Written By Em

Em Morley

New Mortgage Lending Increases by 84%, Reports Paragon

Published On: January 23, 2018 at 10:32 am

Author: Em Morley

Categories: Finance News

New mortgage lending across the buy-to-let sector increased by 85% year-on-year in the first quarter (Q1) of 2018, reports Paragon Banking Group.

Across all business lines, the firm reported a 65% rise in new advances, to deliver £470m of new lending in Q1.

Within this total, Paragon’s mortgage lending grew by 84% to £367m, with buy-to-let advances standing at £343m. Second charge and specialist residential lending rose by 74% to £24m.

In the buy-to-let market, Paragon increased its share of more specialist, portfolio landlord business, despite a backdrop of lower annual lending volumes in the sector overall.

This follows the implementation of the Prudential Regulation Authority’s (PRA’s) new requirements to underwriting more complex mortgage applications in September 2017, which led to a realignment of competition, with some mainstream lenders exiting the portfolio segment or offering only a limited proposition.

The mix of Paragon’s buy-to-let completions in the quarter included 66% of loans to landlords with more complex portfolios. The impact of the PRA underwriting rule changes from September had a more profound impact on application flows during the quarter, with the mix in the pipeline at 31^st December 2017 moving to 79% complex. The pipeline rose from £604m at 30^th September 2017 to £619m at the end of December.

The Group also demonstrated strong progress in its strategy to deliver greater diversification. Paragon grew Q1 commercial lending by 21% to £103m, as it continued to develop its franchise. It also maintained strong progress in deposit raising, with savings balances exceeding £4 billion at the quarter end – up by 98% from £2 billion at 31^st December 2016.

John Heron, the Managing Director of Mortgages at Paragon, says: “Paragon was the first lender to offer buy-to-let mortgages over 20 years ago and has developed its specialist capability around professional landlords over many years. It is very well aligned with the developments we have seen in the market following changes in Government policy and regulation in the sector, and this has allowed Paragon to significantly increase lending to portfolio landlords with more complex requirements.

“We are continuing to focus on product and technology developments that will deliver improved products and services to our landlords and intermediaries with the roll-out of new mobile applications and document upload over Q2.”

Bill Allowing Tenants to Sue Landlords over Poor Housing Passes Second Reading

Published On: January 23, 2018 at 10:05 am

Author: Em Morley

Categories: Law News

Last week, MPs voted in favour of the Homes (Fitness for Human Habitation and Liability for Housing Standards) Bill, which will give tenants the power to sue their landlords over poor housing.

Now that the bill has passed its second reading, it is a step closer to becoming law.

Adam Joseph, the CEO of The Happy Tenant Company, which manages over £500m of property on behalf of landlords throughout London, responds to the news: “On the whole, this is a positive step forward in holding landlords accountable for the condition of their properties, forcing them to raise standards and consistently maintain their property portfolios. It goes without saying that homes should be presented and maintained in a state fit for human habitation, and any subsequent law brought in will have little impact on the vast majority of professional landlords who already take their legal and moral obligations seriously. Any change which helps force those unscrupulous landlords, who are happy to take a rent cheque without ever tending to their responsibilities, out of the market, should be welcomed.

“However, there is a concern that enabling tenants to seek action against their landlords through the courts could give lead to a raft of unjustified claims for compensation by tenants. It will now be paramount for landlords who use managing agents to be kept up to date on the wellbeing of their tenants and property. Transparency and clear record keeping of regular itemised inspections from managing agents will be fundamental to landlords.”

Dan Wilson Craw, the Director of tenant lobby group Generation Rent, also reacts: “Cross-party support for this bill is a brilliant achievement by Karen Buck and the organisations we have campaigned alongside. Too often, tenants are powerless to get hazards in their homes fixed, so the ability to sue negligent landlords will be an essential new route to justice. So that tenants can properly exercise their rights once this is enacted, Parliament must also act to prevent unfair evictions and improve access to legal support.”

Finally, the Chief Executive of ARLA Propertymark (the Association of Residential Letting Agents), David Cox, comments: “We’re pleased the bill has passed in Parliament after two failed attempts. It will give renters greater protection against criminal operators, is a step in the right direction for the market, and, as Karen Buck MP said, we look forward to working with her to achieve better enforcement against those who bring the sector into disrepute.”

One in Four Buyers are Landlords, Romans Reports

Published On: January 23, 2018 at 9:29 am

Author: Em Morley

Categories: Landlord News

Although last year was a difficult time for buy-to-let landlords, Romans estate agent reports that one in four buyers registered in 2017 were landlords.

From the phasing out of mortgage interest tax relief, to tougher buy-to-let lending criteria, to the additional homes Stamp Duty surcharge, landlords have faced a difficult few years. However, the Romans figures suggest that appetite for property investment has not been dampened by the Government changes.

Michael Cook, the Managing Director of Lettings at Romans, explains: “2017 showed steady demand from tenants throughout, with August being a new record for tenant move ins. Average rents rose steadily and, although some market places remained flat, most of our locations demonstrated growth of between 1-2.5%. Couple this with the slightly reduced capital values in some locations, those who purchased at the right time, in the right area, are likely to have benefitted from increased yields.

“We know that one in four of all new buyers that register are looking to purchase for buy-to-let, yet only one in eight properties sold by Romans in 2017 were sold to an investor – demonstrating a clear appetite, but also uncertainty from some landlords over tax implications, with the increased Stamp Duty levy on second homes and the continued phasing of the removal of mortgage interest tax relief.”

He continues: “My predictions for this year are: whilst there will be some uncertainty, not least caused by the continuing Brexit negotiations, we are fairly certain that tenant demand will remain strong, and there will remain an underlying demand/supply gap for suitable rental property.

“We believe that, with a steadying of house price inflation continuing this year, and no obvious signs of a sharp downturn in prices almost 18 months after the referendum result, investors that were sitting on the fence last year will now commit to a purchase.”

However, Cook also notes: “Conversely, there may be some landlords that are reviewing their tax position given some the changes, and consider selling their property the more viable option. If this is the case, we would urge them to speak to us first before making a firm decision, as, with the right advice, what at first seems an unviable investment can turn into something far more lucrative if structured differently.

“Whilst the political landscape is unclear, and will no doubt cause inhibitions for some to make the move, we believe the rental market will continue to provide consistent returns for landlords, with no real signs of tenant demand abating. Returns may not be as buoyant as previous years, with increased rents of around 1-1.5%, but they are returns nonetheless. Tenants will benefit from an improved financial position, with a slower rate of rent inflation and the introduction of legislation to regulate the industry, which we have been campaigning for as members of ARLA (the Association of Residential Letting Agents) for some time.”

Stamp Duty Change to have Limited Impact on New Buyer Interest

Published On: January 18, 2018 at 10:34 am

Author: Em Morley

Categories: Property News

The UK housing market continued to display a lack of momentum in December, with buyer interest edging lower, according to the latest UK Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS). The report also highlights that the recent Stamp Duty change is having little immediate effect.

In December, activity in the UK housing market continued to drop. After new buyer enquiries came close to stabilising in November, 15% more respondents to the RICS survey noted a decline in demand (as opposed to a rise) in the month of December.

Stamp Duty change

Furthermore, when contributors were asked whether they have witnessed an increase in first time buyer enquiries following the Stamp Duty change in the Autumn Budget, an overwhelming majority (86%) across the UK said that they hadn’t.

While this could be in part due to the time of year, respondents were also asked to consider the likely impact on the market over the coming months. Nationally, the majority of contributors (66%) anticipated the change having little consequence, while 12% felt it would result in higher overall activity. In London, however, 48% envisaged not much response, but a higher proportion of respondents compared to the national figure (28%) did say that the Stamp Duty change would increase overall market activity. The results for the wider South East are closer to the national picture.

Agreed sales

Stamp Duty Change to have Limited Impact on New Buyer Interest

Agreed transactions also fell at the national level, with 13% more respondents reporting a decline in volumes over the month. Significantly, Scotland, Northern Ireland and the North East were the only areas to suggest stronger sales, whereas transaction trends were either flat or negative across the rest of the UK.

Sales expectations nationally remain flat over the coming three months, but contributors are more optimistic over the year to come, with activity anticipated to pick up across all regions/countries over the next 12 months, with London recording its first positive reading since last June.

Looking at supply, new instructions continued to drop nationally, extending a run of 23 months. Comments from respondents continue to emphasise the adverse impact this is having on the market. There is, however, a possible improvement on the horizon, with 23% of contributors noting that appraisals were higher this December than last (compared to 15% of respondents in November).

Growing house prices

Looking at house prices, the headline balance moved to +8% in December, following a reading of zero in November. As such, this measure is now consistent with a marginal increase in prices nationally (on the most closely followed indices) over the coming months. The three-month price expectations series, however, remains negative at the national level, highlighting a lack of conviction surrounding the near-term outlook.

Property to let

In the lettings market, tenant demand continued to fall during December (on a non-seasonally adjusted basis), albeit the pace of decline eased somewhat from the previous report. Meanwhile, new landlord instructions dropped at a slightly faster rate. As a result, rental growth expectations were modestly positive for the three months ahead (net balance moving to +9% from +4%).

The Chief Economist at the RICS, Simon Rubinsohn, comments: “The initial feedback from the market doesn’t suggest that the change in the Stamp Duty regime announced in the Budget is going to have a material impact on activity. Indeed, the risk was always that a good portion of the benefit would be capitalised in the price, therefore limiting the benefit for the first time buyer.

“Meanwhile, the latest RICS data continues to highlight the importance of disaggregating the headline numbers when talking about the market. Challenges over affordability may have grown across the UK, but they are clearly having a bigger impact in some parts of the country than others. This is clearly evident in the sales expectations figures, which still remain in positive territory in more than half of the areas surveyed in the report.”

Simon Heawood, the CEO and Founder of property investment platform Bricklane.com, also responds to the survey: “Abolishing Stamp Duty was a drop in the ocean, given the affordability challenge of getting generation rent onto the property ladder. Increasing supply of the right kinds of housing will also go some way to stopping ever-rising house prices, but many of generation rent still face the prospect of waiting many years to buy their own home.

“The focus on bridging the housing generational gap must lie on the all-important first rung of the ladder – saving up for a deposit. The issue of housing supply and price is important, but looking at measures to support generation rent’s ability to get together a deposit is crucial.”

He continues: “The current situation will mean a continued reliance on the private rental sector, so it’s welcome news that the Government will be opening a consultation on how to encourage landlords to offer longer tenancies. Some forward-thinking landlords have been offering more stable tenancies for a while now and it is a great win-win – tenants get greater stability, enabling them to feel more at home, whilst investors have the benefit of higher occupancy rates.”

Over Half of Brits Faced Issues with Agents and Landlords

Published On: January 18, 2018 at 9:54 am

Author: Em Morley

Categories: Property News,Tenant News

Over half of Britons have faced issues with estate agents, letting agents and landlords in the last five years, new research from Propertymark reveals.

The organisation asked Brits who have bought, sold or rented a property in the past five years about their experiences with estate agents, letting agents and landlords, finding that more than half (54%) have faced issues.

Over one million homes were bought or sold in England and Wales in 2016, a clear majority of which will have involved an agent. However, the study found that 37% of buyers and sellers, and 42% of tenants didn’t consider whether their agent was part of a professional body before progressing with their transaction.

For 42% of tenants, it didn’t cross their minds to ask – one in six (14%) wrongly assumed that all agents are regulated. Of the 55% that faced issues with their property, more than half (57%) hadn’t checked if their agent or landlord was indeed covered, leading to issues such as:

Waiting a long time for any issues with the property to be fixed (38%)
Struggling to get old items replaced (20%)
Not getting their full deposits back, and not being given a reason why (12%)

Those who did check if their agent was a member of a professional body lucked out, with shorter waiting times when things needed fixing in their property. Issues were typically being addressed within a week (41%). By contrast, just 25% of those who didn’t check had their issues solved within a week.

Less than half (47%) of buyers or sellers checked if their estate agents were regulated before moving ahead with their sale or purchase. As with tenants, a third (37%) didn’t think about it, while 14% prioritised the property and went with the agent because they were attached to the home they wanted to buy. More than half (53%) faced issues, such as bad communication (19%), feeling as if the agent didn’t care about them (12%) and feeling pressurised (10%).

On top of this, 70% of buyers worry that their sale won’t go through, even after the offer has been accepted, which, according to the Ministry for Housing, Communities and Local Government, costs buyers between £695-£744 and sellers between £582-£740. Concerns over gazumping, and a sense of mistrust between buyers and sellers, also plagues property sales, making some transactions uncomfortable for all involved.

Propertymark’s Mark Hayward and David Cox comment: “Choosing a property, whether it’s to buy or rent, is a huge financial commitment and can be overwhelming, especially for first timers. We almost always go with the agent attached to a property if we’re buying or renting, but it’s important to at least ask the question.

“Property transactions almost always takes longer than expected, and you may be forced into negotiations mid-way through the process – particularly for buyers. Your estate or letting agent should be there to guide you through the process, and make it as smooth and pain-free as possible, which all Propertymark Protected agents will endeavour to do.”

They continue: “The number of buyers, sellers and renters checking to see if their agent is regulated has improved since 2014, but it’s still worrying that so many people assume all agents are members of a professional body, such as Propertymark, and aren’t considering this when choosing an agent.”

RLA Supports New Measures to Improve Safety of Tenants

Published On: January 18, 2018 at 9:17 am

Author: Em Morley

Categories: Landlord News

NRLA calls for landlord and tenant conciliation service

The Residential Landlords Association (RLA) is expressing its support for new measures to improve the safety of private rental homes and give tenants the right to take legal action when their landlords do not comply with their duties.

Last week, the Government confirmed its support for a proposal put forward by Labour MP Karen Buck, which suggests that tenants should be given the right to take legal action against their landlords if they offer a property that is not fit for human habitation.

The Chairman of the RLA, Alan Ward, responds: “While the vast majority of landlords provide properties which are safe, legal and secure, there is a minority that brings the sector into disrepute. That is why the RLA is supporting Karen Buck MP’s Homes (Fitness for Human Habitation and Liability of Housing Standards) Bill.”

The Government has already introduced a range of powers for local authorities, enabling them to crack down on the minority of landlords that let unsafe or substandard accommodation.

This includes the ability to fine rogue landlords up to £30,000 and, from April this year, councils will also be able to issue banning orders to kick the worst offenders out of the business.

“We have also a perverse situation whereby councils will take action against landlords in the private sector, while tenants living in substandard property owned by a council or housing association are unable to obtain the same rights,” Ward says.

“Karen Buck MP’s Homes (Fitness for Human Habitation and Liability of Housing Standards) Bill helps to address this and it is one of a number of reasons why the RLA supports the legislation.”

Ward points out that the bill does not place any new standards or regulatory burdens on landlords that they are not already legally obliged to meet under the Housing, Health and Safety Rating System (HHSRS).

RLA Supports New Measures to Improve Safety of Tenants

He explains: “This does not end the pressing need for the HHSRS to be updated, with guidance especially needing to be updated to make it easier for everyone to understand.

“In fact, the requirements to make a house fit for habitation were already in the law when the Landlord and Tenant Act 1985 passed and they replicated rights first created in the Housing of the Working Classes Act 1885. They only ceased to be effective because a very low rental limit was placed on these obligations. This new bill therefore resets the position to that which was originally intended.”

Ward also highlights the fact that the bill seeks to achieve better enforcement of existing laws and regulations against rogue operators.

He continues: “With poorly resourced councils not doing a proper job at the moment of enforcing the rules, good landlords are being undermined by the criminals who bring the sector into disrepute.

“This bill ensures parity in all rental markets, giving tenants in both the private and social rented sectors the opportunities to hold to account those landlords providing accommodation that is not up to scratch.”

He concludes: “This is not a charter for spurious tenant complaints. Tenants would first need to raise their concerns with their landlord and provide sufficient time for the landlord to respond. Only after that could the tenant go to court and, even then, the court would need to be satisfied that the concern raised by the tenant was genuine and that it was not related to a problem of their own making.”

Paul Sloan, the Operations Director of Haart Lettings, also notes that tenants could always be sued if their accommodation did not meet certain standards: “This legislation is not new – tenants have always been able to take legal action against landlords, but this particular bill, which was originally brought forward two years ago, gives more rights to the tenants themselves. It failed to get enough votes in 2015, but was brought forward again in the summer in the wake of the Grenfell Tower disaster, and has now got the Government backing it needs.

“In the main, it is definitely a positive move. Everyone deserves the right to a decent and safe place to live. Most landlords would already expect this to be law, and good landlords want it to be, as those who are offering substandard accommodation bring the reputation of the whole industry down. Yet it may well be concerning to landlords worried about tenants bringing spurious claims.”

He adds: “If landlords use a good lettings agent, they will never need to worry, however. It is their job to maintain the property for the landlord and ensure they always offer a high standard of accommodation and the tenants are happy, so there is no danger of being sued.”

However, while Sloan supports any move to improve standards in the industry, he urges the Government to go further.

“The aim of this bill is to raise standards and push the bad boys out of the market, but it is just another bit of legislation and I think there is a danger that the bad boys will be driven underground rather than out,” he believes. “If the Government is going to regulate, it needs to regulate the industry as a whole – that’s the only way to raise standards across the board, not this piecemeal approach which seems designed more to win votes than to actually change the way that the rental market operates.”