Search Results For: buy to rent sector

Policy changes to increase costs for buy-to-let landlords

Published On: December 13, 2016 at 12:40 pm

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Undoubtedly, the current market is a tough one in which to be a buy-to-let let landlord. The number of measures aimed at curbing the market have led to many concerns that investors with lower profit margins could well end up making a loss.

Some could well be pushed out of the market completely.

Challenging changes

The introduction of the 3% stamp duty surcharge, alterations to mortgage interest tax relief and Right to Rent checks are just some of the measures that have impacted on landlords over the last year.

Now, the Bank of England’s Financial Policy Committee has been granted increased powers over the buy-to-let market.

John Heron, director of mortgages at Paragon, believes, ‘it is clear that this will need to be reflected in lender affordability assessments.’[1]

‘Government policy towards the private rented sector will increase costs for landlords. The Prudential Regulation Authority’s supervisory statement released in September this year is helpful in ensuring that lenders approach this in a consistent fashion,’ he continued.[1]

Policy changes to increase costs for buy-to-let landlords

Policy changes to increase costs for buy-to-let landlords

Affordability concerns

Paragon is the latest lender to make changes to its affordability assessment for buy-to-let mortgages, to take into account the increase in costs that some landlords will face as a result of the alterations in mortgage interest rate relief.

The lender is bringing in graduated interest coverage ratio, in order to tailor to each individual landlord’s tax status.

Landlords paying a basic rate of income tax will carry on being assessed at a ratio of 125%. However, landlords paying a greater rate of tax will be assessed with an interest coverage ratio of 140%.

Concluding, Heron said: ‘The changes that we’re announcing are designed to tailor affordability to each landlord’s individual circumstances, whilst keeping the application process straightforward for brokers and their customers.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/12/government-policy-towards-the-prs-will-increase-costs-for-landlords

Rents set to increase by 15% by 2020?

Published On: December 12, 2016 at 10:17 am

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UK rents are expected to rise much faster than property prices over the next three years, according to the chief operating officer of one of Britain’s leading property franchises.

Dorian Gonsalves of Belvoir, suggests there will be a 15% increase in rents by 2020. This, he feels, is due to, ‘a raft of recent anti-landlord Government policies in the past year,’ though he notes the rent rises will vary depending on region.

Buy-to-let measures

New measures introduced, including the new 3% stamp duty rise and tougher mortgage lending criteria, could well see many landlords making a loss. Gonsalves also believes that the Government’s failure to improve the availability of social housing for rent has led to a shortage of quality rental accommodation in the private rental sector.

Mr Gonsalves believes: ‘’Throughout 2017 Belvoir will continue to work with decision makers and we hope that some of the Government’s recent changes will either be reversed or incentives will be launched to help drive up the supply of rental properties. This would then bring down rents and benefit millions of tenants, making for a healthier rental sector.’[1]

The most recent rental index from the firm reveals that 88% of offices had recorded an increase in demand for properties to rent during Q3 of 2016. However, a huge 86% of tenants-around 6m households-had less than the £8,838 needed to secure a 5% deposit on the average home. This means that they are hugely unlikely to be able to buy a property.

Rents set to increase by 15% by 2020?

Rents set to increase by 15% by 2020?

Struggling

Continuing, Gonsalves said: ‘People from all walks of life, including students, migrant workers and professionals with families, are struggling to meet strigent lender affordability ratios.’[1]

‘When someone is not in a position to buy, they obviously start looking for somewhere to rent, but unfortunately, Government policies seem to lack any direction and have done nothing to benefit either landlords or tenants, so tenants could find it more difficult to find good quality suitable accommodation in 2017 and beyond,’ he concluded.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/12/rents-predicted-to-increase-15-by-2020

 

Buy-to-Let Investment Plummets Following Government’s Attack on Landlords

Published On: December 9, 2016 at 11:33 am

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Buy-to-let investment has plummeted following the Government’s “attack on landlords”, according to a new report from estate agent haart.

The agent found that the number of buy-to-let transactions across England and Wales has dropped by 63.7% over the last 12 months, following the introduction of an array of measures that are putting many prospective investors off the private rental sector.

Buy-to-Let Investment Plummets Following Government's Attack on Landlords

Buy-to-Let Investment Plummets Following Government’s Attack on Landlords

The report claims that the volume of buy-to-let investment, which has fallen by 8.2% in the past month alone, is unlikely to increase any time soon, unless the Government reverses recent tax increases and regulations in the sector.

The CEO of haart, Paul Smith, says: “The scale of decline in buy-to-let in just 12 months is deeply worrying – landlords have clearly pulled out of the market and are unlikely to return any time soon. However, this is entirely the result of Government policy, with Theresa May now picking up George Osborne’s baton and proceeding to bash landlords with renewed vigour.”

It has been a difficult year for buy-to-let landlords. Alongside stricter lending criteria, a 3% Stamp Duty surcharge for additional properties was introduced in April, while the 10% Wear and Tear Allowance has been scrapped, leaving landlords only able to claim for the amount that they have actually spent.

In addition, mortgage interest tax relief is due to be reduced to the basic rate of tax from April 2017.

“The Government’s attack on investors adds up to a war on landlords and a buy-to-let market crippled by tax hikes and unnecessary regulation,” Smith adds. “The effect has been to more than halve the number of buy-to-let sales in England and Wales, and the inevitable consequence will be fewer properties available to renters next year and higher rents.”

A leading housing expert has warned that families may even lose their homes as a result of the changes: https://www.justlandlords.co.uk/news/families-lose-homes-landlord-tax-changes/

Rather than punish buy-to-let landlords for a property market that is not working for first time buyers or generation rent, Smith believes the Government should channel more investment into housebuilding and increasing the supply of much-needed rental homes.

He continues: “Tenants are stuck in an intensely competitive market where rents are often more expensive than mortgages, because there are simply not enough properties available for lettings, and many landlords now have no choice but to pass the extra costs onto tenants.

“It is time for the Government to end this damaging war on landlords and instead create a market that genuinely works for everyone. The Government is casting landlords as the pantomime villains of the property market, but we need a more grown-up and serious approach to policy-making, as well as a recognition of the contribution that landlords make.”

Have your buy-to-let investment habits changed following the Government’s so-called attack on landlords?

A Year of Two Halves for Buy-to-Let Borrowing

Published On: November 25, 2016 at 11:34 am

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It’s been a year of two halves for buy-to-let borrowing, according to the latest financial results from Paragon Mortgages.

A Year of Two Halves for Buy-to-Let Borrowing

A Year of Two Halves for Buy-to-Let Borrowing

The firm reported a strong performance across all of its business lines in the year to October, contributing to a 9.1% increase in underlying profits, totalling £146.9m.

The Director of Mortgages at the group, John Heron, comments: “This was very much a year of two halves for buy-to-let, with very strong completion levels being seen in the run up to the Stamp Duty increase in April, followed by a commensurate reduction in activity levels across the market from April.

“However, our pipeline of new business is now gathering momentum with an increase of approaching 20% in October. Much of this is due to the success of Paragon Bank in providing us with diversified funding, allowing us to deliver a series of competitive products, which is driving an increase in application volumes.”

He continues: “In particular, we are seeing an improvement in the professional landlord segment of the market, a sector we are well positioned to satisfy, given our extensive experience of meeting their individual requirements.

“Whilst the buy-to-let market has had a challenging year, we continue to see the potential the sector has to offer. 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.”

While buy-to-let borrowing may have had a mixed year, how has the rest of the market fared?

The British Bankers’ Association (BBA) has also published its High Street Banking Statistics for October.

It found that house purchase approval numbers are 10% lower than in October last year, while they’ve dropped by 4% in the first ten months of the year when compared to the same period of 2015.

However, the Chief Economist at the BBA, Dr. Rebecca Harding, says: “Mortgage approvals ticked up a little October. There has only been a relatively modest increase in activity since the Bank of England cut rates in August.”

Property industry calls for boost to Build to Rent

Published On: November 22, 2016 at 10:51 am

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The UK housing industry has called on Chancellor Philip Hammond to announce measures in tomorrow’s Autumn Statement that will give a boost to the Build to Rent sector.

Official figures released from the British Property Federation (BPF) reveal that during the last year, the number of Build to Rent units with planning permission, under construction or completed in Briton increased by more than 200% to hit 67,000 units.

Encouragement

The BPF notes that despite these figures being encouraging, the sector could be doing more to deliver homes. It feels that investors could have as much as £50bn to invest.

Interest in Build to Rent has come from far and wide, particularly from the United States where the scheme is already popular.

Research from Strutt & Parker, Stanhope and Network Homes indicates that the UK is on the verge of a large, commercially developed Build to Rent sector.

Growth

Stephanie McMahon, head of research at Strutt & Parker, observed: ‘The UK private rental market is going through a period of sustained growth, doubling in size to 5.4m from 2001 to 2014, a trend which only looks set to continue. Some 48% of those who responded to our Urban Renters survey had been renting the same property for at least the last two years, with 24% of tenants anticipating renting as a family in the future.’[1]

‘Our analysis illustrates that, although the majority may wish to own at some point, a burgeoning group of renters is making the choice for rental over ownership and enjoying the flexibility it provides. While the aspiration to own is still a key motivation for the majority of households, a preference for renting is starting to surface, with 9% of respondents in Greater London preferring to rent. We seem to be on the brink of becoming a rental nation,’ she added.[1]

Property industry calls for boost to Build to Rent

Property industry calls for boost to Build to Rent

Lifestyle choice

In addition, analysis seems to show that there is growing evidence to suggest that renting is becoming more of a lifestyle choice, as opposed to a consequence of unaffordable housing.

The Private Rental Sector has increased by 82% in the last decade, becoming the second largest tenure group. Halifax’s 2015 Generation Rent survey indicated that between 2012 and 2015, for those aged between 20 and 45, homeownership dropped by 1%. Additionally, there was a 2% fall in first time buyers, while there was also a 3% increase in those who do not want to own a property.

[1] http://www.propertywire.com/news/europe/property-industry-uk-wants-tax-boost-build-rent-sector/

 

Deadline to register for Rent Smart Wales is tomorrow

Published On: November 22, 2016 at 10:04 am

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There are less than 24 hours to go until landlords in Wales must sign up to Rent Smart Wales.

The scheme, designed to push up quality of rented accommodation in the country, becomes mandatory tomorrow, 23rd November.

Licensing Scheme

Rent Smart Wales is a new licensing and registration scheme that went live last year. It represents a large change for the private rental sector in the country.

Landlords and letting agents must register their properties and undergo training to gain a licence, should they wish to self-manage their investment.

Investors have until midnight tonight to comply with the new legislation, before it becomes an offence to manage or to let a property without the necessary licence.

Deadline to register for Rent Smart Wales is tomorrow

Deadline to register for Rent Smart Wales is tomorrow

Registration

David Cox, Managing Director at the Association of Residential Letting Agents (ARLA) noted: ‘The law means landlords in Wales-and those in the rest of the UK who own properties in Wales-need to register themselves and their properties with Rent Smart Wales, as well as being suitably trained and licensed to carry out letting or property management activities.’[1]

‘If landlords do not wish to get trained, they need to arrange for a trained and licensed agent to manage their properties on their behalf. If landlords and agents find themselves unlicensed when the deadline arrives on 23 November, they will be unable to practice,’ he added.[1]

Landlords and agents can find out more about the Rent Smart Wales scheme by visiting the Government website.

[1] https://www.landlordtoday.co.uk/breaking-news/2016/11/deadline-looms-for-landlords-to-register-in-wales