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Em

Em Morley

PCL rents drop for first time in two years

Published On: February 17, 2016 at 2:12 pm

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Categories: Property News

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The final quarter of 2015 saw rents drop in the capital for the first time in two years, according to a new report.

Cluttons estate agents has provided data suggesting that average Prime Central London rents dropped by 2% over the year to stand at £1,097 per week.

Falls

In addition, Cluttons claim rents are slipping faster than capital values, with average gross rental yields dropping to 3.16%. Despite this, the firm has reported an increase in buy-to-let activity in an attempt to beat the upcoming stamp duty surcharge.

Regions that have seen the most significant dips in rents include Notting Hill, where they slipped by 6.4%, Hollands Park (4.4%) and Marylebone (3.9%).

PCL rents slip for first two in two years

PCL rents slip for first time in two years

‘Landlords are growing wary of burgeoning supply levels at virtually every price point and are adjusting their rental incomes accordingly,’ said Faisal Durrani, head of research at Cluttons. ‘Furthermore, many tenants don’t realise they’re actually paying less than their predecessors in many cases. Some landlords are on the back foot and have been slow to adjust to the evolving conditions and are now undercutting one another to secure tenants,’ Durrani continued.[1]

Stamp Duty changes

James Hyman, Cluttons’ head of residential agency, noted, ‘in the lead up to any tax changes, there is always an increase in activity and the looming SDLT changes are no different, which we expect will become more evident in the coming weeks.’[2]

To this end, Cluttons has forecasted a reduction of the lettings market during 2016, but a growth of more than 16% before 2020.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/prime-central-london-rents-fall-for-the-first-time-since-2013

The High Price of Missing the Stamp Duty Deadline

Published On: February 17, 2016 at 12:54 pm

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Categories: Landlord News

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The 1st April deadline for an increase in Stamp Duty for buy-to-let investors and second homebuyers is moving ever closer, and the price of missing this date is high.

The High Price of Missing the Stamp Duty Deadline

The High Price of Missing the Stamp Duty Deadline

Tax specialists are warning that many property buyers could be caught out by the surcharge, as the deadline is 1st April, rather than the start of the new tax year on 6th April.

Missing the deadline by just a day will make buyers subject to the additional 3% Stamp Duty charge. This increases the amount of tax charged on the average property in England and Wales, costing £188,270, by a huge £5,648. In London, the surcharge could add over £15,000 to the cost of buying an average property.

The Director at accountancy firm Smith & Williamson, Chris Springett, insists that anyone looking to purchase a residential buy-to-let, investment property or second home must be sure that they can complete by midnight on 31st March 2016.

This applies unless contracts were exchanged on or before 25th November last year.

Springett adds: “Missing the date by a few days could cost thousands of pounds and I fear many people could inadvertently miss out.”

The Stamp Duty charge on a home costing £188,270 is currently £1,265. However, this will rise fivefold to £6,913 from 1st April for buy-to-let landlords and second homebuyers.

Stamp Duty on the average London property, costing £514,097, will more than double from a current £15,704 to £31,127.

Springett concludes: “The changes are due to apply from April Fool’s Day, so anyone seeking to buy a second home, buy-to-let or residential investment property should keep this in mind.”1

Many landlords are already rushing to buy ahead of the deadline in order to avoid paying the additional tax.

1 http://www.mindfulmoney.co.uk/personal-finance/dont-be-an-april-fool-tax-hike-on-second-home-buyers-comes-into-force-on-april-1st-not-april-6th/

Company fined £47,900 for breach of HMO regulations

Published On: February 17, 2016 at 12:12 pm

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A property company managing a HMO in Notting Hill has been ordered to pay a substantial fine, after not complying with HMO regulations.

AA London Property Limited was fined £47,900 in relation to 24 charges under the Housing Act 2004. Council officers found numerous breaches or regulations. These ranged from a faulty smoke detector to unsafe bannisters.

Charges

The director of AA London Property Limited, Jagit Kaur, was fined £21,780 relating to 16 charges under the Housing Act 2004. Kaur entered guilty pleas to nine of the charges at a previous hearing and was subsequently found guilty of the other seven charges after a trial at the City of London Magistrates’ Court.

Both the firm and Kaur were prosecuted by the Royal Borough of Kensington and Chelsea in relation to offences at 14-16 Clanricarde Gardens, W2. The prosecutions followed a failure to comply with a Prohibition Order made under the Housing Act 2004, which prohibited the use of one of the rooms as living accommodation. In addition, there were breaches of the Management of Houses in Multiple Occupation (England) Regulations 2006 and failure to produce tenancy agreements under Section 235 of the Housing Act 2004.

Kaur and the company opposed the need to provide tenancy agreements to the council, citing that they would be in breach of the Data Protection Act. Additionally, they disputed that a sink was blocked on the day of inspection by a council officer and that smoke alarms were incorrectly installed. Kaur’s defence team argued that somebody else was managing the property.

Company fined £47,900 for breach of HMO regulations

Company fined £47,900 for breach of HMO regulations

Responsibilities

Magistrates also heard that the property in question is a six-storey HMO, that had been converted into 35 lettings. Around 45 tenants lived in the building.

In court, the council produced a copy of the HMO application form, which confirmed that AAA London Property Limited was the licence holder and that Kaur was the manager, with responsibility.

When sentencing, the court took into account the previous guilty pleas, alongside both parties’ good character. As such, the magistrates imposed a reduction to the financial penalty imposed. In addition to the fine AAA London Property Limited and Kaur were told to pay council costs of £7,709.75 and to pay a victim surcharge of £120.

Duty

‘Councils have a duty to ensure that licensed HMOs are fit for the number of occupiers,’ said Councillor Rock Feilding-Mellen, the Royal Borough of Kensington and Chelsea’s cabinet member for housing. ‘The purpose of the licensing requirements is to enable local authorities to ensure that HMOs are safe, have adequate facilities for the occupiers and are properly managed.’[1]

‘It is very important that, when faced with landlords who are not adhering to the appropriate regulations and licensing conditions, we take all necessary action to ensure that tenants are protected and that the properties they live in meet all legal requirements. In this case, both the company and its director failed to meet the minimum standards and their responsibilities as a landlord so I am very pleased that the court has handed down these fines,’ he added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/2/notting-hill-property-company-fined-47-900-for-hmo-failings

 

Young, would-be homeowners stuck in rental properties

Published On: February 17, 2016 at 10:22 am

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A think tank has presented a gloomy outlook for would-be homeowners looking to take their first steps onto the property ladder. It claims that most working households on average incomes will be forced to rent for the indefinite future.

Analysis from the independent Resolution Foundation body indicates that for this group, home ownership will approach just one-in-ten by 2025.

Decline

With the largest decline in young families owning property is for those on modest incomes, it has also slipped for those that are on benefits and on higher incomes.

As a result of this, home ownership is becoming more and more the domain of older and wealthier households.

Data from the analysis shows that those aged 65 or older now make up 32% of all homeowners. By contrast, those aged between 18 and 34 account for just 10%, down from 19% in 1998.

In addition, under 35 modest income working households have also recorded sharp declines. Homeownership has dropped from 57% in 1998 to 25% at present. In contrast, levels of private renting have more than doubled, from 22% to 53%.

Young, would-be homeowners stuck in rental properties

Young, would-be homeowners stuck in rental properties

Capital pains

This decline is more harshly felt in London, where the proportion of younger people on modest incomes owning their own property have fallen to 13% over the last ten years. This is a drop of more than 50%.

Should this trend continue in the capital, young homeowners on modest incomes would slip to less than one-in-twenty by 2025.

Nationally, homeownership currently stands at around 63%.

‘With the average modest income household having to spend 22 years to raise the money needed for a typical first time buyer deposit-up from just three years in the mid-1990’s-it’s no surprise that owning is increasingly a pipe dream for many,’ observed Matt Whittaker, chief economist at the Resolution Foundation.[1]

‘Schemes such as Help To Buy can only ever help a minority-often providing a leg-up to those who would eventually climb onto the housing ladder anyway. More than half of those benefiting from Help To Buy to date have household incomes in excess of £40,000. It is hard to imagine any way out of the home ownership crisis facing those on low to middle incomes that doesn’t involve significantly boosting house building,’ Whittaker added.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/figures-show-why-private-rental-sector-is-dominated-by-young-tenants

 

First Time Buyer Mortgages Outnumber Buy-to-Let Loans by Three to One

Published On: February 17, 2016 at 9:26 am

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Despite an increase in buy-to-let lending last year, first time buyer mortgages outnumbered landlord loans by three to one, according to data from the Council of Mortgage Lenders (CML).

First Time Buyer Mortgages Outnumber Buy-to-Let Loans by Three to One

First Time Buyer Mortgages Outnumber Buy-to-Let Loans by Three to One

In 2015, 311,700 mortgages were approved for first time buyers. Although this figure is the same as 2014’s number, the amount borrowed, £46.7 billion, was the highest since 2007.

Home movers took out 365,800 mortgages for house purchase, down slightly on 2014 (0.2%). However, the amount was up, at £72.1 billion – again, the highest since 2007.

Buy-to-let mortgages increased by both volume, by 28%, and by value, up 39%, which was also the highest recorded since 2007.

Just 41% of buy-to-let loans were for house purchase, amounting to £15.6 billion.

The Managing Director of Paragon Mortgages, John Heron, comments on the data: “A common accusation levelled at buy-to-let landlords is that they have an unfair advantage over homebuyers.

“The data would suggest this is not the case, with buy-to-let purchases making up only 11.6% of all purchases.

“First time buyers accounted for three times as many transactions as buy-to-let purchasers.”1

While this may sound like good news for generation rent, since the start of this year, buy-to-let landlords have been flooding into the property market in a bid to beat the 1st April deadline for an increase in Stamp Duty. The figures for the first half of 2016 are likely to be very different.

Separate data from the Office for National Statistics (ONS) found that the average house prices across the UK ended last year at £301,000 in England, £175,000 in Wales, £193,000 in Scotland and £148,000 in Northern Ireland.

The highest average property price in England was unsurprisingly in London, at £536,000, and the lowest was in the North East, at £155,000.

The ONS reports that annual house price inflation was 7.3% in England in 2015, 1% in Wales, -0.2% in Scotland and 1.5% in Northern Ireland.

1 http://www.mortgageintroducer.com/cml-data-proves-buy-to-let-isnt-out-of-hand/#.VsQ7o1tLH8s

More Tenants than Homeowners in London by 2025, Claims PwC

Published On: February 16, 2016 at 2:56 pm

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The majority of Londoners will be living in rental accommodation by 2025, with just 40% owning their own home, according to a new study by PwC.

This prediction is a reversal of 2000’s property market, when 60% of Londoners owned a home either outright or with a mortgage.

The expected continuation of generation rent will be bad news to many, including the Government, which has been attempting to fuel homeownership through schemes such as Help to Buy.

Additionally, Chancellor George Osborne is clamping down on the buy-to-let sector by imposing tax and financial changes on landlords.

However, it is young people that will be the hardest hit by changes to the housing market. Priced out by high house prices and impossible deposits and mortgages, only 26% of those currently aged 20-39 will own their own home by 2025.

Comparatively, 64% of those born in 1960 and 1970 owned a home by the time they were 35.

Affordability issues will hit Londoners the hardest, with a predicted 24.4% rise in the amount of people renting privately in the capital between 2000 and 2025. In the UK as a whole, it will increase by 14.5%.

A senior economist at PwC, Richard Snook, comments on the firm’s predictions: “This analysis shows that people are increasingly being locked out of owning a home in London, demonstrated by the sharp rise in private rental levels and sharp fall in homeownership.

“High prices are making homes in the capital unaffordable to most and could undo a century-long trend towards rising homeownership rates. In just 25 years, the city has been transformed to one where rental is becoming the norm – especially for younger people.”1

Thanks to low interest rates, those with mortgages are seeing their housing costs fall in comparison to tenants, particularly in London.

The Resolution Foundation reports: “Measured before housing costs, median incomes in London appear to have grown by 2.9% post-crisis; measured after housing costs, they remain 3.7% below pre-crisis levels.”1

The number of people renting is expected to grow in every region of the UK. Northern Ireland will experience the next highest increase in renters, at 24.4%, fuelled by low levels of house building and a younger population. The slowest rise will be seen in the South West, at 6.1%.

Homeownership in Britain hit a high in 2003, at 71% of households. It has been in decline ever since, according to Savills’ Neal Hudson. The Right to Buy scheme of the 1980s is thought to have boosted the peak in homeownership.

David Snell, a partner at PwC, explains how the country must adapt to these forthcoming changes: “With around 60% of Londoners predicted to be renting by 2025 – 40% private sector and 20% social housing – policy will need to adapt. This could include encouraging a better quality of private rented accommodation, including longer tenure periods and more rental properties designed for families.”

He continues: “Demand for housing in the UK has outstripped supply for more than two decades. Changing the outlook for generation rent will require us to build more houses than needed, just to match population growth in order to make up the past shortfall between housing supply and growth in demand.”1 

Recently, we reported that the average buyer who purchases a home this year will have already spent a huge £52,900 on rent.

However, it was also revealed in HomeLet’s rental index that rent price growth in Greater London is at its lowest rate for two years. Despite this, the average new rent in the capital is £1,510 per month. The average across the UK, excluding London, is £740 a month.

The Chief Executive of housing charity Shelter, Campbell Robb, says: “Faced with sky-high housing costs and instability, and forced to wave goodbye to their dreams of securing a home of their own, the shortage of affordable homes in the capital is putting huge pressure on London’s renters.

“But it doesn’t have to be this way; many renters in Europe enjoy greater stability, and there’s no reason London’s tenants can’t as well. To turn around this crisis, the next Mayor of London must prioritise longer, more stable tenancies in the capital and finally commit to building the genuinely affordable homes that Londoners are crying out for.”1

1 http://www.telegraph.co.uk/finance/property/property-market/12157946/Generation-Rent-London-to-become-a-city-of-renters-by-2025.html