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Em Morley

Buy-to-let boom could lead to risks

Published On: September 25, 2015 at 12:46 pm

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The Bank of England has warned that the booming buy-to-let market in Britain could be a threat to the wider financial stability.

A report from the Bank’s Financial Stability Committee has concluded that buy-to-let mortgage lending had the potential to cause a housing boom and bust.

Lending

In the sector, lending has risen by 40% since the beginning of 2008. The Financial Stability Committee stopped short of calling for any intervention by the government or calling for any regulations to slow this process.

‘The FPC is alert to the rapid growth of the market and potential developments in underwriting standards,’ the committee said. ‘As the market continues to grow, particularly if driven by loosening of underwriting standards, the sector could pose risks to broader financial stability, both through credit risk to banks and the amplification of movements in the housing market,’ said the committee.[1]

Growing

A 40% increase in the outstanding stock of buy-to-let mortgage lending since the beginning of 2008 is in comparison to a rise of just 2% in owner-occupier mortgage lending. In terms of overall mortgage lending, the share of buy-to-let rose to 16% from 12% in 2008.[1]

Buy-to-let landlords are much more likely to sell up should there be a significant drop in property prices, according to the bank. In addition, it feels that a similar effect could occur if prices were to rise sharply.

‘Any increase in buy-to-let activity in an upswing could add further pressure to house prices. This could prompt owner-occupier buyers to take on even larger loans, thereby increasing overall risks to financial stability,’ the FPC stated.[1]

Buy-to-let boom could lead to risks

Buy-to-let boom could lead to risks

Changes

Reductions to the amount of tax relief that can be claimed in mortgage interest payments by buy-to-let landlords were announced by the Chancellor in this year’s summer budget.

As a result, the amount that landlords will be able to claim will be capped at the basic rate of tax, currently standing at 20%. This change will be phased in over four years from April 2017.

At present, the FPC said that no intervention was required in the Help to Buy scheme, which sees the Government secure part of a low-deposit home loan, as it poses no risk to stability.

[1] http://www.bbc.co.uk/news/business-34356801?ocid=socialflow_twitter

 

 

Fewer People Working in Property, Claims ONS

Published On: September 25, 2015 at 11:56 am

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There are now fewer jobs in the property industry, claims the Office for National Statistics (ONS). Recent data reveals that property jobs dropped by 0.3% between 2013-14.

Fewer People Working in Property, Claims ONS

Fewer People Working in Property, Claims ONS

Property was one of just two employment sectors – the other being public administration and defence – to experience a decline.

The 0.3% reduction compares with a 6.2% increase in property jobs between 2009-14.

Property jobs have been measured separately to construction jobs, which dropped by 6.9% between 2009-14, but grew by 5.5% between 2013-14.

The ONS states that the current number of people working in property is 319,000 full-time and 16,400 part-time.

Although there is no breakdown, it is believed that the property category includes public and private sector jobs, such as property managers, administrators, consultants and maintenance, as well as estate and letting agents.

However, earlier this month, the ONS did claim that between April and June this year, 50,000 people were working as estate agents or auctioneers in Britain, down from 55,000 in the same period last year.

These numbers seem very low when compared to research by The Property Ombudsman and Rightmove last year, which found that there were 20,000 agency branches in the country.

Property recruiters have also disputed the ONS’s report that there are fewer people working as estate agents.

Founder and Managing Director of recruitment firm CV-Library, Lee Biggins, disagrees with the latest ONS data on property jobs.

He says: “Our own data contradicts the ONS findings, as jobs in the property industry were up 29.61% in 2014 versus 2013.

“What’s more, our data shows this trend continuing as jobs in the sector are already up 37.19% in 2015 versus 2014.”1 

1 http://www.propertyindustryeye.com/jobs-in-property-are-down-says-office-for-national-statistics/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Support needed for elderly people downsizing

Published On: September 25, 2015 at 11:11 am

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A new investigation has called on local authorities and the property industry to come together to provide more support to elderly people looking to downsize to a smaller property.

The Royal Institution of Chartered Surveyors believes that will help to cut-down on the emotional distress of pensioners moving home in later years.

Visits

RICS suggested that councils work more closely together to arrange, ‘accompanied visits,’ to suitable properties to, ‘create a more positive experience.’[1]

In addition, the company thinks that the Government should pay for a new fund that covers pensioners’ moving costs, in order to encourage them to move home.

Data from the report shows that pressure is growing on pensioners to move from their large homes and into smaller flats or bungalows. It suggests that a third of over 55 year olds considered moving in the last five years, but only 7% have actually moved property.[1]

Community

The report stated, ‘knowing ones neighbours and feeling a sense of community is also an important factor in deciding to move homes for some older people. RICS recommends that local authorities and industry work together to provide accompanied visits to suitable properties to mitigate emotional distress and create and more positive experience.’[1]

One of the authors of the report, Jeremy Blackburn, told The Telegraph newspaper, ‘one of the things we heard was about the number of pensioners living in under occupied property, who might be asset rich terms of the property itself but are actually quite poor overall in terms of their savings.’[1]

While reluctant to provide a more accurate figure for how much elderly people would be offered to assist with moving costs, Blackburn said it would be, ‘more in the hundreds than in the thousands.’[1]

‘I think for many older people, they want to downsize and it’s really hard to do it, so anything that makes it easier must be a good thing,’ he continued. ‘There’s a lot of hysteria about forcing people to downsize but this is just ridiculous, because nobody is forcing anyone to do anything. It’s just helping people who want to do something already.’[1]

Support needed for elderly people downsizing

Support needed for elderly people downsizing

Exciting

Lord Best, chair of the All Parliamentary Group stated, ‘we want to make it easier to move all round, that’s the essence. Looking for a new home should be exciting and fun. We don’t want people to feel as though they are being forced out of their homes, we want downsizing to be a positive experience.’[1]

‘As people get older, by in large they don’t want to move very far where they live already, the challenge in many areas is that there just isn’t good quality housing available so that has to be looked at as well,’ added Lord Newby.[1]

[1] http://www.telegraph.co.uk/active/11885825/Elderly-people-should-be-given-emotional-support-to-encourage-them-to-downsize.html

 

 

The Property Ombudsman Redesigns Website

Published On: September 25, 2015 at 10:55 am

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The Property Ombudsman (TPO) has redesigned its website and added in new features, including live feeds from its social media.

The new site is easier for members to navigate and makes it simple for non-members to join the scheme online. The site can also be used on smartphones and tablets.

Users will be able to search for members, learn how to make a complaint and download the codes of practice, which explain the obligations that members must follow.

The Property Ombudsman Redesigns Website

The Property Ombudsman Redesigns Website

Vice-Chairman of The Property Ombudsman, Gerry Fitzjohn, says: “Our goal with this new website was for it to be compatible with all mobile and tablet devices, as well as improving communications by providing all our visitors with better access to useful information.”1

The scheme’s codes of practice are currently being reviewed, so that recent changes to legislation are included. These will be live on the website in the coming weeks.

View the new site here: https://www.tpos.co.uk

1 http://www.propertyindustryeye.com/property-ombudsman-sceme-relaunches-website/

First Rental Index Reveals Continuing Rent Rises

Published On: September 25, 2015 at 9:53 am

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Rent prices for three-bedroom homes have grown faster than for any other property type in the last 12 months, according to a brand new rental index.

The Landbay Rental Index is based, where possible, on rents provided by Zoopla.

It found that the average rent on a three-bed home increased by 4.6% annually to August, compared with a 3.3% rise for all UK rental properties.

Landbay claims that it is the first to track rents at county and London borough level in terms of number of bedrooms. The index shows that rent prices for three-bed properties have increased faster in areas within London’s commuter belt.

First Rental Index Reveals Continuing Rent Rises

First Rental Index Reveals Continuing Rent Rises

The Royal Borough of Windsor and Maidenhead experienced the greatest yearly rise in rents, with the average three-bed home costing £1,936 per month, a 22% increase on August 2014.

The average price on a similar property in Southend-on-Sea rose by 20% in the 12 months to August, to £1,121 a month.

Rents in Swindon grew by 13%, to £813, and every area in the top ten saw rises of over 10%.

Co-founder and CEO of Landbay, John Goodall, comments: “Rents for three-bedroom family homes are racing ahead of the rest of the market at the moment.

“This trend is particularly strong in commuter hotspots outside of London, with 12 of the 20 areas with the fastest growing three-bedroom rents within an easy commute of the capital.

“For investors in the private rental sector, our data makes family homes in the South East look like an attractive proposition. As well as performing well now, rents for three-bedroom homes saw the smallest falls when rents dipped in 2013.

“The challenge for investors looking to benefit is finding suitable properties for professionals at a cost that produces a good yield.”

The index was compiled alongside mortgage asset analytics provider, MIAC. It found that the average UK rent is now £1,282 per month, a 3.3% annual rise, which closely matches wage increases of 2.9%, according to the Office for National Statistics (ONS). However, this is still much higher than inflation.

The seaside town of Southend also witnessed average overall rent prices increase by a large margin, with growth of 12.6% over the year, to £767 a month.

Following Southend is York, where rents rose by 12.1% yearly to £776, and Wrexham has an average monthly rent of £539 after growth of 11.1% over the year.

The greatest declines in rent prices were in Cheshire, where they fell by 6.9%, Aberdeen City, down 5.7%, and Buckinghamshire, at 3.5%.

Goodall explains: “At the national level, rents performed very strongly in 2014 after a dip in 2013.

“This year has seen rents continue to grow, but at a slower rate.

“The macro trends at the national level aren’t uniform when you drill into the local level and look at different types of property, which is why we want to establish a rental index that gives landlords, tenants and others interested in the private rented sector access to a more granular level of insight.”1 

According to MIAC, the drop in 2013 was caused by the extortionate prices charged during the London Olympic Games in 2012, which had an effect on rents across the country, but mainly in the capital.

1 http://www.propertyindustryeye.com/new-rental-index-says-average-rents-continuing-to-grow/

Fresh Opposition to Scottish Rent Controls

Published On: September 25, 2015 at 8:57 am

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The Scottish Government is facing fresh opposition to its plan to introduce rent controls in the private rental sector.

The controls are set to be implemented in rental hotspots as part of the Government’s legislative programme.

Now, lettings portal Citylets has revealed that it has not found any hotspots.

It claims that in real terms, almost all rent prices have dropped across Scotland since the start of the recession.

Fresh Opposition to Scottish Rent Controls

Fresh Opposition to Scottish Rent Controls

Even in the major cities of Edinburgh, Glasgow and Aberdeen, rents for most property types have declined in real terms.

And where rents have increased – in the two-bedroom markets in Edinburgh and Glasgow – Citylets found that price growth only rose from 1.45% to 3.8% since 2008.

Founder of Citylets, Thomas Ashdown, insists: “Rents are not out of control in this country. They are, on the whole, falling in real terms and it is simply not credible for any party to contend otherwise.

“As far as we can see, it is only the two-bedroom markets in Edinburgh and Glasgow that have risen above inflation over the last eight years with just three postcodes recording double digit growth – EH1, EH9 and G12.”1 

Earlier this month, Zoopla named Edinburgh the best place for landlords to invest in student accommodation.

The research found that four out of five of the most profitable locations for buy-to-let investors are in Scotland.

Zoopla’s report states that a four-bed house in Edinburgh has a high rental yield because of an average price of £426,774, at a rent of £2,171 per month.

Properties in Oxford and Warwick have higher selling prices than in Edinburgh, at an average of £559,312 and £482,569 respectively, but returns on investment are lower due to monthly rents of £2,148 and £1,924.

Economist at Rettie & Co and a spokesperson for pressure group PRS 4 Scotland, Dr John Boyle, comments on the report: “The numbers quoted by Zoopla highlighting rental yields across the UK might encourage those looking to introduce rent controls in Scotland, but in reality the picture is quite fragile.

“We need a continuous supply of high quality rental accommodation to meet growing student demand, and while returns are good for those who have invested in buy-to-let in our university cities, investors and lenders perceive a far higher risk here than elsewhere in the UK.”

He continues: “The prospect of rent controls without any balance in the form of tax or planning regulations to encourage investment is a huge cause for concern.

“Add to this the proposed new tenancy agreement, which will make a landlord unable to repossess a property at the end of a contract, and suddenly the reason to invest becomes even less compelling.

“We have a serious housing shortage in Scotland, and a strong, modern and sustainable rental market is essential.”1

Meanwhile, Your Move has revealed that rents in Scotland fell in August, the first monthly decrease since January, while rent arrears rose to 12.2% of all rent due.

Your Move’s Brian Moran believes that rent controls “will end up being more of a hindrance than a help to tenants if landlords are dissuaded from investing in the private rented sector as a result”1.

1 http://www.propertyindustryeye.com/opposition-to-rent-controls-in-scotland-mounts-as-new-evidence-emerges/