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Em Morley

BTL investors seemingly undeterred by Stamp Duty

Published On: February 1, 2017 at 12:38 pm

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New data released from the Council of Mortgage Lenders indicates that the number of homes eligible to pay stamp duty rose to 62,800 in Q4 of 2016.

This was a rise from 56,200 in Q3 and 30,400 in Q2 and suggests that people are still believing in the buy-to-let sector.

Stamp Duty rises

The introduction of the 3% increase in Stamp Duty during April of last year was widely expected to deter many investors from purchasing. However, the lure of high yields, low void periods and capital appreciation is still proving high for a number of people.

Many investors are still adding to their portfolios , reflected in rise in the amount that buy-to-let investors borrowed to invest in property during the final stages of the year.

Landlords borrowed £3.2bn in November 2016, up by 10% month-on-month, the greatest amount since the stamp duty changes were introduced.

The Treasury made £1.19m from the additional surcharge on second homes since the second quarter of last year.

BTL investors seemingly undeterred by Stamp Duty

BTL investors seemingly undeterred by Stamp Duty

Windfall

Nick Leeming, chairman Jackson-Stops & Staff chairman, said: ‘So far £1.19m worth of stamp duty receipts are estimated to be attributable to the additional 3% element payable on second homes, a significant windfall for Treasury coffers.’[1]

‘Between Q2 and Q3 the number of second homes liable for the 3% surcharge nearly doubled. This increase is understandable as many buy-to-let investors would likely have rushed to make purchases before April 1st, but the number of liable second home transactions is up again in Q4 to 62,800. The data suggests that buy-to-let investors are not being deterred by the new tax which is supposed to be dampening demand from this group to the benefit of first-time buyers. We will see the true impact of this policy in time, but my fear is that additional costs will be passed on to tenants,’ he continued.[1]

Concluding, Leeming noted: ‘The better solution is a real concerted drive to build more homes, rather than targeting buy-to-let investors – I hope the upcoming Housing White Paper contains a real blueprint for change in this regard.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/1/buy-to-let-landlords-undeterred-by-stamp-duty-surcharge

The Secrets to a Long-Lasting Tenancy

Published On: February 1, 2017 at 11:12 am

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The Secret to Securing a Long-Lasting Tenancy

James Davis – Portfolio landlord & property expert

The Secrets to a Long-Lasting Tenancy

The Secrets to a Long-Lasting Tenancy

After being a landlord for 22 years and becoming increasingly frustrated with the lack of quality tenant find services for landlords, James started Upad. Upad has mastered the intricacies of online to provide landlords a service they can rely on. The skill is not always how fast you can find a tenant, but getting the right tenant for a lasting tenancy. In this article, James reveals how.

Viewings are the most important part of marketing a property. Do not leave these opportunities to chance. On average, it takes between four and six viewings to secure a letting and 90% of tenants would prefer to meet the landlord before making a decision.

You must be there to sell your property, but, more importantly, you must be there to find the right tenant.

By all means, go in with the key benefits of your property at the forefront of your mind. However, don’t show off your property without taking the time to interrogate your potential tenants. A property may be your biggest asset and you are completely within your rights to ask viewers as many questions as you like.

Engage your landlord instinct

Gut feel is a wonderful thing if understood correctly. Your instinctive impression of someone is often made up of some important factors, such as, do they look presentable and are they likeable? Tenants may read this as being judgmental, but if someone looks well-kept and is naturally easy to get along with, it’s a good indicator of how they may be as a tenant.

More importantly, with rent arrears on the rise, you need to communicate so that both parties have complete clarity over what is to be agreed.

A great way to begin is to present the property in the condition that you wish the tenant to leave it in. That should be made clear to the tenant from the outset. Also, I advise carrying a copy of the tenancy agreement, highlighting key parts in person to ensure that they’ve understood what is required of them. Covering the logistics of the deposit and the tenancy start date will prevent any stutters in the process. You can also walk through some practical examples of wear and tear to help improve their understanding of that inevitable grey area.

The written word is king

Having a clear opinion of those viewing your property will help your chances of a problem-free tenancy. That said, there is nothing more critical than the written word. A tenant sign-up can be complex and littered with pitfalls, so be detailed and use support services to help cover all grounds.

For more useful tips from the UK’s largest online letting agent, please visit: https://www.upad.co.uk/hub

Steady Start to the Year for UK House Prices, Reports Nationwide

Published On: February 1, 2017 at 10:08 am

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Figures for January show a steady start to the year for UK house prices, according to the latest House Price Index from Nationwide.

Over the month, the annual rate of growth for UK house prices fell slightly to 4.3%, from 4.5% in December 2016. The monthly increase in January also slowed, from 0.8% to 0.2%.

Steady Start to the Year for UK House Prices, Reports Nationwide

Steady Start to the Year for UK House Prices, Reports Nationwide

Nevertheless, the steady start of the year takes UK house prices to an average of £205,240, from £205,898 in the previous month.

The Chief Economist at Nationwide, Robert Gardner, comments on the report: “The outlook for the housing market remains clouded, reflecting the uncertainty surrounding economic prospects more broadly.

“On the one hand, there are grounds for optimism. The economy has remained far stronger than expected in the wake of the Brexit vote. Recent data indicates that the economy didn’t slow in the second half of 2016 and the unemployment rate remained stable, at an 11-year low in the three months to November.”

Nonetheless, he continues: “However, there are tentative signs that conditions may be about to soften. Employment growth has moderated, and while wage growth has edged up in recent months in real terms (i.e. after adjusting for inflation), earnings growth has already slowed.

“With inflation set to rise further in the months ahead as a result of the weaker pound, real wages are likely to come under further pressure. Employment growth is also likely to continue to moderate, should the economy slow as most forecasters expect.”

He adds: “On balance, we agree with the consensus view that the economy is likely to slow through 2017 as the squeeze on household budgets intensifies and heightened uncertainty weighs on business investment and hiring.

“Nevertheless, we continue to believe that a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices.”

Following the release of the report on UK house prices, the CEO of online estate agent eMoov.co.uk, Russell Quirk, says: “Today is the first look at house price movement for the New Year, as the market whirs back into life after Christmas and, on the face of it, the overarching stability and market confidence that was seen throughout 2016 seems to have spilt over into 2017.

“It’s fair to say that as far as external influences are concerned, 2017 has already thrown up its fair share of curve balls, particularly across the pond. But the ripple effects of these distance influences are unlikely to reach the UK property market, unless you own a second home in high-end London.”

He goes on: “That said, this year is probably the year we see some form of the knock-on effect from the turbulence of 2016 where price growth is concerned. But this is likely to come in the form of a slower rate of escalation rather than a negative movement.

“Despite this potential marginal slowdown, it is widely predicted that the market will remain robust throughout the coming year, and prices will maintain their upward trend, which certainly seems to be the case based on today’s numbers.”

He concludes: “A New Year and another increase in house prices will provide a positive outlook for UK homeowners in 2017, perhaps not so positive for those still struggling to buy.”

Do you believe UK house prices will continue growing this year?

RLA Calls on Government to Delay Tax Changes Following Higher than Forecast Stamp Duty Revenue

Published On: February 1, 2017 at 9:29 am

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The Residential Landlords Association (RLA) has called on the Government to delay its forthcoming tax changes for buy-to-let landlords, following the release of figures that show higher than forecast Stamp Duty revenue as a result of last year’s surcharge introduction.

RLA Calls on Government to Delay Tax Changes Following Higher than Forecast Stamp Duty Revenue

RLA Calls on Government to Delay Tax Changes Following Higher than Forecast Stamp Duty Revenue

Since April 2016, purchasers of rental properties and second homes have been charged an additional 3% in Stamp Duty. At the time, the Government predicted that the surcharge would raise an additional £630m in the first year.

However, figures published yesterday from HM Revenue & Customs (HMRC) show that in just the first nine months, the tax hike had brought in £1.19 billion – £560m more than forecast for the whole year. If this rate continues, the RLA warns that revenue for the year will exceed £1.58 billion – almost £1 billion more than projected.

In November, the Office for Budget Responsibility predicted that, in its first four years, the surcharge would raise £3.1 billion more than expected.

The RLA is calling on the Government to use this extra revenue to scrap planned tax changes to the amount of relief that landlords can claim on finance costs, and prevent investors from leaving the sector or increasing rents.

One RLA survey found that 58% of landlords are considering further reducing investment in rental properties because of the tax changes. Some 66% of investors feel the tax changes will place upwards pressure on rent prices.

At the very least, the RLA believes that the Government should delay the introduction of the restriction, which is planned for April, to enable a better assessment of the likely impact of the tax changes to be conducted.

The Policy Director of the RLA, David Smith, says: “In raising nearly twice as much in just nine months as the tax was predicted to make in one year, this Stamp Duty windfall gives the Government a chance to back the rental market and support the development of new homes, which we desperately need.

“At no stage has evidence been published to support the assertion that landlords are taxed more favourably than homeowners, or that they are squeezing first time buyers out of the market. Assessments by the Institute for Fiscal Studies and the London School of Economics contradict the Treasury’s position completely. It is also nonsense for HMRC to suggest that one in five landlords will be affected by the mortgage interest changes, when what matters is the number of properties affected.”

He continues: “The Government has received far more money than it expected. We urge them to use this to support the country’s tenants and undertake a fuller impact assessment of a policy that has the potential to cause untold damage to the rental market.”

Do you support the RLA’s call for a delay in the introduction of the tax changes?

Barclays launches new 10 year BTL fix

Published On: January 31, 2017 at 2:30 pm

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Barclays has become the latest lender to offer buy-to-let landlords an opportunity to take advantage of low interest rates. However, the Bank has moved to offer this incentive for a full decade.

The ten-year buy-to-let let mortgage is fixed at 2.99% and comes with a £2,000 fee. It is not subject to strict rental income requirements due to the length of the loan, which has led to suggestions that some buy-to-let investors could brrow more than could on other shorter-term fixed deals.

Stringent Checks

For mortgage products with terms up to five years, the lender requires landlords to illustrate their rental income can cover their mortgage payment by a ratio of 145%, should their mortgage rate increase to 5.5%. However, this rule is waived in favour of a more flexible ‘affordability calculator, on products of five years or more.

Jonathan Harris, director of mortgage broker Anderson Harris, said on the new product: ‘A 10-year fix for buy-to-let is unheard of and the result of changing circumstances for the sector. What is exciting about this product is that the affordability calculator takes into account the applicant’s overall income and expenditure position – so massively benefits those applicants with strong incomes and limited commitments.’[1]

Barclays launches new 10 year BTL fix

Barclays launches new 10 year BTL fix

‘The upshot is that they can borrow more than previously – a welcome innovation to recent restrictive practices in the buy-to-let market,’ he added.[1]

Landlords considering this product should be wary that the product comes with an exit charge of 5%, which could be a gamble should investors be unsure of what their future holds.

[1] https://www.landlordtoday.co.uk/breaking-news/2017/1/barclays-unveils-10-year-fix-buy-to-let-mortgage-at-2-99

 

Tenancy Deposits in London Hit the Highest Level Ever

Published On: January 31, 2017 at 11:07 am

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Average tenancy deposits in London have hit the highest level ever, while the typical deposit in England and Wales continue to hover just below £1,000, according to the latest figures from The Deposit Protection Service (The DPS).

Tenancy Deposits in London Hit the Highest Level Ever

Tenancy Deposits in London Hit the Highest Level Ever

The firm’s Tenancy Deposit Ratings show that the average tenancy deposit between October and December 2016 stood at £970.18.

However, properties with London postcodes set a new all-time high during the period, with tenancy deposits averaging £1,831.14 – more than double that for areas outside of the capital (£883.21).

Julian Foster, the Managing Director of The DPS, comments: “It’s important that landlords have protection against damage and other problems that can arise when they rent out property, but tenancy deposits can be demanding sums for tenants to raise when they move.

“However, both parties can have peace of mind over the money when it is protected with The DPS, with our secure and easy processes backed up with a free, impartial dispute resolution service on the rare occasions it is needed.

“The DPS is the UK’s largest protector of tenancy deposits, and we’ve been entrusted with over 4.7m since launching a decade ago.”

Landlords, remember to stick to the law surrounding the protection of tenancy deposits: /landlords-guide-tenancy-deposits/

While The DPS’s figure for October to December represents a £154.40 increase on July to September, it is just 30p lower than April to June, with the third quarter typically experiencing a dip, as students return to rental accommodation ahead of the new academic year.

The average tenancy deposit for the fourth quarter of 2016 also represents a £21.88 rise on the same period in 2015 (£948.31) and a £117.81 increase on the fourth quarter of 2014 (£852.37).

The research found that Sunderland has the lowest tenancy deposits in England and Wales, with the average cost in the SR postcode less than three times lower (£490.13) than that in London.

Have you put your tenancy deposits up over the past few months?