Posts with tag: Buy-to-Let

Tax changes spark buy-to-let surge

Published On: December 4, 2015 at 10:20 am

Tags: Buy-to-Let,landlords,limited companies,UK landlords

The forthcoming changes in stamp duty announced in last week’s Autumn Statement have already led to a surge in people looking to invest in buy-to-let, before the hikes come into effect.

Data from an investigation by Kent Reliance also shows that alterations to tax relief mortgage interest announced in the Budget also triggered a surge in borrowing through limited companies.

Acceleration

Following the changes announced in the Summer, the firm said that applications for buy-to-let mortgages increased by substantial margins. In September, applications tripled year on year to stand at £213% over the period. In addition, a quarter of all buy-to-let mortgage finance demand is now put through limited companies, up by 13% at the same time last year.

For the buy-to-let market as a whole, Kent Reliance believes that 56,800 buy-to-let loans will be issued to companies in 2016, if total lending doesn’t grow further. This would represent an increase of more than a fifth in comparison to the estimated total for 2015 (46,700).

As the Autumn Statement continues to sink in, the Treasury is continuing to consult on whether corporate entities with 15 or more properties will be excluded from the stamp duty surcharge. If this happens, it could give further incentives for professional landlords to incorporate, thus increasing demand.

Changes

An increase in switching to limited companies could prove not to be the only impact of the recent tax changes. At present, the average value of a buy-to-let property is £220,726. With the 3% stamp duty hike announced, this would presently represented an additional upfront charge of £6,622, which landlords would look to recoup through rental charges.

If a landlord was to hold a property for ten years, moving this cost over the duration of the tenancy would result in an increase of £55 per month for each tenant. In turn, this would support rental inflation, which currently is at 8.3% per annum.

Within Britain as a whole, there are now 5.6m households living in rental homes, a year-on-year growth of 8.4%. England has seen the number of privately renting homes pass the 5 million mark. This is likely to rise with landlords becoming more active in the market before April 2016.

What’s more, the value of rented accommodation has seen a marked growth, increasing by 6.5% in the year to September. With the number of properties and average value rising, the total value of landlords’ holdings has risen by £171.0bn in the last twelve months to stand at £1.2trillion by the end of September, a growth rate of 16.0%.

Tax changes spark buy-to-let surge .

Consequences

‘The Chancellor has trained his sights on buy-to-let, given the sector’s rapid rise in value, but the changes to the tax treatment in the last six months will bring unintended consequences,’ noted Andy Golding, Chief Executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands. ‘First, the rush to put properties inside a limited company will be sustained, especially if larger scale investors are indeed exempted from the new stamp duty surcharge. Secondly, the buy-to-let market will see activity hit overdrive between now and April as landlords seek to beat the stamp duty deadline,’ he continued.[1]

‘Yes, smaller-scale investors are now more likely to think twice before investing and I see that as a good thing. However, in the longer term, it is tenants who will pay the price of the chancellor’s tax raid on buy to let, as landlords will recoup increased costs through rent increases. Ultimately, the move will do little to help tenants save for a deposit on a home of their own. Making rented homes more expensive was surely not the Chancellor’s intention, ‘Golding added.[1]

Concluding, Gosling said that by, ‘tinkering with the cost of lending by subsidising first time buyers or penalising landlords is not the way to make housing more affordable.’ He thinks that,’ the only way to do that is to build more homes and while the Government’s new initiative is an improvement, it will need to be a catalyst of almost unprecedented proportions for housebuilding is a long way from where it needs to be.’[1]

‘With mortgage criteria tight, the PRS will remain pivotal to the country’s housing market and it is imperative that its growth and professionalisation is supported.’[1]

[1] http://www.propertyreporter.co.uk/landlords/btl-tax-change-sparks-landlord-rush.html

Bank of England Stress Tests Results Revealed

Published On: December 2, 2015 at 9:14 am

Author: Em Morley

Categories: Finance News

Tags: Bank of England,buy to let market,Buy-to-Let,economy,Mortgage lending,mortgages

Bank of England Stress Tests Results Revealed

The Bank of England (BoE) has revealed the results of its stress testing on the UK banking system. It plans to take action to cool the buy-to-let sector, as the market continues to grow.

The BoE has also informed UK banks that they could be forced to hold up to £10 billion of capital ahead of a potential economic downturn.

The stress tests were designed to measure how banks would deal with another financial crisis. The BoE reports that Standard Chartered and the Royal Bank of Scotland (RBS) are in the weakest financial positions.

It believes that both would have been unable to endure a shock to the financial system had they not already taken action to strengthen their financial position over the year.

For months, the BoE has raised concerns over the buy-to-let mortgage market. Although it has not taken immediate action to cool this sector, it announced that it is reviewing the lending criteria used by firms and is “ready to take action”.

It will also observe the impact of the extra 3% Stamp Duty imposed on buy-to-let landlords, as announced by Chancellor George Osborne in last week’s Autumn Statement.

The buy-to-let sector has experienced “rapid growth” recently, with lending rising 10% in the first nine months of 2015.

It is expected that changes to landlord taxes, including the reduction in buy-to-let mortgage interest tax relief from April 2017, will cause some investors to leave the market altogether or sell some of their properties. The additional Stamp Duty may also cool the market.

Read the Bank’s complete stress tests results here: http://www.bankofengland.co.uk/financialstability/Documents/fpc/results011215.pd

How do you think the buy-to-let sector will change in the short term and further into the future?

Bridging Specialist Launches Product to Release Landlord Equity

Published On: December 1, 2015 at 4:04 pm

Author: Em Morley

Categories: Finance News

Tags: bridging loans,Buy-to-Let,equity,finance

Bridging Specialist Launches Product to Release Landlord Equity

Recent research found that £70 billion has been added to buy-to-let equity in the past two years, as property prices have increased by 15% across the UK and by a huge 30% in London.

As a result, commercial bridging specialist JustBridging.co.uk has launched a product and dedicated broker/financial intermediary channel. The product aims to release the billions of pounds in property professionals’ portfolios.

Director of JustBridging.co.uk, John Davies, explains: “Our research shows property professionals are equity rich but options poor. This is because prior to the financial crisis, many had the foresight to take out tracker mortgages around just 0.5% to 1% above base rate.

“Understandably, the last thing they want to do is unlock equity in their portfolios by remortgaging, as this would significantly increase their overall borrowing costs. This can be extremely frustrating, as they are unable to use their equity to take on additional properties or improve their housing stock.”

This annoyance has led to JustBridging.co.uk launching its PortfolioBuilder product, which provides flexible funding solutions from £10,000-£500,000 for established property businesses in the UK that own at least one commercial property, including buy-to-lets.

The product works as a replica of a second charge bridging loan, but with a much higher than standard loan-to-value (LTV) required. It is also an exact replica of a normal bank overdraft, which aids landlords with late rent payments and allows the release of funds for repairs and maintenance work.

Davies concludes: “We are a lender to the business model and not a property lender. We focus on how the business is being managed and who is managing it. This results in potential access to loans at significantly higher LTVs if security is taken over real assets.”

Have you seen your equity change in the last two years?

Cleaning still top dispute at check-out

Published On: December 1, 2015 at 12:12 pm

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,cleaning,landlords,tenancy disputes

Landlords and agents are being faced with more dirty properties at the check-out stage of tenancy agreements, according to a new report.

Research from Imfuna Let reveals that cleaning is still top of the list of dispute cases at the conclusion of a tenancy period, now accounting for 58% of all tenant disputes.

Dirt

In fact, cleaning disputes were up 5% year on year. Next came property damage, which amounted to 52% of all disputes, followed by redecoration (32%), gardening (17%) and rent arrears (10%).

Additionally, the average cleaning claim was found to be the second lowest in value, behind those for gardening issues. At the top of this list came rent arrears, amounting to an average value of £1,164, followed by property damage (£475), redecoration (£449), cleaning (£220) and gardening (£195).

Cleaning still top dispute at check-out

Jax Kneppers, Founder and CEO of Imfuna Let, observed,’ many tenants claim that the cleanliness of the property at the start of the tenancy was not clear, or that the tenancy agreement did not make clear what was expected of them.’ She continued by saying, ‘if agents and landlords wish to make deductions for cleaning costs, they need to be careful to record the cleanliness of the property in sufficient detail, at the start and easy of the tenancy. They will also need to ensure any charges they claim are a fair reflection of the property’s condition at the start of the tenancy.’[1]

[1] http://www.propertyreporter.co.uk/landlords/cleaning-remains-the-number-one-dispute.html

Autumn Statement: The industry reacts

Published On: November 29, 2015 at 10:02 am

Author: Em Morley

Categories: Finance News

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

The Autumn Statement and Spending Review saw Chancellor Osborne pile more financial misery on buy-to-let landlords. Mr Osborne announced that the government is to raise stamp duty on buy-to-let properties and second homes by 3%.

These alterations are planned to come into force in April 2016.

Reaction

Understandably, there has been a heated reaction to the news across the industry.

Richard Lambert, CEO of the National Landlords Association, believes, ‘the Chancellor’s political intention is crystal clear, he wants to choke off future investment in private properties to rent.’ [1]

‘If it’s the Chancellor’s intention to completely eradicate buy-to-let in the UK then it’s a mystery to us why he doesn’t just come out and say so,’ he added.[1]

Paul Smee, Director General at CML said, ‘additional stamp duty on buy-to-let transactions come hot on the heels of the forthcoming tax changes to landlords already announced. The Government will need to keep a careful eye on the cumulative effects; with the private rented sector housing around a fifth of the population, we do need to avoid unintended consequences.’[1]

Catastrophic

David Cox, managing director of the Association of Residential Letting Agents (ARLA) described the increases as, ‘catastrophic news for the private rental sector ,’ considering the, ‘recent changes to mortgage interest tax relief and the annual wear and tear allowance.’ He feels that, ‘increasing tax for landlords will increase rents and reduce property standards for tenants.’[1]

Cox fears that, ‘to make owning a BTL property financially viable, landlords will need to pass on the increased stamp-duty costs to tenants, who will in turn see less spent on maintaining their property and of course see increased rents.’[1]

Autumn Statement: The industry reacts

He also believes that the changes, will, ‘deter new landlords from entering the market, pushing the gap between dwindling supply of available property and growing demand even further apart.’[1]

Stuart Law, CEO at Assetz for Investors, said, ‘the buy-to let investor should not be blamed for house price rises, rather this is down to the chronic shortage of housebuilding in this country which is compounded by population growth. We would therefore advise caution against penalising this group of investors when actually other policy areas hold the key to unlock the solution.’[1]

Blow

Alex Gosling, CEO of online estate agents HouseSimple.com simply said, ‘ouch.’ He did go on to say that the changes in stamp duty were, ‘another blow to landlords, so soon after the cut in mortgage interest tax relief.’ He also described George Osborne as, ‘enemy No1 for the buy-to-let sector.’[1]

‘Hopefully, this hasn’t sounded the death knell for buy-to-let,’ he added.[1]

Jonathan Hopper, managing director of buying agents Garrington Property Finders noted that, ‘landlords are under attack again,’ calling the move, ‘Osborne’s buy-to-let double whammy.’ He believes buy-to-let landlords are, ‘going to get sledge-hammered with a bigger stamp duty tax bill.’[1]

He went on to ask, ‘why does Osborne have such a grudge against the buy-to-let sector?’[1]

A question that will continue to provoke debate, methinks.

[1] http://www.propertyreporter.co.uk/hero/btl-and-second-homes-to-be-hit-by-3-rise-in-stamp-duty.html

BTL homes hit with increased stamp duty

Published On: November 26, 2015 at 11:26 am

Author: Em Morley

Categories: Finance News

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

In the Autumn Statement yesterday, Chancellor Osborne announced that the government is to increase stamp duty on buy-to-let properties and second homes by 3%. This is to become effective at the start of the new tax year in April 2016.

Osborne said that, ‘more and more homes are being bought as buy-to-lets or second homes.’ He feels that many of these are bought by cash transactions that are not affected by the restrictions introduced in the Budget earlier this year.[1]

Affordability

‘Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy. So I am introducing new rates of Stamp Duty that will be 3 per cent higher on the purchase of additional properties like buy-to-lets and second homes. It will be introduced from April next year and we’ll consult on the details so that corporate property development isn’t affected,’ the Chancellor added.[1]

The stamp duty surcharge will raise each band by 3%. This means that for properties valued between £125,000 and £250,000, where stamp duty is 2%, buy-to-let landlords will have to pay 5%.

Further important information for landlords comes with the news that for the average buy-to-let purchase costing £184,000, they will have to pay a further £5,520 from April 2016.

There was good news for commercial property investors with 15 or more properties, who are thought to be exempt from the new charges. In addition, Mr Osborne has pledged to fund an extended Help to Buy scheme in London, alongside more money for the Starter Homes programme.

BTL homes hit with increased stamp duty

Capital Pains

In further alterations, buy-to-let landlords will be hit in the pocket by changes to the Capital Gains Tax. From April 2019, they will be permitted to pay any outstanding Capital Gains Tax within 30 days of selling a property, as opposed to waiting until the end of the tax year as the current rules permit.

Landlords are already set to get a lower rate of tax relief on mortgage fees. In this year’s Budget, the chancellor outlined plans for landlords to only receive the basic rate of tax relief (20%) on mortgage payments. This will be phased in from 2017.

‘If it’s the Chancellor’s intention to completely eradicate buy-to-let in the UK then it’s a mystery to us why he doesn’t just come out and say so,’ he added.[1]

Where the money is going

Up to £60m of the funds raised by the stamp duty surcharge will assist home-buyers in England in locations where holiday homes have led to an increase in local prices.

In addition, the Help to Buy scheme will be extended to 2021, a year more than first planned. What’s more, an extension to the scheme in the capital will see purchasers who can raise a 5% deposit given a loan worth up to 40% of the property. This loan will be interest free for 5 years.

The existing maximum loan is for 20% of the property’s value elsewhere in the country.

In total, the Government has pledged to put an extra £6.9bn into housing in England. This includes an extra £2.3bn in loans for the government starter homes programme and £4bn given to housing associations and local authorities to build more houses for shared ownership.

A further £200m will be utilised to build homes for rent, with the aim to allow tenants to save for a deposit.

[1] http://www.propertyreporter.co.uk/hero/btl-and-second-homes-to-be-hit-by-3-rise-in-stamp-duty.html