Written By Em

Em Morley

New Underwriting Standards to Maintain Discipline in Buy-to-Let Mortgage Market

Published On: October 4, 2016 at 9:09 am

Tags: buy to let mortgages,buy-to-let landlords,Mortgage lending,mortgages

The Prudential Regulation Authority’s (PRA’s) new underwriting standards will maintain discipline in the buy-to-let mortgage market, according to Paragon Mortgages, one of the UK’s leading specialist buy-to-let lenders.

New Underwriting Standards to Maintain Discipline in Buy-to-Let Mortgage Market

Paragon has welcomed the PRA’s Supervisory Statement, which will introduce more comprehensive and uniform affordability testing for buy-to-let mortgages.

The standards will introduce new rules to ensure that lenders undertake a thorough assessment of mortgage affordability based on a more standardised review of rental income and property costs, alongside a full understanding of each buy-to-let landlord’s wider economic circumstances.

This will include a requirement for lenders to consider how buy-to-let applicants are affected by the tax changes announced last year, including the Stamp Duty surcharge and reduction in mortgage interest tax relief.

Importantly, the new standards also require lenders to tailor their underwriting approach to distinguish between landlords with small property portfolios of no more than three buy-to-let properties, and those with more extensive and complex investments.

The Managing Director of Paragon Mortgages, John Heron, comments: “As an experienced specialist in the buy-to-let sector, Paragon is already well-aligned with the PRA’s requirements.

“A thorough affordability assessment, together with a full understanding of the characteristics of each property and landlord that we lend to has always been central to our approach and instrumental in maintaining our strong credit metrics.”

He explains: “By requiring a more consistent approach across the market, the PRA should be able to ensure that the strong credit performance of buy-to-let lending is maintained and that lending remains sustainable.

“We would, however, expect these measures to restrict the level of growth in the buy-to-let market going forward, by cutting out more marginal business. We also expect a larger proportion of the market to be specialist in nature, consisting of more professional portfolio landlord business. We believe that Paragon is particularly well placed to capitalise on the opportunities this presents, given its unparalleled experience in this sector.”

Do you believe that the PRA’s new underwriting standards will benefit buy-to-let landlords looking to invest?

RICS calls for Government to address shortage of rental homes

Published On: October 4, 2016 at 8:49 am

Author: Em Morley

Categories: Property News

Tags: rent,rental crisis,rental market,rental property,Stamp Duty

New figures released by The Royal Institution of Chartered Surveyors (RICS) shows that soaring property prices is making homeownership more unaffordable for families.

As such, the report claims that 1.8m more households will be forced to rent by the year 2025.

Pressures

RICS is calling on the Government to cool financial pressures on investors by introducing tax breaks. In addition, it has called on ministers to shift their focus from supporting homeownership to rebuilding the buy-to-let market.

Data from the report indicates that between 2001 and 2014, the number of UK properties renting a property rose from 2.3m to 5.4m. Further investment has been hit by the changes in stamp duty last April.

The report indicates that as a result of the stamp duty changes, 86% of landlords have no plans to add to their portfolio in the coming year.

Supply issues

An extract from the report reads: ‘RICS is urging the Prime Minister to abandon David Cameron’s previous home ownership focus and reverse April’s Stamp Duty measures in order to address short term rental supply issues. However, they are recommending that Government takes a much bolder long-term approach and pioneers a new build-to-rent sector, with the private sector encouraged to build properties specifically for residential letting.’[1]

‘It would like to see pension funds incentivised with tax breaks to build large scale rental properties with affordable elements. Additionally, local authorities holding brownfield sites should be encouraged to release land for such properties.’[1]

RICS calls for Government to address shortage of rental homes

Critical

Jeremy Blackburn, head of policy at RICS, added: ‘it’s time for Theresa May to get out her hard hat. We are facing a critical rental shortage and need to get Britain building in a way that benefits a cross section of society, not just the fortunate few.’[1]

Richard Lambert, CEO of the National Landlords Association, believes: ‘The stamp duty surcharge for second home purchases was nothing more than a crowd-pleasing policy from a Government that was dead set on championing homeownership at all costs.’[1]

‘However, it frankly isn’t raising any money for the exchequer, so it makes sense for Mr Hammond to reverse it and give private residential investors the opportunity to help ease the housing crisis. This government should be commended for setting out a programme for building one million homes by 2020 and it needs to put the effort into making sure this is realised. In the meantime we’ve still got a burgeoning renting population that need to be housed right now,’ he concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/rics-calls-on-government-to-address-18m-shortage-of-rental-homes.html

Chancellor Must Scrap Osborne’s Stamp Duty Reforms in Autumn Statement, Says SLC

Published On: October 4, 2016 at 8:33 am

Author: Em Morley

Categories: Property News

Tags: Autumn Statement,housebuilding,housing crisis,Stamp Duty

The new Chancellor, Philip Hammond, should scrap his predecessor’s Stamp Duty reforms for landlords in the Autumn Statement, according to the Society of Licensed Conveyancers (SLC).

The organisation believes that the Government should be addressing real housing issues, rather than consulting on changes to Stamp Duty.

Chancellor Must Scrap Osborne’s Stamp Duty Reforms in Autumn Statement, Says SLC

The SLC has called upon Chancellor Philip Hammond to reverse George Osborne’s damaging attacks on the private rental sector, in order to stimulate the housing market.

As of 1^st April 2016, buy-to-let landlords and second homebuyers are charged an additional 3% in Stamp Duty on property purchases.

The SLC warns the Chancellor that these “attacks” on landlords have had a significant impact on property investment, which consequently affects the whole housing market.

The Chairman of the Society, Simon Law, says: “In spite of some trying to talk the market up, there is no doubt that transaction levels and new housing building are being adversely affected by a number of factors. While some people point at uncertainty created by Brexit, it is the Society’s belief that Osborne’s punitive and unnecessary reforms to the taxation regime associated with private sector property investors and landlords have been the main cause.

“The reforms have also caused enormous confusion for property purchasers and their conveyancers, particularly in respect of Stamp Duty, resulting in frequent delays and even transaction failure.”

He insists: “There is a real and significant opportunity for the new Government under Theresa May to unlock economic growth very quickly by simply reversing the Osborne reforms in the Autumn Statement. There is no doubt that a robust property sector can help allay any fears of an economic downturn if swift action is taken.”

Hammond’s first Autumn Statement will take place on 23^rd November.

The SLC is calling on other property stakeholders to back its call on the Chancellor for the benefit of all property investors and landlords, and ultimately, their tenants. It reminds the Government that investment leads to construction, and a greater supply of housing keeps rent levels in check.

Yesterday, the Chancellor announced that he is focused on boosting housebuilding in order to tackle the housing crisis, rather than reducing the deficit.

Do you believe that abolishing the Stamp Duty reforms for landlords will help resolve the housing crisis?

Prime property values remain constant in Q3 of 2016

Published On: October 3, 2016 at 11:42 am

Author: Em Morley

Categories: Property News

Prime property prices in Britain remained largely unchanged during the third quarter of the year, according to new data released today.

The latest report from Knight Frank shows that prime property values fell by just 0.1% in the three months to September. However, year-on-year, growth is up by 0.5%. In London, there has been an annual fall of 1.8%.

Prime peaks

Currently, the growth in the prime market outside of London is slower than the peak of 5.2% recorded in 2014. Knight Frank believes that the moderation in price growth is due to the recent stamp duty changes being factored into asking prices and offers.

In addition, there are indications that prime property buyers are looking outside of the capital to the Home Counties. While overall figures suggest that the market has been subdued, activity has actually risen following the historic Brexit vote.

There was a 13% increase in new instructions between July and August in comparison to the same period in 2015. Knight Frank believes that this is due to many vendors who had previously halted plans to put their property onto the market now pushing on.

What’s more, there was a 7% rise in the number of properties going under offer. Sensible pricing remains constant, particularly for properties valued above £1.5m, where the top rate of stamp duty applies.

Prime property values remain constant in Q3 of 2016

Strong

Oliver Knight, partner at Knight Frank, observed: ‘the strongest markets continue to be affluent towns and cities which have outperformed their more rural counterparts, although the differential has narrowed in the last six to twelve months.’[1]

Knight also noted that the average property values in urban locations have increased by almost 2% year-on-year. In comparison, annual price growth for rural properties was 0.5%.

‘Prime urban markets benefit from good schools and amenities as well as excellent transport links to London, which make them among the first port of call for buyers from the capital. Our figures show a 43% increase in the number of sales to Londoners in the Home Counties in the first nine months of 2016 compared with the same period the previous year. We will continue to keep a close watch on key market indicators in the coming months to assess any potential longer term impacts of the referendum result,’ Knight added.[1]

[1] http://www.propertywire.com/news/europe/prime-property-prices-uk-mostly-unchanged-showing-positive-outlook/

Compensation Charges Can Lead to Deposit Disputes, Warns Imfuna Let

Published On: October 3, 2016 at 10:34 am

Author: Em Morley

Categories: Landlord News

Tags: compensation,deposit disputes,inventory,tenancy deposits

Compensation charges at the end of a tenancy can lead to deposit disputes, especially when there is little or no evidence to support the charges, warns Imfuna Let.

The firm reminds landlords and letting agents that they do not charge for betterment or fair wear and tear when calculating compensation costs. It explains that if an item was old at check-in and has suffered some additional damage over a two-year tenancy, the law does not allow a landlord or agent to simply replace the item with a new one. However, some compensation towards the item is allowable.

Compensation Charges Can Lead to Deposit Disputes, Warns Imfuna Let

The Founder and CEO of Imfuna Let, Jax Kneppers, goes into more detail: “Landlords and agents who are calculating the cost for compensation charges against a tenant should ensure that the costs are reasonable and fair. They should also have a working knowledge of the accepted principles of compensation and explain to their tenants how they have worked out the deductions. If landlords and agents can prove how they arrived at the proposed deductions from their tenants’ deposits, all parties involved will be happier to accept the decisions.

“In order to work out accurate compensation charges, landlords and agents need the original cost of an item, age and condition at the time of check-in, length of tenancy, average life expectancy of the item, and any extenuating circumstances. Landlords and agents should be able to provide written evidence of the original cost and age of the item for any compensation claim.

“For example, if a tenant damages vinyl or laminate flooring with drag marks, deep scratches or scrapes, burn marks and stains, these are considered to be chargeable issues. However, a small number of surface scratches, nicks and minor indentations are considered to be consistent with fair wear and tear, depending on the length of tenancy and original condition.”

He explains: “The final compensation cost will depend on a number of factors, such as if pets and children were in the property, any previous wear and tear, quality of the items, etc. Landlords and agents need to ensure they have brought together all the evidence to reach a safe conclusion.

“This evidence will require detailed descriptions and photographs taken at the start and the end of the tenancy as part of an inventory. If a professional inventory has been supplied for the property, then its condition will have been fully recorded at the start and the end of the tenancy. This is the bulletproof evidence that landlords need to support a claim for compensation charges.”

If you need any assistance in compiling a professional inventory, our guide will help you create a comprehensive document and avoid deposit disputes: /guide-compiling-good-inventory/

The Director of Balgores Property Group, Howard Lester, also comments on the importance of correct compensation charges: “Normal wear and tear is a fact of life with rental properties. However, there is a distinct difference between fair wear and tear and actual damage. For example, carpet tread will flatten over time where there has been foot traffic, but cigarette burns, stains or soiling will require a charge.

“Our deposit clerk spends many hours a day explaining the difference in these issues to both landlords and tenants, and the vast majority of issues that end up being sent off for arbitration are from one or other refusing to accept these facts. We find that by preparing a detailed inventory at the beginning, together with the property inspections and final check-out, we are normally able to accurately predict the outcome of over 90% of disputes before they reach arbitration. In the event of there being no inventory, we always advise the landlord that they will be very unlikely to win any compensation.”

Chancellor Hammond to put housing before deficit reduction

Published On: October 3, 2016 at 10:29 am

Author: Em Morley

Categories: Property News

Tags: Brexit,housebuilding,landlords,Philip Hammond

New Chancellor Philip Hammond has pledged to spend on new homes during his term in office, going against predecessor George Osborne’s desire to balance the books.

Speaking to the BBC, Mr Hammond said that the Brexit vote had caused major uncertainty and that a pragmatic approach was needed in order to support housing growth.

‘Eye-watering’

Hammond went on to say that the deficit is still, ‘eye-wateringly large’ and would need to be addressed soon.

During his speech at the Conservative Party Conference later, Mr Hammond is to state that Osborne’s deficit reduction policies, ‘were the right ones for that time.’ However, he will then say that, ‘when times change, we must change with them.’

He believes that the Government will, ‘restore fiscal discipline in a pragmatic way that reflects the new circumstances we face.’[1]

Further details are slated to be provided in November’s Autumn Statement.

Chancellor Hammond to put housing before deficit reduction

Building

Part of a new plan for Britain following Brexit, there is likely to be a greater scope for investment to boost the economy. This is to include extra borrowing of £2bn to hurry the construction of new properties.

‘As we go into a period where inevitably there will be more uncertainty in the economy, we need the space to be able to support the economy through that period,’ Hammond noted. ‘If we don’t do something, if we don’t intervene to counteract that effect, in time it would have an impact on jobs and growth.’[1]

At today’s conference, Mr Hammond, alongside Communities Secretary Sajid Javid, will set out new procedures to try and build 40,000 new homes by 2020.

Borrowing

The Government is set to borrow £2bn in order to support the ‘Accelerated Construction’ scheme. This is set to get houses built on publicly-owned brownfield land, for quick development.

In addition, there is set to be a £3bn Home Building Fund, in order to provide loans to stimulate projects. This, according to the Government, will assit in building 25,000 homes by 2020, with a long-term target of over 200,000.

[1] http://www.bbc.co.uk/news/uk-politics-37536943