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Em Morley

UK property prices set to rise by 50% in next 10 years

Published On: September 1, 2017 at 1:41 pm

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Categories: Property News

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Interesting new research has revealed that Britain’s property market is set to be resilient in the face of ongoing Brexit uncertainty.

The investigation conducted by eMoov suggests that property prices are set to rise by over 50% during the next 10 years.

Price Rises

Analysis from eMoov suggests that UK house prices have risen by 0.37% per month on average since the EU referendum, in comparison to 0.67% per month on average between June 2015 and 2016.

Data from the report indicates that if values carry on rising at 0.37% per month, the average UK house price would still reach £34,757 in the next decade. This is a rise of 56%.

Using data from the Land Registry, the firm applied the present rate of growth to the current average house price up until 2027 in order to assess the new data.

It then calculated the total percentage difference between the current and future average house price in order to rank each city on the highest overall growth rate.

Nottingham comes out on top for price growth since the Brexit vote, with prices rising by 0.8% per month on average. If this was to continue, the average house price would increase 160% from £133,215 to £346,592 by 2027. Glasgow has seen values increase by 0.7% a month since the start of June last year, which was the second highest.

Oxford and Cardiff have also seen strong price rises since the Brexit vote.

UK property prices set to rise by 50% in next 10 years

UK property prices set to rise by 50% in next 10 years

Growth

Even those cities that have seen the smallest house price growth since the EU referendum vote would still see decent increases. Newcastle, where prices have risen by an average of just 0.07% on average each month since June 2016, would see the current average of £156,753 rise by £13,731 to £170,485 in the next 10 years.

Russell Quirk, Chief Executive Officer of eMoov, observed: ‘With latest industry figures indicating an end to the post-Brexit market slowdown that has seemingly plagued the market over the last 18 months, many UK home owners will be breathing a sigh of relief, despite having still enjoyed a notable annual increase in their property’s value.’

‘Although these recent slower rates of price growth are unlikely to persist going forward, and we are by no means predicting they will, this research demonstrates that the outlook would still be rather positive and far from the apocalyptic prophecy’s many have talked the market down with since the Brexit vote.’[1]

[1] http://www.propertywire.com/news/uk/brexit-brexit-british-house-prices-set-rise-50-next-decade/

 

 

44% of landlords making alterations following tax changes

Published On: September 1, 2017 at 9:58 am

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Categories: Landlord News

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An interesting report from mydeposits has revealed that 44% of landlords are looking to make changes as a direct result of tax changes imposed on the sector during the last 18 months.

Tax Changes

Since April of 2016, three large tax changes have impacted on landlords. Buy-to-let investors have faced an additional 3% Stamp Duty surcharge, while there was also the abolition of ‘ landlords ability to claim a 10% tax break for ‘wear and tear.’

The third significant change came with alterations to mortgage interest tax relief, brought into force from April 2017. This means that by 2020, when the scheme is fully rolled out, landlords will only be able to claim a basic rate of tax back from their tax charges.

Worryingly, 26% of respondents to the survey said that they were unaware of the changes to mortgage interest tax relief. 23% said they were unaware of the alterations to Stamp Duty.

86% of respondents to the survey said they owned between one and four rental properties, with a further 8% having between 5-10 properties. 21% replied that the tax changes would not affect their buy-to-let business, but 25% said they will need to raise rents.

10% said that they are looking to sell-up for good, with 9% switching from a managed service through a letting agent to self-managing.

50% said that they have no intention of leaving the sector, nearly 25% plan to sell up during the next 5 years.

44% of landlords making alterations following tax changes

44% of landlords making alterations following tax changes

Business

Tony Gimple, Founding Director of Less Tax for Landlords, noted: ‘Landlords should be running their buy-to-let portfolio as a business regardless of tax changes, and those forced out of the market will be the ones who are too highly geared with too little yield. Many landlords are trying to do everything themselves and often following unreliable or out of context information, whereas once they are professionally educated on what their options are, many choose to remain landlords and go on to prosper.’

Eddie Hooker, CEO of Hamilton Fraser, parent company to mydeposits, also said: ‘The results of this survey are particularly interesting for the short to medium future of the private rented sector. Around 25% of those who responded were unaware of the changes to the tax regime on their existing portfolios which shows that more is needed to be done to help educate the market and help prepare landlords for the changes to their personal tax liabilities over the next few years.’

‘Even more poignant however, is the suggestion that more than 50% of landlords are considering changing their behaviour to safeguard their income by either increasing rents, turning to self-management or even selling up completely. With all the well-meaning efforts that are being made in the market to make the whole renting experience a better place for both landlords and tenants, there is now a clear danger that supply could be restricted with the knock-on effects this may cause. The right tax planning advice and income protection strategies are absolutely crucial.’[1]

[1] http://www.propertyreporter.co.uk/landlords/almost-half-of-landlords-planning-changes-as-a-result-of-tax-implications.html

 

 

Be Prepared for New Buy-to-Let Portfolio Rule Changes this Month

Published On: September 1, 2017 at 9:30 am

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Categories: Finance News

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This month, the Prudential Regulation Authority (PRA), which is part of the Bank of England (BoE), will start to enforce tougher lending standards on buy-to-let portfolio landlords – those with four or more mortgaged buy-to-let properties.

We have created a guide for landlords on the new rules: /landlords-guide-pra-portfolio-underwriting-changes/

Be Prepared for New Buy-to-Let Portfolio Rule Changes this Month

Be Prepared for New Buy-to-Let Portfolio Rule Changes this Month

Although the new buy-to-let portfolio rule changes are due to be introduced from 30th September 2017, some lenders will apply the new rules from today, 1st September.

We’ve spoken to London estate agent Portico about the upcoming buy-to-let portfolio rule changes.

The agent’s Regional Director, Mark Lawrinson, comments: “Under the new rules, if you want to make an application for a buy-to-let-mortgage on a new rental property, the lender will have to look at your entire property portfolio when they decide what mortgage deal they can offer on a single property.

“For example, if you have six properties and four are generating enough rental income to cover mortgage payments and then some, but the other two are not, your new mortgage application may not be approved by some lenders.”

He continues: “As of 30th September, lenders will also require a full breakdown of rental properties, a business plan, and cash flow projection to support a new application.

“As a result of the new buy-to-let lending changes, we may see a surge of rental stock come back on the market for sale, as landlords look to offload their weakest performing properties in order to get further lending on more potentially profitable properties.

“The new rules could also have a knock-on effect on rental prices, as landlords look to cover any shortfalls or carry out works to a property to both increase the capital value and the rent, in turn improving the yield and the return.”

Seasoned landlord and the London representative for the National Landlords Association (NLA), Richard Blanco, had this to say: “Landlords who want to remortgage or capital raise before being assessed through the new criteria will need to get their skates on. They may be too late for some lenders, who are applying the new rules from Friday 1st September.

“Many lenders will unfairly assess landlords’ existing mortgages through a 145% x 5.5% prism, even though they originally got their mortgages on looser criteria years ago. This could create mortgage prisoners: borrowers who are unable to switch lenders. This is a reminder that if you do remortgage to another lender, always choose one that has a good track record in switching customers to competitive follow-on rates once the initial product has expired.”

He adds: “Landlords are gradually waking up to the fact that they are having to borrow at a much lower loan-to-value [LTV], so they may not get further advances because rental coverage has to be much higher. If their regular lender has decided not to do business with portfolio landlords, they may need to take their business elsewhere.”

Portico also asked mortgage experts Capricorn Financial who the new buy-to-let portfolio rule changes will affect: “A few lenders are likely to withdraw from this arena as a result of the new rules. Santander have already indicated they will not lend to portfolio landlords for purchases or additional borrowing, while others have improved their offering through brokers – NatWest, for example, have gone from a maximum of four properties to ten.”

The new lending changes come on top of tighter stress tests for buy-to-let landlords, which came into force in January this year.

 

Hundreds of Landlords Fined over Failure to Comply with Right to Rent

Published On: September 1, 2017 at 9:03 am

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Hundreds of landlords have been fined thousands of pounds for failing to comply with the Government’s controversial Right to Rent scheme.

Penalties totalling £163,000 were handed out after the Right to Rent scheme was rolled out across England, official data reveals.

Fines were issued to 236 property owners between the start of February 2016 and June this year – a rate of around one every two days.

The scheme requires landlords to establish whether a tenant has a right to live in the UK, by taking copies of documents, such as passports or identity cards.

Hundreds of Landlords Fined over Failure to Comply with Right to Rent

Hundreds of Landlords Fined over Failure to Comply with Right to Rent

Failure to comply with the scheme can lead to fines of up to £3,000 per tenant, while those that knowingly let to people with no right to rent in the UK can face up to five years in prison.

Ministers introduced the measures to create a “hostile environment” for those with no right to be in the UK. Illegal immigrants are also banned from opening bank accounts, while driving licences can be refused or revoked.

Figures published by the Home Office show that the number of landlords that have been fined for failing to comply with the scheme has more than tripled in just over a year.

Between April and June 2017 – the latest statistics available – 76 penalties worth £47,700 were issued. This compares with just 14 fines worth a total of £13,800 in the first three months of 2016.

The Immigration Minister, Brandon Lewis, says: “We believe in creating an immigration system which is fair to people here legally, but firm with those who break the rules or who enable others to do so.

“The Right to Rent scheme deters people from staying in the UK when they have no right to be here.”

He continues: “We regularly meet with representatives from the private rented sector, local authorities and housing charities, to discuss and monitor the scheme.

“Landlords can avoid the risk of a civil penalty by conducting simple and straightforward checks on tenants’ documents, in accordance with Home Office regulations.”

To help landlords comply with the rules, we have created a guide with the Home Office’s help. Read it for free here: /home-office-reinforces-landlord-responsibilities-right-rent/

Campaigners claim, however, that the scheme fuels discrimination and argue that there is little evidence of it having an impact on the crackdown on immigration.

Chris Norris, the Head of Policy at the National Landlords Association (NLA), believes: “A growing but small number of landlords have been penalised as a result of the scheme so far, with an average fine of around £600 handed out in conjunction with these cases.

“This suggests that landlords are more likely to be accidentally falling foul of the law, rather than deliberately or maliciously breaking the rules.”

He adds: “It’s important to remember that landlords are neither immigration experts nor border agents, so, with time, education and the right support, we’d hope that these kinds of cases begin to diminish.

“However, ultimately, this scheme should be judged on whether it tackles or prevents those who knowingly ignore the law and let to people who are in the UK illegally, but, so far, there’s little evidence to suggest it is having the desired effect.”

The Joint Council for the Welfare of Immigrants insists that the Government “has provided no evidence that this policy actually encourages undocumented migrants to leave the UK”.

The charity’s Legal and Policy Director, Chai Patel, concludes: “It is likely that, instead, the policy is driving vulnerable migrants into the hands of rogue landlords.”

Whatever your thoughts on the scheme, it is essential that you avoid fines and imprisonment by complying with the rules.

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Scottish rents at highest level since February

Published On: September 1, 2017 at 8:52 am

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Categories: Property News

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The Scottish property market continued its steady progress throughout July, with property prices rising and rental yields staying strong.

Average Scottish rents – not seasonally adjusted – was £575 during July 2017, according to the latest report from Your Move Scotland. This was 1% more than the £569 recorded last month and the greatest total recorded since February.

The most expensive region was Edinburgh and Lothians, with rents standing at £662 per month. On the other hand, the lowest were in Eastern Scotland, reaching £541 per month on average.

Improvement

Brian Moran, Lettings Director at Your Move, observed: ‘The rental market in Scotland continues to improve, with rents in July performing as well as they have all year. The next year will be an interesting time for the rental market due to the launch of a new style of tenancy agreement in December, while additional rules governing Scottish letting agents come into force in 2018.’

 

Concluding, Mr Moran said: ‘Whether you’re a landlord, tenant or letting agent now is the time to take stock and make sure the rental market is working for you and that you’re prepared for these changes.’

‘Looking ahead, we can expect the end of the summer to see a rise in letting activity as students move into new properties ahead of the academic year.’[1]

Scottish rents at highest level since February

Scottish rents at highest level since February

[1] http://www.propertyreporter.co.uk/landlords/scottish-rents-hit-highest-total-since-february.html

 

 

The Effects of Tax & Finance Changes on Buy-to-Let

Published On: September 1, 2017 at 8:10 am

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Categories: Finance News

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By Paul Mahoney, Managing Director of Nova Financial

Paul Mahoney Nova Financial

Paul Mahoney, of Nova Financial

There is presently much debate in the buy-to-let community and in the press with regards to how recent events and legislative changes are likely to affect the market, and whether buy-to-let is still a viable investment option.

Although, I’m confident that if you’re reading this article, that you’d be familiar with the changes, for clarity, I will name a few;

To date, landlords have been very resilient and, although some surveys suggest a slowdown in buying appetite and some considering selling, at Nova Financial, we’ve experienced the opposite. Our clients are simply buying properties at lower values and with higher yields, predominantly in the North West of England. These properties circumvent the repercussions of the changes by generating more profit, hence tax doesn’t hurt as much. They also fit into the lower Stamp Duty thresholds and solve mortgage servicing issues.

There was speculation that the changes would result in increased rents due to landlords trying to cover their increased tax bill and buying costs, however, to date, this hasn’t occurred. I believe that many overestimate the landlord’s control over rents, as they do not set rents, the market does and, if a landlord charges too much for their property, it won’t rent. However, if the changes result in less supply of rental properties available and, given there is a growing demand, rents will go up due to the market.

The number of new purchases have fallen, especially since the introduction of the Stamp Duty premium in April 2016. This is a concern, as new builds are the new supply that is required to solve the UK housing crisis. If new builds aren’t bought, then they aren’t built, and we have very little chance of building the number of houses needed per annum. This will drive house prices and rents higher. I concur with recent comments made by Tory MP Iain Duncan-Smith, that the Government should incentivise landlords to buy new builds to help solve the abovementioned problem.

It seems very unlikely that section 24 will be reversed any time soon, especially given the Parliament’s current workload with Brexit to be resolved, however, I’d say there is a slight chance that the Stamp Duty premium could be changed. Many viewed the changes as an attempt to professionalise the buy-to-let market, which, in a way, it has done, by driving many to invest through limited companies, whether this be good or bad. It is very likely though that landlords were viewed as an easy target, due to bad public opinion, for a tax grab.

Buy-to-let is still a very viable and potentially lucrative investment. At Nova Financial, most of our clients are currently achieving net yields on funds invested of 10%+ and, add to that the average growth in housing over the past 20 years per annum of 5%+, that brings the yearly returns on cash invested to over 30%! This return may seem very high, but that’s the benefits of high levels of borrowings at low interest rates when investing in high yielding growth areas. This is what separates property investment as the clear winner from all other investment options.

If you have any questions or would like to determine how Nova Financial can be of assistance, please call 0203 8000 600, visit www.nova.financial or email info@nova.financial

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