Posts with tag: Buy-to-Let

Concerns aired over buy-to-let competition

Published On: February 26, 2016 at 12:06 pm

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With buy-to-let investors rushing to purchase property ahead of the stamp duty changes a little more than a month away, fresh concerns have been aired about the future of the market.

Mortgage approvals hit their highest ever level during January. The British Bankers’ Association revealed that its members approved 27% more loans last month than at the same period last year.

However, additional data from HM Revenue and Customs suggests the number of property sales didn’t keep pace, with a slide in transactions over the previous month.

Stamp Duty Changes

Following Chancellor George Osborne’s announcement of a 3% rise in Stamp Duty Land Tax for buy-to-let investors in the Autumn Statement, buyers have been flocking into the sector.

Ajay Jagota, founder and MD of sales and lettings firm KIS, noted, ‘the start of 2016 has seen a significant rise in mortgage borrowing and it seems perfectly reasonable to attribute that to property investors trying to get in ahead of April’s tax changes.’[1]

‘These changes are not insignificant and will undeniably drive up purchase costs and are also being introduced at the same time as the scrapping of the wear and tear allowance which allows landlords to claim tax relief for keeping their properties in good condition,’ he continued.[1]

Concerns aired over buy-to-let competition

Concerns aired over buy-to-let competition

Bottleneck

Mr Jagota observed that, ‘anecdotally the industry is full of stories of a substantial number of homes stalled in the pre-completion stage and even a shortage of solicitors available to carrying out conveyancing.’ He went on to say that, ‘it’s clear we’re seeing something of a competition bottleneck. The real questions are whether or not buyers will persevere with the sales if their transactions are not completed when the tax changes come in. Will they take the hit, or will we see a spate of sales simply abandoned?’[1]

‘It’s more than likely that we will see demand from investors drop off after April, but this is unlikely to have a significant impact on the wider property market as residential buyers, particularly if first time buyers return to centre stage,’ he concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/btl-investors-warned-of-completion-bottleneck.html

 

Most common struggles faced by landlords revealed

Published On: February 26, 2016 at 10:44 am

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Categories: Landlord News

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A new investigation has looked at the struggles landlords face and the most common demands put on them by their tenants.

According to the survey conducted by property management specialists London Shared, one-third of buy-to-let landlords said that the full-on nature of the role made it more stressful than they first imagined.

Responsibilities

The research quizzed 500 UK landlords, who noted that the job of being a landlord is far from straightforward. Worryingly, 76% of landlords said that their tenants do not understand their responsibilities as renters. 10% of landlords said they had experienced anxiety problems due to the behaviour of their tenants.

Many landlords said that they are call for 24 hours, with 34% saying that they had received calls in the middle of the night from renters.

Of the landlords questioned, the top five minor issues that they said they have been called out for were:

  • Unblocking the drain (23%)
  • Lost Keys (19%)
  • Turning the heating back on (14%)
  • Changing a light bulb or fuse (13%)
  • Mowing the lawn (7%)

Repairs

Another worrying stat was that 43% of respondents to the survey said they were unsure of their responsibilities when repairing a property.

Just 24% of landlords said they were clear on their legal obligations for adequate HMO licensing and just 18% said they knew they had to apply for a HMO licence.

Additionally, the survey found that landlords spend an average of 11 hours per month managing their rental property. 83% said they spent up to £5,000 per year on property repairs from their rental accommodation.

Most common struggles faced by landlords revealed

Most common struggles faced by landlords revealed

Arrears

A major source of landlords’ stress was underlined by 40% of those questioned saying that they had received their rental payments late. Of those that said that they had received late payments, 18% said they had defaulted on their bills.

When looking further at those that have either had late or missed payments from their tenants, 11% said they were unable to pay off their existing debt. 22% said they had to go to court to reclaim money owed to them by their tenants.

Many landlords were found to be dependent on their rental income to pay off their mortgage, with over half stating this was the case. 23% said they used rental incomes to renovate their homes, while 13% said it paid for their children’s rental fees.

Notices

Some tenants are causing such a problem for their landlords that 24% said they had to serve notice on them. Of those that served noticed, the main reasons for doing so were found to be rent arrears (69%), property damages (44%) and inappropriate behavior (24%). Furthermore, 18% said that they served notice as their tenants sublet the property without consent and 11% after finding out their tenants were using the home for illegal purposes.

Despite it being illegal to live in a property once an eviction warrant is given, 44% of tenants who had been served notice refused to leave. As such, 25% of landlords said that this caused them extra financial stress. 13% of landlords admitted that they wished their rental property was managed by somebody else!

 

Right To Rent scheme slammed by peer

Published On: February 25, 2016 at 12:43 pm

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A senior Liberal Democrat peer has accused the Government of hypocrisy over the Right To Rent scheme.

Baroness Hamwee has slammed the notion of landlords or letting agents being jailed for housing an illegal immigrant. She believes that the potential presence of an illegal migrant is due to, ‘the government’s failure,’ in protecting Britain’s borders.

‘Immigration Officers’ 

Writing on the Politics Home website, the Baroness said that Right to Rent, ‘turns landlords and agents into immigration officers.’

Continuing, she criticises the Government for allowing the scheme to roll out nationally, while the pilot scheme in the West Midlands was still continuing. ‘It could hardly be said that the pilot was of adequate size, or a representative sample and that the scheme does not make discrimination all too easy,’ she noted.[1]

‘The great majority of landlords, owning one or two properties, are amateurs who let out a property to supplement pensions or top up salaries. It is these landlords who are likely to be caught out,’ Hamwee added.[1]

Right To Rent scheme slammed by peers

Right To Rent scheme slammed by peers

Discrimination

However, Baroness Hamwee believes it is not only migrants that could be discriminated against through this legislation. She feels that, ‘the 12 million Britons who do not have a passport will find it difficult to prove their right to live in their own country, like all the non-British residents who have a legitimate right to be here but whose documentation is not easily identified.’[1]

‘It is likely that the extra administration costs (created by a government keen on deregulation) will be passed on to tenants. The government’s own estimates indicate that this will amount to an extra cost to tenants of £17.9m over 10 years,’ Hamwee concluded.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/right-to-rent-peer-accuses-government-of-hypocrisy-over-migrant-checks

 

Supply of rental accommodation slips further

Published On: February 25, 2016 at 11:51 am

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Categories: Property News

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A worrying new investigation by the Association of Residential Letting Agents suggests that the supply of rental accommodation is at its lowest level since records began.

What’s more, demand for accommodation was up slightly in January.

Decline

Supply of rental accommodation slips further

Supply of rental accommodation slips further

After months of steady decline, January saw the number of properties registered per letting agent branch slip by 5%. The total currently stands at 172 properties, down by 10 on December 2015.

However, renters north of the border have much more choice, with 280 properties registered per member branch in Scotland. In London however, demand for property is being driven up by lack of supply, with just 116 properties available per registered branch.

Rising demand

Demand for rental property rose in January, following a lull in December. One average, 31 would-be tenants registered per member branch during the last month. This is still lower than in January 2015, when 38 tenants were registered per branch.

Growing demand was underlined by the number of agents reporting rent hikes in January. 30% reported a rise in rental values, the largest since September 2015.

‘Supply of housing continues to be a problem and tenants bear the brunt of this with more people competing for properties at higher prices,’ noted David Cox, managing director of ARLA. ‘The majority of tenants find that it is impossible to save very much at the end of the month to put towards buying their own home. Our recent Cost of Renting report found that a fifth of those renting in the UK do not expect to ever be able to afford to buy a home and unless we act soon to build more properties, this number will only get higher,’ he continued.[1]

Reforms

The upcoming stamp duty changes on buy-to-let and second residential homes is causing concern in the sector. 63% of ARLA members believe the Chancellor’s reforms will drive landlords out of the market. This in turn will lesson supply still further, with 58% of ARLA members believing that reforms will also push up rental costs.

Mr Cox went on to say, ‘a few weeks into the new-year and the April deadline for the stamp duty surcharge is looming and interest from buyers looking to invest in buy-to-let properties and beat the deadline is ramping up. The final details of the new tax will be revealed at the Budget in March but we are not expecting to see the Government back down on this policy.’[1]

‘The findings from our members echo our concerns that efforts to penalise buy-to-let will ultimately impact those entering and currently in the rental market, as by increasing rents landlords will seek to recoup their costs. Rent costs are already rising exponentially and tenants are feeling the strain of a crowded marketplace. We just need more houses; it’s a simple as that,’ he concluded. [1]

[1] http://www.propertyreporter.co.uk/landlords/where-have-all-the-rental-properties-gone.html

 

 

Tenants prefer short-term lease agreements

Published On: February 25, 2016 at 10:13 am

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Categories: Property News

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New research has revealed that nearly four out of five tenants would like a rental lease that lasts between six months and two years.

Further data from the report by online letting agent PropertyLetByUs.com shows just one in five tenants preferred leases of between two and five years.

Just over half of tenants said that they hoped to move further up the rental ladder when they could afford to do so.

Homely

The survey found that the majority of tenants want their rental accommodation to feel like home, even if they are letting for a short period. 60% of tenants said they would like to redecorate their property and over 50% said they wanted to alter the carpets or flooring.

23% of tenants expressed their desire to install decking, 18% wanted to install a hot water tub and 13% wished for a patio.

‘Clearly tenants don’t want long leases,’ observed Jane Morris, Managing Director of PropertyLetByUs. ‘For many, longer than two years does not give them the freedom and flexibility they need. They may find a job, then move on to another one, start out living with friends and then want to move in with a partner. However, landlords like longer leases-they get charged fees each time their agent needs to find new tenants. Landlords can save money by using an online lettings agent instead of a high street lettings agent.’[1]

Tenants prefer short-term lease agreements

Tenants prefer short-term lease agreements

Aspirations

Morris said that her company’s research, ‘shows that many tenants do aspire to owning their own home and a large proportion of them want to redecorate their rental accommodation.’ She feels, ‘this can cause a major headache for landlords, with many facing redecorated properties at the back end of the lease, with no prior approval secured by the tenant. The latest Tenant Deposit Scheme report shows that redecoration is a major cause of dispute, taking 32% of the share.’[1]

‘We have seen properties with walls painted in bright colours, despite landlords specifying that the décor must be a neutral and standard lettings property colours, from off-whites and beige to magnolia,’ she continued. ‘One tenant decided to decorate the whole house black and white; removed all the carpets/lino downstairs and upstairs; and painted all the floors/ceilings/kitchen/bathroom tiles in a beautiful shade of black! She did keep the walls white. Another tenant chose a dark burgundy for all the walls, throughout the property.’[1]

Inspections

Concluding, Morris said, ‘even when a tenant repaints in the correct or authorised colour scheme, there are still problems. We have seen instances of bad paint application, patchy walls, paint spills on carpets, curtains, fixtures and fittings, all of which the tenants will be responsible for at the end of the tenancy.’[1]

She stresses that, ‘it is vital that landlords carry out mid-term property inspections and ensure the inventory and check-in stipulates the colour and quality of the decoration. If tenants do want to decorate, they should be given colour swatches to choose from and clear instructions on what can be painted and how.’[1]

[1] http://www.propertyreporter.co.uk/landlords/majority-of-tenants-want-short-term-leases.html

 

The Private Rental Sector Will Continue to Grow, Despite Clampdown on Landlords, Says Savills

Published On: February 24, 2016 at 3:54 pm

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Over the last few months, landlords have been subject to forthcoming changes to the buy-to-let market, which could dampen future investment. However, Savills believes that the private rental sector will continue to grow, despite the measures.

The Government has announced a series of policies designed to clamp down on buy-to-let investors and increase homeownership in the country. The changes to landlord law and finances are detailed here: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

The Private Rental Sector Will Continue to Grow, Despite Clampdown on Landlords, Says Savills

The Private Rental Sector Will Continue to Grow, Despite Clampdown on Landlords, Says Savills

Despite the changes, demand for rental properties appears to be as high as ever, with the latest forecast from Savills suggesting that the sector will continue to grow for years to come.

The country’s strengthening economy and improved employment figures, which have hit an all-time high recently, would usually push up the number of homebuyers. However, the continuing surge in house prices – the average is edging closer to £300,000 – means that many people are still priced out of the property market, leaving the private rental sector in a state of constant expansion.

Savills reports that the Government’s statistics reveal the private rental sector has grown by around 17,500 homes per month for the ten years to the end of 2014. The firm believes that this growth will continue over the next few years, with Government policies designed to dampen the market having only a minimal impact.

Despite continued demand, private tenants may start to feel the pinch, as landlords are forced to raise rents in response to changes to their finances.

At present, there are 4.6m households in the private rental sector, with 260,000 added each year, says Savills.

But even with the Government trying to push for increased homeownership, it is only expected to bring around 40,000 new homeowners per year from the private rental sector, meaning that rental market growth will still continue, rising by only 15% less than the current level, at 220,000 per year.

With constant high demand expected for the sector, institutional investors are seeking clarity from the Government regarding their exemption from certain policies.

Originally, it was stated that institutional investors (those purchasing 15 or more properties in one transaction) would be exempt from the Stamp Duty surcharge arriving in April, but this has not been confirmed.

Additionally, landlords that operate as limited companies will not be subject to the cut in mortgage interest tax relief, set to be implemented gradually from 2017. Over 40% of landlords are looking at forming a limited company to avoid the change.

If large-scale investors are not exempt from the Stamp Duty surcharge, there is a risk of a lack of money, and therefore shortage of supply, coming into the private rental sector.