Written By Em

Em

Em Morley

Clampdown on BTL lenders could harm supply

Published On: March 30, 2016 at 9:21 am

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Categories: Landlord News

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Yesterday saw the Bank of England’s Prudential Regulation Authority recommend that lenders are subject to stricter conditions, in a bid to reduce borrowing to buy-to-let purchasers.

However, the Residential Landlords Association (RLA) believe that these proposals from the Bank are premature.

Tests

The Prudential Regulation Authority  (PRA) says that individual lenders should ramp up so called ‘stress tests’ on borrowers. This is to ensure that they could cover interest payments, should rates rise to 5.5% for five years.

Whilst agreeing that no landlord should take on a debt that they cannot afford to repay, the RLA has called the proposals premature. This, it claims, is due to the introduction of the stamp duty surcharge and mortgage interest tax relief.

David Smith, Policy Director at the RLA, said, ‘the Bank needs to be careful that it does not over-react to the current surge in buy-to-let applications which are aiming to beat the tax increases coming in April.’ He feels, ‘it is likely that the impact of these will significantly reduce the demand for borrowing. We would urge the Bank to tread carefully and avoid any premature moves that could stifle the supply of the one million rental properties the country desperately needs.’[1]

Clampdown on BTL lenders could harm supply

Clampdown on BTL lenders could harm supply

Reductions

The PRA’s proposal, if rubber-stamped by the full Bank of England, could see a reduction in buy-to-let approvals by up to 20% by 2019. If constraints are not put in place, the authority says that borrowers predicted an increase of 20% during the same period.

31 major lenders in the industry were assessed by the PRA, representative of 90% of buy-to-let lending in Britain.

Over three-quarters were found to meet the new standards, but five of the twenty largest lenders currently utilise a’stressed interest rate,’ of 5.47%.

Concerns on buy-to-let lending were also highlighted by the Bank of England’s Financial Policy Committee in minutes from their last meeting:

‘Macro-prudential risks centre on the possibility that buy-to-let investors could behave pro-cyclically, amplifying cycles in the housing market, as well as affecting the resilience of the banking system and its capacity to sustain lending to the wider real economy in a stress.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/3/mortgage-clampdown-could-stifle-lettings-supply-warns-industry-body

 

Huge fines for landlords after illegal letting

Published On: March 29, 2016 at 12:01 pm

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A pair of buy-to-let investors who flaunted planning regulations have been told to pay a total of £116,000.

Efstratios Filis-Gelagotis and Andreas Charalambous converted a property into seven studio flats in the London borough of Islington. This conversion was carried out without the required planning permission.

Warning

In December 2013, Islington Council issued a planning enforcement notice, permitting the unauthorised use of the single-family property for studio flats to cease inside six months.

Despite this, the flats continued to be let without authority, even after several further warning letters were issued by the council. As such, a decision was taken to prosecute the two men.

In October last year, both Filis-Gelagotis and Charalambous pleaded guilty to failure to comply with the enforcement notices.

Huge fines for landlords after illegal letting

Huge fines for landlords after illegal letting

Fines

Blackfriars Crown Court has instructed both men to pay a fine of £5,000 each, alongside legal costs of £4,000. In addition, they were each ordered to pay another £49,000 under the Proceeds of Crime Act. This money represents the value made from renting the property between July 2014 and October 2015.

Since the trial, the property has now been legally converted into a six-bedroom house in multiple occupancy (HMO.) Planning permission was granted in October of last year.

 

New Bank of England powers target BTL lenders

Published On: March 29, 2016 at 10:56 am

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Categories: Finance News

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Today has seen the Prudential Regulation Authority publish a report regarding underwriting standards for buy-to-let mortgage lenders. This report addresses potential ways to control the volatile buy-to-let market, in a bid to negate the chances of another crash.

Clampdown

As expected, The Bank of England has said it is to implement new, tougher quality assessments on buy-to-let lenders. The Prudential Regulation Authority is to put a, ‘guardrail,’ in place to stop banks from giving risky loans, noting that as many as one in five lenders does not carry out the sufficient checks.

This clampdown comes as concern grows over the notion that there is a bubble in the buy-to-let market, which could ultimately cause the wider property market to slow.

Following the Chancellor’s perceived attacks on the sector, including the 3% additional stamp duty charges on buy-to-let purchases, the Bank has now also weighed in.

Affordability

The Bank believes that lenders should impose affordability checks on all buy-to-let landlords. It said that borrowers should consider how much money borrowers had to cover their interest payments, should costs rise up to 5.5%.

New Bank of England powers target BTL lenders

New Bank of England powers target BTL lenders

Presently, five of the twenty lenders under scrutiny from the Bank do not impose these standards. The Bank is hopeful that these measures will cut the predicted growth of buy-to-let mortgage lending from around 20% a year to 17%.

Though less severe than first feared, the measures could be reviewed later in the year, according to the Chancellor.

In his address to the Treasury committee, Mr Osborne said, ‘the Bank of England and the financial policy committee have identified potential systematic risks in the large increase in the buy-to-let market. It is highly likely we will give the FPC powers over the buy-to-let market. It is possible we can do that later this year.’[1]

[1] http://www.propertyreporter.co.uk/landlords/landlords-to-be-reined-in-by-new-boe-powers.html

 

 

Buy-to-let investors surge ahead of SDLT changes

Published On: March 29, 2016 at 9:50 am

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Data from a new report by the National Association of Estate Agents showed that buy-to-let investors saturated the market during February.

According to the figures, 85% of estate agents saw a rise in the number of investors coming into the market in the last month. This was due to savvy investors looking to beat the additional stamp duty charges on buy-to-let and second homes, which come into force this Friday (April 1st).

Changes

The Chancellor made the announcement for stamp duty on additional homes and buy-to-let purchases in last year’s Autumn Statement. As a result, 72% and 85% of agents respectively recorded an increase in activity during January and February.

This surge from buy-to-let investors saw housing demand rise to its highest level for 12 years in the last month. On average, there were 463 house hunters registered per member branch, a rise from the 453 recorded in January.

Encouragingly, the number of properties available per branch increased from 33 in January to 35 in February.

Buy-to-let investors surge ahead of SDLT changes

Buy-to-let investors surge ahead of SDLT changes

 

Urgency

Mark Hayward, managing director at the National Association of Estate Agents, notes that, ‘it is evident from February’s report findings that we’ve seen a real sense of urgency from landlords trying to complete on sales ahead of the stamp duty reforms-which now come into force next week. However, the mounting pressure and increased demand for housing has meant that first time buyers have had to compete with landlords for property and as a result they have lost out.’[1]

‘The number of properties available per branch increased marginally from 33 in January to 35 in February, as the number of sales agreed per branch in February increased too. There were an average nine sales completed in February, back to the level seen in October 2015 and a rise from eight sales agreed per branch in January,’ Hayward added.[1]

[1] http://www.propertyreporter.co.uk/landlords/housing-market-erupts-with-flood-of-btl-investors.html

Tenants can Request Energy Efficiency Improvements from Friday

Published On: March 28, 2016 at 8:28 am

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Categories: Landlord News

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As of Friday, 1st April, private tenants will be able to request consent from their landlords to conduct energy efficiency improvements on their rental properties.

The landlord will not be able to unreasonably refuse consent. However, it is the responsibility of the tenant to ensure that the works are funded and that there are no upfront costs to the landlord, unless the landlord agrees to contribute.

This is a separate regulation to the new energy performance rules, which will require all private rental properties to be brought up to an Energy Performance Certificate (EPC) rating of at least an E from 1st April 2018.

Tenants can Request Energy Efficiency Improvements from Friday

Tenants can Request Energy Efficiency Improvements from Friday

Tenants in the private rental sector can make the requests in England and Wales from Friday. Properties covered by the regulations include those let under an assured tenancy, or a tenancy or shorthold that is a regulated tenancy for the purpose of the Rent Act 1977.

Regardless of whether the property has an EPC rating at the time of the tenant’s request, the tenant still has the right to make a bid. However, if a building is not within the scope of the EPC regulations, a landlord does not have to provide consent for the improvements.

The works covered by the regulations are any energy efficiency improvements that qualify for the Green Deal and the installation of a gas supply where the mains are within 23 metres of the property.

The tenant’s request is for a landlord to give consent to the carrying out of specified works. This includes not just the immediate landlord, but also the superior landlord or freeholder in leasehold properties. Consent must not be unreasonably refused by any of them.

Consent is required not just for permission under the terms of a tenancy agreement, but also for work outside the boundaries of the property, such as in a block of flats.

From 1st April, a tenant will be able to request consent to install energy efficiency measures at their property, as long as the measure is one of those listed in the Schedule of the Green Deal (Qualifying Energy Improvements) Order 2012, or is to connect the property to the gas network. The tenant must also have a way of funding the measure at no cost to the landlord, such as through Green Deal finance, Government grants or incentives, ECO, other grant funding, or paying for the measures themselves.

An EPC, surveyors report or Green Deal Advice Report (GDAR) is not required under these regulations, but may be required if the tenant wishes to make use of Government funding or ECO.

If a tenant does not provide an EPC, surveyors report or GDAR, the landlord will have grounds for refusing consent if they have advice that the measure is not suitable for the property.

For a request to be valid, a tenant must specify and provide details of the energy efficiency measures that they wish to install, and provide written evidence to the landlord of either a Green Deal Finance Plan, or evidence of quotes for the improvements from an authorised Green Deal installer, or installer who meets relevant installer standards.

Landlords are able to propose a counter offer, where the energy efficiency improvements would provide the same or mostly the same savings on energy bills as was specified in the tenant’s request. Additionally, the counter proposal must not include work that would result in an initial or continuing cost to the tenant that exceeds the cost of all the relevant energy efficiency improvements specified in the request.

Be aware that from Friday, you will be required to grant consent for tenants to have these improvement works completed.

Capital Pains for would-be property purchasers

Published On: March 24, 2016 at 2:15 pm

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Categories: Property News

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New research from HouseSimple.com shows that over one quarter of London boroughs have no properties for sale for less than the average UK house price.

Typical property prices in the capital currently stand at £530,409, with affordability causing real concern for these looking to purchase in the city.

Capital Pains

Data from the report looks at the cheapest properties currently available for sale in the 32 London boroughs. The research also looked where it is possible to purchase a property in the capital for less than the average UK house price of £191, 812.

In 9 of the 32 boroughs of the capital (28%), it is not possible to find one single property for less than this price, according to the Land Registry Property Index.

The figures reveal that Bexley is the one borough where it is possible to purchase a property for less than £100,000. A studio flat in this region will set one back £94,995.

Stamp Duty

When looking at Stamp Duty bands, HouseSimple research shows that in just 4 of 32 boroughs, it is possible to buy a property exempt from stamp duty. The 0% stamp duty band is £0-£125,000.

The table below shows the cheapest properties on the market in each of the 32 London boroughs:

Borough Property Listing Price (£)
Barking and Dagenham 2-bed flat: Grand Parade Oxlow Lane, Dagenham RM10 £140,000
Barnet 1-bed flat: Finchley Park, Lychgate Court, Finchley N12 £129,950
Bexley Studio: Frobisher Road, Erith, Greater London DA8 £94,995
Brent Studio: Masons Avenue, Wealdstone HA3 £159,950
Bromley 1-bed flat: Downham Way, Bromley BR1 £160,000
Camden Studio: Cliff Road, London NW1 £225,000
City of Westminster Studio: Hallam Street, London W1W £150,000
Croydon Studio: Zodiac Court, Croydon CR0 £119,950
Ealing 2-bed flat: Western Road, Southall UB2 £159,950
Enfield 1-bed flat: Bowes Road, Palmers Green N13 £139,995
Greenwich Studio: North Greenwich, London SE10 £149,000
Hackney 1-bed flat: Edmeston Close, London E9 £230,000
Hammersmith and Fulham Studio: Devonport Road, London W12 £229,950
Haringey Studio: Creighton Road, London N17 £160,000
Harrow 2-bed flat: Vancouver Road, Edgware, Middlesex HA8 £149,950
Havering 1-bed flat: Station Chambers, Oak Road, Harold Wood, Romford RM3 £130,000
Hillingdon Studio: Willow Tree Lane, Yeading Middlesex UB4 £129,950
Hounslow Studio: Redford Close, Bedfont TW13 £130,000
Islington 1-bed flat: Holloway Road, London N7 £240,000
Kensington and Chelsea Studio: Acklam Road, Ladbroke Grove W10 £249,950
Kingston upon Thames 1-bed flat: Alexandra Drive, Berrylands KT5 £185,000
Lambeth Studio: Leigham Vale, Streatham SW16 £105,000
Lewisham Studio: Blythe Hill, Catford SE6 £129,995
Merton 1-bed flat: Moore Close, Mitcham CR4 £150,000
Newham Studio: Charlemont Road, London E6 £100,000
Redbridge 1-bed flat: Selborne Road, Ilford IG1 £130,000
Richmond upon Thames Studio: Kingston Road, Teddington TW11 £220,000
Southwark 1-bed flat: Peckham High Street, London SE15 £199,995
Sutton 1-bed flat: Defiant Way, Wallington SM6 £169,950
Tower Hamlets 2-bed flat: Henshall Point, Bromley High St, Bow E3 £250,000
Waltham Forest 1-bed duplex: Chingford Road, Walthamstow, London E17 £165,000
Wandsworth 1-bed flat: Tangley Grove, London SW15 £205,000

[1]

Capital Pains for would-be property purchasers

Capital Pains for would-be property purchasers

Desperate

Alex Gosling, CEO of online estate agents HouseSimple.com, notes, ‘these figures reveal how desperate the plight is for ordinary Londoners on average salaries, hoping to buy their first property. How can they feasibly afford to buy when average property prices in the Capital are over £530,000?’[1]

‘Although this research reveals there are properties for sale below the UK’s average house price, the pickings are extremely slim and you’re getting very little square footage for your money. It’s a studio or nothing in many boroughs,’ Gosling continued.[1]

Concluding, Mr Gosling said, ‘it’s not surprising that more and more people are starting to move out of London for value. Why pay £200,000 for a studio flat when you can buy a house for the same money just an hour commute away. It’s likely in the future we will see less and less people putting their first foot on the property ladder in London.’[1]

[1] http://www.propertyreporter.co.uk/property/which-is-the-last-remaning-london-borough-with-property-below-%C3%A3%C3%A2%C2%A2100k.html