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Em Morley

Radical Changes Required to Fix Theresa May’s Damage, says Housing Hand

Published On: July 22, 2019 at 9:36 am

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Categories: Landlord News

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The majority of landlords are paying 40% tax on their rental income (plus VAT) due to tax changes, according to Housing Hand. This means that the Government is profiting hugely from Generation Rent.

Landlords and agencies may have been vilified in the past for keeping young people locked into renting for longer, but not enough has been said about the Government’s lack of motivation to fix the housing market, says.

“Theresa May has not only failed to fix the broken housing market but has dealt it repeated blows during her time as Prime Minister. And it’s easy to see why. Despite her rhetoric around encouraging home ownership, the government is unlikely to turn down the near-50% tax that it receives from rents in the UK,” commented Terry Mason, Group Operations Director of Housing Hand.

The Tenant Fees ban has meant that letting agents and landlords can no longer charge fees to tenants, but it is likely to drive rent prices up, just as it did in Scotland. As fees are increased by agencies for landlords, landlords will also increase the rent they charge to cover such fees. Both have shouldered their fair share of blame for the situation.

However, Housing Hand says that the Government is doing little to step back from the additional tax that will pour into its coffers as a result.

Terry Mason also commented: “Though a well-intentioned idea, the Tenant Fees Act has made the broken housing market worse. It comes on top of successive changes that have served to drive landlords away from the private rented sector. What we’ve actually been left with is a growing pool of tenants fighting for a reduced number of rental properties. The result? Again, rising rents, as demand increasingly outstrips supply.”

The UK-based guarantor believes that only radical changes will fix the damage done by Theresa May’s government. Reverting to taxing landlords on their profits instead of their income would be the first step. This could see landlords returning to the market, rebalancing supply and demand and lowering rent prices as a result.

The next step would be to address homeownership. Housing Hand advocates a government-backed deposit scheme, where individuals contribute a 2% deposit and the Government loans them the other 8%. This could move a whole generation into their own homes. Housing Hand has suggested that an appropriate insurance, such as a reimagined mortgage protection insurance scheme, could easily be paid for by homebuyers, due to their mortgage payments being so much lower than their current rental payments.

Having more people buying would lead to builders stepping up their game, as it would reduce their reliance on buy-to-let investors and line up a whole generation of would-be owner-occupiers.

Terry Mason said: “As a result of years of mis-management, the new Prime Minister has a huge challenge on his hands when it comes to the UK’s housing sector. The leadership contenders’ promises will mean very little unless the government dares to make some radical decisions. Sadly, with so much to gain from the growth of Generation Rent, it seems unlikely that any big changes will be made anytime soon.”

Scrapping Section 21 will Squeeze the Vulnerable, says RLA

Published On: July 22, 2019 at 8:21 am

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Vulnerable tenants at a higher risk of rent arrears will be hit hardest by Government plans to scrap Section 21, says the Residential Landlords Association (RLA).

One of the largest ever non-government surveys of landlords and agents recently took place, revealing that 84% feel these plans to get rid of Section 21 repossessions would make them “more selective” about which tenants they let to.

The RLA conducted this survey and has warned that this will lead to landlords being less open to accepting applications from those considered to be at a high risk of rent arrears or causing damage to a property. The concern is that in the case that a problem did emerge, they would not be able to swiftly regain possession.

Una, a landlord in Leeds, told the RLA: “If Section 21 were to go I would only rent to professionals because I don’t want to be left in a situation where a tenant is in my property who cannot afford to pay the rent.”

There has been speculation that many Section 21 notices are used for no reason or even as an act of revenge by the landlord, but this research disproves such a theory.

Of those landlords who did use this method to repossess a property, 84% had done so because of tenant rent arrears. 56% had used it because of damage to the property, and 51% went down this route due to anti-social behaviour.

Furthermore, rather than landlords seeking to evict tenants of their own accord, 26% said that their tenant had requested it in order for them to seek social housing and avoid being classed as intentionally homeless.

There are two routes currently available for landlord repossession:

  1. Section 21, which enables a landlord to regain possession at the end of a tenancy and requires two months’ notice to be given, but a reason is not needed.
  2. Section 8, which allows landlords to repossess a property under a number of set grounds, including rent arrears and anti-social behaviour.

Section 8 will still be an option, but it is known to take a long time to be processed, during which a problem tenant may not be paying rent or could potentially be causing a nuisance to other tenants or neighbours. Landlords’ dissatisfaction with the courts has been reported, citing numerous delays and problems with regaining possession from tenants for anti-social behaviour or rent arrears.

As it stands, the average time it takes from a landlord applying to court to a property being returned to them is an average of over five months.

Plans for a consultation by the Government has been announced, in which an alternative as-of-yet undefined system will be discussed.

David Smith, Policy Director for the Residential Landlords Association, said:“Whilst no landlords should ever abuse the system, it is only right and fair that they can repossess properties swiftly and with certainty in legitimate circumstances.

“At present, only Section 21 provides this certainty. If the Government is to get rid of it, landlords should have the same level of confidence and certainty about repossessing properties in cases such as rent arrears, anti-social behaviour or wanting to sell the property.

“Without such confidence landlords will simply leave the market, making it more difficult for the growing number of people looking for a home to rent.

“Secure tenancies will mean nothing without the homes to rent being there in the first place.”

Highest Rental Yields to be had from University Cities

Published On: July 19, 2019 at 9:03 am

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It has been revealed that almost all of the UK’s top 20 best postcodes for buy-to-let rental yields are nearby a university campus.

This information comes from new research released by lettings platform Howsy. The statistics provided by PropertyData calculated 12 months’ rent divided by the average property price in each area. It then ranked these postcodes from the highest rental yields to the lowest for buy-to-let landlords.

It has been determined that 17 out of the top 20 on this list are within easy reach of a university campus.

Number one on the list was BD1 in Bradford, providing a key student accommodation investment for landlords. The city centre is a short walk from the University of Bradford and average house prices currently sit at £54,938. Average monthly rent prices are at £468, meaning landlords look to receive a yield of 10.2%.

Other areas on the list include SR1 in Sunderland, with a potential yield of 9.4%, and L7 in Liverpool (close to both the University of Liverpool and the Royal Liverpool University Hospital), with a potential yield of 9.3%.

Calum Brannan, Founder and CEO of Howsy, commented: “It’s no coincidence that the vast majority of postcodes with the highest rental yields are found within a stone’s throw of a university campus, and for a safe bet on your investment, these are the places to look when buying.

“While students aren’t always the ideal tenants, they bring consistent demand via an annual flow of new arrivals, the void periods are generally much shorter, and the supply-demand imbalance puts the landlord in control when choosing a tenant.

“As a result, these hot pockets of buy-to-let demand offer landlords an investment option that is almost certain to provide a healthy return despite slower market conditions and uncertain times in the buy-to-let market. Couple this with Howsy’s 24/7 customer service that seems to resonate well with student tenants and their nocturnal lifestyle and you’re onto a winner.”

Final Report on New Regulatory Proposal for Letting Agents Released

Published On: July 19, 2019 at 8:24 am

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The final report on the proposal of a new regulatory framework for letting and managing agents in England has been released.

Based on the Regulation of Property Agents Working Group (RoPA)’s recommendations, the final report has been compiled by the Ministry for Housing, Communities and Local Government (MHCLG).

The aim is to raise the professional standards in the industry, with the introduction of a regulatory framework recommending the following is introduced:

  • A new system of regulation;
  • A new licensing regime;
  • A mandatory code of practice for all property agents;
  • Mandatory qualifications;
  • Transparency and use of leasehold and freehold charges;
  • A new regulator;
  • Assurance and enforcement under the new system.

Neil Cobbold, Chief Operating Officer of PayProp, comments: “The industry will be eager to know how a new regulator will work alongside existing trade bodies and redress schemes. Moreover, the new system will need to be clear so agents and agencies know their responsibilities and consumers can understand their rights and routes to redress.

“The introduction of mandatory qualifications and licences required for operating could be successful in identifying those agencies which aren’t professionally committed to the industry and prohibit them from operating. Qualifications for all agents, no matter their experience, could also help towards achieving the ‘level playing field’ the government has been striving to create.

“However, it is important that the qualifications agents are required to have are spelt out as soon as possible so that agencies can plan for the training time and costs to reduce the impact on their business.

“Meanwhile, a Code of Practice will help to establish minimum standards for agencies and work as a benchmark for consumers using their services.

“That being said, the additional cost of funding the new regulator through an ‘industry levy’ on agents and agencies is not specified, so there could be concerns this cost could drive up landlord fees. In turn, this could drive more landlords towards the short-lets sector, which will not be regulated, or to self-management, which will not initially be covered by the new regulator.

“As we move forward with these proposals, agents’ key considerations will revolve around associated costs, time taken for implementation and how existing workforces and new recruits will be affected in the future.

“This historic shake-up can be positive for agencies, adding an additional layer of professionalism and contributing towards improving the public perception of the industry.

“The next crucial step for agents will be to start preparing for change immediately, as the report indicates that the regulator could be in place in two years. The government will need to implement the new system clearly and efficiently, with capacity for effective enforcement.”

Mark Hayward, Chief Executive of NAEA Propertymark and David Cox, Chief Executive of ARLA Propertymark have also commented on the final report: “This is a significant moment for those in the property industry and a huge leap forward in stamping out bad practice. We have long called for Government intervention to ensure everyone in the industry is licensed, adheres to a strict code of practice and holds at least a Level 3 qualification (A-level). 

“Following the extensive considerations by the working group, it is now for Government to create the structures for a properly regulated industry, whose professional knowledge and skills are trusted and respected by all.

“These are substantial changes, which will require agents to start making preparations now to ensure that they are well placed for when these proposed qualification requirements are introduced. 

“While we anticipate that the need for property qualifications will be phased in, we advise agents to get ahead of the competition and to stand out by adopting the new requirements early. Propertymark can support you and your organisation both with getting qualified and preparing for regulation.”

29% of Private Renters Struggle to Pay Rent, English Housing Survey Figures Reveal

Published On: July 18, 2019 at 9:08 am

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The results of the English Housing Survey 2017-2018 for the private rented sector (PRS) have been released. The findings include:

  • 29% of private renters said they found it difficult to pay their rent
  • 14% of private renters who had moved had been asked to leave or faced rent increases 
  • 63% of private renters report having no savings. Just over a third (37%) of private
    renters reported having some savings. 11% of private renters had savings of
    £16,000 or more
  • Over half (58%) of private renters thought they would eventually buy a home. Of the 42% of private renters who did not think they would eventually buy a home, most (68%) said this was because they could not afford to do so

Dan Wilson Craw, Director of Generation Rent, has commented: “High rents are making life miserable for private renters. Today’s figures reveal that 3 in 10 find it difficult to pay their rent, forcing them to choose between going hungry or getting into debt.

“Even for those who can cover the rent, escaping the sector by moving into home ownership is a long way off – nearly two-thirds cannot save and just 1 in 10 have more than £16,000 in the bank. 

“With millions of people growing older in private rented homes, the next Prime Minister must make it an acceptable long term tenure. That means protecting tenants from unfair evictions and rent rises, and doing what it takes to make rents affordable.”

The English Housing Survey report also highlights that 65% of homeowners aged 65+ live in an under-occupied property, which is not helping the already limited UK housing market, in regards to available property for sale. 

Private Finance mortgage consultant Chris Sykes has commented on this statistic: “The baby boomer generation is holding onto at least 4.8 million spare bedrooms across the UK, with 67% of households aged 65+ currently living in an under-occupied home with two or more spare bedrooms. 

“The cost of stamp duty is discouraging these empty nesters from downsizing, leaving them in homes too large for their future needs, but too costly to give up. As a result of this inactivity at the top end of the ladder, housing stock is limited and the UK property market is somewhat paralysed.

“To free up housing stock and re-energise the property market, we’re calling on the UK government to introduce a stamp duty exemption for last-time buyers. Minimising the tax liabilities for older generations could encourage and enable them to finally downsize, freeing up housing stock and thereby helping to fix the supply issue that has hindered the market for so long.”

The full report can be read on the GOV.UK website: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/817630/EHS_2017-18_PRS_Report.pdf

House Price Growth has slowed, According to Latest ONS Index

Published On: July 18, 2019 at 8:20 am

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The latest House Price Index (HPI) by the Office for National Statistics has been released, revealing that the average property price in the UK for May 2019 was £229,431.

Highlights also include:

  • House prices for property in the UK grew by 1.2% annually in the year to May 2019, down from 1.5% in the year to April 2019.
  • House prices for property in the UK grew by of 0.1% between April 2019 and May 2019, compared with a rise of 0.4% during the same period in 2018.

John Goodall, CEO and Co-founder of buy-to-let mortgage specialist Landbay, commented: “Considering the wave of political and, by extension, economic uncertainty that the UK has been riding since the start of the year – the fact that prices are still growing at all underlines the strength of the housing market. The old cliché rings true; people will always need somewhere to live.

“However, the reality is that affordability remains an almost unshakeable concern for first-time buyers despite the recent uptick in wage growth. Regionally, this is reflected in London by the recent cooling of demand in favour of areas like the East Midlands and East Anglia where prices are rising much faster.

“Prospective buyers should take heart that despite the recent fall in residential transaction volumes, there is significant appetite for mortgage lending from lenders as a collective. The fact that house price growth is slowing means now could well be the time to act.”

Paul Stockwell, Chief Commercial Officer of Gatehouse Bank, has shared his thoughts: “Falling house prices in London have become the norm, but the small annual decline in the North East points to low transaction volumes having an impact on the market across England. 

“It isn’t the first time prices fell in the North East this year, they also took a small dent back in February and March, but declining buyer activity is almost certainly forcing sellers to drop their prices.

“Brexit uncertainty is playing a role, with buyers still in the dark over which way the wind is going to end up blowing, but affordability is almost certainly dampening price growth. 

“If the annual price growth drops any lower, we will see the lowest figures in six years, and with price falls registering outside London and the South East, this is starting to look more likely. Further price falls may be needed to bring buyers back to the table, especially while they wait on Brexit to be decided.”

The next UK HPI will be released 14thAugust.