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Em Morley

Government’s buy-to-let policies attacked again

Published On: April 18, 2016 at 11:56 am

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Categories: Landlord News

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Another journalist has voiced their disagreement towards the government’s perceived attack on the buy-to-let sector.

Paul Thomas, editor of Mortgage Strategy, labelled the string of policies as, ‘political short-termism,’ and, ‘a vote winner to disguise the fact that this administration lacks a clear, joined-up plan for housing.’[1]

War

Writing on the Spectator website, Mr Thomas believes talk of a ‘buy-to-let war,’ is wrong-as war involves two sides and in his mind, only the Government has gone on the attack!

Thomas said mortgage lenders are starting to panic and as such have reduced buy-to-let mortgage prices to record lows. Although this could support the market in short-term, Thomas believes, ‘the truth of the matter is the buy to let sector is likely to stagnate and even shrink in the long term.’[1]

In addition, Thomas said that there is a, ‘damaging double-whammy’ for buy-to-let landlords. These are the mortgage interest tax relief cuts, coupled with the Prudential Regulation Authority proposing stricter lending criteria on mortgage lenders.

Government's buy-to-let policies attacked again

Government’s buy-to-let policies attacked again

Intentions

Continuing, Thomas stated, ‘the Government’s policy intention is clear: it wants to wrestle back housing stock from wealthy landlords so first-time buyers can get on the housing ladder. This is political short-termism in its purest form; a vote winner to disguise the fact that this administration lacks a clear, joined-up plan for housing.’[1]

‘There is an acute lack of social housing and, while it is now easier to get a mortgage than it was a few years ago, house prices have increased to such an extent that raising a deposit has become an impossible task for some. Moreover, some people simply do not want to own their own home, given the flexibility renting offers,’ he added.[1]

In conclusion, Mr Thomas warned, ‘things could get very painful for millions of tenants up and down the country should renewed attacks force landlords to find new homes for their money.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/4/scathing-attack-on-governments-anti-buy-to-let-short-termism

 

Wealthy Londoners Turn to the Private Rental Sector

Published On: April 18, 2016 at 11:17 am

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The number of wealthy Londoners looking to rent their homes rather than buy has risen by a third in the past year, according to Knight Frank.

The estate agent reports that super-rich renters are flooding the private rental sector, as the number of tenants moving into homes worth more than £10m has soared over the last 12 months.

Higher Stamp Duty rates and a drop in house prices in the capital’s wealthiest areas have caused the jump, believes Knight Frank.

Wealthy Londoners Turn to the Private Rental Sector

Wealthy Londoners Turn to the Private Rental Sector

However, letting agents believe that concerns over the forthcoming EU referendum and the recent Panama offshore tax scandal are prompting the super-rich to rent rather than buy.

Indeed, we recently reported that the EU referendum and Stamp Duty changes could bring house prices and sales down.

Knight Frank conducted research on the prime central London market between March 2015 and March 2016. It found that sales of homes worth £10m or more have dropped by 33%.

Under Stamp Duty changes from 2014, buyers of a £15m property will be charged around £1.7m in the tax, which is around three years worth of rent for a similarly priced house.

Additionally, Stamp Duty is now even higher for those buying second homes or buy-to-let properties. As of 1st April, these buyers will be charged an extra 3% in Stamp Duty.

Property expert Henry Pryor says: “No one is predicting that homes at the top end will be worth 10% more in the near future and most people think they will be worth less.

“It is much easier to make a decision to rent and make sure that if you do buy, it’s something you really want.”

Knight Frank also reports that yields for landlords of properties costing £5,000 per week in rent can go above 4% in areas such as South Kensington, Knightsbridge, Mayfair, Holland Park and Regent’s Park.

Pryor adds that the recent Panama Papers scandal means “no one can buy quietly”1 anymore, which is putting buyers off.

Knight Frank warns landlords of pricey homes to expect high-maintenance tenants moving into their properties.

1 http://www.dailymail.co.uk/news/article-3544889/Rise-super-rich-renters-Number-lettings-homes-worth-10m-year-wealthiest-avoid-stamp-duty-increase-fears-grow-Brexit.html

New organisation to drive professionalism in sector

Published On: April 18, 2016 at 11:07 am

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With residential landlords flocking to the sector in greater numbers than ever before, a new organisation promoting professionalism in the market has been launched.

The UK Apartment Association (UKAA), the first cross-industry organisation dedicated to the task, said it will focus on customer service and renter experience

Higher Standards

Championed by Housing Minister Brandon Lewis, the scheme has been designed to deliver more homes for rent with higher standards for tenants. What’s more, the UKAA plans to differentiate the multi-family housing market from the service provided by smaller scale buy-to-let landlords.

In a statement, Mr Lewis said, ‘I want to see the private rented sector respond to the nation’s housing needs by providing new forms of supply and improved quality and choice. I welcome the UKAA as a body that can help build the capabilities of the build to rent sector in this country, bringing together the needs of private renters with the institutional capital that wants to invest in meeting their demands.’[1]

New organisation to drive professionalism in sector

New organisation to drive professionalism in sector

Development

With over nine million renters in Britain and with demand still soaring, there are certainly opportunities for build to rent developers. In recent times, the numbers of developers and investors interested in projects have risen. However, there is still a way to go before renting is the professional and service led industry, driven by institutional investors, as seen in the states.

The first international partner of the US-based National Apartment Association (NAA), the UKAA will hopefully benefit from the experience its partner is able to provide.

Doug Culkin, president and chief executive of the NAA, said, ‘the NAA is eager to bring industry training, best practices and networking opportunities to the UK. In addition, our US members are increasingly seeing opportunities for global growth and are looking to NAA for guidance when entering a new market. Our partnership with UKAA will be invaluable to our association as we address the growing need for a global renting housing industry.’[1]

Founder of the UKAA and chairman of Chainbow, Roger Southam, also said, ‘This evolution of the rental sector is creating some interesting dynamics and raising many questions about what renting in the UK should and will look like. There is clearly a case for using the extensive experience gained by the US and working together to create a more professional market to ultimately give renters a better service.’[1]

[1] http://www.propertywire.com/news/europe/uk-multi-home-sector-2016041511803.html

 

Universal Credit Almost at the End of its Rollout

Published On: April 18, 2016 at 10:36 am

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As of today, Universal Credit is now in operation in most of the UK. Below, we detail which postcode areas have moved onto the Government’s new welfare system.

Universal Credit Almost at the End of its Rollout

Universal Credit Almost at the End of its Rollout

Since its introduction in 2013, Universal Credit has been on a nationwide rollout to new areas every Monday.

The new welfare system sees six payments rolled into one monthly payout, meaning that claimants receive all of their benefits in one. For those receiving housing benefit, the change also means that they will be paid instead of their landlord.

If you are a landlord of housing benefit tenants, you must be aware of this change, as it means that tenants are now responsible for paying their rent when it is due.

It is also important to note that many claimants have been forced into long-term debt since moving onto Universal Credit. Your tenants may be facing financial difficulty as their benefits change, so remember to communicate with them about any problems they are having. You can also protect your rental income with Rent Guarantee Insurance, which ensures you still get paid if your tenants default on rent payments.

For information on the previous areas that moved onto the new system, see our latest piece on Universal Credit: /following-areas-now-moved-onto-universal-credit/

As of today, the following postcode areas have moved onto Universal Credit:

  • DN6 7 in Doncaster.
  • LS25 1, LS25 2, LS25 4, LS25 7, LS26 8 and LS26 9 of Leeds.
  • S71 4, S72 9, S75 4 and S75 5 in Sheffield.
  • WF1, WF2, WF3 1, WF3 3, WF3 4, WF4, WF5, WF6, WF7, WF8, WF9, WF10, WF11, WF12 0, WF12 7 and WF12 8 in Wakefield.

We will continue to keep you updated of all the financial changes affecting the private rental sector, both for landlords and tenants.

Property prices driven up by Stamp Duty rush

Published On: April 18, 2016 at 9:21 am

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Interesting new data has highlighted how the rush from buy-to-let investors to beat the Stamp Duty deadline drove property prices up.

Research from Rightmove reveals that the prices of property coming onto the market was up by 1.3%, or £3,843 to hit a record high of £307,033.

Reform rises

Rightmove also revealed that there were record numbers of visits to the site during March. According to the portal, movement towards the bottom of the market has remained stable, however, demand is showing no signs of slowing down.

Miles Shipside, director of Rightmove, noted, ‘the onset of Spring is traditionally when the housing market swings into full-on action and while the early Easter this year could be credited with its very active current state, the housing market actually received a much earlier kick-start at the end of November. Chains need a buyer at the bottom to enable everyone to move and that was boosted by investors looking to avoid the 3% levy introduced on April 1st.’[1]

The bottom end of the sector with properties with two bedrooms or less has seen greater demand in recent years from both first-time buyers and buy-to-let investors. This in turn has created upward property pressure. As such, there has been a chain of higher property demand in more expensive price brackets, with more people able to move.

Pressure

This upward price pressure has moved into the second-stepper sector, which includes three or four bed properties. Prices in this sector are 0.6% up in comparison to the last month and have seen a year-on-year rise of 8.6%.

Shipside continued by saying, ‘while some felt that there would be a stampede of existing landlords selling to other landlords, these figures indicate that many of those who sold during the buy-to-let rush were actually first-time sellers looking to trade up. They used the heightened demand from investors competing fiercely with first-time buyers to springboard themselves onto the next rung of the housing ladder. After several years of being held back from moving by post-credit crunch price doldrums, they have now benefitted from a heady combination of price growth, historically cheap interest rates and confidence of a quick sale with purchasers working to a tight deadline.’[1]

‘Trader-uppers have now been unleashed and this has spread demand upwards and helped to form longer chains. Interestingly there has been a stamp duty double-whammy effect pushing up prices in these higher sectors too. Earlier reforms in December 2014 reduced stamp duty for all properties priced below £937,000, especially around the previous punitive thresholds, also boosting demand and prices,’ Shipside added.[1]

Property prices driven up by Stamp Duty rush

Property prices driven up by Stamp Duty rush

Advantage

With some buy-to-let investors now not interested in adding properties to their portfolio in the wake of the changes, there is hope from the Government that first-time buyers will fill this void.

Shipside concluded by stating, ‘there’s a whole army of aspiring first-time buyers keen to get on the ladder and they now have a 3% price advantage over the formerly more agile legion of landlords, some of whom have retreated for the time being. First-time buyers could fill some of the gap but sellers of properties with two bedrooms or fewer need to realise that with less overall demand they need to price cheaper to match first-time buyers and highly-taxed investors.’[1]

[1] http://www.propertyreporter.co.uk/hero/btl-chain-reaction-triggers-record-high-prices.html

Landlords Fighting Tax Changes Launch Second Crowdfunding Campaign

Published On: April 18, 2016 at 9:02 am

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The two landlords fighting forthcoming tax changes in the buy-to-let sector have launched the second phase of their crowdfunding campaign to help them challenge the Government.

Steve Bolton and Chris Cooper have hired Cherie Blair’s law firm, Omnia Strategy, to tackle the Government’s plans to reduce the amount of mortgage interest that landlords can offset against tax. They have also announced an event in London to support the challenge.

The Judicial Review of Section 24 – Tenant Tax campaign aims to raise an additional £250,000 to fight the Government in court. The initial crowdfunding round raised £50,000 in just eight days.

On 9th June, the pair will hold the Tenant Tax Summit – Landlords Fight Back event at the ILEC Conference Centre in Earls Court. Confirmed speakers include Lord Howard Flight and representatives from Platinum Property Partners, SpareRoom.co.uk, Shawbrook Bank, Property 118 and Property Tribes.

Landlords Fighting Tax Changes Launch Second Crowdfunding Campaign

Landlords Fighting Tax Changes Launch Second Crowdfunding Campaign

The event will highlight the struggle of landlords and tenants, explaining how the new legislation will force many landlords to either sell their properties – therefore reducing the supply that the private rental sector needs – or raise their rents much higher – making renting even more unaffordable.

Bolton, the founder of Platinum Property Partners, and Cooper are calling on landlords, tenants, letting agents and others who will be affected by the new legislation to support their cause.

The campaign is now reopen for pledges via CrowdJustice (https://www.crowdjustice.co.uk/case/tenanttax/). It hopes to raise £250,000 to fight Section 24 of the Finance (No. 2) Act 2015.

Tickets for the London event are being offered to anyone who makes a minimum pledge of £100. Event costs are being covered by corporate sponsors, partners and patrons.

In February, the pair submitted a full application for a judicial review, and an Acknowledgement of Service was received from HM Revenue & Customs and the Treasury.

From April 2017, the amount of mortgage interest relief that can be offset against tax will be reduced to the basic rate for buy-to-let landlords. Those operating as limited companies will not be hit by the tax change, thus causing many landlords to consider setting up their business this way.

Bolton explains the importance of the campaign: “The days where nobody loves a landlord must come to an end. We need to unite to show that we will not accept the victimisation of landlords and tenants by the out of touch political elite. They are deluded if they believe that they will go unchallenged when trying to reclassify mortgage interest as anything other than a normal business expense.

“The tenant tax is wrong on every level, and if we allow a normal business expense to become a taxable expense for landlords, who will be next: Corporate landlords? Shopkeepers? Small business owners? Anyone who has used finance to help expand their business?”

He continues: “We aim to make the Tenant Tax Summit a very enjoyable, inspiring, interactive, uplifting, informative, educational and motivational day. It is a unique chance for our grassroots supporters to come together, support each other, share ideas and shout from the rooftops. We want to show politicians, the media and the country at large that we truly are a force to be reckoned with.”1 

Support the cause on Facebook: https://www.facebook.com/clause24/?fref=nf