Search Results For: buy to rent sector

Cowboy Letting Agents have to be Stopped

Published On: July 19, 2013 at 9:22 am

Letting agents charging hidden and excessive fees are to be cracked down on, a team of MPs has requested.

The Communities and Local Government Select Committee have asked the Government to introduce stricter new rules and regulations for letting agents, to reflect those of estate agents.

This would allow the Office of Fair Trading to ban agents who practise incorrectly and would protect landlords’ and tenants’ money.

Clive Betts MP, Chair of the Committee, says: “Amazingly, letting agents are subject to less control that estate agents. This lack of regulation is giving rise to sharp practice and abuse by some letting agents. We were told that the letting sector was the property industry’s Wild West.

“Cowboy agents who rip off landlords and tenants have to be stopped. They need to play by new rules or get out of the sector.

“Unreasonable fees and opaque charges are not confined to a few rogue agents.

“Many well-known high street agents are just as guilty. Agents must make tenants aware from the outset of the fees they intend to charge. All property listings on websites, in print or in agents’ windows must be accompanies by a full breakdown of fees.”

The Committee have called for agents to inform tenants about fees before the letting process commences.

Cowboy Letting Agents have to be Stopped

The Committee’s report suggests that all property listings and advertisements should list in full the fees a tenant would have to pay.

While the private rental sector has increased substantially in the last ten years, the market is still undeveloped and does not provide the service that tenants are looking for, says the Committee.

The MPs would also like to see barriers on longer tenancies removed, and that landlords should be able to evict tenants more easily when they did not pay their rent.

The report also found that tenants and landlords are often unaware of their rights and responsibilities, and so the Committee have requested a publicity campaign to encourage awareness.

The report recommended the Government to work with groups that represent tenants, landlords, and letting agents to create a standardised, plain language tenancy agreement that all contracts can be based upon. The agreements should also include a simple fact sheet.

Mr Betts adds: “Too often, the security desired by many families is not available within the private rental sector. We heard from one father whose ten-year-old daughter had already had to move home seven times in her life.

“We have to overcome the barriers to longer tenancies. Letting agents should not be chasing renewal fees. Instead they should be working to ensure the length of tenancies meets the needs of both tenants and landlords. In addition, mortgage lenders should remove conditions that limit tenancies to one year.

“I want to see renting as an attractive alternative to owner-occupier. The market has to better meet the needs of renters. Tenants and landlords need to be much better informed about their rights and responsibilities. Bad landlords should be driven out of the sector.”¹

Mark Prisk, housing minister, says: “We’re determined to build a bigger and better private rented sector that gives tenants more choice, but we should avoid excessive regulation on the sector which would push up rents and reduce choice for tenants.

“That’s why we’re taking action to require all letting agents to belong to a redress scheme so landlords and tenants have somewhere to go if they don’t get the service they deserve, and investing £5.5m for councils to tackle rogue landlords in their area.”1

Housing charity Shelter cautioned that the amount of families renting their house has doubles in the last decade, as an increasing number are priced out of the property market.

The latest Census figures revealed that one in five families in England, equal to 1.2 million households, currently rent from a private landlord. This number has doubled since 2001.

The proportion of families who own their property has decreased by 13% also.

Shelter believes that the Government should build more affordable houses to resolve the housing shortage, and to prevent more families living in rental accommodation, and bringing up their children in unstable homes.

The Strategic Society Centre would also like the Government to initiate new regulations preventing buy-to-let landlords from purchasing new build houses, and introduce a lending limit, to avoid another housing bubble.

They believe that buy-to-let investors are obstructing first time buyers from getting into the property market.

The Centre suggested mortgage lenders should be limited to only lending 5% of their book to buy-to-let landlords.

They found that one in ten families who rent have had their lives interrupted by moving home, that they have even had to change their children’s schools.

10% of parents who have moved in the last five years said that their children would have liked to stay where they were, and 13% said the move was stressful or upsetting for their children, revealed the Centre.

An additional 44% believes that their children would have had a better childhood if they had had a more stable home.

One in ten families moved because their landlord requested them to leave or gave them notice, while 15% had moved because their accommodation was in a poor condition.

¹http://www.thisismoney.co.uk/money/mortgageshome/article-2368631/Call-crackdown-cowboy-letting-agents-stop-hidden-charges.html

Landlords Have Unrealistic Expectations of Returns

Published On: July 15, 2013 at 10:27 am

Author: Em Morley

Categories: Finance News

Tags: buy-to-let returns,property returns

Data taken from YouGov’s Landlords and Mortgages 2013 report suggests that landlords are expecting unrealistic returns from their buy-to-let property.

Lenders have suggested that landlords newly entering the buy-to-let market are more focused on potential long-term returns of a property than before the financial crisis. Critics argue however that YouGov’s findings suggest many landlords are not taking into account a range of necessary payments when calculating their figures.

Decline?

The report indicates that landlords’ total returns are in decline, despite rising rental prices. Between 2002-2006, landlords’ returns were between 4%-6%. However, the findings suggest that they are now between just 1%-4%.[1]

A possible reason for this reported decline is landlords overlooking many mandatory costs. The data shows that 93% consider mortgage interest payments, but only 68% take account of agency fees, and 46% budget for other management expenses.[1]

Buy-to-let in general has continued its remarkable growth, with 1.5m landlords making up 13% of total lending.[1]

Landlords Have Unrealistic Expectations of Returns

Landlords

The Strategic Society Centre recently released a report entitled Understanding Landlords, collated in order to ascertain the profile of the everyday landlord. The think tank found that “private rented sector landlords have, on average, a more advantaged background,” with 40% of 45-64 year old landlords having a degree or higher qualification.[1]

There are concerns that the well educated private sector are driving up prices, making it increasingly difficult for young people to purchase property.

Limits

The findings of the YouGov report have called for limits on landlord activity. Campaigners are asking for prohibition surrounding the purchase of new build properties with buy-to-let loans. Pricedout.org.uk, a website campaigning on behalf of young would-be homeowners, has called for a landlord’s right to offset mortgage interest against tax to be stopped.

However, Richard Lambert from the National Landlords Association (NLA), has slammed the Strategic Society Centre’s report, coining it “Misunderstanding Landlords.” Lambert suggests: “The authors just want to prove their preconception that the growth of the sector is the cause of problems in the market rather than a consequence of them.”[1]

Lambert then asks: “Will anyone be surprised to learn that those who invest in property are wealthier than those who have not been able to buy?” before continuing, “claiming that the private rented sector represents a transfer of wealth from tenants to landlords is like saying that pubs represent a transfer of wealth from drinkers to publicans.”[1]

[1] http://www.landlordexpert.co.uk/2013/07/15/landlords-have-unrealistic-expectations-of-property-returns-claims-new-report/

Singletons Need to Save for a Deposit for 30 Years

Published On: June 19, 2013 at 1:26 pm

Author: Em Morley

Categories: Property News

Tags: high mortgage deposits,saving for a property deposit,young people housing market

Single people in their 20s will have to save for a deposit for up to 30 years, revealed Shelter.

An entire generation could be forced out of owning a house, housing charity Shelter also said.

Single people are facing the greatest obstacles in owning a house. They could need over 14 years to save enough money for a deposit, unless they enter into a relationship. Many are therefore trapped in the private rental sector, or living with their parents.

London faces the highest costs, with single people faced with 30 years of saving, while couples with children will wait 21 years before having enough money for a deposit.

Couples who have a family in their 20s could have 12 years of saving ahead of them, which is almost double that of childless couples.

This could result in couples having children in secondary school before they have their own house.

Couples without children have an average of six and a half years of saving, compared with 11 years in London.

The study is based on homeowners needing a 20% deposit. The research considered earnings, house prices, rents, and spending on essentials across the country.

There are also considerable regional differences in the time for first to buyers to save, according to Shelter.

In 60% of areas in England, couples with a child are looking at more than a decade of saving for a deposit.

High outgoings and house prices, alongside low incomes, mean couples with children in Devon, Cornwall and Leicester, need more time to save than the same couple in some parts of London.

Singletons Need to Save for a Deposit for 30 Years

Shelter has made an online calculator available for people to work out how long it should take them to save for a house in their area, based on their circumstances.

Lauren Pinney, 28, from Brighton, says: “My husband Ivan and I have tried everything to save for a deposit. We moved out of our one-bedroom flat and tried living with my parents for a while.

“Now we live in a flat share with friends to keep costs as low as possible, but with bills, rent and the cost of living going up, it’s just impossible.

“We both earn decent salaries, but it’s just not the same as it was in my parents’ generation.

“We want to start a family but we’ve had to resign ourselves to the fact that saving for both a child and deposit is not going to happen and we may never own a home of our own.”¹

Chief Executive of Shelter, Campbell Robb, comments: “This is the first time research like this has been conducted at a local level to reveal the harsh realities that generation rent is having to confront because of our shortage of affordable homes.

“Despite working hard and saving what they can each month, today’s young people face life-changing choices between starting a family or buying a home of their own. Imagine a 28-year-old couple weighing up their options: they can save for a home now and put off starting a family until they’re 35, or they can start a family now but accept they’ll be renting until their child is a teenager.

“Meanwhile, single people face an added pressure to either find a partner or to live with their parents well into their 30s if they’re ever to have a hope of saving enough for a deposit.

“It seems the only ones with any hope left are the few who can resort to the bank of mum and dad. But with so many parents already feeling the squeeze, this is not a sustainable option.

“When we have young people working hard to save up for a home of their own to no avail, it is obvious that the Government has to start meeting people halfway. Unless we see radical action to tackle our chronic shortage of affordable homes, the next generation of young people will find it even harder to find a place to call their own.”1

The amount of affordable housing constructed in 2012-13 was down by 29% from the previous year. This shortage of homes forces higher rents and house prices, and deposits are even harder to save for.

Jack Dromey, shadow housing minister, says: “This research shows the scale of the housing crisis, and the impact it is having on young people and families, who are locked out from home ownership.

“David Cameron simply has no answer to Britain’s housing crisis. Despite relaunching his Get Britain Building programme four times and making hundreds of announcements, the number of affordable homes being built actually went down by a third in the last year.

“Labour has been calling for urgent action to tackle the biggest housing crisis in a generation. We need to bring forward investment in house building to tackle the chronic shortage of affordable homes, help the next generation find a home of their own, create thousands of jobs and apprenticeships and rebuild Britain for the future.”1

Housing minister Mark Prisk, adds: “The evidence shows that affordability has improved under this Government, with housing at its most affordable since 2003 and the highest number of first time buyers since 2007.

“We are building 170,000 new affordable homes across England, and have introduced a package of measures to help people move on to and up the housing ladder.”1

¹http://www.independent.co.uk/property/generation-rent-young-people-need-30-years-to-save-for-a-house-deposit-says-shelter-8664419.html

Landlords need more Advice on Increasing Regulations

Published On: May 31, 2013 at 3:55 pm

Author: Em Morley

Categories: Landlord News

Tags: buy-to-let legislation,landlord regulations

Leading buy-to-let lender Paragon has released a report that suggests landlords are not getting sufficient help in maintaining their investment.

The survey from Paragon indicates that 78% of landlords questioned said that they believe there is significant requirement for advice on landlord matters. For landlords owning a portfolio of 11 or more properties, this figure rose to 89%.[1]

Regulation

There have been calls from the private rental industry for some kind of regulation in the letting sector for a number of years. Complaints to the Property Ombudsman from both tenants and landlords alike rose by 9% in the previous year.[1]

The Government has introduced a crackdown on rogue agents, with agents responsible for repaying tenants or landlords who have been treated unjustly.

Eligibility checks

In last month’s Queen’s Speech, her majesty announced the proposal that landlords are to become responsible for background checks on all of their tenants, to ascertain their eligibility to live within the UK. Landlords subsequently found to be renting to illegal migrants will face hefty fines.

The proposal has been met with disdain from landlords, who believe that the plan to get them to combat immigration is unfair and will add more complications to the buy-to-let industry.

Landlords need more Advice on Increasing Regulations

Backtrack

Following this angry response, the Government is looking at ways to adapt their proposals and Eric Pickles, Communities Secretary, is reportedly in continued discussions with the Prime Minister.

A Whitehall source recently told the Daily Express that the Government want to bring in regulation “that does not inflict red tape on millions of people.”[1]

The source went on to say: “What we want to avoid is disproportionate regulations on the private rented sector. If you are British, we don’t want a bureaucratic check, the cost of which is passed on to the landlord and then the tenant.

“It is a question of getting the balance right and targeting the regulations at high-risk areas.”[1]

Tougher

Unsurprisingly, Paragon’s report found a high majority of landlords were opposed to the changes. 90% said that they thought the potential added workload, on top of taxes and existing regulation, would lead to it being even tougher as a landlord moving forwards.[1]

Furthermore, 46% of private landlords stated that they were already finding changes in legislation difficult to follow. 43% said that they were concerned about the impending impact of Universal Credit on the sector. 54% of landlords said that additional licensing would affect them the most.[1]

Help and Advice

Paragon’s Director of Mortgages, John Heron, said that the findings made for interesting reading. Heron stated that it is “interesting to note that although many of the landlords surveyed were greatly experienced, having owned buy-to-let properties for a considerable time, there is still a need across the board for information, help and advice. Of course the buy-to-let landscape never stays the same, and new regulations affect professional landlords just as much as they do those who are relative newcomers to the market.

“Paragon would always advise our customers, experienced or otherwise, to do their homework before they commit to buy a rental property; research the market, the area and also their obligations as landlords.

“Buy-to-let isn’t a short-term investment; many of our customers have been landlords for more than two decades, and see their portfolios as an alternative to a pension when they retire.”[1]

[1] http://www.landlordexpert.co.uk/2013/05/31/uk-landlords-need-more-advice-in-light-of-increasing-regulations/

Government Boost BTL Investor Chance of Instant Return

Published On: March 25, 2013 at 10:57 am

Author: Em Morley

Categories: Finance News

Tags: Government help BTL investors

The Government’s efforts to boost lending have produced an arbitrage of instant return, says Rightmove.

The property listings website said that heaps of investors are leaping into buy-to-let for the staggeringly good returns. Rightmove also said that they’ve found rents to be creating average gross yields of 5.9%.

In their monthly house price report, Rightmove said: “With some remortgage finance available at lowest ever levels, from as little as 2% for a two year fixed rate and 2.7% for a five year fixed rate, there is the possibility of a straight arbitrage of immediate return on money borrowed against your main residence.”¹

This could mean borrowing against your home to release equity that could provide a deposit for a buy-to-let property. Lenders often oblige investors to have buy-to-let mortgages, which have higher rates than residential mortgages.

Mortgages have decreased due to the Government’s Funding for Lending Scheme (FLS) that has provided £80bn of loans to banks with rates as low as 0.25%.

A Director at Rightmove, Miles Shipside, says: “There are blindingly good returns on the right buy-to-let investment, with the Funding for Lending Scheme giving the possibility of an immediate and enticing profit gap between borrowing costs and available rental returns.

“With the prospect of capital growth in future years if you buy the right property, you can see why investors are piling into the rental market; why wouldn’t they when it can offer a much better return than money in the bank?”

The amount of investors with buy-to-let mortgages has increased rapidly in the last few years, to almost 1.5 million.

Sellers have also raised asking prices on houses by 1.7% recently, which is another indication of a strong property market, says Rightmove.

However, houses are selling faster than before, with the average time on the market now 80 days, down from 90 last year.

Government Boost BTL Investor Chance of Instant Return

The number of new sellers on the market has risen by 12% month-on-month, whereas the volume of unsold properties has stayed generally the same. This suggests that the amount of homes that are bought is increasing.

Rightmove also found that the amount of people moving house who think that prices will rise this year (23%) is double those who believe prices will drop (11%). The majority think that prices will stay the same.

Monthly rises have been the greatest in the South East, where average prices are now £309,439, a 4.2% increase. London has witnessed a 1.9% growth, however property values are now 9% higher than last year, at £496,298.

The only place to see a monthly decline was the West Midlands, where prices dropped by 0.5% to an average of £185,942. These were, however, 2.2% higher than a year ago.

Wales saw average house prices of £163,772, which is a rise of 1.5%, but annually they are steady.

This research has further highlighted the growing strength of the property market, alongside the Council of Mortgage Lenders (CML) find recently that mortgage lending to home buyers has been the strongest start to the year since 2008.

The amount of mortgages on offer has risen by about one third, since the Government introduced the FLS, which gives lenders cheaper finance to help borrowers.

The Government has also reserved over 3,000 houses in the NewBuy scheme, an aim to get people buying new build homes with just a 5% deposit.

Rightmove have also suggested that the Government should promote a positive attitude towards the market in the coming Budget, which they’d like to see include the reintroduction of stamp duty concessions for first time buyers.

Shipside says: “More houses need to be built to meet growing household numbers, and the activity it creates is a great boost to the economy.

“If new initiatives spur the resale market as well as new build sector, then the Government could generate a welcome feel-good factor that it may judge to be timely with just over two years to the next election.”1

Chief Executive of homeless charity Shelter, Campbell Robb, says that even these slight price increases are taking away the dream of owning a house for many people.

Robb says: “We hope the Chancellor will use this week’s Budget to boost house building and get more homes built.

“This is the only way to make sure that this generation, and the next, aren’t prices out of a place to call home.”1

¹http://www.landlordexpert.co.uk/2013/03/24/government-efforts-has-given-buy-to-let-investors-arbitrage-of-immediate-return/

Top Five Tips for BTL Investors

Published On: March 17, 2013 at 10:52 am

Author: Em Morley

Categories: Landlord News

Tags: tips for BTL investors

Would-be investors can follow simple tips to see high yields from the property market.

By referring to this advice, private landlords can gain the maximum returns on their investment.

Identify future opportunities

Top Five Tips for BTL Investors

It is always of interest to developers that the next key areas of the property market are acknowledged. Estate agent Knight Frank has identified Nine Elms in Battersea, Earls Court, and Paddington in London as prepared for huge price increases, due to development plans. However, these areas already sport a high price, so places outside of the capital may be more appealing to investors.

Significant elements to consider are transport, employment opportunities, and development plans.

Keep it simple

If you’re aiming for either income from a rental property, or a place to live hoping for capital gains, stick to the basics, such as location, transport links and closeness to schools, shops, etc.

Estate agent Huntley Hooper has found that period properties hold their value better than new builds. Towns have also retained their value better than villages in recent years. Nevertheless, prime property always holds value better in market declines.

Don’t over-spend

It is often thought that investing in property is fool proof. However, as most people have to borrow to buy into this market, losses can be far greater than expected when the industry drops. As a consequence, banks have narrower lending criteria, so borrowing higher than you can afford to pay back is difficult. If you are an investor in the buy-to-let market, issues such as void periods, losing your day job, reduced hours, or long-term illnesses are things to consider when repaying a mortgage.

Remember there will be negatives

Buy-to-let landlords don’t have money trees, like the rest of us. Despite rental returns currently being high, the demand-outweighing-supply situation could change. If more people are able to buy a house, and credit conditions loosen, first-time buyers could be putting landlords out of a lot of business.

If prices are to drop further, the value of good properties will decrease, and tenants may not want to pay the same rents.

Additionally, a new initiative to encourage better insulation in houses will create high costs for landlords with older properties. Tenants can also demand these changes to reduce their bills, with landlords paying the price.

Investment funds

Owning a property outright is not necessary when investing in this market. There are several property funds on offer, however these predominantly invest in commercial properties rather than residential accommodation. Although a number are now moving into the residential sector.

The TM Hearthstone UK Residential Property Fund invests in the buy-to-let industry and hopes to be a low-cost alternative. Another is Castle Trust’s Growth Housa, a method of linking gains to the Halifax house price index, as opposed to the FTSE 100. Both can be achieved through an ISA, discarding Income and Capital Gains Tax.