Investing in English Property: Will it Work For You?

Although we’re an Edinburgh-based company, our services are available to all buy-to-let investors. Our clients come from every corner of the globe, and it follows that they’re looking for opportunities wherever they occur.

Portolio have taken the decision to expand into the English property investment market with our unique approach. To ensure that we continue to deliver at the highest level, we now have a highly experienced member of staff based in England.

So, to coincide with our expansion into the English market, I felt it was high time that we took a look at what’s what with our biggest neighbour when it comes to investing in English property.

Is the English buy-to-let market that different?

In some respects, yes it is. We have written recently about some of the differences between England and the rest of the UK with regards to the private rented sector (PRS) 

These differences revolve largely around the different legal and regulatory regimes between England and the devolved governments, however there are also differences in methods of selling and taxes which it’s sensible to be aware of.

Size

The PRS in England is the biggest in the UK, although with a population of nearly 59 million people, that shouldn’t be any surprise. That’s more than ten times the population of Scotland. All those people need a lot of homes.

The PRS in England represents some 4.1 million households, compared with around 344,000 in Scotland. That’s four times the size of the market north of the border, which is another reason that investing in English property could be attractive.

Regulation

Increased regulation is, or will, affect landlords and property investors throughout the UK. At present, Scottish landlords may well feel that they are more heavily regulated than elsewhere, but there are changes afoot everywhere.

English landlords and investors will see changes in the government’s white paper, ‘A fairer private rented sector’.

It’s aims are as follow:

1. All tenants should have access to a good quality, safe and secure home.
2. All tenants should be able to treat their house as their home and be empowered to challenge poor practice.
3. All landlords should have information on how to comply with their responsibilities and be able to repossess their properties when necessary.
4. Landlords and tenants should be supported by a system that enables effective resolution of issues.
5. Local councils should have strong and effective enforcement tools to crack down on poor practice.

The National Residential Landlords Association (NRLA) have set out their response to these proposals and are seeking an open and clear dialogue with the government.

Propertymark has questioned the same plans, seeking clarification from the Dept. of Levelling up on a number of key issues.

In Scotland, many reforms are already in place, driven by the Green Party currently in coalition with the Scottish National Party (SNP)

Over the past few years the Scottish Government has established a direction of travel with regards to the PRS which is not inherently favourable to investors and landlords.

Changes to the tax regime and rent freezes which affect the PRS alone have caused a degree of concern.

Since no business benefits from uncertainty, the fear of what might come next from the Scottish Government is likely to have more impact on the sector than what they actually do.

John Blackwood, CEO of the SLA said in our end-of-year blog The Scottish Property Market in 2023 – Predicting the Impossible? “landlords are struggling to cope with the increasing burden of new legislation and the cost of living rises…”.

Tax

With a devolved administration, Scottish property taxes are slightly different to those in England.

The broad sweep of personal taxation as it applies to earnings, capital gains and corporation tax are the same north and south of the border. However specific property-related taxes differ.

In Scotland when purchasing property you will be subject to LBTT (Land and Buildings Transaction Tax). This is the current equivalent of stamp duty. Where a second or subsequent property is being purchased, ADS also applies.

Additional Dwelling Supplement (ADS) is now levied at 6% of the purchase price of additional properties. There is an exception for purchases of six or more properties in a single transaction.

In England, Stamp Duty Land Tax (SDLT) is payable on property purchases. The rate varies depending on the purchase price, information on those rates can be found here.

For landlords and property investors, looking to buy additional properties, further taxes are payable in the form of additional dwelling supplement to the standard rates of stamp duty.

Short-term lets

Unlike Scotland, which has now introduced a licensing system for short-term lets, there are few such regulations in England. There are notable exceptions, the 90-day rule in London is one, but by and large, only normal safety regulations apply.

There exists in England a provision to impose selective licensing, the decision on whether this is necessary lies with local authorities. It’s not strictly analogous with the scheme in Scotland as it has broader aims.

Yields

It will come as no shock to learn that yields in England are as diverse as they are north of the border. TrackCapital published an extensive map of yields in 2022.

As you can see, across the country they range from 2.2% in St. Albans to 11.3% in parts of Nottingham, so doing your research is as important here as anywhere else. 

Legal system

If you’re considering investing in English property be aware that English property law has some significant differences to Scottish law. Probably the best-known feature of property sales down south is gazumping.

This describes the situation where, having accepted an offer, the seller then breaks the agreement in order to accept a higher offer for the same property. This happens only rarely in Scotland, and is usually dressed up as something else.

The Scottish seller may claim a sudden change in circumstances, or legal problems to divert attention from the real reason for dropping out. In England, there is no need for such pretence.

Contrary to popular belief, enforcing a breach of contract claim in Scotland is difficult, and seldom worth the cost or effort, but the general approach is that once an offer is accepted, the deal is done.

If you’re using the services of a property buyer to find properties for you (off-market sales), this is less likely to happen but you should still be aware that until contracts are signed and exchanged, nothing is binding.

Landlord’s responsibilities in England

Just as in Scotland, there are regulations that lay out the responsibilities of landlords to their tenants. These are clearly expressed by the UK government, and are broadly similar to those in Scotland.

Notably lacking is the requirement to register as a landlord unless you are renting out a house in multiple occupancy (HMO). If you’re considering investing in HMOs additional regulations apply and you should make yourself aware of them.

Investors in England also need to look out for selective licensing schemes which have been implemented across England in order to raise standards.

Landlords of properties within designated selective licensing areas must register themselves and their properties, must provide compliance information and enable the relevant local authority to inspect the property.

Registration can be as much as £500 per property, therefore it is important to understand selective licensing. Our resident expert in the English property market will be happy to guide you further on selective licensing.

More information can also be found on the NRLA website: Selective Licensing Schemes | NRLA. 

Advice from the property pros

In many respects, the considerations before you decide to invest in buy-to-let property are the same wherever the property is located.

There is also an attraction, and a lot of good sense, to diversifying your portfolio, whether that is simply different types of property or different geographical locations. You can do that in Scotland, or you could look further afield.

We often suggest that before making a major decision, you should seek professional help, and in this case, we’ve taken our own advice to heart! Although the UK buy-to-let market is similar there are sufficient differences to justify specialist advice.

So, in order to expand our services to our clients, we have teamed up with John Forth, who is based in County Durham. John has 25 years experience in buying, selling and letting property in England, as well as being a senior representative of the NRLA. John is very happy, to offer local assistance and expertise should you wish to consider investing in English property.

We’ll continue to promote the Scottish property investment market, it is after all where our knowledge lies, but if you’d like advice concerning opportunities south of the border, we can assist you there with confidence, courtesy of John.

In summary…

I hope you’ve found this investing in English property blog an interesting read. We appreciate that taking a decision to invest in a market you’re not familiar with is quite a big step, so as with all matters concerning property investment, we want to help.

If you would like advice or guidance through the property jungle, wherever you find it, we’re always happy to discuss your needs and goals, please get in touch for a free consultation.

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]