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More professional landlords are need, claims mortgage lender

Published On: November 25, 2016 at 11:09 am

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A specialist lender has issued a positive outlook for the buy-to-let market, despite the raft of legislations threatening to drive many landlords away.

Paragon Mortgages, which has just posted a 14.2% fall in buy-to-let completions in the year to September, believes the market will pick up sharply. This is due to the fact more rental properties are required to meet demand.

Challenges

John Heron, director of mortgages at Paragon, noted: ‘Whilst the buy-to-let market has had a challenging year, we continue to see the potential the sector has to offer.’[1]

Mr Heron observes that 2016 has been a year of two halves for buy-to-let. Completion levels were very strong in the run up to the stamp duty increases seen in April, since when, as Heron says, there has been a ‘commensurate reduction in activity levels.’[1]

‘With strong rental demand, there will continue to be a growing need for professional landlords to provide quality private rental accommodation and with our 20 years’ experience in the market, we remain very-well positioned to work with these landlords,’ Heron stated.[1]

More professional landlords are need, claims mortgage lender

More professional landlords are need, claims mortgage lender

Autumn Statement

The challenges facing buy-to-let landlords are likely to heighten, following this week’s Autumn Statement. Many have been left frustrated with Chancellor Hammond’s failure to cut or amend stamp duty or the proposed mortgage interest tax relief.

However, the main move was to introduce a ban on letting agent fees. This has led to fears that these charges will be passed onto tenants, in the form of higher rents.

 

[1] https://www.landlordtoday.co.uk/breaking-news/2016/11/strong-rental-demand-means-growing-need-for-professional-landlords

Government Still Doesn’t Understand the UK Property Market, Insists Expert

Published On: November 25, 2016 at 9:37 am

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Categories: Property News

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Following Wednesday’s Autumn Statement, delivered by the new Chancellor, Philip Hammond, many experts in the housing, buy-to-let and financial sectors have spoken out about its effects on the UK property market.

But one sentiment seems to stand out more than any other: The Government still doesn’t really understand the UK property market.

Government Still Doesn't Understand the UK Property Market, Insists Expert

Government Still Doesn’t Understand the UK Property Market, Insists Expert

While some believe that the Government has delivered yet more empty promises on housebuilding, others claim that the letting agent fee ban will force landlords out of the sector and raise rents, causing yet more difficulty for tenants.

Some believe that Hammond was wrong to leave further Stamp Duty reform out of the Autumn Statement, while others, predominantly tenant groups, have welcomed the lettings fee ban.

And the Managing Director of Nova Financial, Paul Mahoney, agrees that the ban may not be as detrimental as expected: “Some have viewed this as a negative, however, I believe it is a storm in a teacup. The fees aren’t generally exorbitant and it should encourage letting agents to be more efficient in the way they structure their revenue, as opposed to hitting tenants with fees they often can’t afford.”

He also claims that any expectation of a U-turn in the mortgage interest tax relief changes was “always a long shot”.

However, he adds: “The raising of the no tax threshold to £11,500 and the higher rate tax threshold to £50,000 will benefit mum and dad investors, who can split their rental income.”

But in terms of boosting the UK property market, was it all bad news?

Mark Lawrinson, the Regional Sales Director of Portico estate agent, explains: “The announcement of additional funding for affordable housing across the UK and new homes in areas ‘of high demand’ is good news for the housing market.

“The planned budget of £2.3 billion on infrastructure surrounding these homes is also a sensible move, but I cannot help but feel the Government still doesn’t truly understand the property market in the UK.”

He goes on: “The schemes the Government launch are typically geared toward the first time buyer, yet what we really need is a way of helping the second steppers move up the property ladder, which would stimulate the market, but also increase stock for first time buyers.

“If we found a way to encourage property owners to move, we would create both greater demand and greater supply. Ultimately, we need to enable the entire market to turn over – and as much as first time buyers are an important part of that, we can’t forever build starter homes. People need to move into bigger houses and different areas as their lives change, so the natural movement of the market needs re-establishing.”

He adds: “Further focus is also required on the red tape and processes surrounding building, and I believe this should be streamlined under one governing body, rather than individual local authorities. This holds up the development of sites through the amount of planning applications required, and more needs to be done on allowing sites – including brownfield sites – to be freed up for development.”

Landlords seeing the Autumn Statement as a missed opportunity

Published On: November 24, 2016 at 10:06 am

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Yesterday saw the controversial, packed and as it turns out, final Autumn Statement delivered by Chancellor Philip Hammond.

During his address, Mr Hammond outlined plans to ban letting agent fees in the very near future. This has understandably left many landlords upset, with them now left to fit the bill for these charges.

Missed Opportunity

In fact, many buy-to-let landlords have been left disappointed, considering the Statement as a missed opportunity, to back those investing in the sector. Failure to alter stamp duty rates, or abolish proposed changes to mortgage interest tax relief have been highlighted as two missed chances.

Stamp Duty reforms announced by previous Chancellor George Osborne have moved to slow the housing market and has only raised half as much money as the Treasury forecasted.

The Exchequer has received £370m less in Stamp Duty than the £700m it expected, analysis has revealed.

Figures compiled by the Council of Mortgage Lenders indicate that the total amount borrowed by buy-to-let landlords slipped on an annual basis. The total dropped by 22% year-on-year to £2.8bn in September, with loans also down by 6% to 18,200. This shows a decline of 26% on the same period in 2015.

Anthony Hesse, managing director at Property Personnel, said: ‘Slashing the rate of stamp duty would have been Philip Hammond’s single most effective fix for UK finances. There is no more economically stimulating activity than house sales and purchases-so it would have been a tax cut that would largely have paid for itself. As a result, the continued stifling of the market is a missed opportunity for both the estate agency sector and the country.’[1]

Landlords seeing the Autumn Statement as a missed opportunity

Landlords seeing the Autumn Statement as a missed opportunity

Tax alterations

According to the National Landlords Association, 440,000 basic-rate tax payers will be driven into a higher tax bracket from April 2017. This is due to changes to mortgage interest tax relief, which will restrict the amount of mortgage interest landlords can offset against tax.

By April 2020, when the measures have been fully withdrawn, it is feared that higher-rate tax payers will only get 50% of their current relief. The worry is that these additional charges will be passed down to tenants.

Richard Lambert, chief executive officer at the National Landlords Association, observed: ‘This policy will push 44% of basic rate tax-paying landlords into a higher bracket, forcing them to either sell up and end perfectly happy tenancies, or increase rents.’[2]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/11/autumn-statement-missed-opportunity-to-support-buy-to-let-landlords

 

Hammond Should Have Addressed Stamp Duty, Insists eMoov

Published On: November 24, 2016 at 9:40 am

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Yesterday, Chancellor Philip Hammond delivered his first Autumn Statement, detailing his fiscal plan for the near future. While housing featured heavily in the strategy, Hammond should have addressed Stamp Duty, insists a leading online estate agent.

Hammond focused on easing the current housing crisis in his first address, including measures to deliver a property market that works for everyone.

However, eMoov.co.uk believes that little has changed in terms of the message being delivered during the Autumn Statement and insists that Hammond was wrong to leave Stamp Duty out.

Housing market boost 

Commenting on yesterday’s Autumn Statement, the Founder and CEO of eMoov, Russell Quirk, says: “The main headline where today’s Autumn Statement is concerned is yet another cash injection for the beleaguered UK property market, with Mr. Hammond pledging £2.3 billion for infrastructure to support 100,000 new homes and £1.4 billion to build 40,000 more affordable houses in the places they are most needed, plus a further boost to Right to Buy.

Hammond Should Have Addressed Stamp Duty, Insists eMoov

Hammond Should Have Addressed Stamp Duty, Insists eMoov

“Talk is cheap, even if the numbers being bandied about today are not. And it remains to be seen how the announcement and the money will actually lead to more houses being built in practice.”

He continues: “Mr. Hammond must forgive the nation for welcoming this announcement with a degree of scepticism, as, like many a chancellor before him, these words often equate to little more than regurgitated rhetoric and a shortfall of 100,000 new homes a year.

“The Government must realise that these announcements are all well and good, but it isn’t the funding that is the issue and, until they address the mechanism itself, little will come of it. Where is the land going to come from? How will the planning process be expedited? These are all questions that need answers with actions, not just words, if the current crisis is to be tackled head on.”

Tenant referencing fees ban 

He discusses the letting agent fee ban, also announced during the Autumn Statement: “Today’s announcement on rental fees is nothing more than opportunistic tokenism and, surprisingly, is stolen straight from Labour’s manifesto. Interestingly, the Chancellor’s own Housing Minister, Gavin Barwell, described banning lettings fees as ‘a bad idea’ as recently as September.

“It is ironic that the Government should be turning its guns again on the private rental sector, given that the absence of Government action in building affordable homes to rent in the social housing sector has led to private landlords having to fill the gap on their behalf.”

He explains: “A ban on tenancy referencing fees is great on the face of it, but the reality is that the agent will make their money regardless, and this will be passed onto the landlord and in turn the tenant through higher rents.

“We’ve seen the same thing happen in Scotland, whereby the landlord must charge more to the tenant in rent to cover the increase charged by the agent. You would think the Government would have known this.”

Stamp Duty 

But while the Chancellor may have addressed certain issues facing aspiring homeowners, he missed the chance to make vital changes to the Stamp Duty system, believes Hammond.

“More of a Stamp Duty refrain, rather than a Stamp Duty reform, by Mr. Hammond today. Stamp Duty is an archaic tax and one that the industry has been crying to be changed in a manner than benefits UK buyers.

“Rather than penalise struggling UK buyers, the Government needs to flip Stamp Duty on its head and make the seller accountable for paying it. This would help those buyers already paying the price of homeownership, whilst those that have benefitted from the appreciating price of their property are in a better position to stomach the sour taste of Stamp Duty tax.”

How will ban on letting agent fees impact landlords?

Published On: November 23, 2016 at 4:07 pm

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Categories: Landlord News,Tenant Fees Ban

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Today saw Chancellor Philip Hammond announce a ban of letting agent fees to be charged to tenants. Unsurprisingly, this move has not gone down well in the sector, with key industry peers fearing that these costs will instead be passed down to tenants.

However, research from TheHouseShop.com has revealed that the would-be financial impact on buy-to-let investors might not actually be as bad as first feared.

Fees

Data from the investigation shows that the average fees charged to tenants in Britain is around £300. In London, this figure rises to around £700.

Letting agents typically charge a buy-to-let landlord between 10-15% of their rental income for a thorough management service. Based on the average UK rent for October 2016 of £902 per month, this will amount to around £95 per month. This in turn is roughly £1,140 over the course of a year’s agreement.

When the additional cost of tenancy fees, (around £300) are factored in, this adds up to an extra £25 per month.

Returns

While this will undoubtedly leave some landlords upset, TheHouseShop.com feels it will not seriously harm their return on investment. Taking the average rent of £902 per month and the average UK yield of 5%, it has calculated the loss in rental income and yield from proposed increase in fees for landlords.

The results can be seen below:

Letting agents fees pictures

[1]

Nick Marr, co-founder of TheHouseShop.com, notes: ‘The figures above show that even if letting agents are forced to pass on the costs of tenancy fees directly to landlords, it will not have a significant impact on the landlord’s overall yield and profits. In fact, the additional loss in returns could be as little as 0.14% when compared to the existing landlord fees structure.’[1]

How will ban on letting agent fees impact landlords?

How will ban on letting agent fees impact landlords?

‘Some landlords will undoubtedly raise their rents as a result of the ban – as we have seen in Scotland – but many will be able to absorb the costs of this new system without substantial losses, meaning tenants should not face a barrage of rent rises once the ban is in place. The other side of the argument here is that perhaps it should be the letting agents themselves who swallow the loss in fees, but tight margins in the High Street lettings market make this an unlikely scenario,’ he continued.[1]

Ban

Addressing the wider impact of a letting fees ban for both agents and landlords, Marr said: ‘Opponents of the proposed ban are claiming that a “short term fix” may seem appealing at first, but that in the long run it will be tenants who suffer as landlords raise rents to cover the higher costs of agency fees.’[1]

‘However, this is not necessarily true. The extra financial pressure on landlords will almost certainly result in them shopping around and trying to find the best price, and as landlords explore alternative options to the traditional letting agency service, I have no doubt that we will see a significant increase in the number of private landlords taking a more DIY approach to renting their properties.’[1]

Concluding, Marr stated: ‘It essentially comes down to a trade-off between convenience and costs, and good, reputable, hard-working letting agents will still be able to justify their costs to landlords.’[1]

[1] http://www.propertyreporter.co.uk/landlords/how-could-the-ban-on-letting-agent-fees-actually-affect-landlords.html

 

Letting Agent Fees to be Banned in Autumn Statement

Published On: November 23, 2016 at 11:24 am

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Categories: Landlord News,Tenant Fees Ban

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It is now widely expected that Chancellor Philip Hammond is to announce a ban on letting agent fees charged to tenants in today’s Autumn Statement.

Presently, tenants can be charged substantial fees for a number of administration tasks, such as conducting reference and Right to Rent checks.

Ban on letting agent fees

Mr Hammond believes that by shifting these costs to landlords, 4.3 million households could save hundreds of pounds.

He also feels that this move could increase competition amongst landlords, who can now search around for the cheapest agent.

However, the move has not gone down well within the industry.

Richard Lambert, Chief Executive Officer at the National Landlords Association, said: ‘The new Chancellor is clearly aware of the pressures facing those living in the private-rented sector, but in attempting to improve affordability he has shown that, like his predecessor, he lacks an understanding of how the whole sector works.’[1]

‘There’s no doubt that some unscrupulous agents have got away with excessive fees and double-charging landlords and tenants for far too long.  Banning letting agent fees will be welcomed by private tenants, at least in the short-term, because they won’t realise that it will boomerang back on them.’[1

Mr Lambert feels that as a result of the changes, ‘Agents will have no other option than to shift the fees on to landlords, which many will argue is more appropriate, since the landlord employs the agent.  But adding to landlords’ costs, on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents.’[1]

Letting Agent Fees to be Banned in Autumn Statement

Letting Agent Fees to be Banned in Autumn Statement

Increased costs for landlords

Richard Price, Executive Director at the UK Association of Letting Agents commented: ‘Arbitrary bans sound appealing as a quick fix, but the problem of affordability in the private-rented sector cannot be addressed by preventing legitimate businesses from charging for their services.’[1

‘A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents,’ he continued.[1]

David Cox, Managing Director of the Association of Residential Letting Agents, described the ban on letting agent fees as a, ‘draconian measure,’ which will have, ‘a profoundly negative impact on the rental market.’[2]

‘It will be the forth assault on the sector in just over a year and do little to help cash-poor renters save enough to get on the housing ladder. This decision is a crowd-pleaser, which will not help renters in the long-term. All of the implications need to be taken into account. Most letting agents do not profit from fees.’[2]

Welcome

However, Campbell Robb, chief executive of Shelter, observed that: ‘Millions of renters in England have felt the financial strain of unfair letting agent fees for far too long, so we are delighted with the Government’s decision to ban them. We have long been campaigning on this issue and it is great to see that the Government has taken note.’[2]

[1] http://www.landlords.org.uk/news-campaigns/news/hammonds-rental-boomerang-industry-bodies-respond-ban-on-letting-fees

[2] http://www.bbc.co.uk/news/business-38065249