Posts with tag: Buy-to-Let

More residential landlords considering limited companies

Published On: April 4, 2016 at 2:51 pm

Tags: buy to let market,Buy-to-Let,landlords,limited companies,Stamp Duty,tax

An interesting survey of almost 1,400 private rental sector landlords has revealed that more numbers are looking into shifting their property investments into limited companies.

The research was conducted by BDRC on behalf of Paragon Mortgages and was conducted to gauge reaction on how increased stamp duty and cuts to tax relief has changed the buy-to-let market.

Moves

Of the respondents, 41% said that they are thinking of moving their portfolio into a limited company as a direct result of the changes. 5% said that they have already founded limited companies.

For landlords with 20 or more properties, 14% are already operating as limited companies, with a huge 63% saying they are considering this move.

43% of landlords questioned said that stamp duty rises will affect their investment plans in the next two years.

More residential landlords considering limited companies

Demand

Despite rising uncertainty about the impact of tax relief changes and increased stamp duty, tenant demand is still extremely high.

In the final quarter of 2015, demand for rented accommodation was highest in the South West, with 40% of landlords reporting an increase. However in the North West, just 24% of landlords said they experienced more demand in the same period.

Competition

John Heron, director of mortgages at Paragon, noted, ‘recent Government interventions into the buy-to-let market are now beginning to impact landlord sentiment and plans. The fundamental drivers of the market however-tenant demand and yields-remain strong so there are competing dynamics in play.’[1]

‘It is interesting to see that concern about the impact of changes to stamp-duty and tax relief is greatest among larger landlords,’ Heron continued. ‘This concern is likely to grow now that the Government have confirmed that landlords with larger portfolios will have to pay the increased rate of stamp-duty on buy-to-let purchases.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/4/landlords-move-towards-limited-companies

How will Stamp Duty affect build-to-rent?

Published On: April 4, 2016 at 11:31 am

Author: Em Morley

Categories: Finance News

Tags: Budget 2016,build to rent,Buy-to-Let,landlords,Stamp Duty

Following Friday’s implementation of the additional 3% stamp duty land tax charge on buy-to-let properties, the housing industry has expressed its concerns.

The industry is worried about the impact the additional tax will have on the build-to-rent sector, which at present has 40,000 new units in development.

Losses

Based on average rental yields for a 10-15 investment in build-to-rent, the British Property Federation (BPF) predicts the tax will amount to the equivalent of losing a year’s income. As a result, the BPF believes investors will be re-evaluating potential investments into the sector.

The build-to-rent sector has already gained £4bn in investment since the start of 2016, providing quality privately rented properties with affordable value. Despite hopes to the contrary, the Government imposed the additional 3% surcharge to institutional purchases in last month’s budget.

How will Stamp Duty affect build-to-rent?

‘Difficult to fathom’

Ian Fletcher, director of policy (real estate) at the British Property Federation, observed, ‘many institutional investors will find it difficult to fathom why something so good-adding to housing supply-is taxed so highly. Given that in many cases the tax will equate to a loss of a year’s worth on income, it is unsurprising that many investors are thinking twice about entering the sector.’[1]

‘As well as the direct financial impact, what we cannot also afford is for this to knock the sector’s confidence when there are so many units coming out of the ground and the potential for many more,’ Fletcher added.[1]

[1] http://www.propertyreporter.co.uk/property/will-stamp-duty-on-residential-property-slow-new-housing-delivery.html

Energy efficiency improvements can be requested from today

Published On: April 1, 2016 at 1:41 pm

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,energy efficiency,Energy Performance Certificate,landlords,tenants

Landlords are reminded that from today, tenants have the right to request that energy efficiency improvements are made in their property.

As part of the changes, landlords will be unable to refuse reasonable changes without good reason. However, tenants must ensure that the improvements come at no cost to their landlord, unless they have agreed to foot some or all of the bill.

Funding

There are concerns that funding will be difficult for a number of tenants, following the abolition of the Green Deal in July last year. It was originally expected that this scheme would provide the majority of funding for this new initiative.

It must be noted that the initiative is separate to legislation stating landlords must improve their energy efficiency standards of their property to an EPC rating of E or above by 2018.

An energy efficient property is highly beneficial for both landlords and tenants, with costs being reduced. What’s more, a recent survey from the National Landlords Association revealed that 35% of tenants considered the energy efficiency of their property to be an important feature when considering a potential home.

Energy efficiency improvements can be requested from today

Benefits

Richard Lambert, Chief Executive Officer at the National Landlords Association said, ‘we encourage all landlords to think about how they may benefit from making energy efficiency improvements, as many can be made with little or no upfront cost and can have a positive impact on the lives of tenants, their lettings businesses and the environment in general.’[1]

‘Lower fuel bills and more comfort mean that tenants may be inclined to stay for longer, thus reducing void periods,’ Lambert added.[1]

[1] http://www.propertyreporter.co.uk/landlords/tenants-right-to-request-energy-improvements-comes-into-force-today.html

Future of buy-to-let positive, landlords suggest

Published On: April 1, 2016 at 11:51 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,buy-to-let landlords,private rental sector,Stamp Duty,tenants

Further defiance from buy-to-let investors in the face of today’s increases in Stamp Duty alterations has been recorded by new research from Aldermore.

A study of nearly 1,000 landlords by YouGov on behalf of Aldermore looked at how the changes have affected existing and would-be investors. Questions asked included if landlords would increase rents, look to sell their property and how they thought the sector would evolve in the future.

Rises

70% of respondents to the survey noted that they expect the number of tenants in the private rented sector to rise in the next five years. 33% feel that the gross value of the buy-to-let market will fall in the next twelve months.

63% of landlords in the UK said they only own one investment property, which they rent out. 95% of respondents said they had five or less properties in their portfolio.

Future of buy-to-let positive, landlords suggest

Fearless

Charles Haresnape, group managing director for mortgages at Aldermore observed that the figures, ‘show that the majority of landlords believe there is nothing to fear for the future of the buy-to-let market in the UK.’ He feels, ‘it is clear that the vast majority of landlords fall into the accidental category and as such would be unaffected by upcoming changes as they are not actively looking to build a rental portfolio.’[1]

‘With 70% expecting the number of people in the private rented sector to rise over the next five years, it is vital that regulation does not stifle this hugely important segment of the UK housing market, particularly at a time of significant constraints,’ he continued.[1]

Concluding, Haresnape said, ‘the majority of our buy-to-let customers are committed long-term landlords. While they will obviously not welcome an increase in stamp duty, over the course of a 20 year investment the sums remain relatively small and are unlikely to significantly affect the buy-to-let market.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/3/btl-market-has-strong-future-say-landlords

Property price inflation to cancel out Stamp Duty

Published On: April 1, 2016 at 9:31 am

Author: Em Morley

Categories: Property News

Tags: Buy-to-Let,buy-to-let landlords,private rental sector,property price inflation,Stamp Duty,tenants

Today sees the additional 3% stamp duty surcharge come into force on buy-to-let and additional properties in England and Wales.

However, new analysis from national estate agent, Jackson-Stops & Staff suggests the reforms will fail to have the desired effect of putting off buy-to-let investors.

Inflation

Following a surge in investment during the run up to the deadline, there are already signs that purchasers will not be deterred by the changes. A key reason for this is that many investors will see property price inflation compensate them for the additional stamp duty, within one year or less.

Jackson-Stops & Staff warn that the greatest losers of the stamp duty reform will be tenants, with landlords ultimately passing on their additional costs to rental prices.

Research from the Association of Residential Letting Agents (ARLA) indicates that the majority of landlords keep their investment property for more than one year. Data shows that 33% of landlords keep their buy-to-let property for between 11-2o years. This suggests that many landlords reap benefits from house price growth in the long-term.

[1]

Level playing field

Nick Leeming, Chairman at Jackson-Stops & Staff, noted, ‘the Government, through it’s new stamp duty surcharge, is trying to make the playing field more even between property investors and first-time buyers by eating into landlords’ profits.’

‘Our message to landlords is that when you do the sums and look at the direction of house prices, placing money in bricks and mortar is still by far the best investment vehicle. If property prices continue on their trajectory, within a year or less of buying their investment property the vast majority of landlords would have earned back all the money given through stamp duty, even with the new 3% surcharge, by doing nothing at all-just sitting back and watching the price of their home increase. Therefore the idea that the stamp duty tax will act as a deterrent is a fiction, as for most landlords it won’t amount to a significant figure,’ he added.[1]

Property price inflation to cancel out Stamp Duty

Demand

Continuing, Leeming observed, ‘the Bank of England has clearly noted that the 3% stamp duty surcharge is unlikely to ease buy-to-let demand from investors and has now announced its own intervention to cool the market. From a landlord’s perspective it appears as though UK institutions are out to get them. Around half of all privately rented homes are owned by landlords with buy-to-let mortgages, providing homes for people who choose to rent as a lifestyle choice or are trying to get onto the housing ownership ladder.’[1]

If the research is correct, eight of ten regions of England and Wales will find capital gain will negate additional stamp duty payments within a year. The two regions where predicted capital gains on an average priced home do not cover the increase are in the North East and North West.

Concluding, Mr Leeming said, ‘the North East and North West regions of the UK, where house price growth is more restrained at present, are the only regions where landlords will find capital growth in the first year does not eclipse the new stamp duty they would have to pay. These two regions are also the only two where home owners currently pay no stamp duty on the average home as the average property price still remains under £125,000, the price level where stamp duty first bites. Tenants here are more likely to see landlords in future pass on this additional cost via rent and we also anticipate investors to be more assertive when they negotiate on buying a home, which will be reflected in lower offers.’[1]

[1] http://www.propertyreporter.co.uk/landlords/landlords-to-be-compensated-for-stamp-duty-rise.html

Last-minute rush to beat Stamp Duty rise deadline

Published On: March 31, 2016 at 11:54 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,buy-to-let landlords,landlords,Stamp Duty

Landlords and estate agents alike are rushing to complete last minute deals, before the increases in Stamp Duty Land Tax come into force tomorrow.

Those purchasing a buy-to-let property or one that is not their permanent residence face a 3% Stamp Duty surcharge.

Charges

From midnight tonight, Stamp Duty on a property sold for £200,000 will rise from £1,500 to £7,500. Investors feel that that their problems have been extended, due to some of the finer details of the changes only being announced in the Budget a little over two weeks ago.

Rob Hailstone, of the Bold Legal Group, notes that the last few months have, ‘been very chaotic,’ but the, ‘real problems will be today.’[1]

‘It’s been ridiculously busy. Buyers have been saying they want to rush it through, because they don’t want to pay the surcharge,’ Hailstone added.[1]

Last-minute rush to beat Stamp Duty rise deadline

Deadlines

Of course, the deadline is technically midnight tonight. However, more practically, investors have until the banks close today to ensure their deals are completed.

Martin Baum, President of the National Association of Estate Agents, acknowledges, ‘it’s been a crazy day. We’ve all got a bottleneck and a huge amount of deals before the deadline. I’ve heard of estate agents and conveyancers staying open till 10pm and then opening again at 5am this morning.’[1]

Many buyers who are not planning to purchase for buy-to-let or second property purposes are also being caught up in the chaos, with many involved in chains.

Bands

Information for landlords on the Stamp Duty bands can be seen in the table below:


Stamp Duty Bands
Price band	Standard rate	Buy-to-Let/ 2nd home
Up to £125,000	0%	3%
£125,001 to £250,000	2%	5%
£250,001 to £925,000	5%	8%
£925,001 to £1.5m	10%	13%
£1.5m+	12%	15%
Source: HMRC

[1] http://www.bbc.co.uk/news/business-35933208