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Osborne Plans Further Crackdown on Buy-to-Let

Published On: July 23, 2015 at 12:03 pm

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Chancellor George Osborne is planning to further crack down on the buy-to-let sector, with immediate effect.

Osborne Plans Further Crackdown on Buy-to-Let

Osborne Plans Further Crackdown on Buy-to-Let

The new measures would follow new proposals announced earlier this month, to abolish the wear and tear allowance and restrict tax relief on the interest of buy-to-let mortgages.

Osborne has revealed to the Treasury Select Committee that the Bank of England (BoE) could be given radical new powers.

These include the BoE’s control over the number and size of buy-to-let mortgages.

The BoE has cautioned that the buy-to-let boom could affect the financial stability of the country.

Osborne claimed to have already asked BoE Governor, Mark Carney, for a consultation.

On a timescale, Osborne said: “I think the next couple of months. I have just written a letter [to Carney]. It’s all imminent. It’s happening this year.”1 

This follows the Residential Landlords Association’s (RLA) evaluation of the measures already announced.

The RLA says that as a direct result of the Chancellor’s Budget, 65% of landlords are now considering increasing their rents.

It also attacks Osborne for stating that landlords are currently taxed more fairly than homeowners.

RLA Chairman, Alan Ward, said that this is wrong, as homeowners are not taxed on capital gains like landlords.

He adds: “The belief that landlords should be compared to homeowners is like comparing apples with pears. The two are vastly different. It’s time the Treasury recognised residential landlords as a business.”1

1 http://www.propertyindustryeye.com/osborne-poised-for-imminent-new-crackdown-on-buy-to-let/

 

Over a third of agents confirm June rent rise

Published On: July 23, 2015 at 12:02 pm

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A growing number of letting agents are seeing increases in the cost of renting, according to new research.

The Association of Residential Letting Agents’ monthly Private Rental Sector Report suggests that 36% of agents indicated rents had risen between May and June. This was the highest total since tracking of figures began.

Predictions

80% of ARLA members forecast that rents will continue to rise during the next five years. This is thought to be as a result of the changes that will be introduced by the Chancellor which will reduce the amount of tax relief buy-to-let investors are entitled to.[1]

By region, the East Midlands had 48% of agents that indicated rents had climbed in June, in comparison to 17% in Wales. Supply was found to be fractionally down, with an average of 178 properties managed by each ARLA branch, in comparison to 179 in May. However, concern is growing for supply in the capital, with 118 rental properties managed per branch in June, as opposed to 134 in May, a fall of 12%.[1]

Over a third of agents confirm June rent rise

Over a third of agents confirm June rent rise

Holiday boom

With the summer holidays beginning, there has been a continued interest in short-term loans. 33% of agents reported an increase in enquiries for short-term lets in the last month. This represented a rise from the 26% reported in May. The North West has witnessed the greatest increase for short-term lets, with 43% of ARLA members in the region recording a rise in June.[1]

‘It’s worrying to see so many agents reporting an increase in the cost of rent over the last six months, especially considering so many people rent as a way to bridge the gap whilst they save to get onto the property ladder, ‘said David Cox, managing director of ARLA.[1]

Cox feels that, ‘findings like this continue to prove that the housing crisis isn’t going to disappear anytime soon and it will take a while before we see steps heading in the right direction.’ He believes, ‘the impact of the Chancellor’s reductions to the amount of tax relief buy-to-let investors can claim-announced in the Emergency Budget this month-will affect the cost of renting over the coming months and is likely to mean it will take even longer to see any improvement in affordability in the private rented sector.’[1]

[1] http://www.propertyreporter.co.uk/landlords/30-of-letting-agents-confirmed-june-rent-rise.html

 

Over Half of Under-40s Will Live in PRS Within a Decade

Published On: July 23, 2015 at 10:59 am

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Over half of those under 40-years-old will live in the private rental sector by 2025, new research suggests.

Over Half of Under-40s Will Live in PRS Within a Decade

Over Half of Under-40s Will Live in PRS Within a Decade

The study, by accountancy firm PwC, also says that homeownership will fall to around 60% and the amount of households renting privately will increase to 7.2m in the same period.

PwC warns that the difficult housing situation faced by young people at present will worsen within five years.

Seb Klier, of tenant group Generation Rent, told Channel 4 News that there could be “radical action” ahead.1

He believes that angry protestors could go on rent strikes and forcefully oppose evictions.

PwC also predicts that house prices will rise at an average rate of 5% per year, making the average house price £360,000 by 2020.

First time buyers need a deposit of 18% of the property value, meaning that in 2020, they must save a deposit of £64,800.

PwC also cautions that the gap between the young and old will widen, as the young are unable to buy and many older homeowners will own their properties outright, because they have either paid in cash or paid off their mortgages.

The firm expects the number of homes owned outright to increase from 8.4m now to 10.6m in 2025, accounting for 35% of the total housing stock.

Senior Economist at PwC, Richard Snook, says: “Driven by a decade of soaring house prices before the financial crisis and lower loan-to-value ratios post-crisis, the deposits needed by first time buyers have risen significantly.

“As a result, a generation of private renters have emerged and this will increasingly be the norm for the 20-39 age group.”1

1 http://www.propertyindustryeye.com/over-half-of-under-40s-living-in-private-rented-homes-within-a-decade/

Owner-occupation to drop in next decade?

Published On: July 23, 2015 at 10:41 am

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A senior economist has predicted a gloomy outlook for the future of owner occupation in the UK.

Richard Snook, economist at business consultancy PwC, suggests that owner occupation in Britain will drop from its current position of 68% of homes to just 60% in the next decade.[1]

Decline

‘We project that the proportion of owner occupiers, with or without a mortgage, will decline from its peak of around 70% in the mid-2000’s to only around 60% in 2025,’ said Snook. ‘The long rise in the UK owner occupation rate in the post-war years seems to have gone into reverse.’[1]

More positively, PwC suggests that a record number of people will be able to own their homes outright with no mortgage debt, by 2025. The business consultancy states that 8.4m houses are owned outright at present but forecasts that in ten years time, this will rise to £10.6m households, the equivalent of 35% of homes.

The recent PwC report says, ‘a key driver is the rising proportion of over 60 year olds in the UK, who are far more likely to have paid off their mortgages.’[1]

Owner-occupation to drop in next decade?

Owner-occupation to drop in next decade?

Lack of supply

Data from the report also shows that the total number of households owning a home with a mortgage dipped from 10million in 2001 to just 8million last year. PwC suggest that this will dip further to under 7.2million in the next ten years, with limited supply and mortgage availability the prime factors.[1]

In addition, the consultancy believes that the housing supply will persist for at least the next decade. This in turn is expected to see the number of households privately renting increase to 25% of all homes by 2025.[1]

Chronic lack of property supply had led to the firm to suggest that medium-term house price growth is expected to average just 5% per year in the next five years. If this forecast is correct, the average residential property in the UK could be worth £360,000 by 2020.[1]

[1] https://www.estateagenttoday.co.uk/breaking-news/2015/7/owner-occupation-to-fall-to-60-by-2025-says-report

Tenants Win Deposit Disputes Against Landlords and Agents

Published On: July 23, 2015 at 9:58 am

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A tenant has won a case relating to utility charges for the use of a shared heating and air conditioning system within their rental apartment.

The amount of deposit in dispute was £900.

A specially negotiated clause in the tenancy agreement stated that the tenant was responsible for the payment of heating and cooling charges for the apartment.

The clause said that the landlord was entitled to “retain a portion of the deposit towards pro-rata charges incurred for the usage of heating and cooling.” 

The agent said that the apartment block’s managing agents had not yet provided the bill, due to “installation, metering and commissioning issues.” Without a bill, the agents suggested an estimated cost of £900.

Tenants Win Deposit Disputes Against Landlords and Agents

Tenants Win Deposit Disputes Against Landlords and Agents

The tenant disputed this amount, claiming to have not used the heating and cooling system throughout the whole tenancy and proposed a £200 charge, which they deemed a fair “portion” of the deposit to be held.

The adjudicator, the Tenancy Deposit Scheme (TDS), believed that, as the agent could not provide billing information or other evidence to justify its £900 charge, the sum was unfair, given the tenant’s likely usage of the heating and cooling system.

The TDS said that a portion of the deposit should be awarded to the landlord, due to the terms in the tenancy agreement. The adjudicator considered the tenant’s suggestion a suitable amount.

The TDS regards a specially negotiated clause in a tenancy agreement to be an absolute obligation of the tenant.

However, the precise wording of the clause should be carefully evaluated, meaning that the adjudicator can sometimes disagree with the amount in dispute.

This case emphasises the importance of providing justification for an amount to be deducted from a deposit, even if the tenant’s obligation is considered absolute.

Another recent case relates to a claim by a landlord against the deposit when looking to re-turf the lawn after damage caused by a leatherjacket infestation.

The amount of deposit in dispute was £500.

During the tenancy, the tenant reported to their agent that there was an ongoing problem with the rear law. The tenant arranged for the leatherjacket larvae infestation to be treated and the lawn reseeded.

However, the seed did not germinate and at the end of the tenancy, the landlord said the lawn must be re-turfed.

The landlord stated that within the tenancy agreement, the tenant was obliged to keep the garden in a good condition, with a responsibility to take all reasonable precautions to prevent infestations and to pay for any treatment of infestation caused by “negligence.”

A lawn expert’s report said that the seed was failing to germinate because of a lack of sunlight and also found that no larvae were present.

The property check-out report did not state any problems with the lawn, detailing that it had been seeded.

The adjudicator believed that the tenant’s actions did eradicate the larvae, but that the lawn was left bare because the seed did not germinate due to a lack of light.

The adjudicator said this was not within the tenant’s control and there was no evidence to prove that the infestation had been caused by the tenant’s negligence.

As the deposit is used to compensate the landlord when a tenant breaches the tenancy agreement, the adjudicator made no award to the landlord for re-turfing the lawn.

The evidence indicated that the lawn deteriorated during the tenancy and the landlord sought to reclaim their financial loss by relying on the responsibilities detailed in the tenancy agreement.

However, the tenant had tried to treat the problems with the lawn. The fact that the seed did not grow could not be blamed on the tenant.

The adjudicator concluded that the tenant’s actions were reasonable and tenant-like, with no evidence of negligence or clear breach of the tenancy agreement.

Scotland rent arrears rise

Published On: July 23, 2015 at 9:15 am

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A worrying report suggests that tenant arrears in Scotland are rising, despite letting agents’ fees on tenants being banned.

These types of fees are legal in England and Wales and experts commonly point to these costs as a reason why tenants are struggling financially.

Rise

Data from research conducted by Your Move indicates the proportion of rent arrears north of the border rose marginally from 8.8% in May to 9% in June. The growth was more substantial when assessing year-on-year data, with arrears standing at 6.1% in June 2014.[1]

‘It’s become clear over the past year that this isn’t a problem that’s going to fix itself, ‘said Brian Moran, lettings director at Your Move Scotland. ‘Greater supply of homes to let is the only way to definitively address the housing shortage and ease the financial pressure in the market.’[1]

Broader yields

More extensive rental data indicates that Scottish private sector rents have risen to stand 3.1% higher than one year ago. This means that the average rent in the country is £549 per month, with an increase of 0.8% in June alone.[1]

Scotland rent arrears rise

Scotland rent arrears rise

What’s more, rents have reached record highs in traditionally more affordable parts of Scotland, such as the East, South and Highlands.

‘It’s not just the big urban centres of Edinburgh and Glasgow which are coming up against an urgent shortfall of housing-there is furious demand for homes to let the length and breadth of the nation and that is underpinning this build-up in rental prices,’ observed Moran.[1]

Buoyant total annual returns are providing a welcome boost to landlords across Scotland – and represent a nice perk above steady monthly rental income. But most importantly, rental yields are also cruising along on an even keel, and have absorbed some of the recent shockwaves of the new Land and Buildings Transaction Tax, which has disrupted the course of property price growth more recently,’ Mr Moran added.[2]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2015/7/arrears-rising–even-in-area-which-bans-letting-agent-fees

[2] http://www.propertyreporter.co.uk/landlords/scottish-rents-up-31-year-on-year.html