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Em Morley

Compulsory CMP will bring Industry Closer to Transparency, Tech Firm Believes

Published On: November 21, 2017 at 9:23 am

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Categories: Law News

Compulsory CMP (Client Money Protection) scheme membership for letting agents, alongside a range of other regulatory changes, will ensure that the private rental sector in England is more transparent than ever before, believes tech firm PayProp.

The automated rental payment provider is speaking out in response to the launch of an official Government consultation for compulsory CMP, and ahead of this week’s Autumn Budget.

Earlier this month, the Department for Communities and Local Government (DCLG) launched a six-week consultation, seeking views on how compulsory CMP scheme membership should be designed, implemented and enforced.

The Government first made provisions to introduce compulsory CMP in the Housing and Planning Act 2016, after years of campaigning by industry groups, such as SAFEagent. Then, in March this year, it announced its intention to use these powers, before launching a call for evidence.

The COO of PayProp in the UK, Neil Cobbold, says: “It takes a while for any Government legislation to be passed, but for compulsory CMP membership to even reach consultation stage has taken longer than most. We trust this means a lot of thought has gone into enforcing the legislation.”

Once CMP scheme membership becomes mandatory, non-compliant agents will no longer be able to operate, since being a member of a scheme will be a requirement to trade.

PayProp notes that the consultation document sets out that compulsory CMP scheme membership will run alongside the proposed plan for minimum training requirements and an industry code of conduct for agents.

“It seems like a perfect fit,” explains Cobbold. “It’s estimated that around 60% of agents are already members of CMP schemes, but this will bring the remaining 40% in line.

“Pairing the legislation in this way also means agents will be starting from a level point of compliance and practice, which can only be considered a positive step forward for all involved.”

Industry estimates suggest that letting agents hold around £2.7 billion of client funds. As the private rental sector continues to grow and, therefore, this figure continues to rise, it is necessary that this money is protected, for agents’ benefit, as well as landlords and their tenants.

CMP schemes are relatively inexpensive, costing the average agent between £300-£500 per year. This small annual cost makes a big difference when it comes to transparency and trust.

“Mandatory CMP membership for agents demonstrates the industry’s willingness to accept higher professional standards and champion a more transparent and regulated marketplace,” says Cobbold. “This could contribute towards improving the reputation of lettings professionals among the public, which could be in turn be one of the most significant benefits of this legislation.”

With the consultation set to run until 13th December 2017, it remains to be seen if any details of its implementation date will be revealed in Wednesday’s Autumn Budget.

Cobbold notes: “We hope Phillip Hammond gives more details about the ban on upfront letting agent fees now that the draft bill has been published.

“And, along with the rest of the industry, we look forward to promised details about regulation measures announced at the recent Conservative Party conference, including mandatory redress scheme membership for landlords and minimum training requirements for letting agents.”

Who’s Joining Us at the London Landlord Seminar on Wednesday?

Published On: November 20, 2017 at 10:48 am

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Categories: Landlord News

It’s that time of year again when estate agent Portico partners with industry experts, including the National Landlords Association (NLA), to bring you the London Landlord Seminar.

We were proud to have attended the event last year, along with our partner Just Landlords, to hear from the fantastic industry insiders that spoke at the show (as well as enjoying some networking and canapés!).

This year, Just Landlords is coming back as a key partner on the night, which means that both of our teams will be there with goodies, heaps of information and expert advice.

We’re looking forward to meeting lots of landlords and property professionals on Wednesday 22nd November 2017 at the Institute of Directors, Pall Mall, London from 6.30pm to 9.30pm – are you coming along?

If you’d like to get Just Landlords’ exclusive discount code, which gets you 60% off tickets, then click here.

Not only will both the Landlord News and Just Landlords teams be there to give you some freebies, but you’ll also hear from top industry experts on how to approach the challenges thrown at landlords over the past couple of years and optimise your investments in 2018.

The London Landlord Seminar is presented by property buff Richard Blanco, and includes discussions and talks from Carla Sateriale, of UK Finance, Searchlight Finance’s Simon Allen, and Portico’s Regional Director, Mark Lawrinson.

After a bustling break that gives you the chance to network with other London landlords (and speak to us!), a panel of housing insiders will debate current market conditions and accept questions from the floor.

Lawrinson says: “With the correct planning, you can still make money from property. But, unlike pre-2007 and even the past few years, the ability to make money requires great thought and attention, rather than being able to ride a rising market.

“Landlords and investors now need to surround themselves with professional advice and support from finance and lending experts, property gurus and tax specialists. The Portico and NLA London Landlord Seminar will equip landlords with the expert knowledge and data-led insight they need to evolve and continue to make a success of buy-to-let.”

We’re looking forward to it and hope to see you there!

What the Budget Needs to do for Housing, Buy-to-Let and First Time Buyers

Published On: November 20, 2017 at 10:30 am

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Categories: Finance News

With the Autumn Budget being delivered this Wednesday (22nd November 2017), industry experts are coming out in force to offer their opinions on what needs to be done.

Our writer Rose, on behalf of our partner Just Landlords, has given her thoughts.

Now, Peter Williams, the Executive Director of the Intermediary Mortgage Lenders Association (IMLA), explains what he wants the Chancellor to announce regarding housing, buy-to-let and first time buyers on Wednesday: “Expectations are rising that decisive action on pushing back the decline of homeownership might emerge from [this] week’s Budget, but the private rented sector in general and the buy-to-let market particular must be no-go-zones for the Chancellor when it comes to raising revenues to solve the UK housing crisis.

“The private rental sector is already in danger of wilting under sustained pressure of Government action, and the market is still in a state of flux due to the raft of regulatory changes imposed over the last two years. Far-reaching policies to reduce mortgage interest tax relief and raise Stamp Duty charges – at the same time as tightening underwriting criteria – are still new, and their effects have yet to fully bed in. The buy-to-let slowdown has already started and is forecast to continue, reducing further investment and portfolio expansion.”

He continues: “The Chancellor is under increasing pressure to outline a solution to the housing crisis at Wednesday’s Autumn Budget. According to IMLA’s research, the majority of lenders agree this should take the form of increased efforts to boost overall housebuilding (79%) and more provide starter homes (58%). Further punitive tax and regulation on buy-to-let is not the answer, which could cause the supply of high quality rental accommodation to dwindle even further.

“Any action on further boosting housebuilding should be welcomed, but new homes won’t materialise overnight and the supply of affordable homes remains critically low. People still need somewhere to live while we fix the supply shortage: 4.3m people are currently renting in the UK, and rely on a well-served and well-supported private rented sector while trying to save for a home of their own. Further punitive taxation measures for landlords will reduce supply and put pressure on to raise rents, both causing more problems for the households who currently rent but hope to buy. Landlords are not the problem, rather it is the lack of homes and not least affordable homes. That’s where the Budget should focus.”

Williams adds: “We hope to see an Autumn Budget that is supportive of both ends of the property market, as one without the other will only worsen the UK housing crisis.”

Last week, a range of industry experts offered their opinions: https://www.justlandlords.co.uk/news/agent-begs-chancellor-homes-stamp-duty/

We also have further predictions from Will Handley, the CEO of HomeRenter, on his predictions. He offers his wish list: “We want to see a fairer, more equitable marketplace for the UK’s private rental sector. Encouragingly, in recent times, the Government has introduced a raft of measures that penalise private landlords with a view to create more of a renters’ market. However, there’s a real and present danger that these prove to be boomerang policies which actually result in more costs being passed on to the unwitting tenant. Whilst we sincerely hope several of these policies might be revised or heavily tweaked next Wednesday, we’re not holding our breath. So, what can we expect? 

“On the basis that the Government won’t back-pedal on restricting finance cost relief for individual landlords, we predict the Chancellor will focus on initiatives to enforce the tapering of interest relief. For example, we expect the Government to firm up on plans to professionalise and certify the UK’s million-plus accidental landlords, to ensure the additional tax take from restricting interest relief isn’t circumvented.
“We also expect the Government to intervene on tenancy length policies. Whilst both main political parties have made a fair bit of noise about instituting longer-term tenancies, the truth of the matter is both tenants and landlords enjoy the flexibility of break clauses. Landlords and tenants would resist a one-size-fits-all move to two or three year fixed tenancies. With that in mind, we’re predicting some form of tax incentive to be announced for landlords who provide longer-term tenancies to those seeking one, such as families.”
Handley goes into more detail about his hopes for landlords and tenants: “Our wish list for landlords: A repeal, or significant modification, of the tapering of the ability to mortgage interest from taxable profits (Section 24). Professional and private landlords believe this legislation will counterintuitively see more costs passed on to tenants and the lowering of standards in the private rented sector, as more buy-to-let landlords sell up and exit the market; A reversal on the 2015 3% uplift on Stamp Duty for buy-to-let landlords. We believe there are more effective ways to stimulate the sales market for first time buyers, such as building more homes, which don’t risk impacting the provision of quality private rental accommodation; The introduction of a national redress scheme to compel landlords to register with an ombudsman or governing body. We can see the benefits of this outweighing the negatives as it helps professionalise and police the sector as it increasingly moves online and cuts out the traditional estate agent.

 
“Our wish list for tenants: Both parties have made noise about instituting policies that require longer-term tenancies. However, from our research, we find that the majority of tenants are just as likely as their landlords to prefer the flexibility afforded by six-month break clauses. So, whilst long-term tenancies can be of real financial benefit and security to both parties, we don’t see a one-size-fits-all approach working. Rather, we’d like to see some form of tax incentive for landlords who provide longer-term tenancies to those seeking long-term tenancies, such as families; We’d like to see more fine print on the implementation of the lettings fee ban. For example, we support the move to no deposit renting. However, we’re keen to understand the fate of several new online players offering insurance-backed schemes that are solely tenant-funded and whether these will be seen as tenant admin fees too; Regular rent payments should be recorded on renters’ credit scores and count to their creditworthiness when eventually getting on the ladder. The Government needs to take these measures to reflect the fact that more people are renting homes and for longer – often into their 30s and 50s and with families. As it stands, rental expenditure is by far generation rent’s biggest monthly outlay. However, because rent is paid in advance, it’s not traditionally counted into an individual’s wider credit rating and this needs to change.”

Why Passive Property Investment, not Property Development, Suits the Vast Majority of People

Published On: November 20, 2017 at 9:38 am

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Categories: Finance News

By Paul Mahoney, Managing Director of Nova Financial 

When it comes to investing in property, we really view it the same as we view any other investment option, and that is as a means to an end, a way of better utilizing your money to better contribute toward financial freedom in the future, or an early retirement, or even just a normal age retirement but with a comfortable lifestyle.

We meet with a lot of people who are looking to buy and renovate or convert commercial properties to residential property, or from scratch property development, and that is often spurred by something they’ve read, or a TV show they’ve watched, or maybe a seminar or a program that they’ve attended.

Often, those people that we are meeting with and who are telling us these things have absolutely no experience when it comes to developing property or to managing a project of such a scale. An analogy that I often use for this is that you don’t read an article, or do a course, or attend a seminar and then start performing brain surgery.

Paul Mahoney

Paul Mahoney

The reason for that analogy is property development is a profession, not a hobby. It’s something that people spend years and years perfecting and working for other people to learn that trade, how to manage contractors, or even just a main contractor to make sure they’re doing the right job for you and deliver a profitable project. That’s not something that you can just learn overnight.

Regardless of the people that you might speak with that tell you that there’s so much money to be made in property development, and, therefore, why would you want to go and invest in property passively and achieve average returns of 5 to 10% yields and 5 to 10% growth? To be honest, that can actually be quite strong returns, especially on your deposit when you’re using leverage to multiply that return on the overall asset.

In our experience, though, you are far better off investing passively if you don’t have the expertise in property development – and I must stress that expertise cannot be learned in a matter of days, or weeks, months or even years. It’s a very detailed process, and I’ve come across far too many people that have been burnt, that have taken that leap to develop property without the right experience and without the right expertise. There is just so much that can go wrong.

For example, if you do go down the route of choosing a main contractor to manage all of your subcontracts, such as an electrician, a plumber, a plasterer, all those things that are required for a renovation or a development project… If you choose somebody else to manage that for you, then that person essentially has your livelihood in their hands. You need to have absolute confidence that they’re going to do the best possible thing for you to minimise cost, minimise time, get everything done as quickly as they can and, therefore, deliver the most possible profit.

What incentive does that person have to do that to start with? Unless you’re incentivising them based upon cost and profit, which, of course, you could do, firstly, you need to make sure they’re a trustworthy person. You can also do that. You can look at testimonials. You can look at all these things that these people might have done in the past, but, again, without any experience, are you going to do that efficiently?

If you’re going to manage it yourself, things become a lot more complex. I wouldn’t recommend that even more so, but I suppose if we break it all down so far as picking a main contractor, making sure there’s no issues so far as the design process, a sound structure, or planning or extra costs that you might incur, and then also making sure that you’re not going to run into any economic issues such as a recession half way through your build, which might impact upon your funding or the stability of your contractors and their ability to actually deliver on the promises or the contracts that you’ve put in place.

There is just so much more risk involved. Property development is a business. It’s a profession. It is very, very different to passive investing and, therefore, of course you’d expect to make more profit from it, because you’re taking so much more risk, which isn’t always the case. Any development or renovation projects will make 10-15%, which we’ve had clients outperform just by buying off plan and doing nothing. For all the success stories that you hear in this realm of property investment, I’m telling you there are significantly more failures, especially when we’re talking about people that don’t have experience in this area.

I’m not trying to be discouraging. I’m being realistic. I would strongly recommend when it comes to starting out in property investment to build your way up in complexity. Start with something quite passive and simple. Build up toward doing perhaps small-time renovations. Then, you can work your way up to bigger projects, which is the general, intelligent way of doing anything, rather than jumping in the deep end at the start before you have the expertise or the knowledge to do it.

Student Let Hotspots some of the Top Yielding Locations in the Country

Published On: November 17, 2017 at 10:38 am

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Categories: Landlord News

Student let hotspots are climbing the table of the top yielding locations for buy-to-let investment in the country, according to the latest Buy-to-Let Yield Survey from TotallyMoney.

Despite increasing pressure on diminishing margins, the report shows that landlords can still achieve rental yields in excess of 12% in the best postcode areas.

The autumn/winter 2017 Buy-to-Let Yield Survey names Liverpool’s L7 postcode as the top area for rental yields. A combination of lower than average house prices and relatively high rent costs, driven by strong demand, has contributed to the postcode’s 12.63% average yield.

The survey analysed more than 500,000 properties in 2,700 postcodes across England, Wales and Scotland. The Merseyside powerhouse picked up all three of the top positions.

Manchester, Nottingham, Sheffield, Glasgow, Cardiff and Plymouth – all student let hotspots with large university bodies in need of affordable accommodation – also placed highly in the top 25 postcodes, delivering average rental yields in excess of 7.25%.

It was Liverpool’s L7 that remained in the top spot, however. This postcode covers the city centre, Edge Hill, Fairfield and Kensington, while its proximity to two of Liverpool’s three universities make it a top student let hotspot. Liverpool postcodes also dominate the top 25 places in the table, taking up eight spots.

Home to the University of Plymouth, the PL4 postcode soars up the table, from 15th to 4th, with an average rental yield of 10.15%.

Middlesbrough’s TS1 postcode is home to Teeside University and makes the top five, with an average yield of 10.06% and a typical house price of just £64,500.

With four universities and a student population of 100,000, the Manchester rental market is strong. The city boasts two of the highest average yields in the study, with 8.25% in the M6 postcode and 7.98% for M14 – a student let hotspot and home of the University of Manchester’s Fallowfield Campus.

Two Scottish postcodes make it into the top 25 – Glasgow’s G3, covering Anderston, Finnieston, Garnethill, Park, Woodlands and Yorkhill, and Aberdeen’s AB11, encompassing the city centre and Torry.

No postcodes in London or the Home Counties make it into the top 25, while central London postcodes account for eight of the bottom 25 areas.

Joe Gardiner, the Head of Brand and Communications at TotallyMoney, comments: “Realising a decent return on a buy-to-let rental property is becoming increasingly difficult. Property prices continue to rise steadily, albeit more slowly, and rule changes have made lenders more cautious.

“Prospective landlords need to go into property investment armed with the facts: they need to be on top of their credit report, compare the market for the best buy-to-let mortgage rates and focus on property investment in areas that can give them the highest yield.”

He adds: “The buy-to-let hotspots postcode map pinpoints postcodes and gives landlords a solid steer towards the opportunities that university city student lets offer.”

Does the report make you consider an investment in one of these student let hotspots?

Tenants can’t Live in Consultations, the RLA Warns the Government

Published On: November 17, 2017 at 10:08 am

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Categories: Tenant News

Landlords are welcoming new calls by the Communities Secretary, Sajid Javid, for a “giant leap” to address the housing crisis. However, the Residential Landlords Association (RLA) warns the Government that tenants cannot live in the 15 consultations currently ongoing that will affect the private rental sector.

Another consultation, on smoke and carbon monoxide alarm regulations, was announced just this week.

Javid laid down a challenge to the Chancellor, Philip Hammond, in a speech yesterday, in which he called for a “giant leap” in the number of new homes being built.

The Communities Secretary said that the lack of new homes being built was a “big problem, and we have to think big” to tackle the housing crisis. A major new package for housebuilding is now expected to be at the heart of the Autumn Budget next week.

Javid has upped the pressure on Hammond in recent weeks to spend billions of public money on new homes. His words arrive as new Government data shows that we are building fewer homes than at the start of the housing crisis.

In his speech, Javid said that far more had to be done, calling for a “Government of deeds, not words”.

Tenants can't Live in Consultations, the RLA Warns the Government

Tenants can’t Live in Consultations, the RLA Warns the Government

Referring to the Budget next week, Javid insisted: “In next week’s Budget, you’ll see just how seriously we take this challenge, just how hard we’re willing to fight to get Britain building.”

Likening the housing crisis to the challenge that faced Britain in the Second World War, Javid added that the country will rise to the challenge: “Faced with the crisis of the Second World War, Churchill demanded ‘action this day’, so the country could rise to the challenge.

“And, faced with an unprecedented housing crisis, that’s what you’re going to get from this Government. Real action, day after day, week after week, to give this country a housing market that works for everyone.”

The Communities Secretary set out a multi-pronged policy assault on the housing crisis, including allowing the Homes and Communities Agency to make more public land available for new homes.

Private housebuilders will also be required to build homes more quickly, while the Government will introduce measures to train up more construction workers. Developers will also be told to build on land they own or lose it, in an end to “unjustifiable land banking”.

Javid observed: “It’s a time of national shortage and, in this kind of time, British people will not look kindly on anyone who hoards land and speculates on its value, rather than freeing it up for the homes our children and grandchildren need.”

Baby boomers who have paid off their own mortgages should not be allowed to get in the way of the construction of homes for a younger generation “crying out for help with housing”, his speech continued.

“They don’t want the world handed to them on a plate. They want simple fairness, moral justice; the opportunity to play by the same rules enjoyed by those who came before them.

“Without affordable, secure, safe housing, we risk creating a rootless generation, drifting from one short-term tenancy to the next, never staying long enough to play a role in their community.”

The comments come two weeks after Javid called for Hammond to borrow more to pay for more homes. Coincidentally, Hammond announced new powers to fund housebuilding just hours before Javid’s speech.

The plans will mean that housing associations will be reclassified as private bodies, allowing their £70 billion debt to be removed from the Government’s balance sheet.

Government sources claim that Hammond, the Prime Minister – Theresa May – and Javid were agreed on a bid to tackle the housing crisis. Their plans are set to be unveiled in the Budget next week.

However, Hammond said that there was “no silver bullet” to fixing the housing crisis.

Commenting on Javid’s speech, David Smith, the Policy Director at the RLA, responded: “The minister is right that we need a giant leap to tackle the housing crisis we now face. This is particularly the case for tenants and prospective tenants, who increasingly need a vibrant and growing private rental market for a place to live.

“The Government currently has at least 15 consultations ongoing affecting the private rented sector, none of which will boost the supply of such of homes. Whilst it is right to properly consult on proposals, no tenant can live in a consultation.”

He added: “We need immediate practical action to meet the growing demand for private rented housing in next week’s Budget, by bringing small plots of unused land into use and creating a pro-growth tax system that supports good landlords to develop the new homes we need.”

Other industry experts have also called for similar measures.