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NLA’s Latest Campaign Will Help Landlords

Published On: December 15, 2015 at 12:14 pm

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NLA's Latest Campaign Will Help Landlords

NLA’s Latest Campaign Will Help Landlords

The National Landlords Association (NLA) has launched a new campaign that hopes to help landlords in making their lettings businesses more profitable.

Reinventing Renting is designed to identify opportunities for buy-to-let investors.

The campaign includes many useful resources, including guides and presentations, on various topics. They will help landlords:

  • Choose the right investment.
  • Improve financial planning
  • Expand their portfolios and maximise gains.
  • Reduce their exposure to a range of risks associated with renting out property, including: imminent interest rate rises, rent arrears and rogue tenants.

Reinventing Renting focuses on the landlords that are struggling to make a profit, by exploring different business approaches and tenant markets, while offering assistance to landlords hoping to make their business more profitable.

The campaign arrives after announcements in the summer Budget and Autumn Statement, which could seriously hit profitability within the sector.

The NLA has also identified some of the good and bad characteristics of being a landlord in its Vogue or Rogue section.

Chairman of the NLA, Carolyn Uphill, says: “As the leading landlord association, we’re here to provide landlords with all the tools and information needed to make a success of letting.

“Over the next few months, Reinventing Renting will look at some of the key issues for landlords and provide support and tips to improve the way they run their business.

“The campaign has something for both new and experienced landlords and will be particularly useful for those who are struggling to make things work or worried about how the changes to mortgage interest taxation will affect them in the future.”1

For more landlord advice, look here: http://www.landlords.org.uk/reinventingrenting

1 http://www.landlords.org.uk/news-campaigns/news/nla-launches-new-campaign

North West England most lucrative area for landlords

Published On: December 14, 2015 at 3:42 pm

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The North West of England has received an early Christmas present with the news that it is the most lucrative region in Britain for private sector landlords.

Both Manchester and Liverpool made it into the top-four cities for rental yields.

Northern Rule

Online property marketplace LendInvest’s latest quarterly report indicates that Sunderland, Blackburn and Durham also rank highly in the list, as the North as a whole enjoys substantial yields. In terms of house price growth, London and the South East lead the way.

Lendinvest’s report also looks at trends in rental yields, capital gains and total gross return on investment. The top 15 performing postcode regions for capital gains were all located in London and the surrounding area. Inner London however stands in 18th place for rental yield, but top for capital gains.

Capital gains carry on tracking average house prices, with 80% of the 15 best postcode areas also featuring for average house prices. However, the report shows that rental yields are no indication of average house values. Just one of the top 15 postcode areas for rental yields featured in the top 15 for property prices.

Impact

Christian Faes, chief executive of LendInvest, feels that the stamp duty tax changes coming into force next year could have a serious impact on the market. Faes said, ‘there could be some weakening in London’s dominance of capital gains tables if house price growth does soften slightly as forecast and as new buy to let stamp duty hikes take effect.’[1]

‘Inner London margins may narrow slightly, creating opportunities for house prices in other postcode areas, particularly those in the South of England, to better compete,’ he continued. [1]

North West England most lucrative area for landlords

North West England most lucrative area for landlords

Faes went on to say that he feels changes to mortgage interest tax relief and stamp duty for buy to let landlords will ultimately professionalise the market. ‘Landlords whose tax payments under the new regime make letting their properties unsustainable, may make arrangements to leave the market. In turn, we will see fewer highly geared rental properties that push up prices and take stock out of the housing supply for aspiring owner occupiers and first time buyers drawn to densely populated urban area for work.’[1]

Cross Country

Mr Faes also said that there is no one place for market leading yields and capital gains. He believes that 2016 could be the year for the, ‘cross country landlords,’- landlords who live in one city but rent out homes in another.

‘We could expect to see more landlords letting property in the North and Midlands’ major urban areas for more immediate upside, without moving from their family homes in which gains can be longer to materialise,’ he concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-landlords-rents-yields-2015121411318.html

 

 

Stamp Duty rises amount to 11 months net income

Published On: December 14, 2015 at 10:55 am

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New research has found that the cost of the forthcoming 3% stamp duty on buy-to-let properties will be equivalent to 11 months income for the average mortgaged landlord.

An investigation by property services group Countrywide suggests that most private sector landlords looking to buy after April 2016 will attempt to offset this cost by offering less when buying.

At present, rents on newly let properties increased by 2% year on year. This rise was led by markets in the East of England.

Rises

In this year’s Autumn Statement, Chancellor Osborne announced plans to introduce a new 3% stamp duty tax rate for buy-to-let landlords and second home owners.

Research from Countrywide shows that should that larger tax burden not be factored into the purchase price of a property, this would lead to a reduction in gross yield of 0.2%. This is the same as 11 months income for the typical buy-to-let landlord, when borrowing costs are taken into account based on the average LTV of 68%.

Buy-to-let landlords in the South West and the North of England will experience the greatest cost relative to their rental income, with the extra tax burden equivalent to 14 and 12 months rental income respectively. Landlords in the North West of the country will see the least cost hike, accounting for 8 months of income.

The majority of buy-to-let purchases were found to take place in London, the South and East of England. 60% of homes sold in this market during the past year were in these regions. Landlords within these areas face the greatest cash increase in stamp duty of £6,000 on average.

Stamp Duty rises amount to 11 months net income

Stamp Duty rises amount to 11 months net income

Great expectations

It is hoped that the widely anticipated house price growth during 2016 will take some of the sting from the tax increase. Should prices increase at the same rate as in the last five years, the next year will see the cost of additional stamp duty offset.

In the Midlands and the North of England, 16% and 12% of sales are to landlords. What’s more, data from the Countrywide report indicates that the average property purchased in these regions would previously have not faced a stamp duty bill, but will now face a £3,200 tax charge from April.

These changes in stamp duty come as the number of homes available to rent continues to dwindle, with numbers down by 5% year on year.

‘The stamp duty increase will impact landlords’ purchasing power,’ observed Johnny Morris, research director at Countrywide. ‘Many entering the market will be faced with a choice between making a lower offer when buying of having to cover the additional costs themselves, impacting yields.’[1]

Morris went on to say, ‘most landlords view property as a long term investment, on average holding a property for 17 years and larger investors will be exempt from the higher stamp duty rate. This means over the long term the private rented sector will continue to grow, but there’s likely to be a few lumps and bumps along the way as landlords get to grips with and adapt to the changing environment.’[1]

‘It’s unlikely the change to stamp duty will see an immediate impact on rents. Landlords are rarely able to pass on increasing costs to tenants, as rental prices are set by market forces. But if less landlords choose to invest in the sector in the short term, a fall in homes available to rent could put pressure on prices,’ he concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-rental-market-landlords-2015121411312.html

 

Tenant demand grows in Q3

Published On: December 8, 2015 at 11:52 am

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A report from Paragon Mortgages seems to show that tenant demand has risen further during the third quarter of 2015.

The survey of almost 2,000 landlords also showed that rental yields and annual rental income as a percentage of a property value has remained fairly constant throughout 2015.

Increase

Results from the report indicate good news for buy-to-let landlords, with rental yields averaging at 5.6% across the country in Q3. 17% of landlords reported yields between 3% and 4%, with one in ten landlords recording yields of 10% or more.

Yorkshire and the Humber recorded the largest yields in the period with 6.1%, while London reported the lowest with 4.8%. This was surprising considering the capital has the second largest increase in levels of renter demand.

In the East of England, 52% of landlords reported an increase in demand, which was the highest of any area in Q3. This figure dropped to 31% for the North East. Nationally, an average of 41% of landlords said that demand had risen in the period.

This shows a strong annual increase in demand across the country. Demand in the North East has risen from 23% to 31% and in outer London from 42% to 48%.

Tenant demand grows in Q3

Tenant demand grows in Q3

Strong

‘This research shows that yields and tenant demand have remained strong throughout Q3, in common with 2015 overall,’ said John Heron, director of mortgages at Paragon. ‘The figures reflect a steadily improving economic outlook for the UK as a whole and show that, more and more people are actively choosing the flexibility of making a home in the private rented sector.’[1]

‘Yields too have remained stable throughout 2015. Q3’s data shows London and the South East slowing down somewhat, while yields in the region are growing. This represents a welcome rebalancing of the national economy, with some of the heat from London’s economy escaping the M25 and being distributed around the country,’ he added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2015/12/tenant-demand-continues-to-grow-in-q3-while-yields-remain-stable

 

 

What Will Stamp Duty Changes Mean for London Landlords?

Published On: December 3, 2015 at 5:14 pm

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It is believed that the property market will see a rush of buy-to-let investors and second home buyers purchasing property before the increase in Stamp Duty in April. However, experts also warn that existing landlords may sell their portfolios.

In his Autumn Statement, Chancellor George Osborne announced that buy-to-let investors and second home buyers will pay much higher Stamp Duty costs from April next year – they will be charged an additional 3% on existing rates.

For those buying a £400,000 property, Stamp Duty will rise from £10,000 to £22,000 and from £5,000 to £14,000 on a £300,000 house.

More expensive properties will incur tens of thousands of pounds in extra tax.

The Association of Residential Letting Agents (ARLA) believes the additional tax will have a disastrous effect on the private rental sector. It believes that the increase will deter new landlords from entering the market, worsening the shortage of properties to let and pushing up rent prices.

What Will Stamp Duty Changes Mean for London Landlords?

What Will Stamp Duty Changes Mean for London Landlords?

Head of Residential Research at Savills, Lucian Cook, claims that the areas of London already hit by Stamp Duty increases introduced a year ago will be among the most impacted by the latest rise.

He adds: “The likelihood is that this will further suppress transactions and prices in the prime central London market, given the extent to which this market has been supported by purchases from second homeowners and investor-buyers.”1

However, in the short-term, Cook says it is highly likely that some landlords will bring forward their planned purchases before the April deadline.

To avoid paying the additional tax, landlords and second home buyers must, in most cases, have to complete their purchase before 1st April 2016. However, off-plan buyers, which exchanged before the Autumn Statement and won’t complete until after 1st April, will not have to pay the extra charge, according to the Treasury.

Mortgage broker John Charcol’s Ray Boulger believes that with four months before the changes take effect, there could be a rush to buy, as “anyone already thinking of purchasing a buy-to-let or second home will start actively looking”.

However, he warns that this short-term rise in demand could temporarily drive up prices, before they drop again when the charge is enforced: “Buyers need to be careful that price falls after April don’t wipe out the 3% saving they make by rushing to buy now.”

The next few months could also experience a surge in landlords selling their portfolios, notes Rachael Griffin, of investment firm Old Mutual Wealth. The rise in Stamp Duty could be “the final nail in the coffin” for some investors, she warns, following the previous announcement to cut buy-to-let mortgage interest tax relief.

Unlike homeowners, landlords can offset mortgage interest against their rental income to reduce their tax bill. However, the summer Budget revealed that tax relief will be cut to the 20% basic rate, which will be phased in from April 2017.

Although this reduction is expected to raise more than £1 billion in tax by 2021, it could cause some landlords to make a loss.

Additionally, the wear and tear allowance is being revised from April and an earlier deadline for paying Capital Gains Tax (CGT) is due to be implemented.

Boulger comments: “Combining the other tax changes with the 3% Stamp Duty surcharge, it’s easy to see this is an attack on small landlords. Inevitably, some will sell out or not expand their portfolios.”

He also believes that there could be further tax changes for landlords in the future: “Chancellors rarely stop at the first bite of the cherry.”1 

The Treasury will now consult on the details of the Stamp Duty increase, including a possible exemption for firms with large portfolios of rental property.

Experts also hope for a number of grey areas to be clarified, such as the tax on those who temporarily own two properties because they are bridging and of unmarried couples that buy an investment property.

How will all of these financial changes affect your buy-to-let business? Use our Stamp Duty calculator to see how much you will be charged on a new property purchase: /calculator/ 

1 http://www.homesandproperty.co.uk/property-news/will-stamp-duty-hike-turn-buy-to-let-into-buy-to-fret-in-the-capital-a93436.html

Stamp duty changes to cause ‘mayhem’

Published On: November 30, 2015 at 12:54 pm

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A leading broker-focused conveyancing distributor has issued a warning that the upcoming increases in stamp duty for Buy-to-Let homes and second properties could cause, ‘mayhem’ earlier in the new year.

Broker Conveyancing believes that rent hikes effective from April 1st will place enormous pressure on conveyancing firms to meet the deadline over the coming months.

Changes

Those looking to purchase second homes and buy-to-let investment properties will be hit with a 3% extra stamp duty land tax at the beginning of the new tax year. This will represent a considerable increase on the amount presently paid by those in the market.

The conveyancing distributor believes that the sector’s current resources may not stretch to the demands potentially about to be placed upon them. March next year coincides with the Easter break, which is usually a very busy time for the market.

In addition, Broker Conveyancing suggests that other conveyancing firms may start to charge additional premiums on buy-to-let purchases to deal with the added pressure and to discourage too much exposure to buy-to-let business.

Slowdown

What’s more, the firm anticipates a slowdown after 1st April, which would lead to more resource issues for firms to deal with.

Harpal Singh, Managing Director of Broker Conveyancing, said, ‘while I can partly understand why the Chancellor might wish to put the brakes on buy-to-let investment, the method of increasing stamp duty land tax for these purchasers will have a huge impact on the housing market as a whole and could result in a less than smooth process and quite frankly, mayhem.’[1]

Stamp duty changes to cause, 'mayhem'

Stamp duty changes to cause, ‘mayhem’

Singh believes that, ‘the four-month notice period is incredibly short and it is likely to mean a very busy time for all stakeholders, particularly the conveyancing profession who are going to be pushed by all concerned to try and complete purchases before the 31st March next year.’ He thinks, ‘this will mean serious resource issues for these firms, especially when we factor in the double whammy brought about by the timing of the Easter break next year and the fact we’re not just talking about individual investment property completions but also the entire chains that they will sit within.’[1]

Completion Issues

Mr Singh went on to say, ‘another conveyancing issue will be the ‘no completion, no fee’ deals currently on offer – if these buy-to-let and second home purchases do not complete then there is a greater likelihood of them falling through. It seems almost certain that buy-to-let conveyancing fees will rise in order to cope with this, the extra workload, and I wouldn’t be surprised to see some firms pulling back on their ‘no completion, no fee’ offers.’[1]

‘It will be apparent to all advisers that ensuring their buy-to-let clients deal with specialist conveyancing firms is an absolute necessity in order to have that chance of securing a pre-1st April completion. Finally, we have to consider the impact on the market after this deadline is passed – we are likely to see a considerable slowdown and conveyancing firms, along with many other stakeholders, could move from feast to famine. Resource and business issues will need to be managed carefully in such an environment,’ he concluded.[1)

[1] http://www.propertyreporter.co.uk/finance/stamp-duty-changes-to-cause-conveyancing-mayhem.html