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Em Morley

Nationwide’s July House Price Index Shows Slight Rise in Growth

Published On: August 2, 2018 at 9:24 am

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Categories: Property News

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Nationwide’s July House Price Index has now been released, and it is showing a slight rise in house price growth. Annually, there has been a growth in house prices to 2.5% in July, up from 2.0% in June.

Robert Gardner, Nationwide’s Chief Economist, has commented: “…Annual house price growth remains within the fairly narrow range of 2-3%, which has prevailed over the past 12 months, suggesting little change in the balance between demand and supply in the market.

“Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates.”

The Bank of England’s Monitory Policy Committee (MPC) is meeting today to discuss the likelihood of an increase to interest rates, which could rise by 0.25%.

Lucy Pendleton, co-founder director of independent estate agents James Pendleton, has commented on Nationwide’s House Price Index: “The housing market has bobbled up and is beating inflation but only by a hair’s breadth. However, this is only going to be the second most watched number of the week, with a likely rate rise only hours away.

“Finally something might happen which will, at least temporarily, move the conversation away from Brexit, which for ordinary homeowners who are fascinated by their house price has only ever been a fuzzy political puzzle whose association with predictions of economic Armageddon have been difficult to reconcile.

“Rate rises at this level are more psychological than any other, but even if the guidance says rates will remain low, the experts have been wrong before and buyers are prone to being overly cautious.

“Buyers think five years ahead and, when buying a house, focus on how secure their job is and what their income multiple is. They are very much aware that the end of their fixed term deals will arrive quicker than they’d like.

“The truth is that the fundamentals of Britain’s housing market have been little affected by Brexit.

“London has continued to suck in overseas cash, and the market in the capital has risen the quickest and will fall the fastest, which is what it is doing. The only people shocked by this are the same people who throw a ball in the air and act surprised when it hits them on the nose.

“A rise in rates this week is what will really focus minds, so that’s still the one to watch.”

Nationwide House Price IndexKobi Lehrer, co-founder of property investment platform British Pearl, has said: “These figures represent the best growth we have seen since January and call for a collective sigh of relief for those who feared the market was entering a terminal decline.

“Last month’s collapse in the growth figure was the lowest for five years but monthly changes can produce these lurches, before growth recovers quickly the following month as if to balance it out.

“As ever, we’re seeing a continuingly-growing population, building that can’t keep up with demand and the drip, drip of homes hitting the market continuing to hold up prices even though transaction levels have been low for a while.

“The fact transaction levels have remained stubbornly low is what says the most about this market.

“Let’s not forget that one in five properties is still privately rented. Despite the well publicised retreat in buy-to-let tax reliefs in recent years, there has so far been no great landlord exodus in historic terms.

“Conditions will continue to tighten on them over the next few years but the lack of a flood of supply created by exiting investors still speaks volumes about where they think this market is at the moment.

“While annual rises of over 5% seem to be behind us for now, investors are still finding that kind of growth if they pick wisely, and that goes for yields too. The HPIs have a tendency to mask pockets of opportunity, just as the FTSE disguises the outperformance of individual companies. It will be some comfort to investors and homeowners that a rate rise this week probably still won’t have the pulling power to force a significantly greater correction in prices lower.”

Unnecessary Complexity Added by Shared Occupancy Test

Published On: August 2, 2018 at 8:55 am

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Categories: Lettings News

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The Government’s intentions to amend the rules on its ‘rent-a-room’ scheme which enables people to earn up to £7,500 a year tax-free from letting out a spare room, is likely to ‘add unnecessary complexity to the tax system, according to the Association of Accounting Technicians (AAT).

The introduction of a new shared occupancy test is yet to surface, meaning that relief can only be claimed when the landlord is present at the property during the rental period.

Furthermore, this means that those letting out their whole property will now have to pay more tax or to start paying tax if they have not done so previously.

It is the belief of the Government that the newly introduced changes will return the relief to its original purpose and confirm its role in the wider property tax regime.

The government policy paper states: “This ‘shared occupancy’ test will provide that the individual, or a member of their household, in receipt of income, must have a ‘shared occupancy’, a physical presence for all or part of the period of the rental, with the individual whose occupation of the furnished accommodation is generating receipts.

“Those taxpayers that do not satisfy this test will no longer be eligible to claim rent a room relief on those receipts.”

But the AAT fears that the new test will add unnecessary complexity to the tax system and has other shortfalls, particularly around how shared occupancy can be proved.

Phil Hall, AAT’s Head of Public Affairs & Public Policy, commented: “This will add unnecessary complexity to the tax system. Many will be forced to complete a self-assessment tax return when they otherwise wouldn’t and many more will be required to laboriously keep records of when they were and weren’t at home.

“It’s also likely to reduce accommodation availability and choice because many “landlords” will simply choose not to rent out their spare rooms when they are not present.

“Rent-a-room relief is one of the few ways in which people can supplement their annual earnings in a relatively simple and tax efficient manner but this new test will change that.”

Hall added: “If no proof is required then the scheme will be open to widespread abuse. If proof is required, it’s difficult to see exactly how shared occupancy can be proven in practice, especially when this may relate to irregular nights here and there. Enforcement will be a nightmare and I’m not sure HMRC have properly thought that through.

“A shared occupancy test is a headache being created for what the Treasury’s own analysis states will be a “negligible” impact on tax receipts.

“The best solution for landlords, tenants, policymakers and the economy would be to drop these plans and allow rent-a-room relief to continue as it has for over 25 years as a simple to administer, easy to understand tax relief that’s available to all.”

Are Things Improving for the London Rental Market?

Published On: August 2, 2018 at 7:57 am

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Categories: Lettings News

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London

Prime Central London

It is the general consensus amongst landlords that regional markets are where you should be if you’re attempting to generate profit from buy-to-let. However, when turning the attention to London, the latest data provided by Rightmove has revealed a 0.5% increase in the number of lettings listings in June compared to the previous twelve months.

Subsequent to recent tax changes, there was a pattern of declines. However, this data presents a reverse in this pattern and may indicate pricing expectations for some that were not attained in the sales market.

Moreover, the annual rental value growth was 1.1% in June. This was the second successive month of growth following a twenty-eight-month run of declines. Rental values have toughened as supply has declined due to an increased number of landlords exploring a sale after following tax changes.

Prime Outer London

The number of tenancies agreed in prime outer London was reportedly 17% higher in the year to June in comparison to the previous twelve-month period according to the analysis of data provided by Knight Frank. The recent pattern rises began in October 2017.

In addition, the data reveals that rental values ranging from £500 to £750 per week deteriorated by less than any other price bracket in the year to June. This has been the strongest-performing price band since the beginning of the year, reflecting the relative strength of demand for lettings properties at the price mark.

Knight Frank’s Prime Central and Outer London Rental Indices have monitored the performance of London’s prime rental markets since 1995. Accumulated monthly, the indices are based on the valuation of a comprehensive basket of properties throughout central and outer London office network.

Do International Students Choose HMOs to Combat Loneliness?

Published On: August 1, 2018 at 10:05 am

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According to new research, international students are finding it preferable to live in shared accommodation, as a way to combat loneliness whilst studying in the UK.

Many students travel from across the world to the UK in order to study for their further education. Recent research from the Universities and Colleges Admissions Service (UCAS) has revealed a 3.4% increase in the number of EU students applying to study at British universities. Numbers rose by 20% for applicants from China, 36% for India and 52% for students applying from Mexico.

New figures from Housing Hand, the UK guarantor service, show that, over the last 12 months, there has been an increasing amount of guarantor applications for Houses in Multiple Occupation (HMOs) with between 3-5 bedrooms and shared kitchen and bathroom facilities.

Housing Hand believe that more international students are making the decision to move into shared accommodation, as a way to make friends more quickly and avoid feeling alone. A recent report from the BBC adds to this conclusion, with data stating that three quarters of 18 to 34-year-olds in Britain say that they feel lonely.

Jeremy Robinson, Managing Director of Housing Hand commented: “Many international students opt to live initially in shared accommodation, so they have time to make some friends and then move to a flat to share, in their subsequent years at university. It can be very daunting starting student life in a new country and we have helped thousands find their first property with our UK guarantor service.

“Before international students make an application for rental accommodation, it’s important they carry out some research into the areas around the university and potential places to live.  Ensuring there are good transport links to the campus is vital if the accommodation is not within walking distance.  The closer students live to a university, the higher the rent prices.

“If students plan to walk to the campus, they need to make sure they have checked the safety and security of their walking route. They should avoid poorly lit, isolated areas and stick to main roads that have good street lighting.

Incentives to Take in People at Risk of Homelessness Offered by BTL Landlords

Published On: August 1, 2018 at 9:36 am

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Categories: Landlord News

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In an attempt to encourage landlords with properties in Barrow-in-Furness to take in those at risk of being homeless, free gas and electrical checks are being offered among incentives.

Due to the current housing shortage, Cumbria has left some local authorities with little alternative but to consider new methods to increase the housing stock available to them in addition to those applying for affordable homes.

Barrow Borough Council has decided to address the issue of the growing housing crisis in the borough by attempting to encourage more private landlords to take on new tenants by launching a new scheme.

What are the alternative incentives being offered?

 Besides free gas and electrical checks being offered, other offers include smoke and CO2 detectors, designed to ensure that the properties are compliant with standards agreed by the Council.

Chair Committee Leader of Borrow Council, Cllr Dave Pidduck commented: “It’s an initiative that is really important. We have landlords that have short and long-term apartments.

“If we can get them [landlords] to join the scheme that will be for the benefit of the town but also for then. They will benefit working with the local council.”

Further contributing to the discussion was Cllr Brendan Sweeney, who said: “It’s a no brainer. There is a huge number of private sector houses in the borough and there are really good landlords used to taking people in. This is encouraging more to have a go at it.”

 

 

Bank of England Expected to Raise Benchmark for Interest Rates Tomorrow

Published On: August 1, 2018 at 9:18 am

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Categories: Finance News

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The Bank of England’s Monetary Policy Committee (MPC) has now discussed the likelihood of an increase to the benchmark interest rate by 0.25%. The MPC will meet tomorrow, at which point it is widely expected that the rate will rise from 0.5% to 0.75%.

Rob Clifford, group commercial director at property specialist SDL Group, has commented on how meaningful an interest rate rise would be for the property market. He said: “Many commentators have pinpointed 2nd August as the most likely date for interest rates to rise from 0.5% to 0.75%. Of course, there were similar predictions back in May, but a combination of continuing Brexit uncertainty, disappointing economic data and a decline in inflation, meant that the ‘dead cert rise’ never materialised.

“There are many competing opinions as to whether an increase will happen this time round. Back in June, the Bank of England MPC voted 6-3 in favour of holding rates. One person switching his vote to call for a rise was chief economist Andy Haldane, which was a significant move. More recently, Investment Week reported that markets are pricing a 91% chance of a rate rise, a figure underpinned by BoE deputy governor Ben Broadbent, who was somewhat combative when questioned about his own vote.

“All of this does not actually highlight 2nd August as precise date though and other data would actually suggest that a rise is still a few months off. Poor retail sales data for June, the falling pound and the collapse of high street names, including Poundworld and restaurant group Gaucho, have all created uncertainty. This has not been helped by the Consumer Price Index either, which in June came in at 2.4%, down on the forecast of 2.6%.

“If I were to nail my own colours to the mast, I would say that a rise in November, or even in 2019, is now more likely than next week. Of course, I may be wrong, just as I incorrectly predicted that Derby County would get promoted. However, regardless of which commentators are right or wrong, it’s important to consider the real impact of all of this on the sector that we work in.

“If we look at my own business, SDL and in particular our Mortgage Services division, we are currently seeing a record number of mortgage applications – up 16% year-on-year. The appetite for mortgages is very much there and shows little sign of abating. The mortgage market is by no means living in the shadow of a looming interest rate rise. Whilst the very threat of an increase does, of course, tend to generate more activity in terms of borrowers seeking fixed rate certainty, it’s important to note that our own increase in business levels encompasses remortgage, buy-to-let and traditional purchase applications.

“Consumers expect transparency and, I have to be honest, a lot of the discussions around rate rises have had undertones of ‘act now’ and some may view that as unhelpful. The reality of the situation is that a rise of 0.25% will be largely insignificant to the typical borrower and should not have a meaningful financial impact. We all know that lenders’ affordability calculations and lending restrictions over the past few years have verged on draconian, and this has meant that borrowers can tolerate some movement in rates without any real threat.

“Whatever the decision of the Bank of England’s MPC, the cost of borrowing is still exceedingly low and is still amongst the cheapest since records began. In many respects, it would be more beneficial for us all if industry commentary switched from the hype surrounding interest rates to the real barriers that are currently impeding a free-flowing housing market – and that is supply and demand and the level of initial deposit required.”