Posts with tag: Stamp Duty

Mortgage lending at seven-year high-reaction

Published On: January 21, 2016 at 2:18 pm

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New research from the Council of Mortgage Lenders (CML) suggests that gross mortgage lending reached £19.9bn in December 2015.

This was a 3% month-on-month dip on the £20.5bn recorded in November, but was a huge 23% greater than the £16.2bn in December 2014.

Seven-year high

The estimated total of gross lending in 2015 is £220.3bn, an 8% increase on the £203.3bn in 2014 and the largest annual gross lending figure since 2008.

In the final quarter of last year, gross mortgage lending totalled £62.3bn, a 1% increase on quarter three and a 23% rise from the final quarter of 2014.

‘House purchase lending has been rejuvenated over the past year and with the second half of 2015 looking stronger than the first in lending terms, the trend looks positive,’ noted Richard Sexton, director of e.surv charterted surveyors. ‘Small-deposit lending has been transformed by a renewed enthusiasm to help first-time buyers cross the threshold of homeownership, as evidenced by the number of higher LTV products available.’[1]

‘Supply issues have become more of a factor in some areas as we head towards the turn of the year, as both growing demand and house prices finally get the attention they deserve from the Government but limited choice of affordable homes is certainly proving challenge to some buyers. Alongside this obstacle, higher stamp duty changes are finally making their mark upon the top end of the market, Sexton added.[1]

Better than expected

John Phillips, group operations director of Spicerhaart and Just Mortgages noted, ‘in July last year, the CML revised its forecast of gross mortgage lending in 2015 to £209bn from £222bn. However, the latest figures show the total for 2015 was in fact £220.3bn, the highest figure since 2008. The total lending figure is significantly higher than the CML’s previous estimation.’[1]

‘It is promising to see that gross mortgage lending increased by eight per cent last year and the underlying picture is one of modest recovery. The level of demand is likely to be a result of low inflation, strong wage growth and competitive mortgage deals, but there is still an element of uncertainty as demand continues to outstrip supply,’ he continued.[1]

Shaky

Brian Murphy, Head of Lending of the Mortgage Advice Bureau, believes, ‘as well as new entrants to the market, activity has also been stoked by homeowners cashing in on the rising value of their home to climb to the next rung of the property ladder. According to HMRC, housing transactions reached a near two-year high in December.’[1]

Mortgage lending at seven-year high-reaction

Mortgage lending at seven-year high-reaction

Murphy believes however that, ‘this growth is being built on shaky foundations.’ He said, ‘with scarce new homes being brought into the market, housing transactions are largely dependent on homeowners moving and selling their homes. Property turnover has slowed significantly in recent years and this is an unsustainable path for a housing market which urgently needs an increase in the construction of new homes.’[1]

Impressive

Peter Rollings, CEO of Marsh & Parsons, believes the, ‘steady build-up of activity and buyer confidence is even more impressive when you consider some of the adverse changes the housing market has had to stomach over the past twelve months. While the shakeup of stamp duty was indeed a welcome tonic for many first-time buyers and those purchasing property at the lower bands, it has been harder to digest at the middle and top-end, where the increased levy is particularly onerous.’[1]

‘With an additional 3% of stamp duty coming into effect for second homeowners in April, 2016 may well see an opposite trend- and a growth spurt in the early stages of this year that could then taper off in the short-term while the market retunes,’ he continued.[1]

Henry Woodcock, Principle Mortgage Consultant at IRESS, agrees, stating, ‘we expect 2016 to continue in the same light initially, although regulatory change may take its toll eventually. Demand will be bolstered by fast movement in the buy-to-let market ahead of April’s deadline and with a rise in interest rates near enough ruled out for 2016, affordable finance will remain in place for borrowers and prospective buyers.’[1]

[1] http://www.propertyreporter.co.uk/finance/gross-mortgage-lending-reaches-seven-year-high.html

RLA Seeks Legal Advice on Challenging Osborne’s Tax Changes for Landlords

Published On: January 20, 2016 at 9:46 am

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The Residential Landlords Association (RLA) is seeking legal advice on whether to challenge Chancellor George Osborne’s proposed tax changes for landlords.

In the summer Budget last year, Osborne announced plans to cut mortgage interest tax relief for buy-to-let investors.

The change will mean that landlords will be taxed on turnover, not profit, and targets smaller investors.

RLA Seeks Legal Advice on Challenging Osborne's Tax Changes for Landlords

RLA Seeks Legal Advice on Challenging Osborne’s Tax Changes for Landlords

The RLA is taking advice on whether the change will breach the Human Rights Act and EU law on free movement of capital.

Separately, two landlords have crowdfunded to fund a judicial review. Read more: /angry-landlords-hope-to-tackle-george-osborne/

The RLA also believes that the Government’s policies are encouraging overseas property investors.

The additional 3% Stamp Duty charge for buy-to-let landlords and second homebuyers, announced in the Autumn Statement, will, similarly to the change on mortgage interest tax relief, be imposed on smaller landlords.

Landlords with smaller portfolios will be subject to the extra tax, while those buying 15 or more properties in one transaction will be exempt.

The RLA says that this will favour larger investors, “many of whom are likely to be from overseas”.

The Chairman of the RLA, Alan Ward, comments: “It is astonishing that a Conservative Chancellor is leaving the way open for foreign investors and cutting opportunities for individual UK landlords.

“This additional assault on private landlords coming on top of changes to the taxation of rental income will only lead to reduced supply and higher rents.”

He continues: “The Chancellor’s planned changes to Stamp Duty came as a bolt out of the blue. Regardless of the Government’s plans for homeownership, demand for rented housing is only set to increase.

“The Government needs to understand that not everyone will be able to afford to buy a house or indeed want to, even if more houses are built. Its whole policy towards the private rented sector needs to change. If it does not, it will only make the housing crisis worse.”1

The Chair of the Treasury Select Committee asked the Chancellor yesterday whether the Stamp Duty charge would aid or hinder mobility in the jobs market.

Osborne responded: “I think that it will help to promote homeownership, because it will mean that there is a more level playing field between an owner-occupier who wants to buy a house, a first time buying family and a buy-to-let landlord.

“There is nothing wrong with people investing in property, but there should be a level playing field so that we reverse the decline in homeownership in our country.”2 

1 http://news.rla.org.uk/government-discrtment-in-housing/

2 http://www.publications.parliament.uk/pa/cm201516/cmhansrd/cm160119/debtext/160119-0001.htm#16011944000005

London buyers adapting to upcoming legislation changes

Published On: January 19, 2016 at 2:29 pm

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The turn of the year has seen a surge in activity in the property investment market, as buy-to-let purchasers rush to secure property before the increase in stamp duty takes hold on April 1st.

Activity has been prominent in the capital, with investors in London aware of how much an additional 3% equates to in the most expensive area of the market.

Rewards

‘Buy to live purchasers can’t be blamed for stepping out of the arena for this buy to let mini-bubble,’ said Sara Ransom, director of Stacks Property Search in London. She feels that, ‘their reward is likely to be less punchy prices on the kind of property that lends itself to investment purchase. April will be a good month for non-investment purchasers of new homes where there’s a good chance that discounts of up to 3% will be on the table.’[1]

Ransom notes that, ‘at the lower end of the resale sector, buyers may struggle to negotiate discounts,’ saying, ‘the £300,000-£600,000 market has gone from strength to strength since the new Stamp Duty bands were introduced in the Autumn of 2014. The first time buyer market in areas such as Clapham, Balham and Streatham is buoyant; buyers interested in ex-council apartments in Brixton will have to work hard just to look at one before it’s snapped up.’[1]

London buyers adapting to upcoming legislation changes

London buyers adapting to upcoming legislation changes

Higher value, less competition

Observing that overseas buyers make up a small proportion of buyers than they did two years ago,’ Ransom said that, ‘over £600,000, there’s less competition.’ She went on to say however that, ‘the market is moving steadily and there’s plenty of demand from those upsizing to a second home, with help from the bank of Mum and Dad. But here may be a little room for manoeuvre on price if you do your research, kick hard in the right places and get your timing right. April will be a good month to be negotiating.’[1]

‘Meanwhile, the prime central London market remains in intensive care; its recovery is expected to be a slow and painful. The question is, how will prices fall before people start speculating again?’ she concluded.[1]

[1] http://www.propertyreporter.co.uk/property/what-next-for-london-buyers.html

 

 

House prices up 7.7% in November-ONS

Published On: January 19, 2016 at 12:13 pm

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Figures released today from the Office for National Statistics (ONS) reveal that average property prices in the UK rose by 7.7% in the year to November 2015. This figure was up from the 7.0% recorded in the year to October.

Rises

Property price annual inflation was found to be 8.3% in England, 1.3% in Wales, 0.4% in Scotland and 4.6% in Northern Ireland. Annual house price increases in England were propelled by a yearly increase of 10.2% in the East, 9.8% in the South East and 9.8% in London.

With the exception of the capital and the South East, UK property prices rose by 5.8% in the twelve months to November of last year.

In November 2015, property prices paid by first-time buyers were 7.4% greater on average than those recorded one year previously. For existing owner-occupiers, values increased by 7.8% over the same period.

‘House prices in November saw the biggest annual increase in eight months, despite traditionally being a quieter time in the housing market,’ observed Brian Murphy, head of lending at the Mortgage Advice Bureau. ‘Those lucky enough to already be on the property ladder are the clear winners of this boom, as homeowners trading up to the next rung take advantage of improving property values. Increased equity means even those not looking to sell can benefit by switching to a more affordable mortgage deal.’[1]

House prices up 7.7% in November-ONS

House prices up 7.7% in November-ONS

Rush

Murphy feels that, ‘the heat is set to rise in the buy-to-let and second home market in the short-term, as buyers rush to complete before the changes to Stamp Duty kick in in April.’ Continuing, he said, ‘in the long-term, the dearth of properties available combined with rampant demand means house price growth isn’t likely to slow any time soon. This creates clear affordability concerns for first-time buyers.’[1]

‘Government schemes to increase affordable housing will put a bandage over the wound: but without a significant and sustained increase in the construction of new homes, the current housing crisis isn’t likely to be cured any time soon,’ he concluded.[1]

Adrian Whittaker, Sales Director at New Street Mortgages, noted, ‘these figures from the ONS are typical of the strong growth that the housing market experienced last year, as house prices rose well above the level of inflation. A supply deficit and rising demand as more people looked to purchase property is squeezing the market and this puts vendors in a position where the can select the most appropriate buyer.’[1]

‘Increasing gulf ‘

Stephen Smith, Director of Legal and General Housing Partnerships, also said, ‘house prices are continuing to rise well above inflation which is pricing many prospective buyers out of the market. Prices have also risen significantly on an annual basis, exposing the increasing gulf between supply and demand.’[1]

‘Suitably sized housing needs to become more readily available at both ends of the market, to enable first time buyers to take their first steps onto the housing ladder and help last time buyers to ‘rightsize’, making life better for all. The Government needs to build  around 250,000 extra houses this year to give potential buyers any hope of finding their dream home. There are currently a number of constraints which elongate the house building process and the country should consider exploring alternative avenues to help speed up construction, such as modular housing,’ he added.[1]

[1] http://www.propertyreporter.co.uk/property/november-house-prices-gained-77.html

 

Landlords Shouldn’t Pay Extra for Limited Company Mortgages

Published On: January 19, 2016 at 9:18 am

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Mortgage lenders have been criticised for charging extra on limited company buy-to-let products by Foundation Home Loans (FHL), a specialist buy-to-let mortgage provider.

Landlords Shouldn't Pay Extra for Limited Company Mortgages

Landlords Shouldn’t Pay Extra for Limited Company Mortgages

In December, the firm announced that its own limited company buy-to-let mortgage would be priced at the same rate as its ordinary range.

The Commercial Director of FHL, Simon Bayley, believes that landlords should not be expected to pay extra due to a lack of choice, at a time when they face huge changes to their finances.

From April, mortgage interest tax relief for buy-to-let investors will be cut, along with a reduction in the Wear and Tear Allowance. However, those operating as limited companies will not be subject to the tax relief changes, leading to many landlords changing the way they run their lettings businesses.

Additionally, landlords and second homebuyers will be charged an extra 3% in Stamp Duty on property purchases.

Bayley expresses his concerns: “Certain lenders are charging up to 100bps extra for this product over their core range, when the risk is no different – effectively, asking landlords to pay any tax saving from using a limited liability company structure to the lender instead.

“Fortunately, the intermediary community is far too canny to go on selecting lenders who decide on this kind of pricing model. As soon as they realise that there are lenders, like FHL, who are not in the market to take short-term advantage of landlords keen to minimise their tax exposure, then I am sure that market forces will dictate that this kind of overpricing will quickly disappear. It certainly will not win any friends among advisers and their landlord clients in the long term.”1 

How will the tax changes affect your business?

Remember to check back to LandlordNews.co.uk for the latest landlord updates and advice.

1 http://www.financialreporter.co.uk/mortgages/industry-to-combat-limited-company-btl-charges.html

Buy-to-let clampdown beginning to work?

Published On: January 18, 2016 at 2:36 pm

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The Chancellor’s clampdown on buy-to-let investment is already beginning to show signs of working, according to new research conducted by Rightmove.

Data released by the property website suggests that more properties have become available to first-time buyers, with prices also slowing. The firm suggests that there has been a 6.6% rise in two-bed flats, popular with this group, over the past year.

Availability

Two-bed flat availability is now at its greatest since 2007, according to the firm. In addition, their research suggests that buy-to-let landlords may be looking to sell their property before changes in tax relief and stamp duty come into effect.

‘With the monthly price increase in this sector at a near standstill, this suggests that some of the dynamics of the changing tax regime for buy-to-let investors are starting to play out sooner than expected,’ said Miles Shipside, director of Rightmove.[1]

‘For several years buy-to-let investors have been enticed by high tenant demand and attractive returns,’ he continued, before saying, ‘as their window of opportunity starts to close it already appears to be opening wider for first-time buyers.’[1]

Buy-to-let clampdown beginning to work?

Buy-to-let clampdown beginning to work?

Changes

During the summer, Chancellor Osborne slashed tax reliefs for buy-to-let landlords and went on to increase stamp duty on investment and ‘second’ homes in the Autumn Statement.

Prices in the mainstream market continued to rise, with Rightmove’s data suggesting the cost of a property coming to market was up by 0.5% in January, in comparison to December. In addition, demand on the Rightmove website in the first week of 2016 was up by 21% on the same period in 2015.

However, there was little in the way of relief for struggling tenants, with separate analysis by Countrywide suggesting rents rose by 3.1% in 2015. Company research director Johnny Morris said that, ‘2016 looks to be a complicated year for landlords,’ with the, ‘additional 3% stamp duty charge, stricter regulation and changes to tax relief from 2017 onwards will all take their toll on investor sentiment and impact behaviour.’[1]

‘With stock at a premium, the smaller landlords who decide to sell up will add upward pressure to rents although any rises will be tempered by affordability pressures,’ Morris added.[1]

[1] http://www.theguardian.com/business/2016/jan/18/jump-two-bed-flats-for-sale-landlords-selling-up?CMP=share_btn_tw