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Landlords Consider Buying Overseas Property to Avoid Tax Changes

Published On: May 20, 2016 at 8:59 am

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Around a quarter of landlords (23%) are considering buying an overseas property to avoid tax changes introduced by Chancellor George Osborne.

The research, conducted by PropertyLetByUs.com, found that the Government’s new tax measures might push some landlords out of the UK into foreign markets, in an attempt to secure better returns on their investments.

A separate report also claims that the tax changes will drive much-needed landlords out of the private rental sector.

On 1st April, a higher rate of Stamp Duty was introduced for buy-to-let landlords and second homebuyers. Additionally, from April 2017, the amount of tax relief that landlords can claim on their mortgage interest payments will be cut to the basic rate.

The PropertyLetByUs.com survey asked landlords to name their top overseas property locations. Unsurprisingly, France took the top spot for one in five investors (23%). Spain came a close second (18%), followed by Italy (11%), Bulgaria (3%) and Germany (1%).

It is estimated that a quarter of overseas buyers that own second homes in France are British, making them the largest group of international owners.

Landlords Consider Buying Overseas Property to Avoid Tax Changes

Landlords Consider Buying Overseas Property to Avoid Tax Changes

The firm states that if landlords are considering buying an overseas property, it is vital that they educate themselves about the different laws and taxes they will face in their chosen country. Holiday home insurance firm Insure My Villa has lots of helpful tips and advice on being an overseas property owner.

The Managing Director of PropertyLetByUs.com, Jane Morris, explains: “Each country has different tax laws relating to property and they can change quickly, with little warning. For example, in 2012, the French government imposed a 15.5% social charge on capital gains from the sale of second homes or rental income – a measure which was estimated to bring in €250m a year. Tax on rental income rose overnight, from 20% to 35.5%, while capital gains tax on property sales rose from 19% to 34.5%.

“These new tax measures hit overseas investors hard and meant that for example, a British couple who bought a French property for €200,000 20 years ago and were selling it for €750,000 would have to pay almost €60,000 in social charges, on top of the existing capital gains tax. They received no credit against their UK tax bill for this amount.”

She continues: “This onerous tax measure was overturned in 2015 by the European Union’s top court, who deemed it illegal and ordered the French government to reimburse tens of millions of euros to British and other EU non-resident owners who rented or sold their properties in the past two to three years.

“Clearly, overseas property taxation can be more costly than the UK, despite often much lower property prices. It is important that landlords take into account potential tax hikes and don’t get sucked into all the marketing hype that surrounds overseas property investment. Property experts will often highlight new markets they appear to be investment hotspots and you may be able to find bargains in countries where prices have fallen dramatically, but it’s often wiser to buy in more established markets.”

The firm has put together some helpful tips on investing in overseas property:

  • Make sure your property is easily accessible with good amenities nearby. You should also take into account the holiday season in the area, as many tourist destinations shut down at the end of the season.
  • Do some research on the rent price of similar properties in the area. Even better, if the property you are buying is already being rented out, find out how much the current owner charges and how many weeks per year it is occupied.
  • It can be wise to market your property through a local estate agent, but you must remember to take fees into account. Cheaper marketing options include holiday rental websites and word of mouth through family and friends.
  • You must pay income tax on the rent you receive. However, you can deduct some expenses from your rental income to reduce taxable profits. Here is more information on calculating your taxes correctly: https://www.justlandlords.co.uk/news/government-produces-online-tax-tutorial-landlords/

How do rental costs vary between North East metro stations?

Published On: May 19, 2016 at 1:45 pm

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Interesting analysis into the private rental sector has looked at how rents vary between North East metro stations.

Research conducted by property firm KIS reveals that rents can alter by an average of £66 from station to station. Choosing the correct location could save as much as £500 per month in rent!

Fees

Data from the investigation shows that the average cost of renting a home on the Metro Map is £560. However, there is a £545 difference between the £938 a month paid to rent in Haymarket and Monument and the £393 paid in Jarrow.

At £808, Jesmond is the most expensive place outside of central Newcastle in which to rent. This is followed by West Jesmond (£726) and Tynemouth and Gateshead (£723).

On the flip side, Jarrow (£393) is the cheapest place in the region to rent, followed by Tyne Dock (£399), Wallsend (£412) and Hadrian Road (£413).

The map also reveals the average cost of renting a two-bedroom property within a quarter of a mile of all of the Metro’s 60 stations. This shows where Tyne and Wear renters can potentially locate a bargain.

Highs and lows

Excluding central Newcastle, the top five most expensive places to rent in Tyne and Wear per calendar month are:

  • Jesmond-£808
  • West Jesmond-£726
  • Tynemouth/Gateshead-£723
  • Whitley Bay-£673
  • Cullercoats-£660

The five cheapest areas to rent are:

  • Jarrow-£393
  • Tyne Dock-£399
  • Hadrian Road-£413
  • Chichester/Byker-£423
  • Meadow Well-£425
How do rental costs vary between North East metro stations?

How do rental costs vary between North East metro stations?

Between stations, the largest differences were found to be:

  • Manors to Byker-£477
  • North Shields to Whitley Bay-£235
  • Gateshead to Central-£212
  • Gateshead to Gateshead Stadium-£148
  • Haymarket to Jesmond-£130

Location

Managing Director of KIS, Ajay Jagota, commented, ‘location, location, location is one of the classic golden rules of property, but month after month I’m stuck struck by the fact that people are prepared to pay as much as £5724 a year to live in a particular area. To put that into context Metro journey of three or four minutes-or even a bike ride of a little more than five-from Gateshead to Gateshead stadium is worth almost £2,000 a year in rent.’[1]

‘It’s not just the rents that cost, it’s deposits too,’ Jagota considered. ‘If you want and can live in the heart of Newcastle, you’re not just going to have to find the best part of £1000 every month in rent, the chance you’ll need to find £1407 just to move in.’[1]

‘Research this week suggests there are only five places in the UK were renting is cheaper than buying and none of those are anywhere near the North East. One of the major stumbling blocks to buying a home is all-too often the difficulty buyers have in saving up a deposit, and extra costs like deposits can really make a difference to people’s ability to save,’ Jagota concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/choosing-the-right-metro-stop-could-save-500-per-month-in-rent.html

Best April for gross mortgage lending since 2008

Published On: May 19, 2016 at 11:22 am

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The most recent report by The Council of Mortgage Lenders has revealed that gross mortgage lending hit £18.5bn in April.

Despite this being 29% down on the £26.2bn recorded in March, the figure is 16% greater than £16bn lent in April 2015. This makes it the largest lending total for April since 2008, when £25.3bn was lent.

Back-seat

Mohameed Jamel, economist at the Council of Mortgage Lenders, ‘as we move past the stamp duty change that came into effect at the start of April, we expect to see a quieter second quarter, as some transactions that were due to take place were brought forward to the first quarter of this year. This is likely to mean that over the next few months buy-to-let takes a back seat as lending is driven by first-time buyers, movers and remortgage customers.’[1]

‘The underlying picture still shows signs of growth, as the market remains underpinned by strong fundamentals such as increasing wages and rising employment. But it is possible that the uncertainty around the upcoming EU referendum in June will weigh on activity in the upcoming months,’ he added.[1]

Best April for gross mortgage lending since 2008

Best April for gross mortgage lending since 2008

No surprise

Henry Woodcock, principal mortgage consultant at IRESS, said, even with the availability of high numbers of low interest rate mortgage deals, it’s no huge surprise that borrowing in April was so much lower than in March given the false peak which resulted from a rush to beat the Chancellor’s 3% tax hike on BTL. Will we see a rise in lending in May? That will depend on a number of factors.’[1]

‘Lenders may increase the number of long-term deals of up to 40 years to tempt borrowers struggling to afford shorter terms, but on the flip side, as the Bank of England interest rate remains static, lenders may increase interest rate margins. The lowest rate tracker deals have already risen by 0.24% in the last six months. The unknown effect of the EU vote in June may further depress lending in May as borrowers wait and see both the result and the impact on lenders and house prices,’ Woodcock concluded.[1]

[1] http://www.propertyreporter.co.uk/hero/gross-mortgage-lending-sees-best-april-since-2008.html

Will Any Landlord Take this Zookeeper Tenant?

Published On: May 19, 2016 at 10:31 am

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Categories: Landlord News

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If you are a landlord or letting agent in the Cardiff area, you may have recently received a letter from a zookeeper tenant looking for a rental property.

Will Any Landlord Take this Zookeeper Tenant?

Will Any Landlord Take this Zookeeper Tenant?

The problem is that the Bristol Zoo employee is not just seeking accommodation for himself; he also looks after some animals that have now retired from the zoo.

Stressing that the landlord must accept pets, he says: “I’ll need a large bathtub as I’m looking after the zoo’s famous Willy the Walrus now he’s in retirement.

“Also will need a large bird cage for my flamingo, preferably a room with good light exposure due to him needing African climate.

“Please do let me know of any properties you have.”

Responding to the bizarre request in an equally jovial tone, Keylet in Bristol suggests a seven-bedroom property with all en suites, so that Willy the Walrus can spend as much time in the bathroom as he needs.

The agent also notes that Willy can enjoy a short walk to a nearby lake to cool off on a hot day.

In the kitchen, there are two fridges and two ovens – perfect for keeping human and animal meals separate. And in the lounge is a large plasma TV – ideal for watching nature documentaries.

We wonder whether the tenant will book a viewing!

However, there may be a more suitable property for the zookeeper to take a look at. A little further into Wales, near Aberystwyth, is a real zoo for sale.

The property, complete with animals, is on the market for £650,000 (although it is listed with Rightmove, not Zoopla).

Are there any letting agents or landlords that have received an equally peculiar request from a prospective tenant? Let us know!

If you are considering allowing pets in your rental property, here are four things you need to know: https://www.justlandlords.co.uk/news/four-things-you-need-to-know-about-allowing-pets-in-your-properties/

Two industry bodies warn on EU exit impact

Published On: May 19, 2016 at 10:12 am

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Categories: Property News

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Both the National Association of Estate Agents and Association of Residential Letting Agents have warned that leaving the European Union could have ‘damaging consequences,’ on the housing industry.

Despite no conclusive arguments to either leave or remain in the EU, both firms have voiced concerns over construction of new properties should Britain leave.

Worries

Managing director of the National Association of Estate Agents, Mark Hayward, believes the situation is more complex than suggesting a Brexit would be good or bad.

However, a report drawn up by both firms alongside the Centre for Economics and Business Research (CEBR) states that a UK withdrawal from the EU, ‘risks drastically reducing the construction workforce, compromising current plans to build hundreds of thousands of new homes needed to ease the shortage in supply.’[1]

In the 23-page report four particular concerns have been highlighted:

  • Shortage of skills-While the impact of Brexit on migration policies is as yet unconfirmed, any restriction on foreign workers coming into Britain could compromise ability to construct new homes. What’s more, the Government’s target of one million new homes by 2020 could come under threat.Mr Hayward observed that, ‘an out vote could mean that in 10 years’ time we’d find ourselves with a severe skills shortage of construction workers. So even if we then had planning permission, investment and materials to build more housing, we simply wouldn’t have the resource to put the bricks and mortar together. It has the potential to have a very damaging effect on the future housing market.’[1]
  • Foreign investment-The report suggests that an out vote could see first-time buyers given leeway, as demand for housing eases. CEBR figures suggest that in 2014, 19% or 5.3bn of total foreign direct investment into the UK came from EU sources. In 2013, 17% of sales in London’s prime central property market made to non-UK recipients were to EU nationals.
Two industry bodies warn on EU exit impact

Two industry bodies warn on EU exit impact

  • Reduced migration influx impact-At present there are 3.03m UK residents who were born in other EU countries. Should Britain not maintain free labour movement, its total population could decrease by as much as 1.06m. Fewer people will lead to lesser demand, making the market more accessible for first time buyers. However, the report warns that reduced migration will affect the private rental sector: ‘Currently, private renting is a more popular choice among UK residents born in non-UK EU countries than for UK born individuals; if migration reduces the flow of renters from Europe, demand will weaken, which would put downward pressure on rent costs.’ Managing director of ARLA, David Cox, said, ‘the fact that rent costs would face downward pressure is both a blessing and a curse. While renters should face fair and reasonable prices, landlords need to be able to at least break even on any outgoings they have, such as a mortgage. If demand eases to such an extent that landlords cannot recuperate costs, we’ll likely see a mass exit from the market, which would then just have the opposite effect on demand as supply falls-and we’d be back to square one.’[1]
  • Capital Pains-The report also highlights that London has the greatest population of non-UK EU residents, therefore the consequences of a Brexit was be felt more heavily. In 2013/14, 25% of the total of London’s prime property purchasers resided outside of the UK.Mr Cox warns, ‘those whose freedom to work and live in the UK is at risk of Brexit are a key demographic for the private rented sector. Current projections of demand for rental properties therefore could be offset by Brexit. If the sentiment towards London as a safe haven changes, the UK’s largest rental market will feel the brunt of a Brexit.’ Concluding, Mark Hayward said, ‘it’s not as simple as saying that Brexit would have a positive or negative effect on the property market. We might to believe, for example, that the ease in demand and lower prices will allow first time buyers a route into the market, but any transactions may be put off for the short term until the period of uncertainty is over. An ease in demand is likely to be matched or outweighed by a decrease in housing stock, not just from reduced labour, as considered in the research, but also from decreased accessibility to building materials produced in non-UK EU countries. Ultimately, it could have long-lasting and damaging consequences.’[1]

[1] https://www.estateagenttoday.co.uk/breaking-news/2016/5/brexit-could-have-damaging-consequences-warns-naea-and-arla

 

 

House Prices Rise over Five Times Faster than Wages

Published On: May 19, 2016 at 9:54 am

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House Prices Rise over Five Times Faster than Wages

House Prices Rise over Five Times Faster than Wages

The average house price in the UK has risen over five times faster than average weekly earnings in the past five years, according to analysis of the latest Office for National Statistics (ONS) data by the Resolution Foundation.

The study found that house prices have increased by 36% since April 2011, while weekly earnings have risen by just 7% over the same period.

This separation between house price and wage growth has been even more marked in London and the South East, where property values have surged by 57% and 39% respectively. However, the average weekly salary has only risen by 5% in the South East, and has actually dropped in the capital – the product of reductions in bonuses at the top level of earnings and strong employment growth in lower paying positions.

Even in Scotland and the North East – where house price growth has been the lowest over the last five years – property values have roughly doubled the rate of earnings inflation.

The Resolution Foundation claims that this post-millennial surge in house prices has caused a dramatic shift in housing tenure. Homeownership has fallen from around 70% of all households in low to middle incomes to 55% over the last decade. The proportion of people renting from a private landlord has doubled over the same timeframe, to 27%.

The Senior Policy Analyst at the Resolution Foundation, Lindsay Judge, comments: “Runaway house prices have had a clear feed through to living standards in recent years. Most obviously it has priced people out of homeownership, pushing significant numbers into the private rental market.

“But rampant house prices inflation isn’t just a problem for wannabe homeowners. It has increased the stock of mortgage debt, and fuelled demand for renting that is driving up costs there too. Ultimately, we all pay for house price inflation by spending a greater share of our incomes on housing.

“The solution to this housing crisis isn’t easy – especially in London. It will require radical action to both boost the supply of housing for all tenure types, and improve conditions and security in the UK’s private rental sector.”