The attraction of buy-to-let is warning for institutional and individual investors due to the hostile tax system, according to lettings agency chain Winkwork.
Mortgage interest relief changes, scrapping the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have been just some of the changes making things challenging for landlords.
And now investors are faced with the fresh challenge of rising mortgage rates.
Due to the current situation Winworth said institutional and individual Investors are refocusing their efforts by investing in multi-use buildings.
Adam Stackhouse, head of development and commercial investment at Winkworth, said: “That’s partly down to the taxation structure in this country.
“With multi-use buildings, entry costs are lower with a reduced rate of stamp duty. They are very tax efficient during ownership and it’s a lower level of capital gains when you look to sell the property. There are also inheritance tax benefits as well.”
Stackhouse called for a review into the VAT rating on buildings under construction to accelerate regeneration of areas, especially to help conversions into multi-use buildings with the combination of retail, office and residential uses.
He added: “We need to see the 5% VAT rating extended beyond listed and heritage buildings and applied to a regeneration/benefit to the community type assessment model.
Reduced VAT levels may harm the government in the short term but it would speed up the creation of these hybrid buildings and bring renewed energy to city centres.”
Currently the business rates burden means businesses are effectively incentivised not to have a high street presence, according to Winkworth.
Dominic Agace, Winkworth’s chief executive, called for reduction in business rates.
He said: “It seems odd that businesses are incentivised not to have a high street presence.
“We want to encourage local communities, independent shop owners, and small businesses.
“They create pleasant environments, which is good for everyone, and we should be supporting them.”
“Expensive business rates deter people from setting up on the high street, which is a shame.”