Written By Em

Em Morley

Landlords Seeking Advice Ahead of Tax Changes

Published On: March 22, 2016 at 1:01 pm

Tags: Budget 2016,buy-to-let landlords,mortgage interest tax relief,Stamp Duty,tax

A recent study by the Nottingham Building Society reveals that residential landlords have driven a surge in advice enquiries ahead of forthcoming buy-to-let tax changes.

The coming changes are boosting business for mortgage brokers, as landlords seek advice on improving existing mortgage deals and expanding their portfolios.

Over a third (35%) of brokers reported that they have experienced an increase in enquiries from existing landlords, with 42% receiving enquiries about remortgaging and 31% saying

Landlords Seeking Advice Ahead of Tax Changes

landlords are considering expanding their portfolios.

Landlords face two major changes to their finances in the coming months: Firstly, the 3% Stamp Duty surcharge will be implemented on 1^st April, which has caused a rush of landlords to purchase additional properties before being faced with the charge.

Secondly, landlords’ ability to offset their buy-to-let mortgage interest payments against tax will be phased out from 2017, which is forcing others to sell.

Despite concerns that landlords will sell their rental properties and leave the buy-to-let sector, The Nottingham’s research indicates that just one in five (19%) existing landlords plan to sell some or all of their portfolios in response to the tax changes.

The Senior Mortgage Broking Manager at Nottingham Mortgage Services, Ian Gibbons, comments: “The tax changes and Stamp Duty increase have complicated the calculations for would-be buy-to-let investors, but there remains strong interest in investing in the sector.

“It is striking that one in five landlords are planning to sell some or all of their properties, but people need to think carefully before rushing into decisions driven by tax changes.”

He adds: “Brokers we speak to are seeing a wide range of enquiries from customers that are not focused simply on selling, but also on remortgaging and ensuring they have the most competitive deal.”¹

The Nottingham’s study shows that landlords in London are the most likely to sell some of their properties, while those in the North East are the least likely.

For more information about how the Budget 2016 will affect landlords, read this interesting piece from Nova Financial’s Paul Mahoney: /budget-reasonably-positive-believes-finance-expert/

¹http://www.propertyreporter.co.uk/landlords/surge-in-btl-advice-seen-ahead-of-stamp-duty-changes.html

A Brexit Would have Little Effect on Housing Market

Published On: March 22, 2016 at 11:51 am

Author: Em Morley

Categories: Property News

Tags: Brexit,EU referendum,housing market,housing supply

A Brexit after June’s EU referendum would have very little effect on the UK housing market, according to Capital Economics.

The economic consultancy believes that a vote to leave the EU is unlikely to trigger a crash in the housing market or the general economy.

However, it warns that the period before the referendum could cause uncertainty due to companies and consumers postponing major spending decisions.

A Brexit Would have Little Effect on Housing Market

Property agents Savills and Countrywide have also voiced similar opinions that uncertainty in the run-up to the vote could slow the housing market.

Capital Economics questions: “With housing already looking very expensive, could even a brief rise in uncertainty and volatility tip it over the edge?”

However, it continues: “Altogether, uncertainty in the short term might lead to a small drop in transactions and a slight easing in house price growth. But we think the prospect of Brexit driving a collapse in prices is slim.

“Rather, with prices very high compared to incomes, and being propped up by a shortage of homes for sale, a recession and rising unemployment that drove up the number of forced sellers and cooled buyer demand is probably the biggest risk.”

Yesterday, Rightmove announced that the average asking price is now over £300,000. While house prices have increased by a huge 50% over the past ten years, wages are up by just 22% in comparison.

Capital Economics also believes that a Brexit would not affect sales of properties to overseas buyers, who consider London “as a safe haven, due to its robust legal system, favourable property laws, stable governance and cultural draws”¹.

However, the consultancy does say that a Brexit would hit house building particularly hard, as many construction workers were born outside of the UK. Tony Pidgley, of Berkeley Group, claims that half of his subcontractors are from Eastern Europe.

This is a worry for the property sector, as housing supply is already extremely low in comparison to demand. However, it is believed that some house builders are restricting supply to keep house prices high.

Capital Economics adds that there are few signs of a forthcoming recession. Instead, it expects wages to rise, reflecting house price growth.

¹https://www.mortgagestrategy.co.uk/capital-economics-housing-market-meltdown-unlikely-if-uk-leaves-eu/

Budget was “Reasonably Positive”, Believes Finance Expert

Published On: March 22, 2016 at 10:32 am

Author: Em Morley

Categories: Finance News

Tags: Budget 2016,finance,residential landlords,tax

Thankfully, the Budget 2016 did not focus too heavily on residential landlords, and what it did include regarding the private rental sector was mostly expected.

One finance expert explains how last week’s Budget will affect property investors, believing that the changes are “reasonably positive” for private landlords.

Nova Financial’s Paul Mahoney begins: “The announcements were a mixed bag for property investors.

Budget was “Reasonably Positive”, Believes Finance Expert

“The Stamp Duty Land Tax (SDLT) changes were confirmed as expected with a slight surprise regarding that it will apply to limited companies purchasing over 15 properties. Some were hoping the changes would be delayed, but that wasn’t to be.”

Indeed, many industry experts had called upon the Government to either delay or scrap the Stamp Duty plans.

Although the Chancellor’s announcement that the 3% Stamp Duty surcharge will be implemented on 1^st April as planned, it was somewhat surprising that large-scale property investors will also be subject to the change.

Mahoney explains further tax changes: “The personal income tax threshold was increased, and the higher tax rate threshold increased. This is good news for smaller landlords who earn limited income or were borderline with the higher threshold, and also for those able to split income with a lower earning partner.

“It gives some breathing space and further ability to avoid the mortgage interest deductibility changes from the summer Budget, which will now only affect those earning more than £45,000 – up from £42,000.”

Additionally, Capital Gains Tax (CGT) changes were announced.

Mahoney gives details: “CGT was reduced by 8% for all levels of income, but unfortunately, residential property has been excluded from this change, which potentially makes commercial property a more attractive option for some, but in reality, the status quo has been maintained for residential landlords.

“Commercial property SDLT has also been increased with a change to a similar threshold system as residential property.”

So what will affect you?

“Overall, not much has changed for residential landlords, aside from a slight increase in the tax-free threshold and higher tax threshold, which is positive. We therefore view the Budget as reasonably positive, given that the negatives were already known.”

Previously, Mahoney has explained how all of the forthcoming changes to the buy-to-let sector will affect residential landlords: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Many Housing Benefit Tenants in Wales Now Subject to Universal Credit

Published On: March 22, 2016 at 9:27 am

Author: Em Morley

Categories: Landlord News

Tags: housing benefit,tenants,Universal Credit,Wales

Yesterday, many housing benefit tenants across Wales became subject to the Government’s new welfare system, Universal Credit.

Many Housing Benefit Tenants in Wales Now Subject to Universal Credit

Under the new scheme, claimants are paid one monthly payment, rather than up to six individual payouts. As housing benefit is included within the Universal Credit system, landlords must be aware of the changes.

Additionally, while housing benefit was previously paid directly to the landlord, tenants are now responsible for paying their rent each week or month. You must communicate effectively with your tenants to ensure that you are aware of their financial circumstances.

Since January, many areas have moved onto the Universal Credit scheme, and we have been devoted to providing you with weekly updates of where the system is now in place. For the previous areas, see last week’s story: /universal-credit-rollout-continues/

We will continue to provide information for landlords on financial changes within the housing sector.

If you have rental properties in the following postcode areas of Wales, be aware that as of yesterday, any housing benefit tenants you have will now be in receipt of Universal Credit:

CF15 7, CF15 9, CF35, CF37, CF38, CF39, CF40, CF41, CF42, CF43, CF44, CF45, CF48 2, CF72 and CF83 1 in Cardiff.
SA11 5 of Swansea.

As your tenants move onto the new system, be aware that some claimants are being forced into debt by long waiting times or changes to their finances.

It is important to communicate with your tenants in order to avoid rent arrears. If you are concerned about your tenants struggling to pay the rent, the best way to protect your investment is with rent guarantee insurance, which ensures you still get paid if the tenant defaults.

For all of the latest advice for landlords, remember to visit LandlordNews.co.uk.

Rental Demand Looks Set to Remain Strong

Published On: March 21, 2016 at 3:21 pm

Author: Em Morley

Categories: Property News

Tags: first time buyers,Help to Buy,private rental sector,tenants

Landlords need not worry about rental demand waning, as new research indicates that private tenants are set to remain in the private rental sector for many more years to come.

Rental Demand Looks Set to Remain Strong

Hamptons International has found that it will take no less than 46 years for an average single Londoner to save a 15% deposit to buy their first home.

Using figures from the third quarter of last year, Hamptons found that it takes the average single buyer in the UK 13-and-a-half years to save a 15% deposit, without assistance from their family.

Regionally, those in the North East are able to save for a deposit the quickest, with single buyers having to wait just under eight years.

Buying a home with a partner or friend is the best option for young buyers, as it cuts the time to save significantly. For the average couple working full-time, it will take three-and-a-half years to save a 15% deposit across the UK. In London, it takes eight years, while buyers face just two years of saving in the North East.

Therefore, it is unsurprising that the Help to Buy: London scheme received so much interest in its first few days.

The Help to Buy ISA scheme will also help reduce the time it takes to save for a deposit. The Government bonus of up to £3,000 will cut the time a single first time buyer must save for by between nine and 12 months, believes Hamptons.

Additionally, the introduction of the Lifetime ISA, announced in the Budget 2016, will help savers even more. First time buyers in England and Wales will be able to save almost three years faster using the ISA. In London, they can save a huge 19 years faster.

Despite this, it is clear that many households will be forced to stay in the private rental sector for many more years.

Hamptons assumes that households can save 22% of their income, after spending on accommodation, utilities and food.

And while single first time buyers may be able to save in the long-term, there are currently just 16 areas where they will be able to afford their own home.

Demand on Private Rental Sector is Greater than Ever, Says RLA

Published On: March 21, 2016 at 2:07 pm

Author: Em Morley

Categories: Landlord News

Tags: housing,housing crisis,private rental sector,Stamp Duty

The Residential Landlords Association (RLA) has told the Government that it is the lack of housing supply, not the number of private landlords, that is causing a housing crisis.

The Policy Director at the RLA, David Smith, gave evidence to the House of Lords Economic Affairs Committee as part of its inquiry into the housing market.

Smith told peers that the demands on the private rental sector are greater than ever before.

Demand on Private Rental Sector is Greater than Ever Before, Says RLA

Demand on Private Rental Sector is Greater than Ever, Says RLA

He said: “Unless we address supply radically, there will be no significant change in housing cost. Simple shifting the dynamics so that it is more attractive to owner-occupiers than it is to private landlords does not increase supply; it just moves property around a merry-go-round. We must increase supply. Everything else, to some extent, is a red herring.”

Smith also promoted the RLA’s call to local authorities to free up small plots of land to be redeveloped as housing, after 46% of RLA members said that they would be interested in helping to fund developments of fewer than ten homes.

He stated: “At the moment, there is no pressure on local authorities to release small plots. We asked the two proposed candidates for the new [London] mayor, whoever is finally elected, to look at using their planning powers to reconsider that.

“Currently, the mayoralty’s planning interests focus more on building large institutional structures or large buildings that are sold to private sector landlords abroad. We have asked the mayor to rethink his planning powers to look at smaller plots and to encourage or compel local authorities to make them available.”

Additionally, he commented on the new changes to Stamp Duty – announced in the Budget 2016 – calling for tax relief for landlords investing in new build properties.

Under the Budget’s plans, large-scale landlords will also be subject to the 3% Stamp Duty surcharge, set to be implemented on 1^st April.

Smith said: “We would like to see a change to the Stamp Duty Land Tax to give landlords a discount on the 3% increase when they have done something that brings new build property onto the market.

“Where they have invested money in new build property, thereby increasing the overall supply, hopefully, we think that they should be relieved from the 3% uplift that will apply to Stamp Duty Land Tax.”¹

Smith gave evidence along with: Nick Jopling, the Executive Director of Property at Grainger PLC; Chris Taylor, the President of the British Property Federation; Dr. David Miles, a Professor of Financial Economics at Imperial College London; and Paul Johnson, the Director of the Institute for Fiscal Studies.

¹http://news.rla.org.uk/rla-gives-eviden-lords-committee/