Whether you hold property for long-term capital gain, or you derive an income from a buy-to-let portfolio, investing the wealth you earn from playing rugby into bricks and mortar could be an effective strategy.
Of course, like any other financial instrument, the property market is often in a state of flux and can change quickly. Indeed, from rules and legislation to events outside of your control, property prices can rise and fall over time like any other investment, and you may need to constantly adapt to new circumstances.
More recently, uncertainty in the market appears to be driving landlords in particular away from property investments. According to FTAdviser, almost half of landlords are exiting the property market.
Whatever reason you have for investing in property, this movement could be relevant to you. It might present reasons for caution in the market over the next few months. Equally, there may be opportunities for you to exploit in a market sell-off.
Find out why landlords are doing this, and what it might mean for you if you have or are thinking about starting a property portfolio.
Changes to legislation, mortgage rate increases, and tax changes have pushed landlords to sell
FTAdviser reports that 47% of landlords have already sold some of their properties, or plan to do so over the next year. Primarily, their reasons for doing so revolve around legislative changes, with:
- 56% identifying the new renters (reform) bill as their main motive
- 52% saying that new rules around energy efficiency standards would be a reason to leave the market.
Other reasons included rising mortgage rates, increased arrears in rent payments, and tax changes driving landlords to sell up.
In many ways, the landlords who have already started to sell their investments have been somewhat proven right. As you may have read in our other article looking at what key announcements from the recent Budget might mean for you, the Stamp Duty Land Tax (SDLT) surcharge on second properties has increased from 3% to 5%. So, buying rental properties is now more expensive than before.
Furthermore, the chancellor increased Capital Gains Tax (CGT) rates, meaning that the tax bill you face when selling property could be significant, especially if you are a higher- or additional-rate taxpayer.
This immediately increases the tax burden for landlords selling their properties, and as property prices rise over time, so will the associated tax bill when selling.
Similarly, we explained what the renters (reform) bill could potentially mean for you and your property portfolio in a previous article, and how it could affect your position as a landlord.
Additionally, a previous FTAdviser report from August suggests that landlords will struggle to meet the government requirement for all rented properties to have an Energy Performance Certificate (EPC) of band C or above by 2030.
At the current rate of change, estimates suggest it would take 18 years for all privately rented homes to meet the necessary EPC criteria.
As a result of all of this, you can understand why landlords might think that now is the time for them to exit the market.
You may need to make changes to your properties to comply with new rules
Your initial reaction to this news could well be that you think you need to sell your properties too. But, before you do, it is worth taking a beat and not reacting impulsively. By taking your time, you can objectively assess whether what is happening in the property market is detrimental to you, or if you could continue as you are with minimal disruption.
For instance, some of the questions you might want to ask yourself could include:
- Do my properties meet the EPC requirements? If not, how much would I need to spend to make them compliant with the rules?
- How could the renters (reform) bill affect me directly? Would this involve a change to the way I manage my portfolio? Could I outsource the management of my properties to a third-party company, ensuring any decisions I make around renters are in line with the law?
- Have the changes to tax rules made owning property less tax-efficient for me? If so, is there anything I could do to make my portfolio more tax-efficient?
Alongside these considerations, it might also be worth thinking about whether property investments still fit your long-term strategy as a whole.
For example, if you are early on in your career and aiming to generate long-term capital growth, investing in your properties to bring them in line with the energy rules now could be worthwhile as you may well see a return on this in future.
On the other hand, if you are later on in your career or have already finished playing rugby and are using your properties to extract an income, you may feel differently. What you would have to spend to bring your portfolio in line with these rules could outweigh the income on offer.
Furthermore, the additional tax burden that landlords now face when buying and selling properties in the wake of the Budget could mean you want to explore different, more tax-efficient options for holding your wealth.
It is always worth staying across the latest changes and ensuring that your wealth is optimally organised for achieving your goals during your playing career and beyond.
You may be able to find opportunities amid a landlord exodus
One other aspect you may want to keep in mind is that if other landlords are panicking and exiting the market quickly, this may present opportunities for further investment.
As landlords sell, it might free up housing stock in areas that you would be interested in buying in. You could even be able to negotiate favourable prices if these individuals are looking to leave the market quickly.
Of course, some or all the concerns above could still exist during this period. So, you may have to balance up whether these opportunities are worth it, relative to the outlay you might have to make to ensure you meet EPC requirements, for example.
Regardless, when the market is in flux like this, it is worth keeping your eye out and seeing whether you can capitalise on property sales over the coming months.
Get in touch
If you need support managing your wealth as a professional rugby player, then please do get in touch with us at DBL Asset Management.
We know and intimately understand the challenges rugby players face in organising their finances. Email enquiries@dbl-am.com or call 01625 529 499 to speak to us and find out how we could help today.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
The Financial Conduct Authority does not regulate tax planning, and buy-to-let (pure) and commercial mortgages.
Think carefully before securing other debts against your home.
