Posts with tag: buy-to-let landlords

Landlords Seeking Advice Ahead of Tax Changes

Published On: March 22, 2016 at 1:01 pm

Tags: Budget 2016,buy-to-let landlords,mortgage interest tax relief,Stamp Duty,tax

A recent study by the Nottingham Building Society reveals that residential landlords have driven a surge in advice enquiries ahead of forthcoming buy-to-let tax changes.

The coming changes are boosting business for mortgage brokers, as landlords seek advice on improving existing mortgage deals and expanding their portfolios.

Over a third (35%) of brokers reported that they have experienced an increase in enquiries from existing landlords, with 42% receiving enquiries about remortgaging and 31% saying

Landlords Seeking Advice Ahead of Tax Changes

landlords are considering expanding their portfolios.

Landlords face two major changes to their finances in the coming months: Firstly, the 3% Stamp Duty surcharge will be implemented on 1^st April, which has caused a rush of landlords to purchase additional properties before being faced with the charge.

Secondly, landlords’ ability to offset their buy-to-let mortgage interest payments against tax will be phased out from 2017, which is forcing others to sell.

Despite concerns that landlords will sell their rental properties and leave the buy-to-let sector, The Nottingham’s research indicates that just one in five (19%) existing landlords plan to sell some or all of their portfolios in response to the tax changes.

The Senior Mortgage Broking Manager at Nottingham Mortgage Services, Ian Gibbons, comments: “The tax changes and Stamp Duty increase have complicated the calculations for would-be buy-to-let investors, but there remains strong interest in investing in the sector.

“It is striking that one in five landlords are planning to sell some or all of their properties, but people need to think carefully before rushing into decisions driven by tax changes.”

He adds: “Brokers we speak to are seeing a wide range of enquiries from customers that are not focused simply on selling, but also on remortgaging and ensuring they have the most competitive deal.”¹

The Nottingham’s study shows that landlords in London are the most likely to sell some of their properties, while those in the North East are the least likely.

For more information about how the Budget 2016 will affect landlords, read this interesting piece from Nova Financial’s Paul Mahoney: /budget-reasonably-positive-believes-finance-expert/

¹http://www.propertyreporter.co.uk/landlords/surge-in-btl-advice-seen-ahead-of-stamp-duty-changes.html

Buy-to-Let Lender Encourages Landlord Incorporation

Published On: March 18, 2016 at 3:07 pm

Author: Em Morley

Categories: Finance News

Tags: buy-to-let landlords,corporate landlords,limited companies,property investment

Kent Reliance and InterBay Commercial, both part of OneSavings Bank, have launched a new policy to encourage landlords to incorporate their buy-to-let loans.

The new policy allows buy-to-let landlords to transfer their existing property from their individual name into a company or limited liability partnership structure.

A key feature of the new policy is that it will accept directors’ loans of gifted equity, subject to an insolvency indemnity policy.

Buy-to-Let Lender Encourages Landlord Incorporation

After the Chancellor’s announcement in last year’s summer Budget that mortgage interest tax relief on buy-to-let loans will be gradually reduced from 2017, many have viewed incorporation of a limited company as the preferred means of holding investment property.

The Kent Reliance Buy-to-Let Britain report (from November), suggests that limited company lending could exceed 56,000 in 2016, up from 30,000 in 2014.

The NLA has found that 40% of buy-to-let landlords are considering forming a limited company.

Responding to this demand, the new policy will allow both new and existing customers to transfer a property from their individual name into a limited company or limited liability partnership, subject to current policy requirements being satisfied.

Borrowers are instructed to seek professional advice from a qualified professional prior to entering into any transaction.

The policy will be even more popular after Wednesday’s Budget announcement that corporate landlords will now be subject to the 3% Stamp Duty surcharge, due to be enforced on 1^st April.

The Sales Director at OneSavings Bank, Adrian Moloney, says: “The Chancellor’s changes introduced a clear need for products designed specifically for property investors who were moving their investments into a limited company, and needed their mortgage finance to reflect this.

“Our new criteria provide a solution for professional investors who wish to manage their portfolios through a limited company structure. We’ve also made sure that the process is as quick and efficient as possible for brokers and their clients.”¹

¹https://www.landlordtoday.co.uk/breaking-news/2016/3/lender-encourages-landlord-incorporation

Gross Annual Rental Yields Now at 17-Month High

Published On: March 18, 2016 at 11:01 am

Author: Em Morley

Categories: Landlord News

Tags: buy-to-let landlords,rental returns,rental yield,Stamp Duty

Rental yields are showing resistance to soaring property prices, according to the latest Buy-to-Let Index from Your Move and Reeds Rains.

The gross rental yield on the average rental property in England and Wales was 4.8% in February – unchanged from January. On an annual basis, this is slightly lower than the 5% gross rental yield recorded in February last year.

Gross Annual Rental Yields Now at 17-Month High

Taking into account both rental income and capital growth, a typical landlord in England and Wales has seen total returns of 12.7% over the 12 months to February. This is up from the average 11.7% return for the year to January, representing a 17-month high. The last time that rental yields reached 12.7% was in the 12 months to September 2014.

In absolute terms, the average landlord in England and Wales has made a return of £23,227 in the past year, before any deductions for buy-to-let mortgage payments or property maintenance. Of this sum, the average capital gain accounted for £14,767, while rental income made up £8,460 of the yield.

The Director of Your Move and Reeds Rains, Adrian Gill, explains: “Rising property prices and rising rents are two sides of the same coin. There is not enough supply of housing across the UK to match soaring demand. This is powering a sellers’ purchase market and a landlords’ rental market. Housing costs are rising, and housing wealth is rising – two very different perspectives on the same issue.

“Faced with this dilemma, investment in property is a rational response, and has been proving extremely lucrative for landlords and some homeowners alike. Building more new homes would be an even better response, and where possible is even more profitable. But it is Government inaction preventing more homes being built to fill the gap – just as it is a Government decision to attack those willing to navigate the risk and complexity of property investment.”

He insists: “Until this country builds new homes at the rate needed to match our rising population, property investment and buy-to-let activity will continue to be especially profitable. Even if that never happens, it could take decades of sufficient home building to make up for the decades of undersupply.

“The only caveat is that property investment decisions are becoming more complicated thanks to the plethora of additional regulations and tax changes. These decisions will be harder to make, and the buy-to-let industry will demand a more professional approach to the business of being a landlord. But for those who already own properties, or have the capital to invest, there are opportunities to be found.”¹

It is unclear how the market will change after the 3% Stamp Duty surcharge is implemented on 1^st April, as it has now been confirmed that large-scale investors will also be hit by the change. Since the start of the year, landlords have been rushing into the market to beat the deadline.

However, research suggests that many investors are now considering leaving the buy-to-let sector.

¹http://www.propertyreporter.co.uk/landlords/gross-annual-rental-yields-hit-17-month-high.html

Large-Scale Property Investors Will be Hit by Higher Stamp Duty

Published On: March 18, 2016 at 9:37 am

Author: Em Morley

Categories: Finance News

Tags: Budget 2016,buy-to-let landlords,large scale investors,Stamp Duty

Large-scale property investors are surprised to find that they will be subject to the 3% Stamp Duty surcharge set to come into force on 1^st April. It was originally thought that corporate investors purchasing more than 15 properties in one transaction would be exempt.

However, Chancellor George Osborne revealed in Wednesday’s Budget 2016 that institutional investors will be charged an extra 3% Stamp Duty on buy-to-let property purchases from next month.

Large-Scale Property Investors Will be Hit by Higher Stamp Duty

From 1^st April, buy-to-let landlords and second homebuyers will be charged an additional 3% of the property tax on properties worth over £40,000.

Finance expert Paul Mahoney, of Nova Financial, reacts to the news: “The Stamp Duty changes were confirmed as expected, with a slight surprise regarding that it will apply to limited companies purchasing over 15 properties. Some were hoping the changes would be delayed, but that wasn’t to be.”

After a boom in the buy-to-let market since the beginning of the year, many industry experts have been calling for the change to be postponed, citing difficulty in completing transactions ahead of the Stamp Duty deadline. Conveyancers even urged the Chancellor to scrap the plans altogether.

The Treasury believes that it will raise over £600m from increasing the tax, some of which will fund a new £115m scheme to help the homeless.

The Managing Director of the Association of Residential Letting Agents (ARLA), David Cox, responds to Wednesday’s announcement: “In November, when Mr. Osborne announced an increase in Stamp Duty tax on buy-to-let properties, we described this as a catastrophic move.

“Today’s news that larger investors will also have to pay the tax is even worse. Professional landlords – those who typically own more than 15 properties – play a vital role in providing rental stock to the market, and providing the army of renters we have in this country with housing.”

He continues: “Our members forecast that the supply of buy-to-let properties will dwindle when the new tax comes into effect, and this news means that supply will fall even faster and harder. We’re already in a position where demand outstrips supply, and as supply falls, rent costs rise, meaning the goal of homeownership falls even further out of reach for most of the country’s renters.”¹

However, the Budget did include some good news for buy-to-let landlords, who previously feared that they would be unfairly caught out by the new tax rates.

However, the grace period during which those who have an overlap between owning two properties can claim a refund on the higher rates has been extended to 36 months, from an originally planned 18 months.

This means that people who own two homes but are trying to sell one will get some breathing room.

¹https://www.landlordtoday.co.uk/breaking-news/2016/3/budget-2016-blow-to-corporate-investors

Buy-to-let investors not put off by stamp duty rise

Published On: March 14, 2016 at 12:31 pm

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,buy-to-let landlords,landlords,Stamp Duty,tax,tenants

Another new piece of analysis has found that the upcoming changes in stamp duty will fail to deter buy-to-let investors as initially planned.

Analysis from Jackson-Stops & Staff suggests that after the buy-to-let rush to beat the surcharge passes, investors will be assisted by property price inflation. The firm suggests that house price rises over the next year will more or less compensate for the increased stamp duty bill.

Losers

Worryingly, the research predicts that the largest losers as a result of the changes will be tenants, as landlords put rents up to deal with increases in tax.

For example, should property prices carry on growing at their present rate in the South East, the capital gain on an average property will be £28,412 per year. Total stamp duty on purchases of an average home will be £11,328.

Separate data from the Association of Residential Letting Agents (ARLA) shows that the majority of landlords keep hold of their investment property for more than one year. Data from the ARLA report shows that 33% of landlords keep their property for 11-20 years and for an average of 20.3 years. This suggests that the majority of landlords will benefit from the positive impact of house price growth in the long term.

Positive outlook

Nick Leeming, Chairman at Jack-Stops & Staff, noted, ‘the Government, through its 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.’ Leeming said that his advice for landlords was, ‘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.’[1]

‘If property prices continue on their current 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. 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,’ Leeming continued.[1]

Leeming feels that, ‘the only losers will be tenants as landlords as likely to pass on any additional costs they might not want to shoulder to their tenants by increasing rents.’ He fears, ‘this could mean that those currently in rented accommodation who are saving for a deposit to buy a home, take even longer to pull this money together.’[1]

Buy-to-let investors not put off by stamp duty rise

Regional concern

It is estimated that in eight out of ten regions, buy-to-let investors will find capital gain will negate all stamp duty costs. However, this is not the case in the North East and North West of Britain.

Leeming noted, ‘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.’[1]

Concluding, Mr Leeming said, ‘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/btl-investors-undeterred-by-stamp-duty-changes-claims-new-analysis.html

Tenants in East Midlands most satisfied with landlord

Published On: March 13, 2016 at 10:16 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,buy-to-let landlords,landlords,tenants,tenants satisfaction

New research has indicated that tenants in the East Midlands are most satisfied with their landlord, compared to all other regions of the country.

A survey from the National Landlords Association found that 83% of renters in the region are satisfied with their current landlord. Renters in the North West and South West were almost as content, with 82% in these areas stating that they were satisfied.

Regional reflections

Data from the report shows that there are sharp regional differences in terms of tenant satisfaction. Only 67% of renters in the North East said that they were content, which represented the lowest rate in the whole of England.

In total, an average of 79% of tenants who replied to the poll said that they were satisfied with their landlord. The South East recorded a satisfaction rate of 80%, followed by the West Midlands with 79%, Yorkshire and Humber with 73%, London 72% and the East with 71%.

Richard Lambert, chief executive officer of the NLA, said, ‘good landlords make up the majority of the market so it’s not surprising that the majority of tenants are satisfied.’[1]

Tenants in England most satisfied with landlord

Far from insecure

‘Private renting is far from the insecure, uncertain and unhappy picture that it is often made out to be and these findings will help to reassure existing renters and those looking to make their home in the private sector. However, it doesn’t help the minority of tenants who are dissatisfied,’ Lambert continued.[1]

Concluding, Mr Lambert said, ‘the NLA provides a range of training and accreditation opportunities for landlords in order to help them develop and improve standards so they can provide a better service but this is only part of the solution. Both central and local Government must also commit more resources to tackling poor standards and weeding out bad landlords.’[1]

[1] http://www.propertywire.com/news/europe/rental-tenants-satisfaction-survey-2016030311628.html