IBTimes UK editor-in-chief George Pitcher interviews Edmund Shing, global equity portfolio manager at BCS Asset Management, about why falling UK house prices do not neccessarily mean that now is the best time to buy property.
In this week's article, Shing mentions the myriad costs and risks a new buy-to-let investor faces, such as:
- transaction costs, most importantly stamp duty when buying a property, 3% or more on properties worth over £250,000
- refurbishment costs, typically underestimated by new home buyers by £3,000 on average
- initial furnishing costs, if letting on a furnished basis
- the vacancy risk, where there is no rent coming in but costs to bear
- default risk, where the tenant does not pay rent owed on time but refuses to move out
- maintenance costs
- annual service charges and ground rent on leasehold flats
- managing agents' fees for finding tenants, higher if also managing the property
- income tax to pay on rents received (less allowable costs) and potentially capital gains tax too on gains when reselling the property hopefully at a higher price.
He adds that the negative seasonal effect - where house prices grow much faster during spring and summer, and often fall back over winter - mean that now is a good time to sit on your hands and let sellers sweat pushing up average discounts of achieved to asking prices.