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House Prices Would Rise Whether We Stay or Leave the EU

Published On: May 23, 2016 at 10:52 am

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House prices would rise whether we vote to stay in or leave the EU, according to a report from the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA). However, the organisations believe that price increases would be slower if we leave.

They estimate that if the UK votes to remain in the EU on 23rd June, the average house price would be £303,000 by 2018.

House Prices Would Rise Whether We Stay or Leave the EU

House Prices Would Rise Whether We Stay or Leave the EU

However, if the UK instead votes to leave, the average price would rise to £300,800, a difference of £2,200.

The difference would be more marked in London, at £7,500.

The report claims that the slower rate of growth in the event of a Brexit would be caused mainly by less investment in London, foreign companies relocating from the capital, and reduced demand for commercial and residential properties.

The study, compiled by the Centre for Economics and Business research, says that while a Brexit could cause a labour shortage in the housebuilding sector, it may help first time buyers onto the property ladder through lower house prices.

The report adds that while there would be no immediate impact, rent prices could fall as a result of reduced demand. It points out: “Currently, private renting is a more popular choice among UK residents born in non-UK EU countries than for UK born individuals.”

The Managing Director of ARLA, David Cox, believes that a fall in rents could create more housing issues: “The fact that rent costs would face downward pressure is both a blessing and a curse. While renters should face fair and reasonable prices, landlords need to be able to at least break even on any outgoings they have, such as a mortgage.

“If demand eases to such an extent that landlords cannot recuperate costs, we’ll likely see a mass exit from the market, which would then just have the opposite effect on demand as supply falls, and we’d be back to square one.”

Mark Hayward, the Managing Director of the NAEA, comments on the report: “Unfortunately, it’s not as simple as saying that Brexit would have a positive or negative effect on the property market.

“We might like to believe, for example, that the ease in demand and lower prices will allow first time buyers a route into the market, but any transactions may be put off for the short term until the period of uncertainty is over.”

Separately, ratings agency Moody’s has reported that a vote to leave the EU would result in lower house prices, which would benefit first time buyers. The firm also claims that London’s property market would be the most affected by a Brexit and that landlords could struggle to pay their mortgages due to falling rental demand.

Will one-bed flats see largest capital gains in 2016?

Published On: May 23, 2016 at 10:46 am

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An interesting new investigation has found that buy-to-let landlords in the UK could see the best capital gains on a one-bedroom flat over the course of the next year.

However, the same survey from Amicus Property Finance found that two-bedroom flats will generate the largest rental yields over the same period.

Gains

25% of British landlords said that one-bedroom flats are to offer the best capital gains in the next twelve months. This was closely followed by student accommodation in towns and cities, with 24%. 22% of residential landlords said that two-bedroom flats would provide the biggest capital gains, with 21% suggesting three-bedroom flats.

In terms of rental yields, 28% of landlords said that two-bedroom flats were likely to be most profitable. 25% said student accommodation in university hotspots would offer the biggest yields, while 21% selected three-bedroom flats. One-bedroom flats (20%) and new build properties (14%) were next most popular.

Will one-bed flats see largest capital gains in 2016?

Will one-bed flats see largest capital gains in 2016?

Winners

John Jenkins, CEO of Amicus, said, ‘the findings show flats are the clear winners over houses and maisonettes for both capital growth and rental yields and this is reflected in our own experience in servicing professional landlords’ short term borrowing requirements.’[1]

‘Despite some uncertainty in the consumer buy-to-let sector as a result of changes to stamp duty charges, we’re seeing a sustained and growing appetite for short-term property finance driven by the tightening of mainstream bank underwriting requirements and the inability of some lenders to act sufficiently quickly to respond to demand,’ Jenkins continued.[1]

[1] http://www.propertyreporter.co.uk/landlords/landlord-tip-1-bed-flats-to-achieve-biggest-capital-gains-over-next-12-months.html

 

Two industry bodies warn on EU exit impact

Published On: May 19, 2016 at 10:12 am

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Both the National Association of Estate Agents and Association of Residential Letting Agents have warned that leaving the European Union could have ‘damaging consequences,’ on the housing industry.

Despite no conclusive arguments to either leave or remain in the EU, both firms have voiced concerns over construction of new properties should Britain leave.

Worries

Managing director of the National Association of Estate Agents, Mark Hayward, believes the situation is more complex than suggesting a Brexit would be good or bad.

However, a report drawn up by both firms alongside the Centre for Economics and Business Research (CEBR) states that a UK withdrawal from the EU, ‘risks drastically reducing the construction workforce, compromising current plans to build hundreds of thousands of new homes needed to ease the shortage in supply.’[1]

In the 23-page report four particular concerns have been highlighted:

  • Shortage of skills-While the impact of Brexit on migration policies is as yet unconfirmed, any restriction on foreign workers coming into Britain could compromise ability to construct new homes. What’s more, the Government’s target of one million new homes by 2020 could come under threat.Mr Hayward observed that, ‘an out vote could mean that in 10 years’ time we’d find ourselves with a severe skills shortage of construction workers. So even if we then had planning permission, investment and materials to build more housing, we simply wouldn’t have the resource to put the bricks and mortar together. It has the potential to have a very damaging effect on the future housing market.’[1]
  • Foreign investment-The report suggests that an out vote could see first-time buyers given leeway, as demand for housing eases. CEBR figures suggest that in 2014, 19% or 5.3bn of total foreign direct investment into the UK came from EU sources. In 2013, 17% of sales in London’s prime central property market made to non-UK recipients were to EU nationals.
Two industry bodies warn on EU exit impact

Two industry bodies warn on EU exit impact

  • Reduced migration influx impact-At present there are 3.03m UK residents who were born in other EU countries. Should Britain not maintain free labour movement, its total population could decrease by as much as 1.06m. Fewer people will lead to lesser demand, making the market more accessible for first time buyers. However, the report warns that reduced migration will affect the private rental sector: ‘Currently, private renting is a more popular choice among UK residents born in non-UK EU countries than for UK born individuals; if migration reduces the flow of renters from Europe, demand will weaken, which would put downward pressure on rent costs.’ Managing director of ARLA, David Cox, said, ‘the fact that rent costs would face downward pressure is both a blessing and a curse. While renters should face fair and reasonable prices, landlords need to be able to at least break even on any outgoings they have, such as a mortgage. If demand eases to such an extent that landlords cannot recuperate costs, we’ll likely see a mass exit from the market, which would then just have the opposite effect on demand as supply falls-and we’d be back to square one.’[1]
  • Capital Pains-The report also highlights that London has the greatest population of non-UK EU residents, therefore the consequences of a Brexit was be felt more heavily. In 2013/14, 25% of the total of London’s prime property purchasers resided outside of the UK.Mr Cox warns, ‘those whose freedom to work and live in the UK is at risk of Brexit are a key demographic for the private rented sector. Current projections of demand for rental properties therefore could be offset by Brexit. If the sentiment towards London as a safe haven changes, the UK’s largest rental market will feel the brunt of a Brexit.’ Concluding, Mark Hayward said, ‘it’s not as simple as saying that Brexit would have a positive or negative effect on the property market. We might to believe, for example, that the ease in demand and lower prices will allow first time buyers a route into the market, but any transactions may be put off for the short term until the period of uncertainty is over. An ease in demand is likely to be matched or outweighed by a decrease in housing stock, not just from reduced labour, as considered in the research, but also from decreased accessibility to building materials produced in non-UK EU countries. Ultimately, it could have long-lasting and damaging consequences.’[1]

[1] https://www.estateagenttoday.co.uk/breaking-news/2016/5/brexit-could-have-damaging-consequences-warns-naea-and-arla

 

 

NLA Chief Executive Accuses Chancellor of Insulting Landlords

Published On: May 18, 2016 at 11:39 am

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The Chief Executive of the National Landlords Association (NLA), Richard Lambert, has accused Chancellor George Osborne of insulting private landlords.

NLA Chief Executive Accuses Chancellor of Insulting Landlords

NLA Chief Executive Accuses Chancellor of Insulting Landlords

Speaking at the Instinctif Partners Great Housing Market Debate, Lambert addressed the Chancellor’s crackdown on the buy-to-let sector.

He claims that Osborne made a mistake by introducing a 3% Stamp Duty surcharge on buy-to-let properties and by reducing the amount of tax relied that landlords can claim on mortgage interest payments.

As of 1st April, landlords are now charged an extra 3% in Stamp Duty on the purchase of rental properties. This guide will help you understand the tax change: https://www.justlandlords.co.uk/news/landlords-guide-stamp-duty-surcharge/

From April next year, landlords will be hit by the reduction in mortgage interest tax relief. Finance expert Paul Mahoney, of Nova Financial, has explained how this will affect your lettings business: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Lambert said: “[The Government] is now talking of discouraging amateur landlords in favour of institutions, in effect directly insulting my members.”

Lambert warns that many landlords will be unaware of the future changes to mortgage interest tax relief and will be shocked when they start receiving bills from the taxman in the near future.

Nigel Terrington, the Chief Executive of the Paragon Group, insists that the changes do not create a level playing field between landlords and homebuyers – as intended by the Government – as landlords don’t benefit from schemes such as Help to Buy and are charged Capital Gains Tax on accumulated housing wealth, unlike homeowners.

Nick Leeming, the Chairman of estate agent Jackson-Stops & Staff, believes there should be a free market for owners and tenants.

Issues such as the forthcoming EU referendum and changes to the law on gazumping were also discussed at the event.

Rogue landlord and letting agent prosecuted

Published On: May 17, 2016 at 1:43 pm

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Today has seen reports of two more rogues in the buy-to-let sector brought to justice.

Firstly, a letting agent from Oxfordshire was ordered to pay £3,500 alongside costs of £2,700 for letting a HMO in excess of licensed number of people that it was able to hold. In addition, the property was in serious disrepair.

Failings

Mr Carl Afialka, of Bicester, runs Christopher Stanley Letting Agents and manages a HMO in Oxford, which council officers found to be in breach of housing lows.

When officers inspected the property, which was licensed for five people, they were alarmed to found 11 inhabitants. These included a family with two young children living in one room!

In addition, the officers found that a number of HMO licence conditions had not been met. The bathroom had serious damp problems, which in turned led to a build up of mould that couldn’t be cleaned. What’s more, the window frames of the property were rotten, the back door was insecure and the garden was littered with rubbish.

After initially pleading not guilty to the charges at an earlier hearing, Mr Afilaka failed to attend his second hearing earlier this month. As a result, magistrates chose to proceed with the case and he was subsequently found guilty.

Rogue landlord and letting agent prosecuted

Rogue landlord and letting agent prosecuted

Hefty punishment

Meanwhile, a landlord from East London was ordered to pay a whopping £100,000 after developing illegal flats at her property.

At her hearing at Snaresbrook Crown Court, Jaghtar Khaira of Elm Park was told to pay £88,500 after failings under the Proceeds of Crime Act. In addition, she was fined £2,500 for a second offence of failing to comply with an Enforcement Notice and an additional £10,300 in prosecution costs.

Khaira was granted planning permission to construct two flats at her property, but decided to develop four units for rent. This in turn resulted in a Planning Enforcement Notice being issued in 2011. As a result, Khaira was prosecuted and fined at Romford Magistrates Court in 2013. Despite this, she continued to rent out the two extra flats.

After the second prosecution, which resulted in a fine of £101,300, Mr Patrick Keyes, head of regulatory services at Havering Council said:

‘Throughout this investigation we have advised Mrs Khaira how she should comply but she continued to breach the Enforcement Notices and prosecution become the Councils only option.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/landlord-hit-with-100k-fine-for-building-illegal

 

 

Property Industry Calls for a Brexit

Published On: May 17, 2016 at 9:28 am

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The majority of professionals in the property industry – almost two-thirds – believe that a Brexit would have a positive impact on the UK housing market.

A study by conveyancing firm My Home Move found that 65% of property agents and mortgage brokers are calling for the UK to leave the EU in next month’s referendum.

The finding contrasts sharply to warnings that the property market will collapse if Britain votes to leave. Ratings agency Fitch claims that house prices could crash by a huge 25%.

Property Industry Calls for a Brexit

Property Industry Calls for a Brexit

The International Monetary Fund also warns that property prices will go into reverse if we leave.

However, the My Home Move survey strongly suggests that agents will vote to leave the EU. Despite this, the same study shows that 53% of the home moving public is still undecided on which way to vote.

The findings arrive ahead of My Home Move’s annual conference tomorrow.

The research also found that most people working in the property industry (90%) say that a lack of stock and high prices have become the new norm.

Interestingly, those surveyed were more in favour of support for downsizers than help for first time buyers.

A total of 61% wanted greater Government help for downsizers, while just 21% called for more support for first time buyers.

The Chief Executive of My Home Move, Doug Crawford, comments: “The market has been suffering from a lack of stock and high house prices for several years, so we’re not surprised that those at the sharp end of the sector are frustrated by what has become the new norm.

“Recent Government changes to Stamp Duty, alongside schemes like Help to Buy, have kept the market going since the recession, but the findings from our survey would suggest that those closest to the market are seeking even more intervention to shake things up.”

He continues: “Nearly two-thirds of the estate agents and brokers surveyed believe leaving the EU would be positive for the housing market, and 85% of home movers are seeking greater Government assistance for those trying to move up and down the housing ladder.

“However, despite the recent policy move to tax additional homebuyers as a way of encouraging more first time buyers onto the market, there remains a level of scepticism that homeownership levels will rise above the current level by 2025, suggesting that without intervention, market conditions would worsen and generation rent would become an even greater reality for many more people.”

Are you decided on which way you will vote in the EU referendum on 23rd June? And what do you think this would do for the property market?