Posts with tag: Buy-to-Let

UK property values in monthly and yearly record rises

Published On: December 30, 2015 at 10:15 am

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With the curtain coming down on 2015, a new report shows that UK property values saw record monthly and annual increases during November.

Data from a report by Haart indicates that UK property values rose 13.4% annually and by 3.7% in the month to go past the £230,000 mark for the first time. British house prices now stand at an average of £231,857.

Rise and Falls

There has been an annual increase of 7.5% in the number of new buyers but supply has dipped by 3.1% in the last month. Viewings too slipped by 4.5% during November. Sales though were more positive, rising by 0.5% over the same period.

In addition, first-time buyer house prices increased by 1.1% in the month and by 0.2% annually to hit £166,581.

However, first-time buyer numbers fell by 7% over the last month as a result of increased competition with buy-to-let investors. As a percentage of all mortgages written, the number of first-time buyers slipped from 42.5% in October to 40.4% in the last month.

More positively, the average deposit for a starter home has fallen by 2% in November and by 2.3% in the last year.

UK property values in monthly and yearly record rises

UK property values in monthly and yearly record rises

Record-breaking

‘UK house prices rose 13.4% annually and 3.7% on the month to break records again in November,’ observed Paul Smith, CEO of Haart. ‘This is the steepest monthly and annual increase on record and follows a surge in registrations from buy-to-let investors since the Autumn Statement in anticipation of the 3% stamp duty surcharge which is effective from the 1st of April of 2016. This could mean the stamp duty payable on a property worth £275,000 could rise from £3,750 to £12,000.’[1]

Smith went on to say that, ‘although first-time buyer house prices have remained relatively stable, up just 1.1% in the last month, I expect these to shoot up over the coming months as first-time buyers face fierce competition from buy-to-let investors.’ He also believes that, ‘The pressure is already being felt by many with demand among first-time-buyers already down 7% in the last month alone. While first-time buyers may face a tough couple of months, once the stamp duty changes come into effect in April, demand from buy-to-let investors is likely to recede so we should see a recovery in prices at this level.’[1]

[1] http://www.propertyreporter.co.uk/property/average-uk-house-see-steepest-monthly-and-annual-increase-on-record.html

 

 

 

Prospective Buyers Must Now Save for 24 Years

Published On: December 26, 2015 at 2:44 pm

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Prospective homebuyers must now save for up to 24 years for a deposit large enough to secure them a mortgage, claims new research.

The Resolution Foundation think-tank has used the Bank of England’s latest study of household finances to suggest that as house prices are rising sharply, it will now take almost 25 years for low and middle-income households to raise a deposit if they save 5% of their disposable income every year.

Prospective Buyers Must Now Save for 24 Years

Prospective Buyers Must Now Save for 24 Years

This is lower than the time needed just before the recession, but is significantly lower than the three years needed in the 1980s and 90s. Additionally, this news arrives despite interest rates remaining at the record low of 0.5%, as set by the Bank of England (BoE) during the financial crisis.

Chancellor George Osborne has launched a series of Help to Buy schemes, including shared ownership and taxpayer mortgage guarantees for first time buyers, promising to turn generation rent into generation buy.

However, Chief Economist at Resolution, Matt Whittaker, warns that Help to Buy may boost house price rises, pushing housing further out of reach for low-income households.

He says: “To the extent that these schemes have stoked demand so propped up house prices in recent years, they have served to make homeownership even less attainable for many, while increasing the gains flowing to older homeowners who have been the main beneficiaries of the sustained housing boom.”1

The think-tank has raised concerns that the increasing cost of homeownership is aggravating a generational divide – the baby boomers having accumulated financial stability and young workers struggling with lower wages.

Having analysed the BoE’s data, Resolution found that among households headed by under-45s, 28% of non-homeowners believe they will never be able to buy. Among the poorest fifth of households, this grows to 39%.

Co-founder of the Intergenerational Foundation think-tank – which campaigns for benefits for younger households – Ashley Seager, comments: “Today’s wealthy baby boomers found it easy to buy housing a generation or two ago, especially as MIRAS tax relief on mortgages was available to them.

“But now their children and grandchildren cannot access housing in anything like the same way.”1

However, he welcomes Osborne’s recent crackdown on the buy-to-let sector through the restriction on tax relief that landlords can claim.

The BoE’s Financial Policy Committee (FPC), which has the job of preventing future financial crises, also warns that it is becoming increasingly concerned about whether buy-to-let investors are driving an unsustainable boom.

Osborne is currently consulting over whether to give the FPC further powers over buy-to-let, which could cause the mortgage market to dry up.

1 http://www.theguardian.com/money/2015/dec/20/uk-home-buyers-save-24-years-housing-ladder-deposit-study

 

CML Predicts Buy-to-Let Market Slump

Published On: December 21, 2015 at 9:57 am

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The buy-to-let mortgage market will experience a slump over the next two years, according to the latest report from the Council of Mortgage Lenders (CML).

CML Predicts Buy-to-Let Market Slump

CML Predicts Buy-to-Let Market Slump

The study states: “Buy-to-let faces a challenging period, as changes to tax treatment and the prospect of macro-prudential intervention run counter to otherwise strong fundamentals. Buy-to-let house purchase activity in 2015 may peak and fall away below 2014 levels by 2017.”

The CML claims there are three main causes of uncertainty in the sector: forthcoming changes to mortgage interest tax relief from 2017; the extra 3% Stamp Duty on buy-to-let purchases from April; and the possibility of the Bank of England (BoE) limiting landlord mortgages from next year.

It warns: “Inevitably, these will adversely impact the rate of growth in the sector and even cause lending volumes to ease back.”

It believes that buy-to-let will account for 9% of all UK property transactions this year, much lower than the 2006-08 period. It also says that buy-to-let will account for about 16% of all mortgaged purchases.

The CML report adds: “Future prospects are closely tied to potential macro-prudential regulation and incoming tax changes. We currently expect buy-to-let house purchase activity in 2016 to fall below its 2015 level, and for activity in 2017 to fall below the level seen in 2014.”

Addressing the extra Stamp Duty charges, the CML says that a consequence will be higher activity levels in the first quarter of 2016, as buyers hope to avoid the increase before it is enforced.

The report concludes: “The scale in terms of transactions is likely to be in the low thousands, though the overall impact will be close to zero over 2016, as there will probably be a corresponding fall in transactions in subsequent quarters.”1

1 https://www.cml.org.uk/news/news-and-views/market-commentary-december-2015/

LSL calls for Treasury to stop targeting landlords

Published On: December 18, 2015 at 11:56 am

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Categories: Landlord News

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Property firm LSL became the latest high-profile organisation to call for the Treasury to stop targeting buy-to-let landlords. Instead, the firm thinks that the Government should be searching for other alternatives to the housing crisis.

The calls came off the back of a new report suggesting that average rents have fallen below the £800 mark in England and Wales.

Decline

Data from the report conducted by Reeds Rains and Your Move indicate that average rents currently stand at £799 per month, down by 1.2% month-on-month.

Despite this monthly fall, rents have actually risen by 4% year-on-year, with more rises predicted for early in 2016.

‘Landlords have become fashionable targets for the Government and Bank of England,’ believes Adrian Gill, director of both LSL firms. He feels that the plans for a 3% stamp duty tax hike announced in the Autumn Statement represent, ‘overdue attention for the sector that provides homes for more than one in five Britons.’[1]

Gill feels that, ‘negative campaigns and unconstructive policies-designed to attack landlords rather than support tenants-will not make rents lower or provide more homes.’ He says that, ‘the effect will be quite the opposite, forcing rents upwards.’[1]

LSL calls for Treasury to stop targeting landlords

LSL calls for Treasury to stop targeting landlords

Worsening finances

In addition, LSL reports that yields for landlords have dipped, with tenants’ finances also worsening, in turn leading to more arrears. ‘For new entrants, or landlords looking to invest in additional properties to let, market conditions could be a little harder to navigate than six months ago,’ said Gill.

‘Choosing the right property in the right area is even more important when looking for the best rental yield on new investments. Partly this is down to enormous competition in the property purchase market-homes are being sold rapidly, whether to landlords or owner occupiers,’ he continued.[1]

Rental hikes

Concluding, Mr Gill said that, ‘it is a property sellers market. Similarly as yields continue to feel the pressure of rising prices, other factors will need to adjust in turn. That means higher rents.’[1]

‘Most likely this will push rents higher still – and indicates an earlier spring for rent rises in 2016. Combined with the latest attacks on landlords from the Government, this could propel demand even higher for every single home that landlords do have to offer. A continued shortage of properties to let is the challenge to overcome – and the Government needs to think pragmatically about this conundrum rather than looking for political targets.’[1]

[1] http://www.propertyindustryeye.com/lay-off-private-landlords-lsl-firms-tell-chancellor/

 

Senior agent warns on landlords setting up ltd companies

Published On: December 17, 2015 at 12:44 pm

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Categories: Landlord News

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A senior letting agency boss has warned landlords to be on their guard if they are planning on setting up a limited company in the wake of the Chancellor’s announcement in the Autumn Statement.

Anita Mehra, managing director of Benham & Reeves Residential Lettings, says Mr Osborne’s cap of mortgage relief for landlords alongside an increase of 3% in stamp duty on buy-to-let properties has seen the industry, ‘reel.’

Due to this, Mehra states that many landlords have approached her firm about information on putting their property portfolio in a limited company.

Popular

This is becoming more popular, due to the restriction on tax relief on mortgages interest only affecting individual investors and unincorporated residential property organisations, not limited companies.

Mehra notes that, ‘before going down this route, landlords need to think carefully. Transferring an existing property portfolio into a limited company structure could potentially attract Capital Gains Tax based on the market value of the property although such a move may be deferred on incorporation and allowing the landlord to roll the gain into the cost of the shares.’[1]

Instead, Mehra believes that landlords should discuss their issues with their accountants before making any decision.

Senior agent warns on landlords setting up ltd companies

Senior agent warns on landlords setting up ltd companies

Bills

‘The transfer can also see the landlord facing a hefty Stamp Duty Land Tax bill as each property is effectively considered to be sold at market value to the company even if there may be no consideration,’ Mehra said.[1]

An example Mehra gave is that people purchasing property through a company for the first time, overseas companies or other similar vehicles are permitted to pay 15% Stamp Duty Land Tax if the purchase price exceeds £1m. From April 2016, this will drop to £500,000 if the property is not for rental investment.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2015/12/senior-agent-urges-caution-over-setting-up-buy-to-let-limited-companies

Majority of tenants satisfied with PRS

Published On: December 17, 2015 at 10:36 am

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A new investigation from Paragon Mortgages has indicated that tenant satisfaction levels remain high in the Private Rental Sector.

In addition, the survey shows that demographics of the sector are changing. 29% of people making a home in the private rented sector are couples, with 21% being couples with children.

Settled

The majority of tenants asked seem to be settled in the Private Rented Sector, with 87% of those asked stating they felt at home. Additionally, the report shows that the average time spent living in the sector presently stands at 12 years.

Improving standards are the key factor driving the popularity of the sector, alongside a shortage of housing stock. 81% of respondents said they were satisfied with their landlord, with 66% of renters considering their rented property to be good or very good value for money.

Majority of tenants satisfied with PRS

Majority of tenants satisfied with PRS

Attractive

John Heron, Director of Mortgages at Paragon, said, ‘the message coming through in this survey is that, for many people, the Private Rented Sector is an increasingly attractive option over the long-term. This in many ways reflects the ongoing issue of affordability in the housing market, simultaneously however, competition and best practice are driving higher standards in the sector-making it a more attractive proposition for both individuals and families.’[1]

‘This data underscores the value of the PRS to the UK’s housing market. The UK’s Private Rented Sector still has some way to go before it catches up with its counterparts in Europe, but higher tenant satisfaction with both standards and affordability, show that there is room for increased growth in the sector,’ he added.[1]

[1] http://www.propertyreporter.co.uk/landlords/private-rental-sector-fuelled-by-satisfied-tenants.html