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Em Morley

Policy changes to increase costs for buy-to-let landlords

Published On: December 13, 2016 at 12:40 pm

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Categories: Finance News

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Undoubtedly, the current market is a tough one in which to be a buy-to-let let landlord. The number of measures aimed at curbing the market have led to many concerns that investors with lower profit margins could well end up making a loss.

Some could well be pushed out of the market completely.

Challenging changes

The introduction of the 3% stamp duty surcharge, alterations to mortgage interest tax relief and Right to Rent checks are just some of the measures that have impacted on landlords over the last year.

Now, the Bank of England’s Financial Policy Committee has been granted increased powers over the buy-to-let market.

John Heron, director of mortgages at Paragon, believes, ‘it is clear that this will need to be reflected in lender affordability assessments.’[1]

‘Government policy towards the private rented sector will increase costs for landlords. The Prudential Regulation Authority’s supervisory statement released in September this year is helpful in ensuring that lenders approach this in a consistent fashion,’ he continued.[1]

Policy changes to increase costs for buy-to-let landlords

Policy changes to increase costs for buy-to-let landlords

Affordability concerns

Paragon is the latest lender to make changes to its affordability assessment for buy-to-let mortgages, to take into account the increase in costs that some landlords will face as a result of the alterations in mortgage interest rate relief.

The lender is bringing in graduated interest coverage ratio, in order to tailor to each individual landlord’s tax status.

Landlords paying a basic rate of income tax will carry on being assessed at a ratio of 125%. However, landlords paying a greater rate of tax will be assessed with an interest coverage ratio of 140%.

Concluding, Heron said: ‘The changes that we’re announcing are designed to tailor affordability to each landlord’s individual circumstances, whilst keeping the application process straightforward for brokers and their customers.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/12/government-policy-towards-the-prs-will-increase-costs-for-landlords

House Price Growth Down Across England

Published On: December 13, 2016 at 11:51 am

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Categories: Property News

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House price growth is down on a monthly basis across England, according to the latest House Price Index from the Land Registry and the Office for National Statistics (ONS).

In the UK as a whole, house prices have risen by 6.9% in the last year and 0.1% over the month to October.

House Price Growth Down Across England

House Price Growth Down Across England

However, this trend is reversed in England, as prices have dropped by 0.1% month-on-month. Nevertheless, growth still stands at 7.4% on an annual basis.

The annual rate of growth is only marginally higher in the capital, at 7.7%, with London house prices falling by a significant 1.2% between September and October.

The East of England enjoyed the greatest monthly and annual growth, while the North East experienced the greatest month-on-month decline, as well as the slowest annual increase.

Russell Quirk, the Founder and CEO of eMoov, comments on the latest index: “It would seem that London has taken a backseat when it comes to the driving force behind UK house price growth, having suffered a 1.2% drop month-on-month, despite monthly growth creeping up by 0.1% across the UK as a whole.

“The industry will really start to stutter to a halt now as Christmas fast approaches, and so any panic over falling house prices should really be taken with a pinch of salt. Not only will buyer demand drop right off as thoughts turn to the stress of the festive season, but many sellers will also freeze the marketing of their property, ready to hit the ground running again in January.”

He continues: “Although there is a great marketing push behind the Boxing Day bounce, and the number of people that log on after the Queen’s speech to surf the property portals, this has little benefit to actual sellers, as those full of Christmas merriment are unlikely to be serious in their search. So it really is worthwhile to enjoy your time with friends and family and prepare for the onslaught of buyer interest that will come with the New Year.”

The Senior Economist at PwC, Richard Snook, also has his take on the recent figures: “The final official housing release from the ONS and Land Registry before Christmas shows that average UK house inflation was 6.9% in the year to October – barely changed from 7.0% in September. This takes the average price of a UK home to £217,000.

“Whilst the annual inflation rate remains high, prices have barely moved over the last three months. If this trend continues into 2017, we will see a pronounced drop in growth rates in the New Year. We project that UK house price growth for 2017 could range between 2-5%.

“The picture was mixed across the regions, with monthly price declines of over 1% in London, the North East and the North West. However, monthly growth is volatile and it is too early to call a slowdown in these areas.”

We will continue to keep you updated of any changes to house price growth across the UK at Landlord News.

Mandatory HMO licensing set to be extended

Published On: December 13, 2016 at 11:28 am

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The Department for Communities and Local Government has now ended its consultation on HMO and residential licensing reforms, which ended yesterday.

This consultation encouraged buy-to-let landlords to air their opinions on the proposed alterations. It came before plans to make numerous changes though secondary legislation, in order to raise the number of properties in England subject to mandatory licensing.

HMO Proposals

Proposed alterations to HMO licensing include:

  • Removal of the story rules, so all properties, regardless of floors, with five or more people from two or more households, are in scope. This will allow local authorities to combat poor living standards, migration and other issues seen in smaller properties.
  • Extension of mandatory licensing to flats both above and below business premises, regardless of the number of storeys.
  • Introduce a minimum room sixe of 6.52sqm in line with the Housing Act 1985 in order to close a loophole created which allows some landlords to let rooms too small for tenants to occupy.

Fines

Under the proposals, which could come into force early next year, a landlord that fails to obtain a licence will be liable to pay an unlimited fine.

Housing and planning Gavin Barwell, noted: ‘In order to build a country that truly works for everyone we must ensure that everyone has somewhere safe and secure to live. These measures will give councils the powers they need to tackle poor-quality rental homes in their area.’[1]

‘By driving out rogue landlords that flout the rules of business, we are raising standards and giving tenants the protection they need,’ he added.[1]

Mandatory HMO licensing set to be extended

Mandatory HMO licensing set to be extended

Licensing

It is forecasted that the proposals will bring a further 174,000 HMOs in line with mandatory licensing.

However, David Cox, managing director of the Association of Residential Letting Agents, has lambasted the amendments.

Cox noted: ‘Landlord licensing doesn’t work. Councils already have a wide variety of powers to prosecute for poor property conditions and bad management practices, with penalties ranging from fines to seizure of property and even imprisonment.’[1]

‘But councils don’t have the resources to undertake effective enforcement action. Imposing more burdens on councils will not mean improved standards and better conditions for tenants – it will merely mean more laws that are not being enforced.’[1]

Continuing, Cox said: ‘Further, we have to consider the unintended consequences of minimum room sizes. Some people are happy to take small rooms to keep their costs down. If these rooms are no longer available, where are people supposed to live?’[1]

‘What’s more, if a small room in a property can no longer be let out, the costs of that room will be spread across the other tenants living in the property; pushing up their rents. A habitable room is essential but a one-size-fits-all policy doesn’t always work,’ he concluded.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/12/government-set-to-extend-mandatory-licensing-of-hmos-in-england

 

Liverpool experiencing surge in student property demand

Published On: December 13, 2016 at 10:23 am

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Liverpool’s student population is continuing to surge, with numbers increasing from 50,000 in 2015 to 60,000 this year.

As such, demand for high-quality student property in the city is also on the rise. Boasting one of the largest universities in the UK, 60% of Liverpool’s students require accommodation.

Soaring student demand

New research from The Mistoria Group indicates that there has been an increase of 37% in demand for shared student properties in the city and surrounding regions during the last 18 months.

Good quality, HMO properties are in serious demand, as are purpose-built developments throughout the region.

Data from the report shows that Liverpool offers some of the greatest rental yields outside of London, around 5.15%. In the capital, returns are fairly low-4.86% in outer London and 4.71% in the centre.

Despite London being a popular buy-to-let hotspot, The Mistoria Group’s research reveals that the North West has been the best area for yields during the last five years.

Scouse success

Mr Mish Liyanage, Managing Director of The Mistoria Group, noted: ‘Liverpool is becoming a city for property investors with more building applications being filed every month. We have seen a steep rise in buy-to-let investors looking for refurbished property within 3 miles of the University – up 28% year on year.’[1]

‘Liverpool is a booming University City and it gives investors the opportunity to acquire high yielding property with excellent occupancy rates. Research shows that Liverpool is one of the  UK’s top five largest rental markets outside of London. Many post graduate students are staying on in the city to work and this is driving demand for affordable, but high quality rental accommodation,’ he continued.[1]

Liverpool experiencing surge in student property demand

Liverpool experiencing surge in student property demand

Redevelopment

Liyanage noted: ‘The city is undergoing a significant redevelopment, with more than £1bn of projects, including a 34-storey triple tower residential development. There are a total of 10 developments, which are set to transform the city centre.’[1]

‘As we mainly specialize in student lets Rent prices of our properties start around £85 per week per room including bills but on ensuits they can be high as £110 per week.  For example, in L6, L7, L8 and L15 post codes are very popular with the students and Investors can acquire a high quality 3 bed  HMO which will house for students, from £120K onwards.  The return on investment is very attractive too, with 13% (8% cash rental and 5% capital growth),’ he concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/liverpool-sees-surge-in-demand-for-student-property.html

 

The Office is the Least Used Room in British Homes

Published On: December 13, 2016 at 10:14 am

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Categories: Property News

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The office has been named the least used room in British homes, knocking the dining room off the top spot, according to new research conducted by Ocean Finance.

The Office is the Least Used Room in British Homes

The Office is the Least Used Room in British Homes

The study found that the office sees less action than any other room in British homes, with more than a third (37%) of respondents admitting that their family spends the least time in there.

Previously consistent at the bottom of the tally, the dining room now ranks as the second least used room in the home. Once a place where families would enjoy quality time together each evening over dinner, use of the dining room is still dwindling. However, with Christmas now less than two weeks away, more families may be making use of the room yet again.

When it comes to spending time together, households are more likely to do so in front of the television. Almost seven in ten (68%) said their family spends the most time in the living room.

Landlords should take the research into account when renting out a property – it may be worth converting an office into another bedroom, knocking the kitchen through into the dining room to create a more open space, and focusing on making the living room as comfortable as possible.

The spokesperson for Ocean Finance, Ian Williams, says: “An office in a house is a favoured attribute when buyers are looking for a new home, however, the reality is that it is more than likely to be used as a large storage cupboard, barely entered into, than its original purpose.

“The same could be said for the dining room. Not that long ago, the dining room was the main place the family would assemble, to enjoy a meal as a family at the end of the day or to eat a hearty family breakfast at the weekend. However, today, this space has fallen into disuse in many homes across the UK.”

He adds: “Christmas could be the one exception to the rule, as families usually decide to celebrate the festive occasion by eating together in a more formal space than the kitchen-diner or living room – will there be a revival in your home?”

Remember that many British homes are being rented from private landlords, so focus on what families are looking for to secure happy and reliable tenants.

Letting Your Property in Winter – 4 Useful Tips

Published On: December 13, 2016 at 9:28 am

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Finding new tenants for your rental property during the winter months can prove to be a lot harder as compared to all other times of the year. Generally, people tend to avoid moving house in winter, as it poses its own set of problems. However, there are still people moving home during the cold months, for one reason or another, and if you channel your efforts in the right direction, you will be able to find new tenants for your rental. Here are a few tips on how to go about letting your property in winter.

  1. Diversify your marketing

There are different routes tenants take for finding a rental property. About 80% of people search predominantly online. However, if you want to reach as many potential house movers as possible, you should use all other marketing channels you have available too. Don’t neglect the remaining 20% of people – one of them might be your next tenant.

Apart from placing ads online, use the local to let boards to reach people searching for a rental in your particular locality.

Using local classifieds are another marketing strategy you should make the most of. These are preferred by people who want to avoid using letting agents and paying their often high fees.

Letting Your Property in Winter - 4 Useful Tips

Letting Your Property in Winter – 4 Useful Tips

Diversifying your marketing strategy will let you capture a wider audience and, especially in winter, the more people know you are letting your property, the better your chances for closing the deal.

  1. Offer incentives to potential tenants

It’s a great idea, especially in the slow winter months, to offer your potential tenants some kind of an incentive for applying for your rental property. Here’s what you can offer them:

No application fees

Letting agents can sometimes charge as much as £300 for applying for a rental. Many house movers try to avoid that fee by searching for properties to let from private landlords. Advertising that you are not charging any application fees can bring a surprising amount of applicants your way.

Half a rent, or no rent at all, for the first month

This is a really lucrative offer, especially around the holiday season, when tenants usually have limited funds. Sacrificing half or one month’s rent can help you find a tenant a lot faster, and offering this incentive will certainly pay off.

Flexible terms on furniture

If your tenant needs a certain furniture piece, like a wardrobe or bed, it pays off to arrange that piece of furniture for them rather than losing a tenant and a month’s rent. Similarly, if you are letting a furnished property and the tenant wants to bring in their own piece of furniture, like a bed for instance, you should remove the bed from your rental home to make room for it. Being flexible on furniture can help you find a tenant a lot faster, and it is a thought worth considering in the winter, when there are far fewer people who are willing to go through house removals.

  1. Come up with fresh advertising

Usually, a property newly put up on the market is let within the first two weeks. However, winter months can be slower and if your rental has been on the letting market for more than two weeks, you should consider freshening up your advertising. Re-write the property’s description, take fresh photos, point out the good sides of your rental, etc. Re-launch your ad and the audience will view it as a new rental property on the market.

  1. Adjust the price

Last but not least, if you are finding it hard to find tenants for your property in winter, you should reconsider the rental price. Check out what your competitors are offering, re-evaluate your property, decide on a realistic letting price and bring that down by 5%. This discount will draw in more potential tenants, as they will know they are saving in the long-term. It can turn out a lot costlier to lose one month’s rent rather than offer a 5% discount monthly – it adds up to just 60% of a month’s rent over 12 months.

If your property is vacant at the end of autumn or your current tenants are about to move out before winter starts, you should plan well in advance and start advertising your rental at least a month before it becomes vacant. As people are more reluctant to go through house relocation in the winter months, you should do your best to make your property more appealing to potential movers. These four tips would be a great way to start.