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Em Morley

Where are the highest sales of new builds in the UK?

Published On: July 5, 2017 at 11:32 am

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A new report has revealed the regions of the UK that are home to the greatest concentration of new build properties, as a share of all property sales.

According to the data from Zoopla, the highest proportion of new builds in Britain as a share of property sales are in Milton Keynes, accounting for 33.2%.

New Builds

Crewe came in second with 29.6%, with the Greater London town of Ilford in third with 28.8%. There were only two regions of Northern England that made it into the top ten positions.

On the other hand, the Shetland village of Sandness has the lowest proportion of property sales for new build properties, at only 0.5%. The next two lowest records were seen in Orpington at 2.7% and Dumfries at 2.9%.

In addition, Zoopla looked at house price values have changed in regions with a greater proportion of new build housing. This data reveals that in areas with a new build concentration of 25% or more, values have grown on average by 29.7% in the past five years.

This is 6% greater than the national average property price growth rate, which stands at 23.6%.

Where are the highest sales of new builds in the UK?

Where are the highest sales of new builds in the UK?

By region, the highest concentration of new build homes are found in the South of England, followed by the Midlands and then the North.

Sales

Lawrence Hall, spokesperson for Zoopla, observed: ‘New housing sales account for 1 in 10 property sales each year but this varies across the country. These new findings give us a useful overview of where new builds are most common around the country, outside of London. Clearly, areas such as Milton Keynes and Crewe are benefiting from new investment by developers.’[1]

‘While there is a correlation between a large proportion of new builds and higher property price growth, new homes are typically developed in areas of high demand, which has already contributed to a rise in property values,’ he added.[1]

[1] http://www.propertyreporter.co.uk/property/where-is-britains-new-build-capital.html

Will limited company landlords with small portfolios be worse off?

Published On: July 5, 2017 at 10:48 am

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Buy-to-let landlords looking to acquire properties via limited companies could well end up £1,000 per year worse off as a result of higher mortgage rates.

Research from Private Finance shows that a landlord with a limited company can expect to pay around 3.41% for a two-year fixed 75% LTV mortgage deal- in comparison to 1.92% for personal borrowers.

Limited Companies

A separate report released recently indicates that limited company lending actually exceeded borrowing from landlords during the second quarter of 2017.

This is unsurprising, as many landlords look to beat recent buy-to-let tax changes, including phasing out of mortgage interest tax relief.

However, Private Finance suggest that the high cost of mortgage borrowing for limited companies will outweigh possible tax advantages for landlords with portfolios of less than four properties.

The firm states that a landlord earning £46,010 over the course of the year will have £36,194 in take home cash if purchasing as an individual- after tax and mortgage costs are deducted.

If the same landlord was to purchase through a limited company, they would actually earn £34,825 in take home pay. This figure is £1,369, or 4%, less, due to the fact that limited company borrowers pay greater rates on mortgage borrowing, this reducing their net income.

Larger Lending

In addition, Private Finance said that repurchasing into a limited company structure could also prove costly for larger landlords.

A landlord with five rental properties, with earnings of £90,050 per year, would have £53,768 in take home pay, once tax and mortgage costs are deducted.

Should the same landlord choose to repurchase under a limited company structure, they would have £54,584 in take home pay. Once capital gains and stamp duty fees are taken into account they would be left with just £5,374.

If they were to spread these payments over ten years, their take home pay would be £49,663- over £4,000 less per year than if they were to operate as an individual.

Will limited company landlords with small portfolios be worse off?

Will limited company landlords with small portfolios be worse off?

Rates

Shaun Church, director of Private Finance, observed: ‘The option to invest through a limited company has come under the spotlight recently as landlords look for ways to offset recent tax changes.  But landlords shouldn’t rush into this assuming it’s a safe bet for saving money. Limited company mortgage products are available through a handful of smaller lenders, resulting in higher rates compared to personal borrowing. Investors need to drive down mortgage costs as much as possible to prevent this from eating into their profits.’[1]

‘Larger landlords might find the tax benefits associated with limited company ownership outweigh the higher cost of mortgage borrowing. Each investor is different and there’s no one-size-fits-all solution. Landlords should ensure they seek professional advice on how best to maximise their profits: an independent mortgage broker can help explain the range of options available to limited company and personal BTL borrowers,’ he added.[1]

 

[1] https://www.landlordtoday.co.uk/breaking-news/2017/6/landlords-with-limited-companies-may-earn-1-000-less-a-year

 

London Rents Drag Down the Average Across the UK

Published On: July 5, 2017 at 9:41 am

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London rents are dragging down the average growth rates for the rest of the UK, according to the latest data from HomeLet.

London Rents Drag Down the Average Across the UK

London Rents Drag Down the Average Across the UK

The figures show that newly agreed rent prices across the UK fell by 0.3% in June on an annual basis, to an average of £908 per month – the same rate recorded in May, when new rents dropped for the first time since December 2009.

London rents continue to record annual declines, falling by 2.6% in the year to June, to stand at an average of £1,524 per month – a long way from the 7.1% rate of rent price growth seen this time last year.

When London rents are taken out of the equation, new rents actually rose by 0.5% annually, to an average of £757.

Just five regions recorded a decline in rent price growth in June, with the East of England, South East, Yorkshire and the Humber and the North East also experiencing annual decreases.

On a monthly basis, most regions recorded growth, with just the East Midlands, South West and East of England experiencing drops.

The Chief Executive of HomeLet, Martin Totty, says: “It is now a full year since rental price inflation in the UK peaked at 4.7%, since when we’ve seen progressively more modest rent increases and, over the past two months, falls in some areas of the country.

“June’s figures are the first indication that this trend may now be beginning to flatten out, but it’s too early to say this with any certainty – the next few months will provide crucial intelligence on the direction the market is taking.”

The data contrasts to new figures released by Hometrack, which suggest that London rents are now at the most unaffordable level for ten years.

Recently, the Local Government Association (LGA) has also attacked private rents for being too high, reporting that one in seven tenants now spend more than half of their income on rent.

Calling on central Government to provide more support for the building of homes that families can afford, the LGA revealed that just 2% of homeowners spend the same proportion of their income on mortgages.

Is Deposit-Free Renting on the Horizon? One Campaigner Thinks So

Published On: July 5, 2017 at 9:21 am

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Deposit-free renting could be on the horizon, according to deposit reform campaigner Ajay Jagota, of Dlighted.

Is Deposit-Free Renting on the Horizon? One Campaigner Thinks So

Is Deposit-Free Renting on the Horizon? One Campaigner Thinks So

With almost 5.8m households expected to be living in the private rental sector within four years, the amount of cash sitting in tenancy deposits is set to surge by around 40% – and that’s despite Government plans to cap security deposits to just one month’s rent, as announced in the recent Queen’s Speech.

Jagota believes that with the average UK tenant currently needing £967 for a deposit, around £5.8 billion worth of funds will be held as tenancy deposits by 2021, reflecting predicted growth of around 24% in the number of households renting privately.

Jagota described the figure as “the absolute scandal of wasting money to fill the funding gap on social care on literally nothing”.

The figures, from a survey conducted by Knight Frank, also show that 37% of tenants now rent out of choice rather than necessity, with renters naming the flexibility and fewer responsibilities of renting as primary reasons for not purchasing properties of their own.

The study also found that 68% of tenants still expect to be living in the private rental sector in three years’ time.

Jagota insists: “Tenancy deposits are a blatant economic inefficiency in serious need of Government intervention – an intervention which could save almost six million renters an average of £1,000 by the time of the next election.

“The £3.5 billion already is an eye-watering figure enough, but the £5.8 billion it could rise to within five years is monstrous. With 97% of deposits unnecessary, this is an absolute scandal.”

He believes: “I’m not convinced a deposit cap goes anywhere far enough, but I believe the industry has to accept that this is just the first step.

“I predicted pre-election that tenancy deposit reform is now irrevocably on the agenda and, even just this week, deposit-free renting was proposed in an influential blog by leading property academic Professor Brian Sturgess.

“The tide is turning in favour of deposit-free renting, and those of us who have worked so hard to put reform on the agenda – even when it has not been a very popular attitude in our industry – are entitled to feel a little vindicated.”

Jagota claims: “There are an infinite number of better ways all that money could be spent, and by abolishing outdated tenancy deposit schemes with deposit-free renting and landlord insurance, we can save renters a fortune while giving landlords better protection and boosting our economy, or facilitating generation rent onto the housing ladder via transfer of funds into Help To Buy ISAs.”

Do you agree that deposit-free renting is on the horizon? And is this a good thing?

London rents at least affordable level for ten years

Published On: July 5, 2017 at 8:51 am

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New research released by property market analysts Hometrack has shown that increased demand and growing unaffordability has pushed the cost of renting in London to a ten-year high.

Since 2007, typical rental values in the capital have risen by 45%, which has married with heightened demand due to strong growth in employment. In addition, more migration from the rest of Britain and overseas and constraints in the accessibility of mortgages for first-time buyers have also led to this growth.

Rental Growth

In contrast to figures seen in London and other regions of southern England, rental growth elsewhere has been largely constant over the last decade. Yorkshire and Humberside have seen average rents remain stagnant, while rents in the North West and North East have slipped by 7% and 4% respectively.

The reason for this difference is that job growth following the financial crisis-when rents slipped between 5% and 12%- has been 2/3 times faster in London.

Rental growth in the capital has averaged at 4.5% per year since 2010 and has majorly outpaced earnings, which in turn has led to the current levels of unaffordability. However, rental growth at national levels, excluding London has been averaging at just 2.7% per year.

What’s more, southern parts of England and the Midlands have seen rental growth start to outpace earnings from 2013, as a result of improved economic conditions. In fact, these regions have seen an overall 20% increase in average rental values since 2007.

Trends

Richard Donnell, Insight Director at Hometrack, observed: ‘This new report aims to provide an important long run context for the current trends in rents and rental affordability and what this means as we look forward. Rents fell by between 5% and 12% in 2008/09 and this explains why rents in parts of the country outside of London, where rental growth has been subdued, are only just back to where they were a decade ago.’[1]

‘London has the largest and most liquid rental market. Demand in the capital has been buoyed by employment levels rising 2-3x times faster than other regions, as well as the much higher deposit and household income required to buy making the transition from renting harder than in the past,’ he added.[1]

view of the city life with the big ben as background

London rents at least affordable level for ten years

Continuing, Mr Donnell said: ‘Another important factor is the growth in sharing amongst renters which means in many parts of London there are multiple incomes combining to pay the rent. This is a particularly strong trend in in inner London where a high percentage of rented homes are fully occupied.’

‘Outside London the drivers of rental demand have been more muted and the resulting impact on rents is less pronounced. However, increased economic activity is feeding into demand and resulting in increased levels of rental growth, at a rate more in line with earnings growth. Our analysis shows that over the long run tenants spend between 32% and 37% of earnings on rent at a national level.’[1]

Concluding, Donnell noted: ‘Ultimately rental levels need to reflect affordability and the buying power of tenants. In London affordability is stretched and demand is weakening on concerns over the outlook, which we expect will lead to average rents in the capital falling by 1-2% over 2017. Conversely, rental growth outside of London is set to continue to track earnings growth with rents rising at 2-3% per annum. The greatest upside for rents is in the midlands and northern regions where rental affordability is the best it has been for a decade.’[1]

 

[1] http://www.propertyreporter.co.uk/landlords/london-rents-at-least-affordable-levels-for-ten-years.html

 

Public Sector Property Purchasing Power Plummets, Finds eMoov

Published On: July 5, 2017 at 8:12 am

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The latest research by leading online estate agent eMoov.co.uk highlights the detrimental impact the 1% annual pay cap has had on public sector employees where their property purchase power is concerned.

The agent analysed the annual average wage for the public sector since the 1% annual pay cap was implemented in 2012, and what that meant in terms of the price of property available with the mortgage approval rate at 4.5 times that wage (including a 10% deposit).

Public Sector Property Purchasing Power Plummets, Finds eMoov

Public Sector Property Purchasing Power Plummets, Finds eMoov

eMoov then compared this to the average house price at the time and the difference between the two, as well as how this gap has widened since.

Finally, with the 1% cap intended to stay in place until 2020, the agent also looked at how much further this gap could widen in the next three years.

Since 2012, the average UK house price has risen by more than £50,000 – up by 31.12%. However, at the same time, a 1% cap on public sector wages means that they have grown by just 6.03%. What this means is that as a typical salary multiple for a mortgage, the average public sector worker can afford a much inferior home than they could have afforded five years ago, due to being hit by both house price inflation and their static purchasing power where mortgages are concerned.

The gap between the cost of the average house price and the property purchase potential of the public sector salary has increased year-on-year.

In 2012, the average house price was £167,854, but the average public sector salary was £25,060. With a mortgage lender typically lending 4.5 times this wage and a 10% deposit of £16,785, a public sector employee could only afford to buy a property at a value of £129,556 – a difference of 29.56% between that and the average house price.

Since then, the gap has continued to widen, increasing to 29.59% in 2013, 37.27% in 2014, 41.61% in 2015 and 49.45% in 2016. So far, 2017 has recorded the largest gap, of 55.46%, with the average house price topping £220,094, while the average public sector wage has continued to stagnate, at £26,571. As a result, a public sector employee today can only secure a mortgage for a property valued at £141,579, including the 10% deposit of £22,009.

Based on the last three years of both house price and public sector wage growth, the forecast for 2020 – the proposed year for the 1% cap to run to – looks even bleaker.

By then, the average house price could be in the region of £263,940, with the public sector wage reaching an average of just £27,581. If this were the case, then public sector employees would only be bale to secure a mortgage on a property worth £150,507 with a 10% deposit of £26,394 – stretching the gap to a huge 75.37%.

The Founder and CEO of eMoov, Russell Quirk, comments on the findings: “The plight of today’s aspirational homeowner is a well-documented one, but it isn’t just a matter of age and the year you were born, the sector in which you choose to build a career can also have huge implications on your chances of getting on the ladder.

“It is very disappointing that those arguably the most deserving of a foot up on the ladder are the ones left well off the pace. If the cap were to remain in place until 2020, the difference between salary, the amount of mortgage available and the average house price will be cavernous for those in the public sector.”