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Em Morley

Getting rid of tax-relief will drive-up rents

Published On: October 20, 2015 at 12:02 pm

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Categories: Landlord News

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Removing tax-relief for buy-to-let landlords will ultimately restrict the supply of rented property and ultimately make life more difficult for tenants, according to a leading lenders’ group.

The Intermediary Mortgage Lenders Association (IMLA) stated that measures discouraging investment into the private rental sector in this period of population growth and limited supply would only serve to drive up rents.

Losses

By removing the higher-rate tax relief, as proposed in the July budget, investors would be forced in losses and lift the effective tax above 100% as a result.

In its investigation, the IMLA said the changes may, ‘slightly skew the market in favour of owner-occupied house hunters,’ by cutting the price landlords are willing to pay for a property. However, it also warned that by, ‘discouraging investment in the private rented sector the changes will put more upward pressure on rents.’[1]

In addition, the firm expressed concern about the chances of the Bank of England’s financial policy committee moving to regulate the sector. This comes after the committee stated it was monitoring the buy-to-let sector, with concerns that the ongoing popularity of investment could magnify any rises or falls in prices.

Popular

After a sustained drop in popularity following the recession, the market has surged back to form. The £16.6bn advanced to landlords during the first part of 2015 was more than four times the figure recorded in the same period in 2010.

Lending volumes are below their previous peak but there has been rumbling discontent from potential buyers who feel they are being beaten to purchasing a home by investors who do not have to go through the same strict affordability checks.

Yesterday, property website Rightmove stated the average first-time buyer homes were popular with investors. Increased competition between these one and two bed properties have driven up asking prices by nearly 10% over the last year.

Getting rid of tax-relief will drive-up rents

Getting rid of tax-relief will drive-up rents

Warning

IMLA’s warning came in its report on the mortgage market as a whole. The overall investigation found that first-time buyers who could raise deposits were benefiting from monthly repayments being at a record low.

‘Even though the first-time buyer house price-to-earnings ratio is, at 4.0, high by historical standards, first-time buyer mortgage affordability has never been better,’ the report states. ‘In the second quarter of 2015, the average first-time buyer spent 10.2% of their income on mortgage interest, the lowest figure on record and less than half the proportion recorded at the end of 2007.’[1]

Executive director of IMLA, Peter Williams, said, ‘Comparing market segments, first-time buyer volumes have actually held up best over the period from 2007-2014, while buy-to-let has been clawing its way back from a deep recession as demand for private rental properties has grown.’

‘Until there is a broader policy push to tackle the chronic lack of supply, homeowners and renters in both private and social sectors will all remain vulnerable to the effects of the current lack of fully joined-up policymaking,’ Williams concluded.[1]

[1] http://www.tenantvet.co.uk/scrapping-buy-to-let-tax-relief-will-push-rents-up-warns-lenders-group/

 

 

Price growth in PCL market predicted to fall

Published On: October 20, 2015 at 10:29 am

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Categories: Finance News

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New analysis suggests that property value growth in the prime central London market is due to be less than previously predicted, due to a slowdown within the sector.

Real estate firm Knight Frank has made revisions to its 2016 forecast for yearly price growth in the region, lowering their increase suggestions from 4.5% to just 2%.

Alterations

The firm noted that the prime London property market has experienced a number of challenges during 2015, from the proposed mansion tax and increases in stamp duty. As a result, annual property price growth has dropped from 5% at the end of 2014 to 1.3% in September.[1]

‘These challenges have been led by the increase in stamp duty at the end of 2014, a factor that will continue to weigh on transactions and price growth into 2016 as the market absorbs the new rates,’ the report states.[1]

In addition, the report shows that worldwide economic uncertainty, particularly in China, has also had a negative effect on housing demand. However, it also says, ‘the strength of the UK’s economic recovery, employment growth in London and the likelihood of continued low interest rates mean price growth will remain positive next year.’[1]

Price growth in PCL market predicted to fall

Price growth in PCL market predicted to fall

Autumnal Increases

Additionally, the report points out that activity during September and October has risen followed a few subdued summer months. With this said, the report also shows that buyers have become more circumspect in their requirements, due to the changes in stamp duty.

This has,’ resulted in a flight to quality, meaning demand is particularly strong for properties in the best condition and on a prime floor, street or square,’ according to the investigation.[1]

‘While the anticipated gear change materialised as summer moved in Autumn, there has been no sense the market is entering full-blown recovery mode after what has been a subdued 2015,’ the report concludes.[1]

[1] http://www.propertywire.com/news/europe/prime-london-property-outlook-2015102011109.html

 

 

 

MP Addresses Rogue Landlords in Receipt of Housing Benefit

Published On: October 20, 2015 at 9:20 am

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MP Addresses Rogue Landlords in Receipt of Housing Benefit

MP Addresses Rogue Landlords in Receipt of Housing Benefit

A Conservative MP is to question the housing minister over the reasons rogue landlords are still able to receive housing benefit, even if their properties are in a bad condition.

The Chairman of the All Party Parliamentary Group on the Private Rented Sector, Oliver Colvile, will raise the issue this week with Brandon Lewis.

He explains: “The Government needs to explain why so much taxpayers’ money is going to rogue landlords without proper accountability.”

He believes that if private landlords do take public money in the form of housing benefit, their properties should be to a high standard.

He suggests: “Allowing local authorities to issue on-the-spot fines to the worst landlords would help, because the revenue could be used for better enforcement.”1 

Do you rent out properties to housing benefit tenants? And do you think fines would help combat rogue landlords?

1 http://www.propertyindustryeye.com/housing-minister-to-be-asked-why-criminal-landlords-grow-rich-off-taxpayers-money/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MP Criticised for Comments on New Housing Bill Proposal

Published On: October 19, 2015 at 4:37 pm

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Categories: Landlord News

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MP Criticised for Comments on New Housing Bill Proposal

MP Criticised for Comments on New Housing Bill Proposal

A Conservative MP has been criticised for making comments about a new housing law proposal that would see landlords legally obliged to make homes fit for human habitation.

Philip Davies, MP for Shipley, said the Homes (Fitness for Human Habitation) Bill – proposed by Labour MP Karen Buck – is unnecessary, after it was presented to Parliament on Friday (16th October 2015).

If passed, the bill will revive a law from 1885 that has been considered outdated for almost 60 years, during which time rents have spiralled.

The law states that tenants have the right to a home that is fit for human habitation, as long as the rent is less than £52 per year or £80 in London. These limits were last revised in 1957.

Buck explained that the current law requires landlords to fix properties when they fall into disrepair, but they do not have to solve issues such as condensation or mould.

Davies said the new bill would be “a huge burden on landlords”.

He continued: “My contention would be… I don’t think this particular bill is necessary to achieve what I would like to see. [It’s] as if [landlords] have nothing else to do but wade through legislation generated by this House.

“The overwhelming majority of landlords, and I will put myself in this category, want to do the right thing and wouldn’t ever dream of renting out a property that isn’t in a fit state to be rented out and want to comply with every regulation that’s introduced.”1

1 https://www.landlordtoday.co.uk/breaking-news/2015/10/torys-under-attack-for-fit-for-habitation-comments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Time Buyers Competing with Landlords for Small Homes

Published On: October 19, 2015 at 2:05 pm

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Categories: Property News

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A new asking price record has been set, as first time buyers compete with buy-to-let landlords for smaller homes, according to the latest report from Rightmove.

The average asking price of a property coming onto the market is now £296,549, up 0.6% on last month and 5.6% over the year.

The property portal states that first time buyers and investors are going head-to-head over homes with up to two bedrooms.

First Time Buyers Competing with Landlords for Small Homes

First Time Buyers Competing with Landlords for Small Homes

It reports that asking prices for these properties are up 4.9% on a monthly basis and 9.6% higher than last year.

However, supply of smaller homes has fallen by 8% on 2014 levels.

Nationally, excluding inner London, the average asking price of a smaller home is now £184,676.

The average second-stepper property coming onto the market costs £247,004, indicating a huge financial leap for second time buyers.

The typical top-of-the-ladder home has an asking price of £530,457.

Although new asking price records have been set, the rate of growth has slowed, marking the lowest October increase since 2010.

Rightmove has found that a “vicious circle” has formed, with high tenant demand fuelling buy-to-let investment.

The portal also reveals that many letting agents are observing same-day rentals, with little or no properties available to let.

It describes rental demand as “extraordinary”1, noting lack of supply from housing associations and local authorities.

Director of Rightmove, Miles Shipside, says: “Tenant demand is such that many letting agents are reporting viewings and tenancy applications on the same day as marketing properties.

“In some cases they’ve nothing left to rent until tenants move out or a new influx of investor landlords gives some short-lived respite to tenants-in-waiting.

“Both investor landlords and first time buyers looking to buy smaller homes are finding them in short supply. As they’re typically owned by potential first time sellers, the price gap and costs of moving to the second step on the housing ladder deter them from coming to market.

“Competition is most fierce in this sector, with first time buyers and buy-to-let investors going head-to-head for the same properties.”1

The report follows data from Your Move and Reeds Rains, which shows that rents around the UK have reached an all-time high.

The average rent in London is now £1,301 per month, up 11.6% on last year.

Nationally, the average rent has risen by 6.3% from last year, hitting £816 a month.

1 http://www.propertyindustryeye.com/first-time-buyers-asked-to-pay-the-price-as-they-go-head-to-head-with-investors/

 

Rent growth slows to pace of house price rises

Published On: October 19, 2015 at 1:01 pm

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Categories: Finance News

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This follows nine consecutive months of accelerated growth.

Increases

The report shows that rent prices are now 8.5% greater than one year ago for the three months to September 2015, following six months of annual growth over 10%.[1]

Average rent for new tenancies in Britain over the period was £995 per month. However in Greater London, this figure rose to £1,555 per months, despite monthly rents dropping for the first time since February 2015.

Data from the Index suggests that deflation across the economy, alongside rising incomes, means that the drop in rents could be a temporary occurrence.

Regional rises

Figures from the report show that nine out of twelve UK regions are experiencing rent price rises on an annual basis. The largest increases were seen in Scotland (8.4%), the East Midlands (7.7%) and Greater London (6.6%).[1]

Three regions are in negative annual price movement, with prices in the North West down by 4.6%, East Anglia 2.2% and Northern Ireland 1.4%.[1]

When comparing September’s figures to those in the previous month, the Index shows that just three regions have sent rental increases since August. In the three months to September, only Scotland (1.2%) and the East and West Midlands (1.4%) have seen price increases.[1]

Rent growth slows to pace of house price rises

Rent growth slows to pace of house price rises

Falls

All other regions saw a modest dip in rents in the same period. The largest falls were seen in South West (2.4%), the North East (2.3%) and the North West (2.2%) respectively.[1]

Martin Totty, chief executive of Barbon Insurance Group, owners of HomeLet, stated that, ‘the UK economy has dipped into negative inflation which is a boost to consumers’ spending power and ultimately, their real income. Affordability is an important factor in determining rents.’[1]

‘Depending on what happens with inflation and real incomes over the coming months, this could have a bearing on future rental price trends especially where, in certain areas of the country, the supply of rental properties is not keeping pace with demand from those wishing to be private sector renters,’ Totty concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-rental-prices-index-2015101911106.html