Search Results For: buy to rent sector

Autumn Statement: The industry reacts

Published On: November 29, 2015 at 10:02 am

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The Autumn Statement and Spending Review saw Chancellor Osborne pile more financial misery on buy-to-let landlords. Mr Osborne announced that the government is to raise stamp duty on buy-to-let properties and second homes by 3%.

These alterations are planned to come into force in April 2016.

Reaction

Understandably, there has been a heated reaction to the news across the industry.

Richard Lambert, CEO of the National Landlords Association, believes, ‘the Chancellor’s political intention is crystal clear, he wants to choke off future investment in private properties to rent.’ [1]

‘If it’s the Chancellor’s intention to completely eradicate buy-to-let in the UK then it’s a mystery to us why he doesn’t just come out and say so,’ he added.[1]

Paul Smee, Director General at CML said, ‘additional stamp duty on buy-to-let transactions come hot on the heels of the forthcoming tax changes to landlords already announced. The Government will need to keep a careful eye on the cumulative effects; with the private rented sector housing around a fifth of the population, we do need to avoid unintended consequences.’[1]

Catastrophic

David Cox, managing director of the Association of Residential Letting Agents (ARLA) described the increases as, ‘catastrophic news for the private rental sector ,’ considering the, ‘recent changes to mortgage interest tax relief and the annual wear and tear allowance.’ He feels that, ‘increasing tax for landlords will increase rents and reduce property standards for tenants.’[1]

Cox fears that, ‘to make owning a BTL property financially viable, landlords will need to pass on the increased stamp-duty costs to tenants, who will in turn see less spent on maintaining their property and of course see increased rents.’[1]

Autumn Statement: The industry reacts

Autumn Statement: The industry reacts

He also believes that the changes, will, ‘deter new landlords from entering the market, pushing the gap between dwindling supply of available property and growing demand even further apart.’[1]

Stuart Law, CEO at Assetz for Investors, said, ‘the buy-to let investor should not be blamed for house price rises, rather this is down to the chronic shortage of housebuilding in this country which is compounded by population growth. We would therefore advise caution against penalising this group of investors when actually other policy areas hold the key to unlock the solution.’[1]

Blow

Alex Gosling, CEO of online estate agents HouseSimple.com simply said, ‘ouch.’ He did go on to say that the changes in stamp duty were, ‘another blow to landlords, so soon after the cut in mortgage interest tax relief.’ He also described George Osborne as, ‘enemy No1 for the buy-to-let sector.’[1]

‘Hopefully, this hasn’t sounded the death knell for buy-to-let,’ he added.[1]

Jonathan Hopper, managing director of buying agents Garrington Property Finders noted that, ‘landlords are under attack again,’ calling the move, ‘Osborne’s buy-to-let double whammy.’ He believes buy-to-let landlords are, ‘going to get sledge-hammered with a bigger stamp duty tax bill.’[1]

He went on to ask, ‘why does Osborne have such a grudge against the buy-to-let sector?’[1]

A question that will continue to provoke debate, methinks.

[1] http://www.propertyreporter.co.uk/hero/btl-and-second-homes-to-be-hit-by-3-rise-in-stamp-duty.html

 

National register of BTL properties requested

Published On: November 23, 2015 at 10:19 am

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A leading property investment search portal has put forwards an online petition with the help of the UK Parliament, requesting a national register of buy to let private rental properties.

Founder of Buy2Let.com Martin Wilkinson, is campaigning for a register of transactions completed by buy to let investors, in order to assist in removing rogue landlords from the market.

Slack

Mr Wilkinson believes that despite recent attempts by the Bank of England to stifle the buy-to-let sector, a chronic shortage of properties available, coupled with increasing house prices, means that the private rental sector picks up the slack.

‘We frequently see reports and statistics on the owner-occupier market but the lack of reliable, comprehensive data on the private rental and buy to let sector means no one-including politicians, mortgage lenders and estate agents-has a clear picture of what is happening in the market,’ observed Wilkinson. ‘In much the same way as a mortgage charge is registered on traditional house sales, we think there should be a similar requirement for buy to let purchases.’[1]

National register of BTL properties requested

National register of BTL properties requested

Wilkinson claims that the Buy to Let sector makes over £100bn in transaction each year. With this in mind, he said, ‘it’s vital that we capture the true scale of this important market and at the same time, use the data gathered to identify and stamp out malpractice and rogue landlords.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2015/11/buy-to-let-chief-wants-register-to-deter-rogue-agents-and-landlords

 

350,000 Households to be Priced Out of Market by 2020

Published On: November 18, 2015 at 3:09 pm

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A shortage of affordable homes will exclude at least 350,000 households from the property market by 2020, insists a new report from Savills.

The data arrives as property portal Rightmove reports the smallest November decline in asking prices for four years, highlighting how the rising cost of private sector housing is pricing out households on low and middle incomes.

The report from Savills suggests that in the next five years, 70,000 new households per year will be unable to afford to rent or buy homes at market rates, unless they are assisted in some way. This means that by 2020, 350,000 will require housing priced at below market rates.

The firm has analysed current incomes and prices for buying and renting, assuming a household can pay up to 30% of its gross income on housing.

350,000 Households to be Priced Out of Market by 2020

350,000 Households to be Priced Out of Market by 2020

It does not include “any backlog of unmet need and the effect of falling stock levels due to Right to Buy and proposed sale of high value council homes”. This indicates that the actual impact of increasing prices could be even worse than expected.

The problem is most severe in London and the South East, where house prices have soared and sit above the peaks hit before the financial crisis. Savills reports that 26,000 new households in London and 11,500 in the South East will be priced out each year.

It says that while the median income of excluded households in London is £20,000, those earning up to £60,000 a year will not be able to afford housing costs in some parts of the capital.

Official data reveals that the amount of new homes built in England rose by 25% in 2014-15. However, there was also an increase in the number of properties sold off through the Right to Buy scheme.

Current Government schemes that allow house builders to avoid providing affordable housing in new build developments that include starter homes could cause further struggles for priced-out buyers.

Associate Director at Savills Research, Chris Buckle, states: “There can be no question that we need to boost house building volumes, but these new homes need to be built across a variety of tenures to put homes within reach of those in greatest need.

“Our concern is that new policy will result in a greater shift from sub-market rental products towards more expensive shared ownership and starter homes accessible only to those on middle incomes.”1

Rightmove’s report shows that the traditional winter drop in asking prices is less marked than usual, indicating that vendors are in no rush to move.

The average asking price for homes coming onto the market in November was 1.3% lower than that in October, compared with an average decrease of 1.9% over the last five years. The typical price of a property being put up for sale in England and Wales is now £292,572, a 6.2% increase on last year.

Miles Shipside, Housing Market Analyst at Rightmove, comments: “Those looking to market their property as Christmas gets closer often have a greater sense of urgency to find a buyer and sensibly recognise that trimming their asking price will provide an incentive to potential buyers more focused on seasonal Christmas trimmings.

“Buoyant market conditions and a confident outlook for 2016 mean that the reduction, while no doubt welcome to hard-pressed buyers, is the most Scrooge-like since 2011. It’s likely to be a short-lived respite as the combination of high confidence and low interest rates is a recipe for higher prices next year.”1 

The portal reports that a survey of 23,000 homeowners found that people are feeling confident about their finances for 2016. Most (85%) said they do not think their financial situation will worsen in the next 12 months, despite the possibility of an interest rate increase.

Just over two-thirds expect house prices to continue rising in the next year, with only 7% predicting a fall in prices.

1 http://www.theguardian.com/money/2015/nov/16/lack-affordable-homes-exclude-350000-by-2020

 

Just 25% of Young Adults will Own a Home by 2025

Published On: November 17, 2015 at 3:55 pm

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Around 60% of 20 to 39-year-olds in England will live in private rental homes by 2025, with just 26% owning their own property, according to new research.

Just 25% of Young Adults will Own a Home by 2025

Just 25% of Young Adults will Own a Home by 2025

It is claimed that generation rent will continue to find it difficult to buy a home and are likely to be older than previous generations before they can get onto the property ladder, says the report from PwC. The firm has analysed data on the housing market from the summer.

It believes that high house prices and deposits, alongside rising interest rates, will put young adults at risk of being priced out of the market.

The biggest shift in lifestyle is expected amongst 25 to 34-year-olds, with two-thirds of households living in the private rental sector by 2025, compared with 48% in 2013. In the 35 to 44 age range, a third will be renting in ten year’s time, compared to 24% in 2013. Among 45 to 54-year-olds, the number is expected to increase from 15% to 21%.

Within the 20 to 39 category, just 26% will own their home by 2025, down from 38% in 2013.

The older generations that have recently benefited from the huge rise in home values will mostly be protected from these trends, believes PwC. Three-quarters of over-55s own the home they currently live in and it is expected that this will be the same in 2025.

Senior Economist at PwC, Richard Snook, says the study highlights the scale of the challenge facing young adults. He insists that the continuous rise of house prices, which has much exceeded wage growth, is fundamentally affecting the way people live. He believes that policy must be changed to adapt to the differences in tenure.

He explains: “This could include encouraging a better quality of private rented accommodation, including longer tenure periods, and more rental properties designed for families.

“Demand for housing in the UK has outstripped supply for more than two decades. Changing the outlook for generation rent will require us to build more houses than needed just to match population growth in order to make up the past shortfall between housing supply and growth in demand.”1

Our recent report on buy-to-let mortgages reveals that competition is mounting amongst lenders hoping to attract new investors. Read more here: /buy-to-let-mortgage-market-is-thriving/

Moneyfacts has found that the average rate on a two-year fixed rate buy-to-let mortgage has dropped to 3.26% from 3.63% a year ago and 5.23% in 2010. The typical rate for a five-year fixed rate loan has fallen to 4.06% compared to 4.33% last year and 6.12% five years ago.

The amount of fee-free buy-to-let mortgages has doubled in the past 12 months, standing at 130.

It appears that a vicious circle of supply and demand has formed. But will this continue?

1 http://www.theguardian.com/money/2015/nov/17/generation-rent-young-adults-housing-ladder-2025

 

Reduced Tax Relief is Major Reason for Landlords Looking to Sell

Published On: November 17, 2015 at 9:35 am

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The Government’s reduction in buy-to-let mortgage interest tax relief is a major reason for half of all landlords currently thinking of selling their rental properties, according to a recent sentiment survey from Your Move and Reeds Rains.

Reduced Tax Relief is Major Reason for Landlords Looking to Sell

Reduced Tax Relief is Major Reason for Landlords Looking to Sell

The tax cut, to the basic rate of 20%, was announced in the summer Budget. The study of over 1,200 landlords revealed that at present, 9% of landlords think that now is a good time to sell, with the tax changes affecting their decision more than any other factor.

Many landlords believe that renting out a property will become much less profitable when the reforms are gradually enforced from April 2017. As a result, they are now considering leaving the private rental sector.

This lack of confidence dampens the positivity of 31% of landlords who believe that now is a good time to purchase buy-to-let properties. In total, two-fifths of UK landlords (44%) think that investing in the sector is more complicated than it was six months ago.

This sentiment is due to stricter regulation, also introduced in the Budget, which includes the requirement for landlords to check the immigration status of prospective tenants. Around a fifth (19%) of landlords are daunted by this task and say they feel unequipped to let their properties without a letting agent to manage their investments.

Almost a quarter of respondents (24%) think the legislation surrounding the lettings sector has become more confusing, with more than one in ten (11%) stating that they don’t fully understand current regulations.

It is clear that these changes in landlord law are hitting investors’ confidence; general disenchantment with the lettings industry was a key factor for 23% of landlords that are looking to sell.

Director of Your Move and Reeds Rains, Adrian Gill, says: “Landlords could be forgiven for feeling a little deflated at the moment and it’s worrying to see this may motivate many to reconsider their investment. The Government’s tax changes appear to be making investing in buy-to-let less attractive because of the seemingly smaller profits margins on offer in the future.

“If a tenth of landlords do decide to leave the industry, this would seriously shrink the number of properties available for tenants. At a time when tenant demand is only rising, shorter supply will only translate into increased rents. This may mean landlords are underestimating the likely pace of future rent rises.”

He believes: “The Government needs to cut the red-tape involved in providing homes for renters if they hope to maintain a healthy supply of rental properties. With the Bank of England (BoE) keeping a wary eye on the buy-to-let market, further regulatory interference may only make landlords’ and tenants’ lives harder. We need landlords to stay in the market and invest further in the sector, in order to match future demand.”1 

Are you considering leaving the sector? If so, what are the reasons for this?

1 https://www.landlordtoday.co.uk/breaking-news/2015/11/reduced-tax-relief-is-top-worry-for-landlords-thinking-of-selling-up

 

Agent Believes Central London Housing Bubble has Already Burst

Published On: November 13, 2015 at 9:44 am

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After warnings of a London housing bubble forming, an estate agent believes that the central market has already burst.

WA Ellis reports that transaction levels in the prime central London sector dropped by 14% in the third quarter (Q3) of this year, compared to the same period last year.

Agent Believes Central London Housing Bubble has Already Burst

Agent Believes Central London Housing Bubble has Already Burst

However, despite stating that the rate of change is an improvement on Q1, when transaction fell at an annual rate of 27%, the bubble may have already burst.

The agent says that more than one third of homes in prime central London have experienced price declines.

WA Ellis, which operates in upmarket Knightsbridge and is part of JLL, has addressed concerns raised by banks that a housing bubble may form in London and spread out to other parts of the country.

Director of the firm, Richard Barber, explains: “It would appear that the bubble may already have burst in prime central London, but the effect is not as decimating as reports from UBS and Deutsche Bank suggest.

“The Government’s intervention in December 2014 by raising SDLT [Stamp Duty Land Tax] has indeed cooled the very top of the prime central London [PCL] market and the continuous upward spiral has been halted – 36% of all properties currently on the market across PCL are now being marketed at a lower price than they were originally listed at, with the average reduction in price being 8.5% of the original asking price.

“Continuous capital growth in any market is an unrealistic expectation. However, we believe that the correction has already happened and the above statistics bear this out. This is supported by the minimal growth that JLL are predicting over the next two years, with much of this being accounted for by the new build sector.”1 

Another London estate agent, Douglas & Gordon, says that stock levels have dropped annually, while demand is at its highest level for 12 months.

The company does not expect a surge in stock, despite growth in valuations activity, and its Director, Ed Mead, describes its pipeline as “bad but not disastrous”.

Mead believes that the fall in sales is not likely to pick up until next spring, and while the under offer pipeline is good, it is also very lengthy.

He comments: “The issue is the absurd length of time to get from agreed to exchange; well over 12 weeks, and this will extend into the New Year.

“Rentals are at their highest revenues ever, but the slack on sales will not be taken up until the spring.”

He says that its pipeline is “about where we’d expect in this market, still bad but not disastrous”, given a lack of supply and heightened demand.

Mead insists that the agency is “lucky”1 to have offices in the capital that are outside the prime central sector.

Douglas & Gordon’s Sales Director, George Franks, reports: “The sales market is treading water, as it has done for some time.

“Valuations are up 20%, although buyer sentiment indicates that a new tranche of stock is unlikely to be released until spring 2016.

“Sales agreed are soaring when we would expect them to be falling, further signalling an upbeat prognosis for the market returning to health in both value and volume towards the end of Q1 next year.

“As we approach the next Autumn Statement, Stamp Duty receipts are forecast to be half of what they were in the last figures, which will not only damage the Treasury’s coffers, but might well trigger a rethink of the swingeing SDLT reforms, implemented almost a year ago.”1

Winkworth, also a London estate agent, has expressed concerns.

Next year, it expects market conditions to be similar to this year’s, with central London continuing to be affected by high Stamp Duty costs and buyers deterred by this when considering what to buy.

However, it states: “We believe that this added burden will be progressively absorbed over the course of 2016 – albeit with fewer transactions – with the changes having little impact from 2017 onwards.”1 

1 http://www.propertyindustryeye.com/a-better-year-lies-ahead-says-london-agent-as-valuations-soar-20/