Posts with tag: buy-to-let landlords

Residential landlords’ actions to change in 2 years?

Published On: April 8, 2016 at 10:56 am

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A leading credit ratings agency has given its forecast for the buy-to-let market in the next two years.

Fitch has forecasted that buy-to-let will continue to grow over the next 24 months. However, the prediction also notes that the effects of the stamp duty increases and mortgage tax relief will cause the sector to cool significantly.

Performance

The agency observes that Britain’s buy-to-let performance has been good in financial terms. Arrears of one month or more stood at 2.43% in January, in comparison to 2.35% for prime transactions. In addition, small void periods and the lack of new housing supply is keeping the sector buoyant.

With this said, the agency warns that the increased stamp duty surcharge and forthcoming tax changes will eventually change landlords’ actions and alter the buy-to-let market.

Residential landlords' actions to change in 2 years?

Residential landlords’ actions to change in 2 years?

Changes

A Fitch report to investors observes, ‘industry surveys suggest that existing landlords are less likely to add new properties when the tax changes take effect, and some may look to sell. Our gross new mortgage lending forecasts for UK incorporate the potential for the announced changes to slow the growth in BTL origination.’[1]

‘Over the longer term, government and regulatory intervention will have a larger impact,’[1] the report continues. This is particularly prevalent should a Bank of England proposal to impose stricter checks on mortgage lenders come into force.

‘The proposal does not set limits on loan-to-value, debt to income, or interest coverage rations (but) if these were adopted, this could make BTL less attractive for landlords if rental yields do not rise sufficiently to offset the impact of such affordability rules,’ the report added.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/4/warning-that-buy-to-let-tax-changes-will-damage-sector-in-two-years-timer

 

ONS figures show changing face of UK housing market

Published On: April 7, 2016 at 12:01 pm

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Interesting data released by the Office of National Statistics (ONS) shows the economic downturn has shifted the demographic of home ownership in Britain.

Results from the latest economic review report from the ONS show the proportion of households who privately rent their home increased sharply following the downturn.

Surge

Those renting from a private landlord increased from 6% to 11% in the twenty years from 1988 to 2008. However, there was then a jump to 16% in the six years to 2014.

In contrast, the proportion of households owning their property increased slowly from 56% to 71% between 1981 and 2008. This figure then fell to 67% by 2014.

The fall in homeownership, coupled with the rise in private renting, reversed a three-decade trend of increasing numbers of home owners. The ONS report shows that this partly reflects tighter mortgage lending and the performance of house prices during the recovery period.

What’s more, the report shows that these features have assisted in cutting the fraction of households owning their own home with a mortgage. This has fallen from 43% in 1991 to only 31% in 2014.

Trends

While trends in homeownership have begun to reverse, the impact on specific groups of the population have been greater. The number of people choosing to stay living with their parents for longer has increased substantially, with patterns in tenure amongst independent property owners also altering.

Numbers of young people living in privately rented accommodation have risen massively both since the economic downturn and in the last decades. In 1987, only 9% of people aged between 26-30 rented. However, this figure increased to 19% by 1997, 30% by 2007 and 39% in 2014.

Nearly one-third of those aged between 31-35 privately rented accommodation in 2014, with one in five people aged between 37 and 41 renting.

ONS figures show changing face of UK housing market

ONS figures show changing face of UK housing market

Fall in ownership

A recent rise in private rentals has been driven by the sharp fall in home ownership and the lower number of mortgages being taken out. Between 1977 and 1987, individuals living in a property with a mortgage increased. However, in the next two decades, the proportion of young people of these properties decreased, but the mortgage owning population between 45 and retirement age increased. This reflects that many purchasers between 1977-87 were youngsters who had now matured.

Differences recorded between 2007 and 2014 are alarming. The report highlights the prevalence of mortgagors is presently lower than in 2007 for every age group below 55.

It shows that the increase of private rentals has been particularly noticeable amongst 21-25 year olds. Proportions of renters in this age group increased from less than 20% in the 1980’s to over 60% in 2014. Smaller percentages of these groups live in mortgaged homes than in any time since records began.

Rent by regions

In London, rent accounted for 34% of disposable income for renters during 2014, in comparison to just 15% for those in the North East. The South East and West saw ratios of renters above 25%, with the East Midlands, Yorkshire and the Humber and Northern Ireland below 20%.

According to the report, the figures reflect movements in the prices of rent across regions. Rents in the capital and South East have become unaffordable, while those in the North are much cheaper.

 

 

Future of buy-to-let positive, landlords suggest

Published On: April 1, 2016 at 11:51 am

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Further defiance from buy-to-let investors in the face of today’s increases in Stamp Duty alterations has been recorded by new research from Aldermore.

A study of nearly 1,000 landlords by YouGov on behalf of Aldermore looked at how the changes have affected existing and would-be investors. Questions asked included if landlords would increase rents, look to sell their property and how they thought the sector would evolve in the future.

Rises

70% of respondents to the survey noted that they expect the number of tenants in the private rented sector to rise in the next five years. 33% feel that the gross value of the buy-to-let market will fall in the next twelve months.

63% of landlords in the UK said they only own one investment property, which they rent out. 95% of respondents said they had five or less properties in their portfolio.

Future of buy-to-let positive, landlords suggest

Future of buy-to-let positive, landlords suggest

Fearless

Charles Haresnape, group managing director for mortgages at Aldermore observed that the figures, ‘show that the majority of landlords believe there is nothing to fear for the future of the buy-to-let market in the UK.’ He feels, ‘it is clear that the vast majority of landlords fall into the accidental category and as such would be unaffected by upcoming changes as they are not actively looking to build a rental portfolio.’[1]

‘With 70% expecting the number of people in the private rented sector to rise over the next five years, it is vital that regulation does not stifle this hugely important segment of the UK housing market, particularly at a time of significant constraints,’ he continued.[1]

Concluding, Haresnape said, ‘the majority of our buy-to-let customers are committed long-term landlords. While they will obviously not welcome an increase in stamp duty, over the course of a 20 year investment the sums remain relatively small and are unlikely to significantly affect the buy-to-let market.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/3/btl-market-has-strong-future-say-landlords

 

Property price inflation to cancel out Stamp Duty

Published On: April 1, 2016 at 9:31 am

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Today sees the additional 3% stamp duty surcharge come into force on buy-to-let and additional properties in England and Wales.

However, new analysis from national estate agent, Jackson-Stops & Staff suggests the reforms will fail to have the desired effect of putting off buy-to-let investors.

Inflation

Following a surge in investment during the run up to the deadline, there are already signs that purchasers will not be deterred by the changes. A key reason for this is that many investors will see property price inflation compensate them for the additional stamp duty, within one year or less.

Jackson-Stops & Staff warn that the greatest losers of the stamp duty reform will be tenants, with landlords ultimately passing on their additional costs to rental prices.

Research from the Association of Residential Letting Agents (ARLA) indicates that the majority of landlords keep their investment property for more than one year. Data shows that 33% of landlords keep their buy-to-let property for between 11-2o years. This suggests that many landlords reap benefits from house price growth in the long-term.

[1]

Level playing field

Nick Leeming, Chairman at Jackson-Stops & Staff, noted, ‘the Government, through it’s new stamp duty surcharge, is trying to make the playing field more even between property investors and first-time buyers by eating into landlords’ profits.’

‘Our message to landlords is that when you do the sums and look at the direction of house prices, placing money in bricks and mortar is still by far the best investment vehicle. If property prices continue on their trajectory, within a year or less of buying their investment property the vast majority of landlords would have earned back all the money given through stamp duty, even with the new 3% surcharge, by doing nothing at all-just sitting back and watching the price of their home increase. Therefore the idea that the stamp duty tax will act as a deterrent is a fiction, as for most landlords it won’t amount to a significant figure,’ he added.[1]

Property price inflation to cancel out Stamp Duty

Property price inflation to cancel out Stamp Duty

Demand

Continuing, Leeming observed, ‘the Bank of England has clearly noted that the 3% stamp duty surcharge is unlikely to ease buy-to-let demand from investors and has now announced its own intervention to cool the market. From a landlord’s perspective it appears as though UK institutions are out to get them. Around half of all privately rented homes are owned by landlords with buy-to-let mortgages, providing homes for people who choose to rent as a lifestyle choice or are trying to get onto the housing ownership ladder.’[1]

If the research is correct, eight of ten regions of England and Wales will find capital gain will negate additional stamp duty payments within a year. The two regions where predicted capital gains on an average priced home do not cover the increase are in the North East and North West.

Concluding, Mr Leeming said, ‘the North East and North West regions of the UK, where house price growth is more restrained at present, are the only regions where landlords will find capital growth in the first year does not eclipse the new stamp duty they would have to pay. These two regions are also the only two where home owners currently pay no stamp duty on the average home as the average property price still remains under £125,000, the price level where stamp duty first bites. Tenants here are more likely to see landlords in future pass on this additional cost via rent and we also anticipate investors to be more assertive when they negotiate on buying a home, which will be reflected in lower offers.’[1]

[1] http://www.propertyreporter.co.uk/landlords/landlords-to-be-compensated-for-stamp-duty-rise.html

Last-minute rush to beat Stamp Duty rise deadline

Published On: March 31, 2016 at 11:54 am

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Landlords and estate agents alike are rushing to complete last minute deals, before the increases in Stamp Duty Land Tax come into force tomorrow.

Those purchasing a buy-to-let property or one that is not their permanent residence face a 3% Stamp Duty surcharge.

Charges

From midnight tonight, Stamp Duty on a property sold for £200,000 will rise from £1,500 to £7,500. Investors feel that that their problems have been extended, due to some of the finer details of the changes only being announced in the Budget a little over two weeks ago.

Rob Hailstone, of the Bold Legal Group, notes that the last few months have, ‘been very chaotic,’ but the, ‘real problems will be today.’[1]

‘It’s been ridiculously busy. Buyers have been saying they want to rush it through, because they don’t want to pay the surcharge,’ Hailstone added.[1]

Last-minute rush to beat Stamp Duty rise deadline

Last-minute rush to beat Stamp Duty rise deadline

Deadlines

Of course, the deadline is technically midnight tonight. However, more practically, investors have until the banks close today to ensure their deals are completed.

Martin Baum, President of the National Association of Estate Agents, acknowledges, ‘it’s been a crazy day. We’ve all got a bottleneck and a huge amount of deals before the deadline. I’ve heard of estate agents and conveyancers staying open till 10pm and then opening again at 5am this morning.’[1]

Many buyers who are not planning to purchase for buy-to-let or second property purposes are also being caught up in the chaos, with many involved in chains.

Bands

Information for landlords on the Stamp Duty bands can be seen in the table below:

Stamp Duty Bands
Price band Standard rate Buy-to-Let/ 2nd home
Up to £125,000 0% 3%
£125,001 to £250,000 2% 5%
£250,001 to £925,000 5% 8%
£925,001 to £1.5m 10% 13%
£1.5m+ 12% 15%
Source: HMRC

 

[1] http://www.bbc.co.uk/news/business-35933208

 

Six in seven landlords undeterred by SDLT changes

Published On: March 30, 2016 at 10:39 am

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Fresh research from the Nottingham Building Society has revealed that the changes in stamp duty rules coming into effect on Friday has failed to deter the majority of investors.

Data from the report shows that just one in seven existing and would-be landlords have shelved plans to add to or make an initial investment property purchase.

Increases in Stamp Duty

The study indicates 14% of existing and potential landlords have now decided against adding or starting their portfolio as a direct result of the changes. Nationally, interest in investment properties remains strong, in the face of fears that the alterations and spiralling costs of buying would curb investors’ enthusiasm.

Further analysis shows 78% of respondents said they would consider investing in property as part of their retirement plans.

Over the last three months, brokers have reported a surge in interest from would-be landlords looking to invest before the 3% increase in stamp duty charges. 35% of brokers said they had seen a marked increase in inquiries from potential buy-to-let customers over the period.

One in seven landlords undeterred by stamp duty land tax changes

One in seven landlords undeterred by stamp duty land tax changes

Strong

Ian Gibbons, Senior Mortgage Broking Manager the Nottingham Mortgage Services, noted, ‘the buy-to-let market remains strong despite a period of uncertainty as lenders and customers assess their options ahead of stamp duty and tax changes.’[1]

‘People should only invest in buy-to-let if they can afford to it and makes financial sense for them. But that said it clear that demand for property investment is not going away any time soon with the research showing people still very much value property as part of retirement planning. The tax and stamp duty changes are complicating the calculations on buy-to-let but given the risks of stock market investment and the low interest rates there is a strong case,’ he concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/78-of-landlords-refuse-to-be-stopped-by-stamp-duty-changes.html