Posts with tag: buy-to-let landlords

New Figures Confirm that Buy-to-Let Landlords are Rushing to Beat Stamp Duty Deadline

Published On: March 9, 2016 at 9:30 am

Tags: buy-to-let landlords,buy-to-let properties,remortgaging,Stamp Duty,valuations

Yet more evidence has confirmed that buy-to-let landlords are rushing to purchase new investment properties to beat the Stamp Duty deadline.

Connells Survey & Valuation has found that in February, it conducted 34% more buy-to-let valuations than in the same month last year, and 25% more than in January.

New Figures Confirm that Buy-to-Let Landlords are Rushing to Beat Stamp Duty Deadline

Meanwhile, remortgaging valuations – including buy-to-let remortgaging – also surged, up by 41% annually and 6% on a monthly basis.

The extra 3% Stamp Duty charge on buy-to-let properties and second homes will be implemented on transactions completed after 1^st April.

The Corporate Services Director of Connells Survey & Valuation, John Bagshaw, comments on the findings: “Buy-to-let investors and those remortgaging with the aim of buying a second home are racing against the clock.

“Expect this activity to reach a crescendo in March before calming in the second quarter of the year. Buy-to-let investors will be calculating the impact the Stamp Duty hike is having on their rental yields, while those thinking of remortgaging to fund a second home will weigh up whether it’s still financially viable for them to do so.”¹

Additionally, the home mover and first time buyer sectors have experienced strong monthly growth in valuation activity. The amount of valuations conducted for first time buyers soared by 36% between January and February, and rose by 8% annually.

Valuations carried out for home movers were up by 35% in February and 9% over the past year.

Overall valuation activity performed well. The total number of valuations conducted in February was up by 21% on the same month in last year.

It was recently announced that the forthcoming Stamp Duty hike is also driving the auction market.

However, conveyancers are concerned about the short timeframe between the next Budget (on 16^th March) and the Stamp Duty change.

¹http://www.propertyindustryeye.com/rush-buy-let-borrowers-try-close-mortgage-deals/

Landlords’ Challenge of Tax Relief Reduction to Receive Response from HMRC

Published On: March 8, 2016 at 12:38 pm

Author: Em Morley

Categories: Landlord News

Tags: buy-to-let landlords,landlord finances,landlord taxes,mortgage interest tax relief

Two landlords’ legal challenge of Clause 24 of the Finance (No. 2) Act 2015 will receive a response from HM Revenue & Customs (HMRC) by 16^th March 2016.

Under the clause, landlords will not be able to deduct the cost of their buy-to-let mortgage interest as a business expense from their rental income by 2020. This will mean that their rental income will be added to any other income, potentially pushing them into the next tax band.

Therefore, tax will be paid on turnover, not profit, meaning that tax could be due on non-existent income. For some higher-rate taxpayers, mortgage costs above 75% of their rental income will mean they make a loss on their buy-to-let investment.

Landlords’ Challenge of Tax Relief Reduction to Receive Response from HMRC

The clause, announced by Chancellor George Osborne in the 2015 Budget, has received criticism from buy-to-let landlords, who have often invested in property to boost their pension pots.

The measure is part of the Government’s plan to turn generation rent into generation buy. Meanwhile, some believe that the Government is favouring large-scale investors over smaller private landlords.

Landlords Steve Bolton and Chris Cooper are leading a legal challenge in an attempt to bring a judicial review of the reduction in mortgage interest tax relief, which will be gradually imposed starting in 2017.

Cooper is a modest investor and part-time landlord, who is boosting his pension through buy-to-let, while Bolton owns around 20 residential and commercial properties, and is also the founder and owner of Platinum Property Partners, a buy-to-let training franchise.

Cherie Blair’s Omnia Strategy has been appointed to represent the landlords.

The application has been filed and signed off by the firm, which gives HMRC and the Treasury until 16^th March to respond with an Acknowledgement of Service. This must detail the grounds on which the departments intend to contest the challenge.

The challenge will argue that the Government’s tax change flouts “a long-established principle of taxation that expenses incurred wholly and exclusively for the purposes of the business are deductible when calculating the taxable profits”.

The landlords have set up a crowdfunding page, which had raised just over £50,000 from 740 supporters in January.

A statement from the landlords says: “We expect the Government to respond aggressively. We are hoping for a positive result, but are mindful both that judicial review proceedings are inherently difficult and also that, even if we win, the Government might introduce changes or new measures that are more defensible legally, but still unattractive and problematic for hard-working private landlords.”¹

We will keep you updated on the landlords’ case and continue to provide information for landlords on all issues affecting the buy-to-let sector.

¹https://www.facebook.com/clause24/posts/1107773035932366

Upcoming tax changes not deterring many landlords

Published On: March 7, 2016 at 11:38 am

Author: Em Morley

Categories: Landlord News

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

A new survey of 170 property investors has revealed that many are not being deterred by the forthcoming changes in stamp duty land tax.

The investigation by Shawbrook suggests that 56% of their clients are looking to purchase a buy-to-let property within the next year.

Tax changes

With the tax changes fast approaching, the survey also revealed that 40% of investors plan to launch a limited company for their properties to soften the impact. 33% said that they planned to increase rents as a result of the alterations.

These new changes to both stamp duty and tax relief have led many investors to reassess their ambitions. Of the 44% of people who said they did not plan on purchasing a new buy-to-let property in the next twelve months, 37% said this was due to the tax relief changes. 16% said that the 3% stamp duty levy on second homes and buy-to-let properties was the reason they will not be investing.

Issues

In addition, the changes show that 49% of clients believe regulation to be the largest challenge facing property investors during the next six months. This is a huge jump from the same time last year, where only 23% of investors believed regulations to be their biggest investment hurdle.

Upcoming tax changes not deterring many landlords

Encouragingly, despite the changes, 61% of respondents said that they had a positive outlook for the next year. This proportion believe there will be an increase in property value over the coming year. 43% said they saw an increase in tenant demand in 2015, with 61% saying their rental income also rose.

44% said that they were confident their business would grow further during 2015.

Positivity

Karen Bennett, Sales and Marketing Director Commercial Mortgages noted, ‘as a lender, it is always great to see such positivity in the market and as with our Broker Barometer conducted in late 2015, it seems that there is a lot of optimism amongst property professionals also. Obviously the new changes will have an effect and may instill more caution across the market; however, Shawbrook is well-placed to adapt to change and we are expecting the market to remain buoyant.’[1]

[1] http://www.propertyreporter.co.uk/landlords/majority-of-btl-investors-say-its-business-as-usual-despite-tax-changes.html

Buy-to-let investors rushing to beat deadline, but will it last?

Published On: March 6, 2016 at 11:40 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,buy-to-let landlords,first time buyers,mortgages,Stamp Duty

Buy-to-let investors are rushing to complete deals before the stamp duty changes on April 1^st, according to new data from the Nationwide.

The firm’s house price index reveals that there has been a large rise in mortgage approvals, which reached a two-year high in January. Data also shows that prices increased on average by 0.3% in February. Growth for the year also increased by 4.8%.

Up and Up

Robert Gardner, Nationwide’s Chief Economist, noted, ‘the number of mortgages approved for house purchase increased sharply in January to almost 75,000, up from around 71,000 approvals in December and the highest number since January 2014.’[1]

‘However, much of the increase is likely to be related to the impending increase in Stamp Duty on second homes which is due to take effect in April 2016. This is likely to have brought forward a significant number of purchases, which in turn will probably result in a fall back in approvals during the spring/summer,’ he continued.[1]

Race

Jonathan Hopper, managing director of Garrington Property Finders, observes, ‘the race is on for second home and buy-to-let buyers to complete before April’s stamp duty hike. The resulting spike in demand sent the number of mortgage approvals surging in January and has sparked high levels of competition for typical buy-to-let properties-flats and terraced houses in popular rental areas.’[1]

Looking to the future, Hopper asked, ‘what will happen once the stamp duty scramble is over?’ He believes that, ‘the chronic shortage of supply is likely to continue nudging up prices, even after the pre-April stimulus fades.’[1]

Buy-to-let investors rushing to beat deadline, but will it last?

Speed bump?

‘It’s hard to know if the April stamp duty deadline will be a speed bump for the market or a speed boost,’ states Mark Posniak, managing director at Dragonfly Property Finance. ‘Demand from buy-to-let investors will fall away during March but first-time buyers could arrive in numbers.’[1]

Posniak feels that, ‘the age-old opponent of first-time buyers, the landlord, has effectively been red-carded and the playing field is now theirs.’ He went on to note, ‘as the buy-to let purge starts in earnest, the appallingly low home ownership rate for younger people may well pick up. With the Bank rate seemingly set in stone for 2016 and people confident about their jobs, demand is unlikely to wane.’[1]

‘The ebb and flow of the property market is difficult to predict at the best of times but with the possibility of Brexit and the April stamp duty change impacting landlords, its bordering on the impossible,’ he concluded.[1]

A storm brewing

However, Alex Gosling, CEO of online estate agents HouseSimple.com feels, ‘this could be the storm before the calm. February house price growth is being driven by the buy-to-let gold rush-investors trying to get in before the stamp duty hike. March is likely to be more of the same, as time is running out. It will be interesting to see what happens in April, which is historically a buoyant time for the housing market. We are walking into the unknown and there’s a chance that demand will drop like a stone.’[1]

‘With less buy-to-let investors snapping up properties from beneath the noses of traditional home buyers, we could well see a surge in first time buyers coming to the market. Home buyer demand has always been there, but they have often struggled to compete against committed investors, many of whom can buy for cash. Now they’re fighting on a more level playing field, we could well see the drop off in investor numbers replaced by a surge in first time buyer numbers,’ Mr Gosling added.

[1] http://www.propertyreporter.co.uk/finance/the-race-is-on-for-btl-investors.html

Where are the top cities for buy-to-let investors?

Published On: March 5, 2016 at 11:45 am

Author: Em Morley

Categories: Landlord News

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

New research has indicated that many buy-to-let investors are leaving London behind in order to secure the best opportunities.

For years, the capital has represented the number one region for yields and soaring tenant demand. Now, with property prices in the city spiralling out of reach, investors are being forced to look further afield.

Best to invest

Data from a report by Savills assesses the top drivers of the rental market and identifies the best cities for buy-to-let investment.

The research discovered that Manchester, Reading and Bristol were the top-three areas in which landlords should invest. This is due to their strong economic growth and reputations as desirable locations to live in.

Though not an exhaustive list, Savills looked at invest prospects in areas where a substantial housing shortfall is expected. This was coupled with the economic potential of every city, including analysis of past and future growth sectors.

In addition, the report examined the investment potential of each city, taking into account the net income return, chances of rental and capital value growth and supply and demand. This included household projections, growth forecasts and local competition.

Eventually, the top ten cities for investment were found to be:

Manchester
Reading
Edinburgh
Bristol
Brighton
Leeds
Glasgow
Cardiff
York
Milton Keynes

Where are the top cities for buy-to-let investors?

Northern soul

‘House prices in London are about five times what they are in Manchester, but salaries re only 30% higher,’ noted Peter Armistead of Armistead Property. ‘Manchester is a very affordable place to live and demand for property is soaring in the city, thanks to the expansion of the MetroLink tram system, the trendy Northern Quarter and the BBC Media City.’[1]

‘Manchester has vibrant restaurants, bars, clubs plus a great music scene, galleries and museums,’ Armistead continued. ‘It also has an amazing student community and its universities, teaching and research facilities are truly wolrd class. It is home to nearly 100,000 students, making it one of the largest student cities in Europe. Despite all of its many advantages and attractions, Manchester is a very affordable place to live and many students chose to carry on living there after they graduate, as well as graduates from other areas moving to Manchester. Furthermore, wages relative to property costs are a very important factor in attracting these people.’[1]

Concluding, Mr Armistead said, ‘Manchester is a great place for BTL investment. An average residential property in Manchester is just £155,000, while a flat in a good area costs as little as £120,000. A property in the city can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper. It’s not surprising that investors are turning away from London to more fruitful, regional cities like Manchester. If investors can purchase cheaper properties with better yields, they will have the opportunity to protect and boost their profits in the longer term.’[1]

[1] http://www.propertyreporter.co.uk/landlords/savills-research-reveals-top-ten-btl-cities.html

Government’s Intervention in the Housing Crisis has Been “a Step in the Wrong Direction”

Published On: March 4, 2016 at 12:13 pm

Author: Em Morley

Categories: Property News

Tags: Affordable housing,buy-to-let landlords,housebuilding,housing crisis,landlord taxes

A new report from the Institute of Economic Affairs states that almost all of the Government’s interventions in the housing crisis have been “a step in the wrong direction”.

The paper, by Dr. Kristian Niemietz, particularly criticises the Help to Buy scheme, Inheritance Tax and tax changes for buy-to-let landlords.

Government’s Intervention in the Housing Crisis has Been “a Step in the Wrong Direction”

However, it believes that the Stamp Duty reforms of December 2014 have been a step in the right direction, but still criticises it for hindering those looking to downsize. It was recently reported that the majority of homebuyers have saved money under the new system.

The paper claims that the prohibition to build on the greenbelt is not just outdated, but conceptually wrong and should be abolished entirely.

The document especially criticises the forthcoming changes to landlord taxes, notably the reduction in buy-to-let mortgage interest tax relief. It says: “Letting a property is a business like any other and the cost of servicing the mortgage is a business cost like any other. Thus, the tax system should treat it as such.”

On the subject of the shortage of housing, the report states that not only is the UK’s stock inadequate, but it is mostly in the wrong place.

It adds that there is no specific shortage of social housing, private rental properties or first time buyer homes, but an overall shortage of affordable housing across all tenures.

It does not believe that boosting homeownership should be a policy aim in itself, but that the Government should strive to improve general affordability.

Dr. Niemietz’s report states that the housing crisis was caused by high costs of buying and renting.

It has found that both house prices and rents are among the highest in the world, both in absolute terms and in relation to average earnings.

Since 1970, house prices have risen by four and a half times after inflation, says the study.

It claims that no other OECD country has experienced price increases on this scale, or anywhere near the enormity seen in the UK.

OECD countries consist of the world’s wealthier states, including the USA and Canada.

The report also found that UK house building has sat at the lowest rate of construction than any other OECD country for over three decades. Earlier this week, it was claimed that UK housebuilders are restricting supply in order to keep house prices high.

Find the full report by Dr. Niemietz here: http://www.iea.org.uk/sites/default/files/publications/files/IEA%20Housing%20Crisis%20Briefing%20Feb%202016.pdf