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Em Morley

Landlords to sell up following tax changes

Published On: June 16, 2016 at 11:15 am

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Concerning new research suggests that thousands of landlords will be forced to sell their properties in the coming years, following George Osborne’s tax changes on the buy-to-let sector.

The study was conducted by estate agent Maskells and concludes that changes to stamp duty, mortgage tax relief and lending criteria will make it harder to make substantial profits from buy-to-let. In turn, this could see landlords driving up rents and deterring potential renters.

Buy-to-let sales

Apart from the extra 3% stamp duty surcharge being imposed from April 1st, the amount that landlords can claim in mortgage interest tax relief is to be limited from 2017. This, it is feared, will cut landlords’ returns, especially higher rate taxpayers.

Maskells suggest that the tax measures imposed by Mr Osborne will see an additional 163,000 homes come onto the market by 2017/18. These, the estate agent believes, will be as a direct result of the changes.

In some areas, this could result in an oversupply of homes for sales, which in turn will put downward pressure on property prices.

Landlords to sell up following tax changes

Landlords to sell up following tax changes

Charles Curran, principal at Maskells, commented that, ‘the buy-to-let market has provided so much of the rental stock the country depends on, but the government’s tinkering could lead to a sell-off.’[1]

‘This situation does seem akin to a slow motion train crash: buy-to-let landlords with mortgages are standing on the track in a game of chicken with regulatory locomotive, hoping to time their exit as best as possible. This high-risk game will almost undoubtedly leave casualties,’ he added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/6/landlords-set-to-offload-property

 

Sharp Decline in Rental Property Levels Recorded

Published On: June 16, 2016 at 11:00 am

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Following a robust lettings market in April, a sharp decline in rental property levels has been recorded for May.

The Agency Express Property Activity Index reveals that new listings dropped by 11.9% and let properties fell by 11.1% last month, marking the greatest monthly decrease for May since the firm’s records began in 2012.

Recent figures from the Council of Mortgage Lenders (CML) have also confirmed that buy-to-let borrowing dropped hugely in April after a rush of landlords flooded the market to beat the 1st April Stamp Duty deadline.

Sharp Decline in Rental Property Levels Recorded

Sharp Decline in Rental Property Levels Recorded

Therefore, while May’s figures appear dramatic, they do remain somewhat distorted by the Stamp Duty changes.

The Director General of the CML, Paul Smee, comments: “There is a sense of calm after the storm this month, as lending eased back, following the significant rises in activity in March, as borrowers looked to beat the second property Stamp Duty deadline. We expect the market to take several months to return to its previous levels after the lending surge.”

Agency Express’ index recorded that all 12 UK regions saw decreases in new listings, while ten regions experienced a fall in let properties in May.

Some of May’s better performing regions include:

Number of properties to let 

  • Scotland: -4.1%
  • West Midlands: -4.2%
  • Wales: -5.2%
  • Central England: -6.7%
  • North West: -8.6%

Amount of let properties 

  • South East: +10.1%
  • Scotland: +4.1%
  • East Anglia: -3.7%
  • East Midlands: -10.5%
  • North East: -10.6%

The top performing region for May was the South East, where the number of let properties rose by 10.1%, marking a record best for May.

Strong figures were also recorded in Scotland, where let properties increased for a fifth consecutive month, by 4.1%.

The largest decrease was seen in the East Midlands, with the amount of properties to let falling by a record of 29.9%.

The Managing Director of Agency Express, Stephen Watson, says: “The Property Activity Index historically shows us a drop in figures throughout May. However, this month we have seen a much greater fall than in years previous. An unseasonal rush in activity throughout March, followed by a reactive dip in April and reduced lending has certainly blurred May’s figures. Now, with the impending EU referendum, it may be some time before we see a more balanced view of the UK lettings market.”

Tenant Loses Case in Supreme Court that Could Have Prevented Evictions

Published On: June 16, 2016 at 9:27 am

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Unlicensed HMO landlord ordered to refund £84,877 to tenants

A private tenant has lost a case in the Supreme Court that could have prevented evictions in the future.

The Supreme Court rejected an appeal by a tenant who claimed a possession order on her home was a breach of her human rights.

Lawyers say that the ruling will be welcome news to private landlords and their mortgage providers.

Tenant Loses Case in Supreme Court that Could Have Prevented Evictions

Tenant Loses Case in Supreme Court that Could Have Prevented Evictions

Had the court ruled in the tenant’s favour, the case could have prevented both landlords and lenders from securing possession of their properties through the courts.

The landmark case, McDonald v McDonald, involved a tenant on an Assured Shorthold Tenancy who had mental health problems and rented the property from her parents.

When her parents fell into arrears on their mortgage, receivers appointed by the lender issued a possession order.

The tenant opposed the possession order on the grounds that it breached her right to respect of her home under Article 8 of the European Convention on Human Rights.

She also claimed that the receivers had not been entitled to serve notice on her in their own names.

The Supreme Court heard the case in March, after initial hearings at Oxford County Court and the Court of Appeal.

Yesterday, five Supreme Court judges ruled unanimously that the tenant’s rights under Article 8 were not infringed by the possession order.

The Residential Landlords Association (RLA) formally intervened in the case to ensure that the rights of landlords and lenders to reclaim possession at the end of a tenancy or lending period remained.

The Policy Director of the RLA, David Smith, says: “It is sad that it has taken this particular case to clarify this important point of law, but if the appeal had been allowed, it would have completely undermined the ability of landlords to reclaim possession of their property at the end of a tenancy.

“It could have opened the door to those tenants who might seek to make false accusations to remain in a property.”

Smith continues: “This would have severely damaged the confidence of landlords to let properties and lenders to provide the funds for the homes to rent the country needs.

“Whilst welcoming the court judgement, it does act as a reminder that landlords should be clear that they can keep up with mortgage payments, even through difficult financial times.”

However, the tenant could still pursue her case… In the European Court of Human Rights.

Investors could pay £10,000 more to secure mortgage

Published On: June 16, 2016 at 8:53 am

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Buy-to-let landlords are set to fork out a further £10,000 to secure a mortgage, following a crackdown on so-called dangerous debts by British lenders.

This new clamp down on worrying debts by lenders is pushing up mortgage costs for buy-to-let landlords. It is thought that banks and building societies will begin to make the substantial fee changes from September 2016.

PRA crackdown

Industry watchdog, the Prudential Regulation Authority (PRA), is concerned that some buy-to-let landlords are stretching themselves too thinly and will as such face difficulties when interest rates eventually rise.

As a result, the PRA is to force lenders to enforce stricter criteria tests, to ensure their investor can afford the repayments on the loan.

At present, investors must prove they can earn enough from their rental yields to cover their repayments. However, the new plans will require plans to see whether or not they could continue to meet these payments, should rates rise by 2%.

Tests

Under these new tests, banks and building societies will demand evidence of a yield of at least 5.2% to qualify for a 25% deposit loan. In essence, this would mean that a borrower would have to earn £7,800 per year in rent on a £150,000 home before paying their mortgage.

This means that investors would either have to raise rents or cut borrowing to ensure that they are covered.

Peter Armistead, of Armistead Property, believes savvy investors will be able to cope with these changes by purchasing cheaper property, with greater yields.

Mr Armistead said, ‘clearly, the investors most at risk are those with smaller deposits who buy property in parts of the UK where rents are low compared with house prices.’[1]

Investors could pay £10,000 more to secure mortgage

Investors could pay £10,000 more to secure mortgage

Regional rates

Continuing, Armistead said, ‘this is a particular problem in places such as London and the South-East where the average annual returns between 2010 and 2015, was just 4.86% in outer London and 4.71% in the City, according to LendInvest. House prices in London are about five times what they are in parts of the North West, but salaries are only 30% higher.’[1]

‘Manchester and Liverpool deliver some of the best rental yields, with Manchester recording average annual rental yields of 6.02% over five years, followed by Liverpool with 5.15% yields. An average residential property in Manchester is just £155,000, while a flat in a good area, costs as little as £120,000. A property in Manchester can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper,’ Armistead added.[1]

Concluding, Mr Armistead said, ‘Landlords will find the best returns in urban areas, with a concentration of students and young professionals. If investors can purchase cheaper properties with better yields, they will have the opportunity to protect and boost their profits in the longer term.’[1]

[1] http://www.propertyreporter.co.uk/landlords/pra-crackdown-sees-btl-investors-pay-an-extra-10000.html

Stamp Duty Deadline Causes Huge Drop in Buy-to-Let Borrowing

Published On: June 16, 2016 at 8:31 am

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The 1st April Stamp Duty deadline has caused a huge monthly drop in buy-to-let lending, according to the latest Council of Mortgage Lenders (CML) report.

Landlords borrowed £2.5 billion in April, down by a huge 65% on March and 7% on the previous year. A total of 16,100 loans were approved, down by 64% compared to the previous month and 10% on April 2015.

Stamp Duty Deadline Causes Huge Drop in Buy-to-Let Borrowing

Stamp Duty Deadline Causes Huge Drop in Buy-to-Let Borrowing

As of 1st April, buy-to-let landlords and second homebuyers are charged an extra 3% in Stamp Duty on property purchases. This caused a rush of investors to flood the market in the first three months of the year.

Homeowners borrowed £8.1 billion for house purchase in April, down by 40% on the month and 4% annually. They took out 47,300 loans, down by 31% on March and 5% on April last year.

The report also found that first time buyers borrowed £3.9 billion, marking a decline of 11% month-on-month, but up by 15% on the year. This equated to 25,100 loans, down by 9% on March, but up by 7% yearly.

Those moving home borrowed £4.3 billion, down by a significant 53% on March and 14% compared to the previous year. This represented 22,200 loans, down by 46% monthly and 15% year-on-year.

Remortgage borrowing totalled £6 billion in April, up by 25% on March and 40% on April 2015. This came to 34,800 loans, up by 23% on the month and 30% on last year.

The Director of e.surv chartered surveyors, Richard Sexton, comments on the figures: “Concerns about a potential Brexit could account for a slight lending market slowdown, with May seeing house purchase loans total 65,113 – down 1.7% from April. Alongside this, lenders are adapting to much calmer market conditions after the rush of buy-to-let activity at the start of the year.

“Lending to first time buyers in particular has eased off slightly on a monthly basis, as a temporary caution enters the market. But lenders are committed to helping first timers get a foot on the property ladder in the long run. Since last year, significant effort has been made to support first timers through a variety of flexible mortgage deals offering low rates and even enabling family support.”

Sexton adds: “Buy-to-let borrowing may also be taking a breather, but the lending market remains buoyant. A remortgaging rush shows no sign of slowing as we approach summer, with homeowners taking advantage of more mortgage options, rising wages and a static interest rate. All this activity suggests that the next couple of months will see an increasingly resilient and balanced lending environment.”

Kitchen size is important when purchasing property

Published On: June 15, 2016 at 11:54 am

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An interesting new survey has revealed that 25% of potential house buyers are deterred by small kitchens.

In an attempt to discover what the public are looking for in the kitchen of a potential property, MayfairGranite.co.uk questioned 1,006 UK residents about what features put them off making an offer.

Kitchen size matters

Results from the survey show that kitchen size was most prominent for those choosing a new property. Other off-putting features included lack of storage and lack of natural light.

The full list of why people were deterred by the kitchen of a property is shown below:

  • Size (too small)-25%
  • Mould/stains/grease-20%
  • Lack of natural light-17%
  • Insufficient storage-13%
  • Old fashioned cabinets/worktops-10%
  • Awkward layout-8%
  • Broken fixtures and fittings-7%

A closer look at the figures show that 18-24 year olds were more likely to overlook out-dated or poorly set out kitchens. However, those aged between 55 and 64 said that they were more likely to be deterred by a lack of storage and natural light.

Kitchen size is important when purchasing property

Kitchen size is important when purchasing property

Important area

Neil Beard, of Mayfair Granite, commented that, ‘from the survey, it’s plain to see that people still regard the kitchen as one of the most important rooms in the house when it comes to buying a property and in many cases a bad kitchen can put people off putting in an offer entirely. In this volatile housing market it is important that home sellers create the right impression to potential buyers.’[1]

‘Home sellers cannot do anything about they size of their kitchen, but simple things like cleaning the kitchen, removing any clutter and fixing broken fixtures and fittings can make a big difference to potential buyers and can help them achieve an offer on or as close to the asking price as possible,’ Beard added.[1]

[1] http://www.propertyreporter.co.uk/property/1-in-4-put-off-by-small-kitchens.html