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Em Morley

Are £514m Worth of Tenant Deposits Unprotected?

Published On: January 28, 2016 at 3:01 pm

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According to finance website Money.co.uk, 284,000 landlords have failed to protect their tenants’ deposits. This would mean that £514m worth of deposit money is unprotected.

The site has also called for a national register of private landlords.

The Centre for Economics and Business Research (Cebr) was commissioned to conduct the research into deposit protection on behalf of Money.co.uk.

Are £514m Worth of Tenant Deposits Unprotected?

Are £514m Worth of Tenant Deposits Unprotected?

The study found that with around one in five (4.6m) UK households living in private rental accommodation and the average protected deposit being £1,040, the total value of tenant deposits placed in protection schemes by landlords has now hit a huge £3.2 billion.

However, despite the risk of fines for landlords who do not protect their tenants’ deposits, Money.co.uk claims that 15% are still failing to do so. It says that these landlords are earning up to £8.5m a year in interest on unprotected money, while leaving themselves and their tenants with no third party protection when their tenancy agreement comes to an end.

It is compulsory for all landlords to protect tenant deposits for Assured Shorthold Tenancy agreements (ASTs) through one of three Government-backed tenancy deposit schemes, within 30 days of receiving the payment.

Landlords must then provide their tenants with prescribed information detailing who their deposit is protected with, who they are renting from and how they raise a dispute if necessary.

The three schemes – the Deposit Protection Service, the Tenancy Deposit Scheme and My Deposits – give landlords and tenants access to a free dispute resolution service if an issue does arise when the tenant moves out. In many cases, this eliminates the need for court action.

The Editor-in-Chief at Money.co.uk, Hannah Maundrell, explains the importance of protecting tenant deposits: “Renting is a money minefield, and with troubled times ahead for the buy-to-let market, the problems caused by dodgy landlords are only likely to get worse.

“While many landlords are doing the right thing and protecting deposits in one of the official Government-backed schemes, a worrying amount of money is falling through the cracks and far too many tenants are being left vulnerable.”

She advises: “Renters must take control and ask landlords which protection scheme their money will be stashed in before signing on the dotted line. Existing tenants must ask for proof their money is protected if their landlord hasn’t given them the correct written documentation.”

Maundrell would like to see changes to the legal system. She says: “It’s not right that tenants are left responsible for taking their landlord to court if their deposit hasn’t been protected. The Government needs to step in and take decisive action. Introducing a compulsory register listing every landlord that rents out property in England and Wales would be a start. This works for Scotland and Northern Ireland, and it seems crazy this hasn’t been brought in across the UK.

“Add in tenants’ ratings and reviews to this too and you have both the beginnings of a solution that helps renters make an informed choice about who they’re handing over buckets of cash to, and the foundation for policing landlords that are currently going unchecked.”1

All landlords must remember to protect tenant deposits – don’t get caught out!

1 https://www.landlordtoday.co.uk/breaking-news/2016/1/money-site-claims-landlords-sitting-on-514m-of-unprotected-deposits

 

 

Supply of Properties For Sale has Almost Halved in Ten Years, Reports NAEA

Published On: January 28, 2016 at 12:55 pm

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Categories: Property News

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The National Association of Estate Agents (NAEA) has released figures that suggest the supply of properties for sale has almost halved in the last ten years.

It reports that the average estate agent branch had 37 homes on its books last month, compared with 72 per branch in December 2005. Last month’s figure is also

Supply of Properties For Sale has Almost Halved in Ten Years, Reports NAEA

Supply of Properties For Sale has Almost Halved in Ten Years, Reports NAEA

down from 45 properties in December 2014.

In December 2015, there were 360 applicants registered per branch, compared to 302 in December 2005.

The NAEA also found that 44% of its members are witnessing a rise in buy-to-let and second home purchases, as buyers try to beat the 1st April deadline for increased Stamp Duty.

From this date, landlords and second homebuyers will be charged an extra 3% in the tax on properties worth over £40,000. Read more: /16883-2/

Over 2015, there was a 6% increase in mortgage lending by the big high street banks, with a particularly strong end to the year.

In December, mortgage lending by both value and number was 24% higher than in December 2014.

In total, there were 75,745 mortgage approvals, of which 43,975 were for house purchases.

The average size of a mortgage for house purchase was £177,000, according to the British Bankers’ Association.

Nationwide reports that the average house price is currently £196,829 – only slightly down on December’s £196,999.

The building society has put annual house price growth at 4.4%.

The Chief Economist at Nationwide, Robert Gardner, says that looking forwards, “the risks are skewed towards a modest acceleration in house price growth”1.

He adds that with interest rate rises likely to stay on hold for longer than previously expected, demand for property is likely to grow in the coming months.

1 http://www.nationwide.co.uk/~/media/MainSite/documents/about/house-price-index/Dec-Q4-2015.pdf

 

 

Evicted tenants should be compensated-Generation Rent

Published On: January 28, 2016 at 11:47 am

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Generation Rent, the campaign group, has called for another controversial legislation to be added to the sector.

The group is asking for tenants who have been served notice to leave a property to be fully compensated by their landlord or letting agent.

Faultless

A lack of stability in privately rented housing means that more than one quarter of tenants could expect to lose their homes, through no fault of their own.

An investigation by BMG research found that 27% of current and previous tenants had been evicted by a landlord who wanted to either sell, refurbish or change the usage of a property. Another reason for eviction was found to be an unaffordable rent increase.

The most common reason for tenants losing a home was the landlord deciding to sell up (14%.) This was followed by 7% who said that soaring rents had forced them out.

However, 51% of respondents said that they were not aware that private landlords can evict tenants without giving a reason. 63% of people questioned said that private tenants, who had not broken the terms of their agreement, should be allowed to stay in their property.

Evicted tenants should be compensated-Generation Rent

Evicted tenants should be compensated-Generation Rent

Compensation

66% feel that abiding tenants forced out of their home should be compensated for the cost of moving to their new property, including 80% of private renters. 75% believe private landlords should be banned from raising their rents by more than the rate of inflation.

With the Housing Bill slowly passing through Parliament, Generation Rent has called on the Government to adapt the eviction law in order to prevent honest tenants who face losing their property a right to compensation. This, the group feels, will also deter landlords from evicting tenants in the first place.

‘Every time a renter moves home they spin the roulette wheel,’ notes Betsy Dillner, director of Generation Rent. ‘They might well get a good landlord who values long-term tenants, but this poll suggests that one in four of us will end up with a bad one sooner or later.’[1]

‘With increasing numbers of us facing a lifetime of renting, we need to be able to call the place we live a home and we can’t until the Government ends unfair evictions,’ she added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/1/generation-rent-calling-for-compensation-for-evicted-tenants

 

BTL lending at Paragon up 80% in Q4 of 2015

Published On: January 28, 2016 at 10:24 am

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Categories: Finance News

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New figures released by Paragon Mortgages suggests that investors are looking to purchase property before the tax changes in April.

The lender said in the final quarter of 2015, its lending to buy-to-let landlords nearly doubled. Mortgages for rental accommodation reached £401m, a rise of 80.6% on the same period in 2014.

What’s more, Paragon’s pipeline of future loans rose by 43% to hit £595.7m.

Profitable

This fantastic quarterly performance was a key feature in Paragon Group making a profit of £35.2m during the period. This was a rise of 14% on the year before.

John Heron, Director of Mortgages at Paragon, said, ‘our buy-to-let business has continued to grow and perform exceptionally well. Whilst over time recent policy developments may cause some softening in the rate of growth of buy-to-let at a market level, demand for private rented housing continues to remain strong and all indications suggest this is only likely to increase in the coming years.’[1]

BTL lending at Paragon up 80% in Q4 of 2015

BTL lending at Paragon up 80% in Q4 of 2015

Sensible

Despite the sudden surge in lending during Q4 of 2015, experts believe that Paragon’s buy-to-let growth will slow at a similar rate. However, Justin Bates, analyst at Liberum, believes the lender has not taken unhealthy risks to aid its quick expansion.

‘I’ve always considered Paragon to be a cautious, sensible lender at that is borne out in the credit quality statistics which are way ahead of industry averages,’ he noted. [2]

‘We see comments on the eye-catching growth rate of 80%, but that is not all new lending on new properties-around 60% of Paragon’s lending is remortgaging activity,’ Bates added.[2]

[1] http://www.propertyreporter.co.uk/landlords/btl-lending-up-80-according-to-paragon.html

[2] http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/12125251/Paragon-Bank-booms-with-80pc-growth-in-buy-to-let.html

 

Legal & General Launches £600m Build to Rent Fund

Published On: January 28, 2016 at 9:28 am

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Legal & General has launched a £600m fund to build large-scale rental accommodation. The news arrives as many other firms look to make private rental homes an institutional asset class.

The new fund will take the total amount of institutional money in the private rental sector since the start of the year to over £1 billion – largely fuelled by insurance companies and pension funds seeking long-term, stable rental yields.

Initially, Legal & General will commit £300m from its own balance sheet, with Dutch pension fund PGGM adding the extra £300m.

Legal & General Launches £600m Build to Rent Fund

Legal & General Launches £600m Build to Rent Fund

However, the fund, which could borrow up to a further 50%, is likely to expand once developments are built.

The Managing Director of L&G Capital, Paul Stanworth, says the fund will seek to capitalise on increasing demand for rental homes, after tax changes for buy-to-let landlords push small-scale investors out of the sector.

He comments: “The rental sector has so far been dominated by individuals with buy-to-let properties, and there has been quite a bit of involvement from local authorities, but both of those are set to fall away. This will exacerbate the supply-demand imbalance.”

Additionally, institutional investors are likely to be attracted to the steady yields that Build to Rent schemes offer.

“The value of rents is significantly more stable than the value of house prices,” believes Stanworth.

The Build to Rent sector is already well established in countries such as the USA and Germany.

However, investors have been more willing to commit to UK funds this year, after support from local planners and the Government, which has exempted large, corporate developments from its crackdown on buy-to-let.

The Government’s proposed reduction in mortgage interest tax relief for buy-to-let investors will not apply to those operating through limited companies, and the extra 3% Stamp Duty charge for landlords will not be levied on those purchasing 15 or more properties in one transaction. Find out more about the changes and how they will affect you here: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Last week, Invesco Real Estate launched a £250m fund, with cash from five international, institutional investors. Additionally, LaSalle Investment Management, a US firm, bought property worth £55m as part of a plan to invest £500m into the sector. Gatehouse, a Kuwaiti-owned investment bank, also committed £100m.

Companies believe that a shift to renting among young workers will prove a huge change in the housing market, while house builders continue to fall short of the Government’s target of building 200,000 new homes each year.

Legal & General’s fund will begin with investments in Bristol, Salford and Walthamstow, northeast London, creating 650 homes. It seeks yields of 3-5% on completed assets.

The firm is also researching the use of modular construction in order to boost efficiency and avoid the skills shortage in vital trades, such as bricklaying.

Stanworth says the fund will take on the development risk of the new units, all of which will be purpose-built, and may split into two funds – one for developments in progress and the other for completed blocks, which will offer investors varying levels of risk.

He adds: “We have built this on a scalable model so we can add investors without having to restructure at all.”1

1 http://www.ft.com/cms/s/0/3f42ab82-c41d-11e5-b3b1-7b2481276e45.html#axzz3yWnpPo8L

Average House Purchase Deposits Pass £80,000

Published On: January 28, 2016 at 9:00 am

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Categories: Property News

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The latest report from the Mortgage Advice Bureau indicates that the average house purchase deposit increased to over £80,000 during December. This is the highest figure recorded by MAB’s Mortgage Index since it started in January 2009.

Rises

A typical purchase deposit rose by 15% yearly to reach £81,721 in December. Similarly, the average purchase price for a property in December increased to £252,990 from £231,487 a year previously. This represented an increase of 9.3% annually.

Borrower traits also played a key role in rising deposits. The average buyers LTV dipped to 68.2% in December, an annual decline of 1.1% and the lowest level seen since 2010.

‘An inevitable repercussion of rising house prices is that higher deposits are required,’ observed Brian Murphy, head of lending at Mortgage Advice Bureau. ‘Those who cannot afford to put up more may find their choice of properties limited. However, those who were able to make a house purchase in December opted to pay a larger amount upfront by taking out a loan with a lower LTV. There are significant benefits to borrowing a smaller proportion of the purchase price, as rates and monthly repayments will be lower.’[1]

‘Demand in the housing market is yet to come off the boil, despite the current dearth in property supply. As a result house prices are likely to continue rising this year, bringing about affordability concerns which will particularly affect first-time buyers.  A significant boost to the construction of new homes is needed to prevent some buyers being priced out of the property market,’ he added.[1]

Average House Price Passes £80,000 barrier

Average House Price Passes £80,000 barrier

Worsening affordability

With deposit sizes rising, December was the third consecutive month of lesser affordability based on a typical purchase buyer’s income as a percentage of property prices.

This proportion stood at 15.3% in December, after a 2% yearly decline from the 17.3% seen in December 2014, with house prices overtaking salary increases.

In addition, the Mortgage Advice Bureau recorded a 2.9% slip in the average salary of homebuyers, from £39,983 in December 2014 to £38,820 in the last month. On the flip side, house values rocketed by 9.3% from £231,487 to £252,990 over the same period.

Access

Mr Murphy added that, ‘the fall in average salaries over the past year suggests those with slightly lower incomes are still able to access the housing market, despite the significant rise in house prices. This has been helped by rock bottom mortgage rates, which have fallen steadily over the past year. However, these low rates won’t last forever and if prices continue to rise faster than wages those with lower incomes may find it more of a challenge to become homeowners.’[1]

‘Government initiatives such as more affordable housing and the Help to Buy schemes go some way in helping those who are finding it difficult to fund a house purchase. However, income and house price growth needs to be more aligned to make homeownership a more realistic dream,’ Murphy concluded.[1]

[1] http://www.propertyreporter.co.uk/hero/average-house-deposit-passes-%C3%A3%C3%A2%C2%A280k.html