgages for expats. The loans may be from those generally small, less well-know and difficult to find lenders who are in a position to tailor a mortgage to suit the particular needs and circumstances of the expat.
Taken into account, for example, is likely to be not only the commercial viability of the property investment, but also the expat’s net worth, his connections with the UK and the source of a verifiable income.