Posts with tag: Buy-to-Let

New year Buy-to-Let surge recorded by BBA

Published On: February 24, 2016 at 11:39 am

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More evidence of landlords rushing to beat the forthcoming buy-to-let stamp duty rise has been given with the results of the latest figures released by the British Bankers’ Association.

According to the data, gross mortgage borrowing from High Street banks increased to its greatest level since 2008.

Pre Stamp Duty surge

The number of mortgages approved for house purchases was 27% greater that at the same stage in 2015, with the British Bankers Association putting this down to a rush to beat the increased charges.

Recently, the Council of Mortgage Lenders (CML) reported that it had seen an eight-year high in mortgage borrowing.

Mortgage lending may be rising, but the number of completed property sales has yet to show a significant rise.

Figures from HMRC show that the number of property sales in Britain actually slipped on a seasonally-adjusted basis, in comparison with December.

New year buy-to-Let surge recorded by BBA

New year buy-to-Let surge recorded by BBA

Buy-to-let Warning

Stamp Duty increases are expected to bring in an extra £1bn for the Treasury by 2021. However, landlords have expressed concern that it will see off investment in rental accommodation.

Samuel Tombs, chief UK economist for Pantheon Macroeconomics, is convinced that demand will carry on exceeding supply in the market, with house prices rising as a result.

‘Looking ahead, we expect approvals to remain on an upward trend,’ he noted. ‘Consumer confidence is high, real income gains remain strong and mortgage rates are set to fall again in response to the decline in wholesale funding costs.’[1]

Mr Tombs went on to say, ‘new buyer enquiries at estate agents have been rising quickly and point to mortgage approvals rising by a further 5% over the next three months. With the active supply of homes on the market close to record lows, house prices look set for very strong gains.’[1]

[1] http://www.bbc.co.uk/news/business-35648994

More information on energy efficiency needed, MP’s claim

Published On: February 24, 2016 at 10:04 am

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Members of the House of Lords and MP’s have called for private rented sector tenants to be given better information on energy efficiency and utility bill charges, before signing a tenancy agreement.

In addition, information on their right to change energy suppliers should also be provided, according to these peers.

Complex

The All Party Parliamentary Group for the private rented sector feel that schemes intended to improve energy efficiency of rental accommodation are too complex. As a result, the Group claims a large number of properties will be unlikely to meet energy efficiency standards required by 2018.

From April 2018, all privately rented homes will be legally required to have a minimum energy performance rating of E on its Energy Performance Certificate (EPC). These changes are causing concern, as they are likely to bring about significant challenges to landlords, with privately rented homes generally being older and harder to maintain.

A report from the Group concludes that landlords, energy companies and local authorities must work harder to identify vulnerable tenants who will benefit most from energy efficiency alterations.

More information on energy efficiency needed, MP's claim

More information on energy efficiency needed, MP’s claim

Solving the problem

To solve these issues, the Group is calling for further incentives to be offered to landlords for them to carry out improvements through being able to offset their fees against rental yields.

Additionally, the report from the Group says tenants should be given more transparent information on the likely cost of their bills before a tenancy begins. Energy companies have also been told to look at bringing in lower-rate tariffs aimed at less-wealthy consumers.

Group chair, Conservative MP Oliver Colvile, said, ‘the Government has set ambitious targets for improvements to the energy efficiency of private rented housing and rightly so. To meet these it is clear that much clearer information is needed for both landlords and tenants to understand their rights and responsibilities and the help available to improve the energy efficiency of the rental housing stock.’[1]

‘Tenants especially need much clearer information on their rights to change energy suppliers whilst energy companies, local authorities and landlords need to do more together to identify vulnerable tenants in need of most help to keep the cost of their Bills down,’ he concluded.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/mps-want-more-energy-info-given-to-renters-before-tenancies-are-signed

17% of tenants have sub-let their rental property

Published On: February 23, 2016 at 12:53 pm

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A concerning new survey shows that 17% of private rental sector tenants in Britain have sub-let part or all of their property to persons not named on lease agreements.

Additionally, 25% of tenants who said they sub-let did not check the terms of their lease to see if this activity was permitted. 34% said that they did not inform their landlord of the decision.

Of these renters who did not inform their landlord, one-fifth got found out. In 11% of cases, the tenants named on these leave were evicted, with 6% losing their deposit. Other punishments for these tenants included increased rental charges, fines and formal warnings.

Tempting

The survey, conducted by Direct Line for Business, also shows 15% of current tenants are thinking about sub-letting either some or all of their property.

A spokesperson for Direct Line for Business said, ‘the average monthly rent across the UK currently stands at £739. This means on average, approximately a third of people’s income goes towards accommodation. With the market having seen a five per cent increase in average rents in the last year, it seems that a larger number of renters are tempted to offset this expense by sub-letting their properties.’[1]

17% of tenants have sub-let their rental property

17% of tenants have sub-let their rental property

 

Sub-let Increases

In the last two years, Landlord Action has seen a rise of 18% in the number of landlords with sub-letting cases. This is making it a more substantial reason for eviction, alongside rent arrears and Section 21 for possession only.

Founder of Landlord Action Paul Shamplina said, ‘organised sub-letting scams are also becoming more prevalent, where tenants, or sometimes even fake tenants, advertise properties and rooms on holiday/accommodation websites in order to cream a profit without the landlords’ consent.’[1]

Further data from the report shows that sub-letting is most common in the North West and West Midlands. In these regions, more than 25% of tenants said that they have sub-let their accommodation. London came in third.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/one-in-six-tenants-has-already-sub-let–and-more-may-do-so-via-airbnb

 

Homebuyers Stretching Their Mortgages to Get on Property Ladder

Published On: February 23, 2016 at 12:42 pm

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A record number of first time buyers and home movers took out mortgages for over 25 years in 2015, as soaring house prices make it harder to get onto, or move up, the property ladder.

Affordability issues have also increased the amount of borrowers taking on mortgages worth more than 4.5 times their income, causing the Chief Economist at the Council of Mortgage Lenders (CML), Bob Pannell, to warn that a “potential problem is building under the noses” of the Bank of England’s Financial Policy Committee (FPC).

Statistics from the CML found that in the second half of last year, 58% of first time buyers took out mortgages for longer than the typical 25-year term. At the peak of the last housing boom in 2007, this was just 42%.

Homebuyers Stretching Their Mortgages to Get on Property Ladder

Homebuyers Stretching Their Mortgages to Get on Property Ladder

Meanwhile, 36% of home movers took out mortgages over the traditional 25 years – double the proportion before the housing crash.

Higher retirement ages and pension freedoms may have encouraged these buyers to borrow for longer, but the CML believes it is mainly a result of the need to stretch incomes to get onto the property ladder.

The CML’s data also shows a sharp rise in the proportion of borrowers taking out mortgages worth over 4.5 times their income.

Around two years ago, this type of lending was cracked down on, due to fears of a housing bubble. Banks and building societies are now only permitted to approve 15% of lending at that level.

After the clampdown from the FPC, the proportion of borrowers taking on such large loans fell, but in the fourth quarter (Q4) of 2015, the number of first time buyers and movers borrowing high amounts almost returned to 2014 levels. Over the quarter, 11% of first time buyers and 9.8% of movers borrowed more than 4.5 times their earnings to purchase a home.

Pannell explains how the mortgage market has changed: “After peaking at 10% just ahead of the FPC action in mid-2014, the proportion of high income multiple lending eased back considerably over the following year, to just below 7%.

“But the picture has changed a lot over the past six months or so. [It] has increased sharply, especially for movers, and retraced a good chunk of the previous year’s reduction.”

Pannell notes that there may have been “a precautionary ‘knee-jerk’ response from lenders” to the new rules when they were first announced, which is now unravelling as they get used to working within the guidelines.

However, he says that lending at all levels above 3.5 times earnings has risen and there are signs “that borrowers are now stretching their incomes more than in mid-2014”.

He adds that the 15% cap on 4.5 times lending means “we should expect to see a build-up of lending just below the 4.5 times threshold”.

At present, the FPC is monitoring the buy-to-let mortgage market, following a boom in borrowing by landlords.

However, Pannell believes: “A potential problem is building under the noses of FPC policymakers, and it has nothing to do with buy-to-let lending.”1

As buy-to-let investors seek to rush through rental property purchases ahead of the 1st April Stamp Duty deadline, it appears that the mortgage market across all sectors will see vast change in the coming months.

The latest information for landlords on property and finance can be found at LandlordNews.co.uk.

1 https://www.cml.org.uk/news/news-and-views/affordability-bites/

New product to assist in smoke alarm legislation compliance

Published On: February 23, 2016 at 11:43 am

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One of Britain’s biggest suppliers of carbon monoxide and smoke alarm testing products has produced a new product to assist agents and landlords comply with legislation.

GasSafe Europe has created a ‘Triplicate Record Pad,’ which can be used as evidence to prove to local authorities that smoke and carbon monoxide alarms have been tested and are in sufficient order.

Legislations

It is a legal requirement for landlords and letting agents to prove that a building’s alarms are compliant with Smoke and Carbon Monoxide Regulations 2015. Tests must be carried out at the beginning of all new tenancy agreements and during property inspections. Those who not adhere to these legislations face fines of up to £5,000.

This new regulation came into effect last October and it is hoped that up to 26 deaths and 670 injuries per year will be prevented as a result.

New product to assist in smoke alarm legislation compliance

New product to assist in smoke alarm legislation compliance

Equipment

The ‘Triplicate Record Pad’ can record the property address details, information on specific alarms tested and any faults or replacements made.

In order to assist landlords and agents meet legislation guidelines, Detectagas has been designed to check the battery and sensor in alarms in just one test. This is done by injecting a specific level of test gas into a transparent cover over the alarm itself.

Should an alarm be found to be faulty, GasSafe Europe has designed tamper-proof stickers to notify residents and ensure that they are not used. The labels use extra-strong glue alongside a fragile material, which means once it is used it becomes very difficult. This makes it ideal for inspectors, with this method helping to make sure alarms highlighted as faulty will be virtually impossible to be re-used.

Retirees still investing in buy-to-let

Published On: February 23, 2016 at 10:10 am

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A new assessment on buy-to-let investment has revealed that retirees are still looking to purchase in the sector.

Data from a report by Fidelity International indicates that retirees putting tax free cash from their pensions into buy-to-let has remained constant during the last year. This is despite the forthcoming tax changes.

Alterations

On April 6th 2016, a buy-to-let investor will be permitted to pay an extra 3% stamp duty in comparison to residential buyers. In addition, higher-rate tax relief on mortgage interest will be cut from April 2017, to the basic rate of 20%. As such, landlords will be able to claim less for wear and tear suffered in their properties.

However, these changes have done little to dispel retirees’ appetite for buy-to-let investment. Fidelity International said that 7% of their retirement customers used their tax-free money to invest in a rental property during January. This was the same proportion seen in the last six months of 2015.

In all, property purchases remain popular with retirees, making up 14% of all usages of tax-free pension money during 2015. This percentage has typically been split 50/50 between buy-to-let and owner-occupier purchases.

Retirees still investing in buy-to-let

Retirees still investing in buy-to-let

‘No Brainer’

‘The British love affair with all things property is well-documented and for many retirees, buy-to-let is seen as a no brainer investment given the spectacular rise in property markets, particularly in London, over recent years,’ noted Maike Currie, investment director for personal investing at Fidelity International. ‘Tax changes aside, the illiquidity of the housing market as well as costs in the way of maintenance, stamp duty, mortgage arrangement fees and a host of unpredictable outgoings can chip away at income. Not to mention the time and effort required to manage a property and the risk that it may lie empty between tenancies,’ she continued.[1]

‘Investing in property funds allows investors access to an income stream without the hard work and unexpected costs of a tangible property. Buy-to-let in retirement may work for some but with the added extras that come with it, it’s worth asking yourself whether you really want to be managing a property in your eighties?’ Currie concluded.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/2/retirees-love-affair-with-buy-to-let-continues