Posts with tag: buy-to-let sector

Future for buy-to-let positive, says Aldermore Bank

Published On: May 12, 2016 at 11:54 am

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The boss of Aldermore Bank has insisted that the buy-to-let housing market is not about to crumble under the weight of tax changes.

Aldermore’s overall mortgage lending rose by 60% to £542 in first quarter of 2016, as buy-to-let landlords rushed to complete transactions before the stamp duty rise in April.

The bank’s buy-to-let lending increased by 144%, to reach £327m.

Changes

Further tax changes are planned, such as alterations to landlords mortgage interest relief.

However, chief executive of Aldermore, Philip Monks, does not believe that this will be a long-term detriment to the sector.

Monks said, ‘I’m speaking to landlords and they believe the market remains resilient and I think that is borne out by the surge that we saw before 1st April-if people didn’t think the market was going to be sustainable, they wouldn’t be queuing up before the stamp duty increase.’[1]

‘The structural aspects of the market are such that, according to Savills, a further 1.1m households will be in the private rental sector by 2021, even if the Government achieves its house building targets and, frankly, it hasn’t managed that in recent years. I think the buy-to-let market is resilient,’ he continued.[1]

Future for buy-to-let positive, says Aldermore Bank

Future for buy-to-let positive, says Aldermore Bank

Brexit uncertainty

Mr Monks also said that he had not yet encountered any negative effect on business sentiment from the forthcoming EU referendum. He did warn however that the poor quality of debates surrounding the issue was not helping businesses.

‘We are seeing continued confidence in investing. People have obviously got an eye on what happens with Brexit, but the quality of debate is such that it is hard for people to make a decision at the moment,’ Monks noted. ‘But we are a UK-only bank and as long as we see the UK economy continue to grow, that is the important thing.’[1]

[1] http://www.telegraph.co.uk/business/2016/05/12/aldermore-bank-bets-on-strong-future-for-landlords/

Government’s buy-to-let policies attacked again

Published On: April 18, 2016 at 11:56 am

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Another journalist has voiced their disagreement towards the government’s perceived attack on the buy-to-let sector.

Paul Thomas, editor of Mortgage Strategy, labelled the string of policies as, ‘political short-termism,’ and, ‘a vote winner to disguise the fact that this administration lacks a clear, joined-up plan for housing.’[1]

War

Writing on the Spectator website, Mr Thomas believes talk of a ‘buy-to-let war,’ is wrong-as war involves two sides and in his mind, only the Government has gone on the attack!

Thomas said mortgage lenders are starting to panic and as such have reduced buy-to-let mortgage prices to record lows. Although this could support the market in short-term, Thomas believes, ‘the truth of the matter is the buy to let sector is likely to stagnate and even shrink in the long term.’[1]

In addition, Thomas said that there is a, ‘damaging double-whammy’ for buy-to-let landlords. These are the mortgage interest tax relief cuts, coupled with the Prudential Regulation Authority proposing stricter lending criteria on mortgage lenders.

Government's buy-to-let policies attacked again

Government’s buy-to-let policies attacked again

Intentions

Continuing, Thomas stated, ‘the Government’s policy intention is clear: it wants to wrestle back housing stock from wealthy landlords so first-time buyers can get on the housing ladder. This is political short-termism in its purest form; a vote winner to disguise the fact that this administration lacks a clear, joined-up plan for housing.’[1]

‘There is an acute lack of social housing and, while it is now easier to get a mortgage than it was a few years ago, house prices have increased to such an extent that raising a deposit has become an impossible task for some. Moreover, some people simply do not want to own their own home, given the flexibility renting offers,’ he added.[1]

In conclusion, Mr Thomas warned, ‘things could get very painful for millions of tenants up and down the country should renewed attacks force landlords to find new homes for their money.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/4/scathing-attack-on-governments-anti-buy-to-let-short-termism

 

Bank of England Expects Buy-to-Let Mortgage Lending to Drop Sharply

Published On: April 14, 2016 at 8:31 am

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Activity in the buy-to-let mortgage sector is expected to drop sharply in the coming months, according to a survey by the Bank of England (BoE).

The BoE’s Credit Conditions Survey, which records the predictions of UK banks and building societies, found that lending to owner-occupiers is likely to increase significantly in the second quarter (Q2) of this year, but the opposite will happen for buy-to-let landlords.

The survey’s results arrive as the Council of Mortgage Lenders (CML) reports that £3.7 billion was lent to landlords in February, a huge 61% rise on the same month last year.

The CML claims there were 48,000 loans approved for house purchase in February – consisting of 22,000 loans for first time buyers and 26,000 for home movers. It also found there were 10,300 buy-to-let loans for house purchase.

Bank of England Expects Buy-to-Let Mortgage Lending to Drop Sharply

Bank of England Expects Buy-to-Let Mortgage Lending to Drop Sharply

All of these figures are up on the previous month and significantly higher than the previous year, with 11.1% more loans to first time buyers and 13.5% more for home movers.

The Director General of the CML, Paul Smee, comments: “Activity has been boosted by landlords seeking to complete purchases before tax changes in April. We do not expect activity to show such strong year-on-year growth later in the year.”1 

However, some analysts believe that there may be too much pessimism regarding the sector.

The Director of mortgage broker Anderson Harris, Jonathan Harris, says: “Buy-to-let goes from strength to strength, but of course, figures will be skewed by landlords bringing forward purchases to beat the Stamp Duty deadline.

“It is highly likely that purchase numbers will slip, although we expect remortgaging to continue to thrive, as landlords squeeze every penny out of investments to help cover other tax changes, such as the reduction in mortgage interest tax relief.”1

Despite the forthcoming changes, Paul Mahoney, a finance expert at Nova Financial, insists that “buy-to-let is not dead”, and explains how the changes will affect you: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Yesterday, we reported that the number of people showing interest in buy-to-let property fell by over a quarter in March compared with the previous month.

New data from e.surv also suggests that mortgage lending dipped over the past month, as buy-to-let activity eased. However, it was still the strongest Q1 for mortgage approvals since 2007.

The firm estimates that there were 67,173 house purchase loan approvals in March, down by 9.1% on February. It believes that first time buyer mortgages accounted for 11,487 of these loans.

For the first three months of the year, e.surv calculates a total of 210,468 house purchase loan approvals, up 13.5% on Q1 2015.

1 https://www.lettingagenttoday.co.uk/breaking-news/2016/4/the-surge-is-over-bank-of-england-says-buy-to-let-lending-about-to-plummet

Will the buy-to-let market move forwards?

Published On: March 17, 2016 at 12:15 pm

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With the Budget taking place in London yesterday, the Financial Services Expo also occurred, north of the border in Glasgow.The Expo saw the intermediaries in attendance asked what their views were on potential buy-to-let growth in the next two years by Ian Boden, Head of Commercial Mortgages at Aldermore Bank.

Split

There was a split response to the question, with 42% of respondents expecting growth in the next two years. However, 33% said they believed there would be a decrease.

Mr Boden noted that, ‘a recent survey showed that 29% of landlords say that they are looking to increase their portfolios, so it’s not a market that’s looking to slow down. Tax and regulation changes were at the forefront of things to consider when looking at how the buy to let market could alter in the coming months.’[1]

‘Most landlords will take this in stride. Many will still see buy to let as being an attractive investment, where they can continue to drive returns through rentals,’ he added.[1]

Removal of uncertainty

Stuart Law, CEO at Assetz for Investors, noted, ‘in my view, the uncertainty has been removed from Buy-to-Let taxes in the Budget. The Budget has clarified that the 3% additional stamp duty will apply to second residential properties that are bought by individuals and companies alike. It has become a cost of investing in the best asset class for several decades and at the forecast growth rate of 5% in house prices this year will take just 7 months to get back! So let’s move on.’[1]

Will the buy-to-let market move forwards?

Will the buy-to-let market move forwards?

‘In addition, it still looks like companies that are used to purchase buy-to-let property will be able to fully offset their mortgage interest against income and achieve full tax relief. The many and varied company tax reliefs such as a 17% tax on profits and capital growth could also mean that setting up a company actually made matters better for a BTL investor than before the tax changes when investing privately,’ Law continued.[1]

Affected

Grianne Gilmore, head of UK residential research at Knight Frank, observed, ‘bulk purchases of residential units at the lower value end of the scale will be most affected by the Chancellor’s move, which seems to counter to the Government’s pledge to provide more affordable housing. But the rental market is an entrenched and growing part of the UK housing market and as such, institutional investment in this asset class will likely continue to grow.’[1]

Celebrity property guru Sarah Beeny acknowledged, ‘the new stamp duty rate increase for buy-to-let investors is definitely coming in and I think it will help to slow price rises at the entry end of the market, which is great news for first-time buyers. I don’t think hitting buy-to-let landlords is unreasonable as helping to correct the market shouldn’t be at the expense of the tax payer, so I fully support the rise in stamp duty on investment properties.’[1]

[1] http://www.propertyreporter.co.uk/landlords/btl-market-will-move-forward-despite-changes.html

 

Could the Buy-to-Let Sector Harm the UK Economy?

Published On: March 12, 2016 at 8:21 am

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The buy-to-let sector has boomed in recent years, fuelled further by landlords rushing into the market since the start of the year. But could this surge harm the UK economy?

The Deputy Governor for Financial Stability at the Bank of England (BoE), Sir Jon Cunliffe, recently told a House of Lords committee that a huge rush of buy-to-let landlords may sell en masse if tax rates rise or higher interest rates reduce their profits.

He believes that this could cause significant house price declines and subsequent threats to the UK economy.

Could the Buy-to-Let Sector Harm the UK Economy?

Could the Buy-to-Let Sector Harm the UK Economy?

Lending data from the BoE shows that buy-to-let mortgages have risen from 11.3% of all new loans in the third quarter (Q3) of 2007 to 15.6% in Q3 2015.

Cunliffe says that if any changes are made in the economy to tax or interest rates, landlords may suffer dismal returns or even losses. This could then cause a mass of landlords to leave the buy-to-let sector and cause instability throughout the UK economy.

In last year’s Budget, the Chancellor announced several changes to landlord finances.

From April 2017, buy-to-let landlords will lose the ability to offset all of their mortgage interest against income tax on rent.

Two landlords have been leading a legal challenge against the change, and HMRC is expected to respond by 16th March.

Additionally, the automatic 10% Wear and Tear Allowance will be replaced from 1st April. Landlords will only be able to claim back on work that has actually been completed.

And while significant figures such as Cunliffe have expressed concerns over these additional costs, research among landlords suggests that rents will be forced up as a result, and many are thinking of leaving the sector. In fact, a recent study from the National Landlords Association (NLA) has found that the number of landlords thinking of leaving the buy-to-let sector has quadrupled in six months in central London.

However, economic analysts expect any interest rate rises to be postponed until 2020.

Indeed, the buy-to-let sector is proving buoyant at the present time. Since the beginning of the year, there have been many reports of a booming market, as landlords look to expand their portfolios ahead of the 1st April Stamp Duty deadline.

As of 1st April, buy-to-let landlords and second homebuyers will be charged an extra 3% in Stamp Duty on properties worth over £40,000. Conveyancers have recently called for the plan to be scrapped.

Although it is expected that buy-to-let investment will decline after the surcharge is introduced, the booming market suggests that landlords are confident in the sector and do not expect the forthcoming tax changes to be much of a threat to their finances. If landlords stick with the sector, perhaps the economy will not fare too badly.

Conveyancers Urge Osborne to Scrap Stamp Duty Plans

Published On: March 11, 2016 at 12:00 pm

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Conveyancers have spoken out against the Stamp Duty changes that are set to be implemented on 1st April, urging Chancellor George Osborne to scrap or modify the plans.

Osborne is due to reveal the final details of the Stamp Duty changes in next week’s Budget, on 16th March. This would leave conveyancers with just nine working days in which to enforce the new tax system.

Yesterday, the UK’s largest conveyancing firm, My Home Move, revealed further evidence that suggests a boom in the buy-to-let sector and second home market.

Now, the Conveyancing Association has urged Osborne to favour stability over continual change regarding the housing market and mortgage industry.

The association says that there has been a surge in buy-to-let transactions, which has stretched all those involved in the property sector and “placed an unnecessary burden on conveyancers to meet an artificial deadline”.

It also claims that there is a high amount of uncertainty surrounding key parts of the change, such as exemption for larger landlords purchasing 15 or more properties in one transaction.

Conveyancers Urge Osborne to Scrap Stamp Duty Plans

Conveyancers Urge Osborne to Scrap Stamp Duty Plans

From 1st April, buy-to-let landlords and second homebuyers will be charged an extra 3% in Stamp Duty on properties worth over £40,000.

The Chairman of the Conveyancing Association, Eddie Goldsmith, says: “Unsurprisingly, the conveyancing market is looking for a period of stability, but I suspect we won’t be getting that post-next week’s Budget.

“The publication of the final rules for extra Stamp Duty charges on additional properties will be made available, and one can’t help think there is likely to be some considerable confusion around them, not forgetting that the conveyancing industry will have to cope with these changes from the start of April.

“The small amount of time this provides firms to ready themselves and to ensure all stakeholders in the market are clear on these new rules is, quite frankly, ludicrous.”

He continues: “Not only would we like to see these additional Stamp Duty charges dropped, or at the very least watered down, but we feel any further change in the UK housing market, unless positively focused on areas like helping to increase property supply or supporting first time buyers, will only add to the instability we – and many others – will have to cope with.

“We believe the Chancellor should allow the market time to breathe; in our view, it is much better served by supporting steady transaction numbers, rather than the artificially-created spikes that have been far too prevalent.

“The last three months of increased buy-to-let transactions have been a case in point.”

He concludes: “Instead, we would like to see the status quo post-April maintained and allow us to plan and prepare our resources adequately based on the market itself, rather than deal with further uncertainty generated by ongoing intervention.”1 

Conveyancers have previously expressed concern over the short timeframe between the Budget and the implementation of the Stamp Duty surcharge: /conveyancers-express-concern-over-short-timeframe-between-budget-and-stamp-duty-change/

Additionally, Paul Saunders, the Head of Residential Conveyancing at Conveyancing Association member firm Shakespeare Martineau, has expressed his thoughts.

He believes: “The conveyancing industry and indeed buy-to-let landlords need some clarity from the Government on the Stamp Duty changes for buy-to-let properties.

“There remain many unanswered questions and the benefits/burden is difficult to interpret for all parties. On a similar vein, I hope that the Government will not continue its trend to disincentivise buy-to-let landlords, as we do not know until after 1st April what damage this could cause to the housing market.”

He adds: “One key subject I would like to see addressed is the huge shortage of housing. The National Housing Federation estimated 974,000 homes were needed between 2011 and 2014, with figures from councils showing only 457,000 actually built.

“With over 11m people over the age of 55, new housing needs to reflect the changing demographic and I look forward to hearing concrete plans from the Government regarding housing development.”1 

1 http://www.todaysconveyancer.co.uk/conveyancing-association-hopes-for-stability-for-in-next-week-s-budget-cms-16054