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Em Morley

First Tax Introduced by Welsh Government in almost 800 Years: LTT

Published On: March 27, 2018 at 8:14 am

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Categories: Finance News

First Tax Introduced by Welsh Government in almost 800 Years: LTT

The new Land Transaction Tax (LTT) in Wales is the first tax to be introduced by a Welsh Government in almost 800 years. From 1st of April 2018, the new LTT rates and bands will replace Stamp Duty Land Tax (SDLT).

These changes to the legislation in Wales aim to simplify the tax system and make it fairer, improve its efficiency as well as focus on Welsh needs and priorities. It seems the new LTT rates are more progressive; around 90% of homebuyers in Wales will either pay the same, or less tax, and 80% of first-time buyers will pay no tax at all.

What are the new LTT rates and bands?

For residential property transactions, the new rates and bands will apply, as displayed below;

Price Threshold

Main Residential Rates

£0 – £180,000

 0%

£180,000 – £250,000

 3.5%

£250,000 – £400,000

5%

£400,000 – £750,000

7.5%
£750,000 – £1.5m

10%
£1.5m +

12%

As of January 2018, according to data from The Principality Building Society, the average house price in Wales was £179,855. Coming in at just under the lower price threshold, this means buyers of lower value properties will pay less LTT than they would have done for SDLT.

The average house price in Wales comes in at just under £180,000

The average house price in Wales comes in at just under £180,000

Mark Hayward, Chief Executive, NAEA Propertymark comments on the new LTT bands in Wales, “We’re pleased that the Welsh Government has listened to our proposals and next week will be introducing new land transaction tax (LTT) bands in Wales; house buyers will really feel the difference of these changes.

“For buyers at the lower end of the market, the new bandings mean they won’t pay any land transaction on properties worth up to £180,000; this is the value of the average house price in Wales.”

What could this mean for Wales?

As Hayward points out, it seems Welsh homebuyers will feel the benefits of the new system. With properties of £250,000 and less, the rate of 3.5% will still be less with the new LTT compared with SDLT, and properties of up to £400,000 will see no change.

It also remains to be seen as to whether the £1,100 tax saving on a £180,000 property will really make a difference to buyers. However, the new legislation does seem a step in the right direction – with these new rates, Wales will have the highest starting threshold for property tax in the UK. Improving the market for first time buyers could help many more get on the property ladder.

The changes do however put Wales at the top for the most expensive place to buy larger and non-residential property. It could be that developers of large commercial properties, such as build to rent developments, might be put off due to a tighter profit margin.

England Average House Prices Affected by Volume of Residential Gardens

Published On: March 26, 2018 at 10:17 am

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Categories: Property News

Leading hybrid agent Emoov.co.uk has undertaken research looking at the volume of residential gardens in areas across England. From this research we can see that areas with the most residential gardens contain properties that are selling for 42% higher on average than the rest of the country.

With Spring on its way, and the start of British Summer Time being marked by the clocks going forward last weekend, we will soon find ourselves soaking up the rays in our gardens once again. The weather will be getting warmer, and the flowers are beginning to bloom, so there may be more of a focused attention during a property viewing on the state of the garden.

If the perfect garden is high on your list, then you may find Emoov’s research insightful. They have looked at where contains the highest percentage of residential gardens, taking into account the total land use within that area, and how this has had an effect on property prices.

Looking at such properties with a garden consisting of 30% or more of the total landscape, Emoov have found the average price is £343,344, whereas England’s overall property price average is £242,286. This makes for a staggering 42% extra paid for the benefit of a bigger garden.

It is also understandably considered that a good up-keep of your garden can help raise the selling price of the overall property, as buyers do tend to like the idea of a house ready to move into, with little renovations required.

Founder and CEO of Emoov.co.uk, Russell Quirk, has commented: “A garden is right up there with some of the most desirable features of a property and so it’s important to maximise its property sale potential, particularly as we head towards British Summer Time.”

Looking at those areas with slightly smaller gardens, there is still a significant increase in price. A 20%-30% volume of land occupied by a residential garden has resulted in houses averaging a price of £303,545, meaning a 25% increase on the national average.

If we were to look at areas with gardens that account for 10% or less of the total land, Emoov’s research shows that even then the prices are 5% above the average in England.

Quirk also said: “While the presence, positioning and size of the garden are ultimately the factors that dictate the price premium of your property, a well presented outdoor space can be the tipping point in converting a viewer to a buyer.

“Buying a property is an emotive process and so enabling someone to picture themselves in your garden during those long summer afternoons can make all the difference.”

If you are looking to buy a property, this information is worth taking into account, as it could help you determine the reasoning behind the asking price, and of course whether it is worth it, based on your own requirements.

Bank of England’s Decision to Hold Interest Rates at 0.5%

Published On: March 26, 2018 at 9:18 am

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Categories: Finance News

Bank of England’s Decision to Hold Interest Rates at 0.5%

Property Master’s, Angus Stewart, and Trussle’s Ishaan Malhi, comment on the Bank of England’s decision to hold interest rates at 0.5%.

In November 2017, the Bank of England raised interest rates by 0.25%, for the first time in a decade. As of now, it seems the bank is set to hold this rate constant at 0.5%. This means different things for landlords and tenants, as well as first-time buyers and larger scale property investors.

Angus Stewart, Chief Executive of Property Master, says:

“Today’s decision by the Bank of England to hold interest rates at the current level of 0.5% is not unexpected but we have to ask for how much longer this situation will continue.

“The Bank has been dropping very heavy hints for quite some time that there needs to be a move towards getting rates back to some kind of more normal level following the 2007/2008 financial crash. I would expect rates to move upwards at least once this year and many commentators have settled on May as being the most likely month for this to occur.

“At the moment we are seeing rates for buy-to-let mortgages hold or even in some cases move slightly downward. This is very good news for landlords, but we would not expect this to continue across the board for much longer, especially as the pressure on the Bank of England to increase rates builds. Also, the withdrawal of cheap Bank of England funding such as the Term Funding Scheme must feed through the lenders at some point. Landlords wanting to take advantage of these attractive rates need to move fast.”

Bank of England’s Decision to Hold Interest Rates at 0.5%

Bank of England in London, UK

Ishaan Malhi, CEO of online mortgage broker Trussle, comments:

“The Bank of England may have opted to sit tight today, but it’s likely that they’ll lift rates in the next couple of months. This would impact all consumers, but particularly home owners who’ll see mortgage rates rise to their highest level in a decade.

“In fact, we’ve already seen many lenders increase their rates in recent months in anticipation of a rate rise. But borrowers are starting to react too. According to recent figures, the number of people remortgaging in January hit a nine-year high.

“However, today’s focus on interest rates really only highlights half the story when it comes to mortgages. As lenders change the rates of their deals, many will change the attached fees and incentives too. It’s important to take the total true cost into account, since a higher-rate deal can actually be cheaper overall than a low-rate deal.

“For example, choosing the lowest rate mortgage deal with one of the Big Six lenders would actually cost the average homeowner £400 more than if they were to choose the lender’s lowest true cost deal. Comparing deals this way isn’t as straightforward as it should be, so it’s worth seeking advice from a broker to make sure you’re making the right choice.”

Check out how landlords are coping with rising interest rates, as well as how the changes might effect tenants and younger people.

Renters Lose £80m per year to Deposit System

Published On: March 26, 2018 at 8:08 am

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Categories: Tenant News

Renters Lose £80 million per year to Deposit System

Private renters in England and Wales are missing out on £80 million each year in interest on their tenancy deposits, analysis by Generation Rent and a University College London academic finds out today.

The campaign is calling on the government to reform the current deposit protection system. The outcomes of the reform would ideally be to:

  • Make the funds available for building new homes
  • Give renters a return on their money whilst it’s locked away
  • Enable renters to transfer part of their deposit between tenancies

Dan Wilson Craw, Director of Generation Rent, said:

“Deposit funds are inherently stable so could be put to work properly, not just for the tenants but wider society as well. By adopting our proposals, the government could unlock these funds for investment in new homes and help to bring down rents.”

What happens to interest on tenants’ deposits at the moment?

More than £4 billion of private tenants’ money is protected by just 3 government-accredited schemes, but only 2% of tenants are seeing any of the interest on it. It appears that many landlords and letting agents are helping themselves to these funds. Freedom of Information data obtained by Generation Rent suggests that some agents are using the deposit protection system to effectively borrow money at very cheap rates.

Data from the Ministry of Housing reveals that 59% of deposits are protected by insurance-based schemes, where agents can hold onto the cash for an insurance premium as low as £9.50 per tenancy. The average deposit held is £1,240, meaning interest accrued over the tenancy can make a large profit.

The other 41% of deposits are held by custodial protection schemes, which cost nothing to use but rely on the interest to cover the schemes’ operating costs. The average value of these deposits is £867. The £373 disparity between this figure and the average deposit price (£1,240) suggests that it is lucrative for letting agents to simply insure and hold high-value deposits instead of placing them with a custodial scheme.

Renters Lose £80 million per year to Deposit System

Renters Lose £80 million per year to Deposit System

What could the solution be?

In a new report with University College London’s Dr Mike Seiferling, Generation Rent estimates that it costs around £18 million per year to operate the protection schemes. If the deposits accrued interest at 2.5%, the rate on Barclay’s Help to Buy ISA, this would be worth £100m in interest. If you take out the running costs of £18m, it could mean there is £82m that could be passed on to tenants.

Seiferling, who is a lecturer in Public Finance at UCL, said:

“Tenant deposits are tenants’ hard-earned money, yet the protection system appears to treat them like a cheap overdraft for the lettings industry. The system is ripe for change. This money is the closest many tenants have to savings so if it is tucked away for as long as they are renting, it should at least be earning them a decent return.”

How could the system be improved?

Generation Rent proposes the system could be improved by abolishing insurance-based schemes altogether. Instead, Personal Tenant Accounts within the custodial schemes would allow:

  • Tenants to transfer deposits to a new tenancy agreement, meaning they wouldn’t need to save for a new deposit before receiving the previous one back
  • Reducing the amount of cash that’s necessary to be kept on hand to distribute at the end of tenancies, and invest the remainder in productive parts of the economy
  • Landlords and letting agents to reduce the costs they currently incur in protecting their tenants’ deposits – especially as forthcoming Client Money Protection Regulations might limit what they can do with tenants’ cash

In addition to improving conditions for tenants, a large proportion of the deposit fund could be invested. Of the £4 billion protected by the current government-accredited schemes, only £57 million is required in cash at any one times. This leaves £3.96 million to be invested. If this was used to finance new homes, 35,000 could be built in 5 years. By way of comparison, in October 2017, the prime minister announced new funding for 25,000 affordable homes.

Universal Credit could Cause up to 1.3m Tenant Evictions, MP Warns

Published On: March 23, 2018 at 10:54 am

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Categories: Tenant News

Universal Credit, the Government’s new welfare system, could cause up to 1.3m tenant evictions from private rental homes, the Liberal Democrat Department for Work and Pensions (DWP) spokesperson, Stephen Lloyd MP, warns.

Lloyd says that delays in payments mean that more tenants are in rent arrears, which could lead to a sharp rise in benefit claimants in the private rental sector being evicted and potentially made homeless.

The MP, like many property experts, would like to see the housing element of Universal Credit paid directly to landlords. However, new data released this week by the DWP shows that just 6% of Universal Credit claimants in the private rental sector have their rent paid direct to their landlords, compared to 35% in the social rental sector.

According to the Residential Landlords Association (RLA), 73% of landlords still lack confidence in letting to tenants on Universal Credit, due to uncertainty that they will be able to recover rent arrears, while 38% have already experienced Universal Credit tenants falling into arrears.

Lloyd explains his thoughts on the issue: “Back in January, I led a Parliamentary debate calling on the Government to make direct payments to private landlords the default option for Universal Credit. Consequently, I am deeply disappointed these are still far lower in the private sector than the socially rented sector.

“If this doesn’t change, we should expect a spike in evictions by private landlords, who are already wary of renting to people on benefits, and a rise in homelessness that local authorities will have to deal with. People on Universal Credit often live in difficult circumstances, which can prevent them from paying their rent on time, as soaring rent arrears under Universal Credit testify to.”

He continues: “And the Government cannot argue that this is technically unfeasible, because their DUP friends in Northern Ireland have already figured out how to make payments to landlords the default option. If the Universal Credit computer allows that to happen over there, then why not here?”

Landlords, what are your thoughts on Universal Credit payments and whether they should be made direct to yourselves on your tenant’s behalf?

If you’re worried about your tenants falling into rent arrears, you’ll be pleased to learn that award-winning Landlord Insurance provider Just Landlords offers Rent Guarantee Insurance to protect your rental income: https://www.justlandlords.co.uk/rentguaranteeinsurance

Buy to Let is dead, long live Build to Rent

Published On: March 23, 2018 at 10:19 am

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Categories: Lettings News

Tags: ,,,

Buy to Let is dead, long live Build to Rent

With many people living in rented accommodation, in part due to difficulty in getting onto the property ladder, it seems it is the number of rented homes available that needs to expand.

  • Buy to let decline leaving vacuum for build to rent (Atlas Residential)
  • 69% of landlords put off further buy to let investment (Residential Landlords Association)
  • There are just 105,000 build to rent homes in UK so far, but sector ready to boom (Atlas Residential)

Buy to Let industry in decline

We’ve heard a lot about the 3% Stamp Duty levy on buy-to-let homes, the effect of which seems somewhat a punitive measure directly affecting private landlords. As a result, 69% of landlords surveyed by the Residential Landlords Association (RLA) have been put off making further investments.

Managing Director of Atlas Residential, Jonathan Ivory, says: “just as the UK needs more rental homes than ever before, the stamp duty change has significantly dented investors’ interest in providing those homes.

“We’re in danger of seeing a real vacuum in the buy to let market – many of those submitting their tax returns this April and May will be thinking carefully about alternative ways to make money.

“Thankfully, the build to rent sector is growing rapidly, providing the UK with the means to fill that vacuum.”

According to the institute of Fiscal Studies, just 25% of those born in the late 1980s owned a home by the age of 27, compared to 43% of those born in the late 1970s. This is quite a staggering statistic for such a short time frame – in just a decade, the housing market experienced significant shifts.

Due to the impact of recent tax hikes on the housing market, buy to let landlords are increasingly being put off new investments, and looking for other ways to generate income.

Build to Rent housing could be a futuristic solution

Despite the buy to let market becoming increasingly hostile, the government has stated it is committed to improving the UK’s housing market in other ways. In fact, the stamp duty levy on buy to let properties (as well as tougher lender criteria and the reduction on mortgage interest tax relief) could put buy to rent investors in a much better position.

Some measures the government may put in place include making planning permission harder to obtain. This mean it is likely to primarily have an effect on developers that might hold onto land simply to watch its value increase. This change could give rise to a generation of build to rent developers who are looking to create homes with the needs of the modern inhabitant in mind.

Atlas Residential and Rockspring Property Investment Managers LLP's complete and operational site, Bow Square, Southampton

Buy to Let is dead, long live Build to Rent – Bow Square, Southampton

As Ivory notes, “Build to rent provides an unprecedented opportunity to put renters’ needs first. Renters can enjoy premium facilities that have been shaped around the contemporary urban lifestyle. Demand for homes in the UK is stronger than ever and the build to rent sector is ideally positioned to meet that demand. It is also well placed to adapt to the changing needs of the market. As the build to rent sector in the UK evolves, family homes are starting to take shape.”

In the United States, build to rent communities are more widespread – with low-rise, family homes including facilities such as playparks and swimming pools on site. In the UK, the sector is still in its infancy with just 105,000 homes either complete, underway or planned. Considering the UK’s population now amounts to over 65 million people, this is a very small amount. With buy to let properties quickly losing their charm, the property development market in the UK is likely to look to build to rent developments to create the housing communities of the future.