Posts with tag: Buy-to-Let

Buyers 10% better off than renters

Published On: February 22, 2016 at 10:06 am

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New research from Lloyds Bank indicates that those getting a foot on the property ladder are better off than those renting.

According to the data, first-time buyers are £865 per year more wealthy than tenants in the rental market.

Costly

The average monthly buying fees, inclusive of mortgage payments, attributed to first-time buyers purchasing a three-bedroom property stood at £672 in December 2015. This was £72 lower than the average monthly rent of £744 paid by renters in the same type of property.

This shows an increase of £105 over the course of the last year. Average monthly rents have risen more sharply, showing a 3% increase, in comparison to a 2% rise in monthly buying costs.

At present, the financial gap between buying and renting (£865) is more than double the saving of £397 recorded in 2010. In this period, average rents have gone up by 23% (£139) per month from £605 and buying costs have risen by 17% (£100 per month) from £572,

Since 2009, buying has been the cheaper option.

Regional variations

Average monthly buying costs in the South East (£965) are £65 greater than the average rental costs in the UK. This is the only region in Britain where renting is the more cost effective option.

Alternatively, buying is more affordable than renting in monetary terms in the North West, where the average first-time buyer pays £133 per month less than the average renter. This was followed by Scotland, where owner-occupiers pay £120 less and Wales, where buyers enjoy savings of £103.

Buyers 10% better off than renters

Buyers 10% better off than renters

First-timers

First-time buyer numbers hit 310,000 in 2015, slightly down from the 311,700 recorded in 2014. However, this is a rise of 60% since first-time buyer totals fell to a low of 193,700 in 2011.

The number of first-time buyers made up 46% of house purchase made with a mortgage during 2015. This was up from 36% at the beginning of the downturn in 2007.

Mike Songer, Mortgage Director at Lloyds Bank, observed, ‘we’ve seen a significant shift over the past five year, with people consistently paying less on average per month when owning their property as opposed to renting. In 2015 this gap widened by over £100 to an annual saving of £865.’[1]

‘This has been helped by record low mortgage rates and rising private rents, making owning a home a much more attractive proposition than renting. This steady improvement in the costs of buying compared to renting has helped to boost the number of first-time buyers over the past few years, who now account for 46% of all home sales in 2015-up from 36% in 2006. Official government schemes, such as Help to Buy have also played a part in helping first-time buyers as have improving economic conditions,’ Songer added.[1]

[1]  http://www.propertyreporter.co.uk/finance/buying-10-better-off-than-renters-says-lloyds.html

Landlords told to wait to replace furniture

Published On: February 21, 2016 at 10:10 am

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Landlords are being advised to wait until the 6th April to replace any furniture in their property.

Accountants Blick Rothenberg LLP are guiding landlords to wait until after this date, when the 10% wear and tear allowance is replaced. These costs will then become deductible under a new relief.

Changes

Robert Pullen, personal tax manager at Blick Rothenberg noted: ‘from April 6 2016, the favorable 10% wear and tear allowance for fully furnished residential properties will no longer be available.’[1]

‘Instead, only the actual costs incurred in replacing furniture, furnishings, appliances and kitchenware provided for the tenants’ use will be deductible. Initial costs are not allowed, only the replacement of such items. The Government expects this measure will bring in around £165 million/year from 2017 onwards,’ he continued.[1]

Pullen went on to say that, ‘this is a significant step away from the wear and tear allowance, bringing the position more in line with general deductibility of repair costs or replacing toilets, boilers etc. Landlords of fully furnished properties will feel this change adds additional complexity to an increasingly complicated area of deductible costs, following closely on the heels of the restriction to finance cost expenditure.’[1]

Landlords told to wait to replace furniture

Landlords told to wait to replace furniture

Relief

Mr Pullen sees the changes as good news for landlords owning part or unfurnished homes, who will now be able to claim the new relief. At present, landlords do not generally receive much relief for associated costs after changes brought in from April 2014.

HMRC have pledged to provide ‘comprehensive guidance’ on the more complicated areas of whether a replacement is considered an improvement or not. Where the furniture is replaced to a modern equivalent, the improvement as a result of technological advances should be ignored, so that the cost is allowed in full.

However, qualifying furnished holiday lets and commercial buildings are not covered by these rules. As such, relief on the initial cost of items, as a well as replacements, remain allowed.

[1] https://www.landlordtoday.co.uk/breaking-news/2016/2/landlords-advised-to-wait-until-april-to-replace-furniture

40% of landlords considering forming a ltd company

Published On: February 20, 2016 at 9:05 am

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Over 40% of landlords are looking into making their business a ltd company, according to new research from the National Landlords Association (NLA.)

Presently, just only 1% of respondents said that they had already chosen to incorporate. The NLA believe this is due to the high cost of transferring personally held property into a private limited company.

Intentions

Additionally, data shows 31% of landlords have no intention of switching their properties to a limited company. 29% are still not sure about what they are going to choose in regards to incorporation.

Mortgage interest relief for buy-to-let landlords is to be levelled at the basic rate of income tax (20%) by 2021 and will begin to be phased back from April 2017. Landlords then will no longer be able to remove the cost of mortgage interest before they declare their taxable profit. The new moves will see them receive a tax credit of 20% of their mortgage interest costs.

The NLA has called the alterations, ‘The Turnover Tax,’ as landlords’ tax will be worked out on the rental income they earn instead of any profits. and will drive many basic rate payers up into a higher tax bracket. Higher rate payers will be left with increased bills.

40% of landlords considering forming a ltd company

40% of landlords considering forming a ltd company

Transferring

Landlords structured as private limited companies will be exempt from the tax alterations. Instead, they will only pay corporation tax on their profits.

‘Transferring personally held property to a limited company isn’t a straightforward process, so it’s not surprising that so few have taken this action so far,’ noted Richard Lambert, Chief Executive Officer at the NLA. ‘Landlords need to do their research but many will realise that incorporating simply doesn’t stack up financially; doing so will incur capital gains and potential stamp duty charges, which means the process may be prohibitively expensive.’[1]

Richard Price, Executive Director of the UK Association of Letting Agents, also noted, ‘while just one per cent have incorporated so far a significant proportion are still considering the move. If landlords follow through with these intentions then it’s likely that more and more will take a hands-on approach to managing their portfolios in the future, which would mean less business to go around for agents and certainly less of a need for full service offerings.’[1]

‘The changes to taxation are forcing landlords to re-evaluate their business and their place in the market, so our advice for agents is to begin talking to your clients about their intentions over the next few years and consider how you’ll meet their changing needs in a way that is distinct from your rivals,’ Price concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/incorporating-doesnt-stack-up-for-majority-of-landlords.html

Buy-to-Let returns highest for 14 months

Published On: February 19, 2016 at 12:39 pm

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The most recent Buy-To-Let Index from Your Move and Reeds Rains has indicated that returns from buy-to-let property are soaring.

Data from the report shows that returns currently stand at their highest level since November 2014.

Growth

Looking into both rental income and capital growth, the average landlord in England and Wales has seen total returns of 12% in the year to January. This is a rise from the 11.2% recorded in the twelve months to December and represents a fourteen month high. In November 2014, returns stood at 12.3%.

In absolute terms, this means that the typical landlord in England and Wales has seen a return of £21,988 in the last year, before any deductions such as mortgage payments.

Of this, the average capital gain totalled £13,594, with rental income making up £8,394 over the same period.

Rental yields have proven to be sturdy when faced by price increases. The gross yield on a rental property in England and Wales remains steady at 4.9% in January, as it was in December 2015. Annually, this was slightly less than the 5.0% seen in January 2015.

‘Picking up’

‘Buy-to-let returns are building and property prices are picking up-as the housing shortage across the UK intensifies,’ observes Adrian Gill, director of estate agents Reeds Rains and Your Move. ‘Landlords’ balance sheets are looking healthier than at any point since 2014 and property investors are looking at an excellent rate of return from their portfolios. With house prices rising rapidly into the New Year, this acceleration will be a welcome addition to the wealth of landlords on paper, while solid rental yields are underpinning total returns pushing well into the double digits.’[1]

Buy-to-Let returns highest for 14 months

Buy-to-Let returns highest for 14 months

‘Stamp duty premiums on new buy-to-let purchases are the rhino in the room-everyone is talking about the 1st April deadline and the extra purchase costs are perceived by some commentators as potentially hazardous. But this is a little simplistic. Landlords are long-term investors and generally take good advice before making a new purchase, while the real changes will come when some landlords see gradual changes to their tax relief on mortgage interest. The rules around UK property are changing-but there is no bull in the buy-to-let china shop,’ he continued.[1]

Shifts

Mr Gill believes that, ‘in 2016, the big shift is likely to be in favour of existing landlords, potentially at the expense of those planning to start up as a landlord for the first time or expand their portfolio.’ He said that as a result, ‘it will be interesting to see how the rental market responds if there is a disruption to investment in supply.’[1]

Concluding, Gill said that, ‘this is likely to be a short-term effect. Over the longer term there is a consistent and developing lack of housing across all tenures, for a spiralling population. Owners and renters alike will see the cost of somewhere to live continue to rise, whether expressed in rents or prices. Stamp duty surcharges could funnel more money from the industry to the Treasury, but ultimately will not change the level of demand from tenants

[1] http://www.propertyreporter.co.uk/landlords/best-buy-to-let-returns-since-2014.html

 

The Court Case That Could Weaken Right To Rent

Published On: February 18, 2016 at 11:30 am

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A recent court case ruling could affect the way that landlords and letting agents are penalised under the Right to Rent scheme.

Since 1st February, landlords or their letting agents have been obliged to conduct immigration checks on all prospective tenants.

However, the court case in question did not involve landlords or letting agents – it regarded the budget airline Ryanair. The outcome of the case suggests that the Government may be open to legal challenges from landlords or agents under the private rental sector Right to Rent scheme.

The Home Office has claimed that it will not penalise a landlord or agent that has been caught out by well-forged documents.

In the case, Ryanair was appealing against Home Office fines imposed for carrying two illegal immigrants into the UK.

Judge Damien Lochrane noted that even trained immigration officers find it difficult to spot forgeries.

He ruled that Ryanair should not have been fined for flying the Albanian couple from Majorca to Edinburgh in May 2015.

The pair had already passed through checks by Spanish border police and Ryanair, before UK border control officers at Edinburgh airport picked up their false documents.

The judge insisted that the way the regime for airlines to check passports is operated by the Home Office “offends the basic concepts of justice and indeed rule of law”1.

The Court Case That Could Weaken Right To Rent

The Court Case That Could Weaken Right To Rent

He added that airline staff could not be expected to spot well-forged documents that even trained immigration officers could not detect.

The Policy Director at the Residential Landlords Association (RLA), David Smith, points out the ruling is not binding on other courts.

However, he says the case does raise the prospect that under Right to Rent, a landlord or agent that has been tricked by a well-forged document could be successful in an appeal against any action taken against them by the Home Office.

The Government has previously stated that it will not go after landlords and agents that have been duped by false documentation, but it has not been clear on the details.

It has emphasised that it will target landlords and letting agents that fail to conduct checks and who are persistent offenders.

The Ryanair ruling arrives as the new Immigration Bill makes its way through Parliament. If passed, it will introduce criminal penalties for landlords and agents that do not carry out Right to Rent checks.

Smith states: “This court ruling vindicates what we have been saying all along, that landlords cannot and should not be expected to act as border police or to detect forgeries that trained and experienced airline staff and immigration officers might miss.

“In light of this case, and to save the Government money from losing similar actions brought by landlords, we call on the Government to provide better information to landlords about document forgeries and to offer more clarity as to the legal responsibility of landlords and agents duped by forged identity documents.”1

1 https://www.lettingagenttoday.co.uk/breaking-news/2016/2/industry-body-says-court-case-may-weaken-right-to-rent-enforcement

Where are Buyers and Tenants Moving to? (So Where Should You Invest?)

Published On: February 18, 2016 at 11:27 am

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reform of leasehold

New research from Urban.co.uk has revealed the top places that people in different age groups are moving to in the UK. By analysing the data, landlords may be able to work out where they can buy a profitable investment.

Online estate agent Urban.co.uk has evaluated Office for National Statistics (ONS) internal migration statistics to find out which cities in England and Wales are the most popular to move to.

Birmingham was the only area included in the top ten destinations for all age groups – 18-21, 22-29, 30-64 and over-65s.

Alongside Birmingham, Manchester, Nottingham and Leeds are all becoming increasingly attractive locations compared to London for those aged 18-21.

The 22-29 age group is also heading north, with many favouring Birmingham, Manchester and Leeds over the more traditionally popular London boroughs of Islington and Hackney.

Birmingham was the most popular area to move to for those aged 30-64, while the over-65s prefer greener regions, such as Wiltshire and Cornwall.

The main finding from the study is that young people are increasingly leaving the capital.

The figures found that Birmingham is London’s biggest rival for all of those aged under 65. In the over-30 category, 12,500 home movers relocated to Birmingham during the past year.

For 22-29-year olds, Birmingham was the third most popular city to move to, coming in ahead of previously popular London boroughs such as Tower Hamlets and Southwark.

Birmingham was also in the top five cities for 18-21s, with Leeds, Nottingham and Manchester making up the top three. Over 45,000 youngsters moved to these areas in the last 12 months, indicating affordability pressures and a definite trend of migration towards the north. This may be due to the quality of educational facilities and the student populations of these cities.

The co-founder of Urban.co.uk, Adam Male, says: “The range and quality of educational institutions north of London, in places such as Leeds, Nottingham and Birmingham, have undoubtedly played a large part in attracting more and more young people away from London and its surrounding regions.

Where are buyers and tenants moving to?

Where are buyers and tenants moving to? (So where should you invest?)

“The interesting trend here is that young people appear to be staying in these regions after university and this is something we can expect to see more of in the coming years, due to their lively culture, increasing job opportunities and a competitive property market.”1 

Older generations are choosing more peaceful and greener spots, such as Wiltshire, Cornwall and the East Riding of Yorkshire over London. Birmingham was also included in the top ten for over-65s.

Visit Birmingham’s Emma Gray believes: “People are increasingly seeing our region as an obvious choice to build a career and raise a family, thanks to excellent schools, outstanding connectivity and affordable homes and amenities.”1 

Indeed, compared with London, Birmingham offers a competitive property market.

As first time buyers continue to struggle getting onto the property ladder, house hunters in Birmingham will find that the average house price is a huge £300,000 cheaper than in the capital.

The Birmingham suburb of Moseley Village was even named the best place to live in the UK by the Sunday Times, beating Mayfair in London.

Investment in the city, including HS2 and the Curzon Street regeneration, has also boosted Birmingham’s reputation as a business centre, making it a hotspot for start-ups and small businesses, in turn creating more job opportunities and investment potential. The city has been named, for the second time, the most investable city, above prime spots like Madrid, London and Paris, in an annual survey by the Urban Land Institute and PwC.

If you are seeking to invest in buy-to-let and beat the 1st April deadline for an added 3% Stamp Duty, could Birmingham be the best place to do it?

1 http://www.propertyreporter.co.uk/property/where-is-currently-the-most-popular-place-to-move-to-in-the-uk.html