Posts with tag: Buy-to-Let

Rise in ltd companies marks change in landlord trends

Published On: July 6, 2016 at 10:49 am

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Lending to buy-to-let landlords looking to borrow via limited companies was up markedly in the first six months of the year, according to a new report.

The results of the H1 2016 Limited Company Buy-to-Let Index also suggests that the number of products available to limited company borrowers also went up.

Stamp Duty impact

Data from the report shows that the number of buy-to-let mortgage applications completed by limited companies rose to 30% of the total number of buy-to-let completions in H1 2016. This was an increase from the 21% seen in the final half of 2015.

Many landlords moved to incorporate their business, to avoid paying the additional 3% stamp duty surcharge on their investment. In response, the number of lenders offering specific products to limited company borrowers stood at 14, up from 12 last year.

In total, lenders offering limited company products now stands at 42% of the total sector, up from 30% in the first half of 2015.

Stabilised

Mr David Whittaker, managing director of Mortgages for Business, noted, ‘both applications and completions for limited company borrowers appear to have stabilised at around one third of all buy to let business. However this masks a dramatic change in the investment pattern for new purchases where the proportion investing through limited companies has risen from less than 20% by number (25% by value) in the first half of 2015 to over 50% in 2016, with second quarter applications by limited companies running at over 60% of total applications related to purchases of buy-to-let properties. This increasing proportion will also drive an increase in the proportion of completions in the next quarter.’[1]

‘There has only been a slight uplift in the proportion of remortgaging activity that relates to limited company borrowers, due to historical investment patterns. It would, however, appear that some landlords who already own property personally are sitting on their hands somewhat and holding back from remortgaging, probably waiting to see how the economy pans out post-referendum. With the Chancellor announcing his intentions to lower corporation tax to 15% following the Brexit result, we may even witness more landlords financing buy to let property via corporate vehicles. Clearly, the trend for limited company buy to let represents a real step change in behaviour as landlords adapt their investment strategies to mitigate the increased costs brought about by recent changes in the tax regime,’ Whittaker continued.[1]

Rise in ltd companies marks change in landlord trends

Rise in ltd companies marks change in landlord trends

Rises

During March of this year, the number of completed limited company buy-to-let applications increased by more than three times, due to investors rushing to beat the Stamp Duty deadline.

Whittaker concluded by saying, ‘Last year I had thought that limited company pricing might come down a bit as some lenders, including our own lending brand Keystone Property Finance, chose to absorb the increased costs and offer the same rates to landlords borrowing both personally and via the limited company route. The fact that this has not happened may encourage more lenders to enter the space.’[1]

[1] http://www.propertyreporter.co.uk/landlords/growth-of-limited-company-btl-marks-change-in-landlord-behaviour.html

Record Month for Buy-to-Let in June, Despite Brexit

Published On: July 6, 2016 at 8:35 am

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Finance and property advisory firm Nova Financial has reported a record month for buy-to-let transactions in June, despite last month’s shock Brexit vote.

The company’s Managing Director, Paul Mahoney, has experienced a surprisingly positive reaction from landlords in the face of the leave vote, and believes that this confidence will continue throughout the rest of the year.

Record Month for Buy-to-Let in June, Despite Brexit

Record Month for Buy-to-Let in June, Despite Brexit

“The response we’ve received from clients who are in the process of purchasing buy-to-let properties following the Brexit vote has been far more positive than one might expect, and most are of the opinion that it is business as usual,” he says. “In fact, we at Nova Financial posted a record month for transactions in June, with more of the same expected for July.”

Indeed, recent reactions from those in the property industry suggest that landlords could in fact benefit from the Brexit outcome.

However, Mahoney believes that the confidence shown by his firm’s clients is due to their interest in cities such as Manchester and Liverpool, which form part of the Northern Powerhouse. Additionally, the North East has shown resilience following the Brexit, with house prices up by 4.8% over the past month.

Despite this, there are concerns within the sector that the Northern Powerhouse scheme may be in danger now that David Cameron has resigned and Chancellor George Osborne’s career remains uncertain. If the scheme does fail, investors in these areas could see their returns dampen.

Although confidence in northern cities has remained strong following the vote, Mahoney reports that landlords seem more concerned about the referendum’s effect on the London property market.

“It seems buyers are more concerned regarding the potential negative impact on the London market, as opposed to other cities,” he states. “We as property advisors agree with this attitude and view the London property market outlook as fairly sombre, whereas the main northern cities still provide very strong fundamentals.”

While investors and advisors may be feeling uncertain about investment in the capital, one investment firm insists that the London property market will prove resilient to the Brexit.

If you are considering a buy-to-let investment in the near future, which area will you choose?

Rise in ‘gifted’ deposits before Stamp Duty deadline

Published On: July 5, 2016 at 11:51 am

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A number of buy-to-let investors were ‘gifted’ financial assistance in order to secure funds for a deposit to beat the Stamp Duty deadline, according to a new report.

Research conducted by My Home Move found that the number of investment properties purchased using a ‘gifted’ deposit rose by 5% in the first quarter of this year. Many investors were found to have turned to the bank of Mum and Dad in order to secure these deposits.

Gifted deposit increases

My Home Move based its analysis on a survey of over 20,000 transactions in a two-year period.

Talking about the results of the investigation, Doug Crawford, CEO of the firm, said, ‘when we talk about the Bank of Mum and Dad, people usually think of first-time buyers who are struggling to afford their first home. However in this instance we’re surprised that investors sought to utilise every avenue possible to secure their next property before the 1st April deadline. Asking for help through a gifted deposit in effect helping to bring forward their purchase date, will have saved them thousands of pounds in additional Stamp Duty charges.’[1]

Investors were found to have used their gifted deposits more prominently in both the East and West Midlands. A rise in investment of 6% and 12% respectively was recorded in these areas. However, investment in London and the South East fell by 4% year-on-year.

Rise in 'gifted' deposits before Stamp Duty deadline

Rise in ‘gifted’ deposits before Stamp Duty deadline

Interesting Investment

Crawford continued by noting, ‘it is interesting that these investors, those who have had the deposit gifted, have made the decision to buy in areas outside of the Capital-suggesting that they either wanted to make their money go further by buying in less expensive locations, or there just wasn’t the stock available to buy in London.’[1]

‘And when we looked further into the data, we also discovered that these investors chose to purchase flats and maisonettes over houses, indicating that they were looking for properties they could easily rent out as opposed to second-homes-making them the buy-to-let landlords with a hotline to the bank of Mum and Dad.’[1]

[1] http://www.propertyreporter.co.uk/property/spike-in-gifted-deposits-as-investors-aimed-to-avoid-sdlt-hike.html

Landlords warned over purchasing deposit hikes

Published On: July 4, 2016 at 11:01 am

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Concerning new claims from crowdfunding platform Property Partner suggest that tighter lending criteria from the Bank of England could have a severe impact on deposits required from buy-to-let landlords.

The platform indicates that would-be investors in over two-thirds of the UK’s major towns and cities could be forced to put down deposits of at least 40%.

Rising ratios

Property Partner has forecasted that interest coverage ratios of 145% could well be enforced. Ahead of the Bank of England’s Financial Stability Report, some providers are imposing stricter rules. These include Barclays and Nationwide, who have already set their interest coverage ratios to 145%.

Should other lenders follow their lead, purchasing a buy-to-let investment with a mortgage in over two-thirds of towns and cities will be impossible without a 40% deposit.

Worcester came out on top of the list with highest financial barriers to entry, should Interest Coverage Ratio be set at 145%. This increase would see landlords permitted to put down a deposit of 61% for a typical property. In monetary terms, this equates to £115,000.

Landlords in the commuter belt, in locations such as Chelmsford, Bedford and Reading, would also face much stricter lending restrictions.

Landlords warned over purchasing deposit hikes

Landlords warned over purchasing deposit hikes

Buy-to-let blow

Dan Gandesha, CEO of property crowdfunding platform Property Partner, observed, ‘buy-to-let landlords have had it tough of late with successive assaults on their potential income. The stricter lending rules expected to be introduced by the Bank of England follow April’s Stamp Duty surcharge of 3% for buyers of second homes and buy-to-lets. And from April 2017, the gradual withdrawal of mortgage interest tax relief will put further restraints on landlords’ profits.’[1]

‘This lending squeeze will only increase the financial barriers to entry to the market, restricting access to only cash buyers or those with hefty deposits and potentially forcing some existing landlords to sell up. Highly-leveraged landlords seeking to remortgage could face a nasty shock, if their bank tells them they no longer qualify for the same loan to value mortgage,’ he added.[1]

[1] http://www.propertyreporter.co.uk/landlords/landlords-face-being-locked-out-by-post-brexit-rule-changes.html

 

Stamp Duty tax avoidance schemes rising

Published On: July 4, 2016 at 8:55 am

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A higher number of landlords are looking to avoid paying the additional 3% Stamp Duty surcharge by being sucked into unscrupulous tax schemes.

An investigation by the Telegraph has revealed that there has been a rise in firms selling so called ‘tax solutions’, claiming to exploit loopholes in the to legally mitigate the surcharge. These firms propose to offset the costs for buy-to-let investors in England, Wales and Northern Ireland when buying property in return for an upfront fee.

Stamp Duty cons

David Hannah, consultant at Cornerstone Tax, a conveyance firm offering legitimate tax planning services to reduce Stamp Duty, spoke exclusively to the Telegraph. Mr Hannah noted that demand from investors worried by Stamp Duty charges had turned into a, ‘tsunami’ following its inception on 1st April this year.

Hannah said, ‘my team has gone from doing one or two of these cases to doing 15 or 20 a day.’[1]

However, HMRC warned that these schemes do not generally work, classing them as tax avoidance. It notes that people taking part in them could be forced to pay 100% of the original tax plus interest, which will leave them substantially worse off.

Stamp Duty tax avoidance schemes rising

Stamp Duty tax avoidance schemes rising

Costly

A spokesperson for HMRC noted that, ‘these kinds of schemes don’t work. We have investigated thousands of cases since 2013, bringing in over £200m in Stamp Duty Land Tax. These individuals have had to pay 100% of the original tax plus interest.’[1]

‘They will be much worse off than if they had just paid the right tax at the right time, especially where they have paid fees to the promoter of the avoidance scheme which are not refundable,’ they added. [1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/7/dodgy-tax-avoidance-schemes-could-cost-landlords-thousands

Build to Rent aims to lure tenants from buy-to-let

Published On: July 1, 2016 at 3:07 pm

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The chief executive of a newly-formed organisation servicing the growing British Build to Rent sector has expressed his desire to attract tenants away from traditional buy-to-let properties.

Mr Michael Green, chief executive of the UK Apartment Association said that in time, he hopes the sector will pull renters away from, ‘tired and poorly maintained properties.’

Build to Rent boosts

The UK Apartment Association is a trade body focusing entirely on new institutionally-funded and managed purposely-built rental accommodation.

Knight Frank suggests that Build to Rent could provide 5% of the country’s privately rented residential buildings by 2020.

Writing in his blog, Mr Green said Build to Rent will give, ‘ a high quality product tailored to the needs of modern living for a market that is becoming increasingly discerning and will demand certain levels of service.’[1]

Build to Rent

Build to Rent

USA trends

Mr Green notes that the USA, where Build to Rent is called ‘multi-family’ accommodation, has had a head start on Britain for the last 20 years, meaning its rental market is on a different level.

Green observes that, ‘over time as the multi-family offering in the UK develops, we hope that customers will choose to switch from tired and poorly maintained properties run by small scale landlords to new, professionally operated communities that offer resident services and amenities as standard.’[1]

‘This is when renting really becomes a tenure of choice that benefits both residents and the wider economy,’ Mr Green concluded.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/6/build-to-rent-chief-bids-to-lure-tenants-from-poorly-maintained-buy-to-lets