The Private Rented Sector – It’s all About Tax
David Lawrenson of Letting Focus looks at city investors, tax and the private rented sector.
When you think about it, everything really comes down to tax.
If you are not very rich or you are not a multinational corporation with an army of accountants, lawyers and other smart people to help you, then you will not be able to avoid it. In this much, it is like death – unavoidable and rather final (though unlike death, you get to “do tax” more than once.)
Recently, the UK government and other governments around the world have been making lots of the “right noises” about tax and saying plenty about how the mega-rich and the multinationals ought to be jolly well doing the “right thing” by their countries and pay some more of this pesky tax stuff.
But is this really going to happen?
Well, in the week that this talk was at its peak, the share prices of the well known multinational tax avoiders – the Vodafones and their ilk – barely registered a blip.
And this kind of tells you that as far as the experts are concerned, all the talk is just so much hot air to be digested by the media for a week or so and then quietly forgotten about, so that the press can return to the usual hate figures – the mad hook handed clerics, the benefit scroungers and the like.
(The UK “tax take” from big corporations is sliding as a percentage of revenues or profits and has done for two decades. And it always seems odd to me that no personal finance journalist or stock market historian has ever sought to look to this to explain why there is a disconnect between big company performance and their share price).
Here Come the New Investors in Private Rent
So, what has all this got to do with property and private renting?
Well, tax gets everywhere, or at least tries to. And how much tax is to be paid really is the arbiter of whether something happens (or not).
The institutional investors are really looking at investing in the private rented sector (PRS) now – and part of the reason they are interested is to do with tax.
(And it is getting reported on too. Indeed, even “The Times” in their “Bricks and Mortar” section last week had a big feature on this. (We have been writing about this for years, of course.))
And a key reason the city big guns are looking at it more closely is that the PRS has been made more attractive to them to invest in tax-wise, due to the way REITS can be set up and how Stamp Duty Land Tax is calculated on big developments.
I predict the government will throw more tax bones and subsidies into the ring to get the city investors to get them even more interested in investing in the PRS.
And managing private rent also gives housing associations something else to do and a great way or recycling money back to more, er, “affordable housing”. (The folk who run the housing associations also get the extra remuneration that can come with managing a market priced product as opposed to one that is socially priced).
The question will be who can make the returns stack up better – the small landlord or the city investors. I am favouring the small landlords for now, but I won’t if the city investors get more help from the government.
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