Written By Em

Em Morley

Sharp Rise in Super Prime London Tenancies

Published On: February 20, 2018 at 10:22 am

With house prices continuing to fall in super prime London, an increasing number of would-be buyers are turning to luxury rentals for a home.

Estate agent Knight Frank has recorded greater activity in the capital’s super prime rental market, where tenants are willing to pay as much as £18,000 per week for a home.

New data from the firm shows that the number of super prime London lets rose by 34% last year to 137, from 102 in 2016, with most of the properties let furnished.

Britons and Americans accounted for a fifth of super prime London tenancies, followed by Russians, French and Chinese renters.

With house prices falling in parts of the capital, a growing number of wealthy households are choosing to rent, partly to avoid hefty tax bills.

Tom Smith, the Head of Super Prime Lettings at Knight Frank, says: “The momentum of recent years is still gathering pace. Demand is resilient, due to higher rates of Stamp Duty and the associated uncertainty over the short-term prospects for price growth in the sales market. A lack of clarity regarding Brexit has also been a factor.”

As well as more tenancies, Knight Frank also found that the deals agreed are now on a longer-term basis. The average length of a tenancy in 2017 was 589 days, which is up from 548 in 2016 and 528 in 2015.

There was also a record number of £15,000+ per week deals last year, with 20 recorded, compared to 11 in 2016.

Smith explains: “There is increasingly the opportunity to rent the sort of high-quality stock that has come from the sales market that historically did not exist on the lettings market.

“The clear message for landlords is that super prime tenants will not compromise on quality in the same way as buyers will not.”

The agent also reports that the prime central London sales market is now moving towards recovery.

Prices averaging more than £10m rose by 0.2% in the year to January 2018 – the first annual increase in almost two years.

In a sign that more tenants are anticipating this recovery, there has been a rise in the number who have requested a clause in their tenancy agreements giving them first refusal to buy at the end of the tenancy.

Smith concludes: “This option was rarely mentioned a few years ago, but is now a frequent topic of conversation on viewings. Many landlords have nothing to lose with this try-before-you-buy route. The worst case scenario is that you have an income stream that covers your costs and the best is that you also have a sale at the other end.”

UK Lettings Market Gained Momentum in January, Reports Agency Express

Published On: February 20, 2018 at 9:40 am

Author: Em Morley

Categories: Lettings News

The UK lettings market gained momentum throughout January, according to the latest Property Activity Index from Agency Express.

Nationally, the number of new property listings in the UK lettings market rose by a record 60.9% on a monthly basis in January, while the amount of properties let increased by 57.7%.

However, looking at historical data, we can see that overall activity has slowed when compared to the growth recorded in 2016 and 2017.

Looking at the UK lettings market across the UK, January’s buoyant trend was witnessed across all 12 regions included in the index.

Rental hotspots in January included:

Property listings

Wales: +84.8%
North West: +82.2%
North East: +71.4%
South East: +67.3%
South West: +66.8%

Properties let

South West: +83.2%
South East: +70.7%
West Midlands: +68.1%
Yorkshire and the Humber: +67.4%
Scotland: +64.4%

January’s top performing region was the South West, which experienced record growth for January. The number of new property listings rose by 66.8%, while the amount of properties let was up by 83.2%. The South West followed suit, with new listings up by 67.4%, again a record best month for the region.

The smallest growth in January’s index was recorded in London. New property listings in the capital increased by 23.1%, while the number of properties let rose by 14.7%. However, looking back at the index’s historical data, we can see that the figures have notably fallen compared to 2017, when new listings increased by 67.7% and the amount of properties let was up by 55.8%.

Stephen Watson, the Managing Director of Agency Express, comments on the data: “Following the December lull, a spike is activity is always predicted. While month-on-month figures for January are robust, they are heavily affected by the change in seasonal activity. This year, we have seen growth, just not at the same rate as we have previously.”

What do the New Stamp Duty Rates Mean for Buy-to-Let Landlords?

Published On: February 20, 2018 at 9:03 am

Author: Em Morley

Categories: Landlord News

This is a guest post written by Caroline Hughes. Caroline is Co-Founder of Lifetise, which creates interactive tools to help make big life decisions easier and more affordable. They’ve recently launched HomeFinder, which shows people where they can afford to buy.

Stamp Duty, much like Inheritance Tax, has a bad name. For first time buyers struggling to save for a deposit, it can seem like the painful last leg of a gruelling, long-distance race. For property investors, it is that extra outlay on top of the purchase price that can affect the return on investment.

It is also a tiered tax, so instead of one flat rate applying to every purchase, how much you pay depends on the value of the property, and different rates of tax apply to different layers of the property price.

Like any tax, Stamp Duty (or Stamp Duty Land Tax, to give it its full name) is subject to change with Government policy. The Government has made two rounds of changes to Stamp Duty on purchases in England and Wales in the past 12 months. In the 2017 Autumn Budget, the Chancellor revealed that Stamp Duty rates would be changing for first time buyers. Prior to that, in April 2016, new rules came in for people purchasing second or additional homes.

So what do these new Stamp Duty rates mean for existing or budding buy-to-let landlords? (If you’re interested in what they mean in general, we’ve written the most comprehensive guide you’ll find to Stamp Duty in England & Wales here).

Stamp Duty on second homes/additional properties

Whilst some first time buyers will undoubtedly benefit from the new rules, the same cannot be said for those looking to buy additional properties. If you are buying an additional property with the intention of letting it out, or have a dream of owning a Robbie Fowler-style portfolio of rental properties, then you’ll have to pay a higher rate tax on each property you buy.

Additional properties over £40,000 have an extra 3% tax surcharge whacked on, and this keeps going up:

Stamp Duty liability	Property value	Stamp Duty rate
Exempt	Up to £40,000	0%
First slice	From £40,000.01-£125,000	3%
Second slice	From £125,000.01-£250,000	5%
Third slice	From £250,000.01-£925,000	8%
Fourth slice	From £925,000.01-£1,500,000	13%
Fifth slice	Over £1,500,000.01	15%

If you’re thinking there must be a loophole to exploit, the net has been cast widely, so all of the following situations would be caught by the higher rate tax:

You already own a share in a property that is worth more than £40k and want to buy another property
You already own a property abroad and want to buy a place in the UK (and this applies equally to UK expats)
One of you in a married couple or civil partnership already owns a property and you want to buy a second home together
One of joint purchasers already owns a property and you want to purchase another property jointly

This, combined with the lowest rental yields since 2001 (5%), and the abolition of the Wear and Tear Allowance for furnished properties, is making buy-to-let a far less attractive nest egg for amateur landlords.

Don’t worry though; this won’t affect anyone who finds their new dream home before they’ve managed to sell their old one. So long as you complete the sale on your old property within three years of your purchase of the new property, you can apply for a refund of the higher rate Stamp Duty.

It will be interesting to see what effects these recent changes will have in 2018.

Hopefully I’ve managed to make a dry subject seem at least a little more palatable! As always with taxation, it’s best to be 100% informed when tackling it head on.

Young Adults Less Likely to Own a Home than Ever Before

Published On: February 19, 2018 at 10:14 am

Author: Em Morley

Categories: Property News

Young adults are less likely to own their own homes than ever before, according to research by the Institute of Fiscal Studies.

The decline in homeownership is most significant amongst those aged between 25-34-years-old, as house prices have soared by an average of 152% over the last two decades.

Just 27% of 25-34-year-olds on middle incomes are homeowners, compared with a substantial 65% in 1995/96 – a decrease of almost 40%.

At the same time, the latest English Housing Survey has highlighted that the private rental sector has grown significantly. Notably, the proportion of 35-44-year-olds living in private rental housing has increased considerably, from 11% in 2006/07 to 29% in 2016/17.

Young Adults Less Likely to Own a Home than Ever Before

Alejandro Artacho, the CEO and Co-Founder of rental platform Spotahome, comments on the findings: “It is getting increasingly difficult for young adults to get onto the property ladder, and this is driving the growth of the rental market. Renting is now becoming the go-to accommodation option for many people.

“Another challenge that renters face is the continued increase in the average rental asking price. The average rent is currently £1,280 per month – a significant chunk of the average salary. This makes it difficult for the average person to save and get a foot on the property ladder. As a result, we are seeing growing numbers of people looking for cheaper alternatives, with a particular desire for shared accommodation.”

David Smith, the Policy Director of the Residential Landlords Association (RLA), believes that plummeting rates of homeownership among young adults demonstrate the folly of choking off investment in private rental homes: “This huge increase in the number of young people unable to buy their own home means that more are renting and for longer periods. This shows the folly of Government policy imposing higher taxes to deter investment in new homes to rent.

“The scale of the housing crisis demands a complete re-think from Government, with policies needed to support investment in homes to rent to meet the increasing demand.”

The CEO of HomeRenter, an online lettings platform, Will Handley, continues: “The private rented sector needs to be modernised to accommodate for the growing number of young adults renting. The rental market needs to make sure it doesn’t price out people too. We recently found less than half (45%) of tenants are happy renting, with unreasonable letting admin fees being a top gripe (42%). 70% of tenants said they would prefer to rent direct from a landlord, suggesting a desire to cut out the middle-man estate agent.

“The reality is, young adults are used to a digital world and traditional estate agents have failed to tap into this. Proptech is filling the void, enabling landlords and tenants to connect directly online and cut out estate agency fees, reducing costs for all parties. In addition, the rental market should be more geared up towards helping people work towards owning their own property, by enabling rent payment history count towards credit scores.”

Ishaan Malhi, the CEO and Founder of online mortgage broker Trussle, offers his thoughts: “In the last two decades, there’s been a seismic shift in homeownership in the UK. For young adults on average incomes, the new landscape looks a little bleak. These squeezed millennials have seen the average house price rise seven times faster than their income. An astonishing statistic, which shows just why homeownership has collapsed among this age group.

“The recent changes to Stamp Duty rules should offer some hope for those striving to get on the ladder. But the Government needs to go much further if we’re to have any chance of balancing the scales again for young adults. It’s no secret that we need more investment in housebuilding to increase the supply of affordable homes. But we also need more forward-thinking, innovative policies to address the challenges of affordability and space in the UK’s cities. The Government has pumped a lot of money into demand side policies, but we must see firmer action on the supply side, if we’re to house the next generation.”

Government Outlines Plans to Create a Single Housing Ombudsman

Published On: February 19, 2018 at 9:35 am

Author: Em Morley

Categories: Property News

The Government has outlined plans to create a single housing ombudsman to help support the private tenants that are forced to live in substandard rental housing.

In the private rental sector, there is currently no legal obligation for landlords to register with a complaints system. However, the plans, which were unveiled over the weekend by the Housing Secretary, Sajid Javid, aim to create a single housing ombudsman that would allow disputes to be resolved faster and consumers to access compensation where applicable.

Naming and shaming rogue landlords and housebuilders, as well as the introduction of a simple and effective complaints system, are among some of the options currently being considered.

An eight-week consultation on a new scheme to crack down on rogue landlords letting overcrowded and dangerous homes is now underway.

Javid says: “For too long, tenants and homeowners have navigated multiple complaints procedures to resolve disputes about everyday household repairs and maintenance.

“Fixing this housing crisis is about more than just building homes; it’s ensuring people have the answers available when something goes wrong.”

Dan Wilson Craw, the Director of tenant lobby group Generation Rent, responds to the plans: “Shaking up the confusing redress system is a welcome step. It is hard enough for renters to take on a letting agent who has ripped them off, so having to first figure out which of three schemes is relevant is counterproductive. The proposed naming and shaming could help tenants understand what practices are unacceptable and give them more confidence to complain.

“But tenants will always be intimidated into staying quiet as long as agents are able to respond with a no-fault eviction or rent increase. If the proposed changes are to work, the Government must restrict these practices and thereby give tenants more security in their homes.”

The proposals were first detailed at the Conservative Party conference last year.

Remortgages Surging in New Interest Rate Environment

Published On: February 19, 2018 at 9:05 am

Author: Em Morley

Categories: Finance News

The number of remortgages has surged by 41% over the 12 months between December 2016 and December 2017, from 28,400 to 39,943, according to conveyancing service provider LMS.

Following the increase in the base rate to 0.5% in November last year, the majority of lenders passed on the full 0.25% rise and also increased their standard variable rates (SVRs). Around 8.1m UK households have a mortgage, with almost half of these on either an SVR or tracker rate. In the current climate, borrowers’ motivation to remortgage has hit its highest level since the financial crisis.

Nick Chadbourne, the Chief Executive of LMS, says: “We are still in a settling-in period – borrowers and lenders have yet to fully acclimatise to the current situation. But rising interest rates on trackers and SVR mortgages are driving remortgage activity, with borrowers highly motivated to remortgage. In this busy climate, all the stakeholders in the mortgage industry need to do what they can to make the borrowing process as simple and straightforward for consumers as possible.”

The rise in activity in December is likely to continue in the coming months, LMS believes, as the base rate is predicted to rise again. In November 2017, the Governor of the Bank of England (BoE), Mark Carney, said that two more base rate rises were likely by the end of 2020.

Remortgages Surging in New Interest Rate Environment

While the Bank kept rates on hold this month, the Monetary Policy Committee (MPC) has stressed that it sees a need to tighten monetary policy more rapidly than it did three months ago. The markets are now pricing in the next base rate rise to occur as soon as May, and for there to be at least three rate increases over the next three years.

LMS research suggests that 82% of borrowers now expect an imminent rise.

Chadbourne adds: “The talk of further base rate increases will no doubt continue to stimulate the market over the coming weeks.”

November’s rate hike is also shaping borrower appetite, with demand for variable rate products dropping to just 2% of the remortgage market in December last year – a sharp decline from the 9% in December 2016 and a new low.

Demand for five-year fixed rate products has risen, making up 46% of recent remortgages – double the 23% market share recorded in December 2016.

Chadbourne comments: “With the base rate having risen for the first time in ten years, borrowers have started looking for greater security. Product requirements have therefore had to change, with lenders adapting to a shift in the market and the dwindling popularity of variable rate products. While variable rate products are versatile and provide a level of flexibility that might have appealed to borrowers when the base rate was falling, in the current climate of rising rates, the security offered by fixed rate products is the natural choice for many now. Borrowers have been primed to expect a higher cost of borrowing, and they are opting to secure their position and eliminate risk where possible.”

The popularity of two-year fixed rate remortgage deals also rose, up from a low of 20% in October 2017 to 23% in November and December.

In the run-up to the introduction of the 3% Stamp Duty surcharge on additional homes in April 2016, investment in the buy-to-let sector soared. Indeed, in December 2015, Connells Survey & Valuation reported that the number of buy-to-let valuations it conducted had risen by 86% compared to the previous year, as landlords raced to secure properties before the tax changes took hold.

Given that the cheapest buy-to-let mortgage rates are found on two-year fixes, landlords are now renewing these deals.

Chadbourne concludes: “At the end of 2015, buy-to-let investors were racing against the clock to make sure they didn’t fall foul of the 1^st April Stamp Duty deadline – it was critical purchasers finalised their transactions before being hit by the 3% surcharge.

“With the popularity of two-year fixed rate mortgages with landlords, that caused a spike in the market, which is now working its way through the system as these deals come to an end. Even with the new interest rate environment driving the popularity of five-year – rather than two-year – fixes, we’ve still seen an increase in their popularity recently.”