Posts with tag: Stamp Duty

North West England most lucrative area for landlords

Published On: December 14, 2015 at 3:42 pm

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The North West of England has received an early Christmas present with the news that it is the most lucrative region in Britain for private sector landlords.

Both Manchester and Liverpool made it into the top-four cities for rental yields.

Northern Rule

Online property marketplace LendInvest’s latest quarterly report indicates that Sunderland, Blackburn and Durham also rank highly in the list, as the North as a whole enjoys substantial yields. In terms of house price growth, London and the South East lead the way.

Lendinvest’s report also looks at trends in rental yields, capital gains and total gross return on investment. The top 15 performing postcode regions for capital gains were all located in London and the surrounding area. Inner London however stands in 18th place for rental yield, but top for capital gains.

Capital gains carry on tracking average house prices, with 80% of the 15 best postcode areas also featuring for average house prices. However, the report shows that rental yields are no indication of average house values. Just one of the top 15 postcode areas for rental yields featured in the top 15 for property prices.

Impact

Christian Faes, chief executive of LendInvest, feels that the stamp duty tax changes coming into force next year could have a serious impact on the market. Faes said, ‘there could be some weakening in London’s dominance of capital gains tables if house price growth does soften slightly as forecast and as new buy to let stamp duty hikes take effect.’[1]

‘Inner London margins may narrow slightly, creating opportunities for house prices in other postcode areas, particularly those in the South of England, to better compete,’ he continued. [1]

North West England most lucrative area for landlords

North West England most lucrative area for landlords

Faes went on to say that he feels changes to mortgage interest tax relief and stamp duty for buy to let landlords will ultimately professionalise the market. ‘Landlords whose tax payments under the new regime make letting their properties unsustainable, may make arrangements to leave the market. In turn, we will see fewer highly geared rental properties that push up prices and take stock out of the housing supply for aspiring owner occupiers and first time buyers drawn to densely populated urban area for work.’[1]

Cross Country

Mr Faes also said that there is no one place for market leading yields and capital gains. He believes that 2016 could be the year for the, ‘cross country landlords,’- landlords who live in one city but rent out homes in another.

‘We could expect to see more landlords letting property in the North and Midlands’ major urban areas for more immediate upside, without moving from their family homes in which gains can be longer to materialise,’ he concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-landlords-rents-yields-2015121411318.html

 

 

Stamp Duty rises amount to 11 months net income

Published On: December 14, 2015 at 10:55 am

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Categories: Finance News

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New research has found that the cost of the forthcoming 3% stamp duty on buy-to-let properties will be equivalent to 11 months income for the average mortgaged landlord.

An investigation by property services group Countrywide suggests that most private sector landlords looking to buy after April 2016 will attempt to offset this cost by offering less when buying.

At present, rents on newly let properties increased by 2% year on year. This rise was led by markets in the East of England.

Rises

In this year’s Autumn Statement, Chancellor Osborne announced plans to introduce a new 3% stamp duty tax rate for buy-to-let landlords and second home owners.

Research from Countrywide shows that should that larger tax burden not be factored into the purchase price of a property, this would lead to a reduction in gross yield of 0.2%. This is the same as 11 months income for the typical buy-to-let landlord, when borrowing costs are taken into account based on the average LTV of 68%.

Buy-to-let landlords in the South West and the North of England will experience the greatest cost relative to their rental income, with the extra tax burden equivalent to 14 and 12 months rental income respectively. Landlords in the North West of the country will see the least cost hike, accounting for 8 months of income.

The majority of buy-to-let purchases were found to take place in London, the South and East of England. 60% of homes sold in this market during the past year were in these regions. Landlords within these areas face the greatest cash increase in stamp duty of £6,000 on average.

Stamp Duty rises amount to 11 months net income

Stamp Duty rises amount to 11 months net income

Great expectations

It is hoped that the widely anticipated house price growth during 2016 will take some of the sting from the tax increase. Should prices increase at the same rate as in the last five years, the next year will see the cost of additional stamp duty offset.

In the Midlands and the North of England, 16% and 12% of sales are to landlords. What’s more, data from the Countrywide report indicates that the average property purchased in these regions would previously have not faced a stamp duty bill, but will now face a £3,200 tax charge from April.

These changes in stamp duty come as the number of homes available to rent continues to dwindle, with numbers down by 5% year on year.

‘The stamp duty increase will impact landlords’ purchasing power,’ observed Johnny Morris, research director at Countrywide. ‘Many entering the market will be faced with a choice between making a lower offer when buying of having to cover the additional costs themselves, impacting yields.’[1]

Morris went on to say, ‘most landlords view property as a long term investment, on average holding a property for 17 years and larger investors will be exempt from the higher stamp duty rate. This means over the long term the private rented sector will continue to grow, but there’s likely to be a few lumps and bumps along the way as landlords get to grips with and adapt to the changing environment.’[1]

‘It’s unlikely the change to stamp duty will see an immediate impact on rents. Landlords are rarely able to pass on increasing costs to tenants, as rental prices are set by market forces. But if less landlords choose to invest in the sector in the short term, a fall in homes available to rent could put pressure on prices,’ he concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-rental-market-landlords-2015121411312.html

 

Landlords urged to add to portfolio quickly

Published On: December 12, 2015 at 2:15 pm

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Buy-to-let landlords have been urged to act quickly to avoid the 3% stamp duty hikes announced by the Chancellor in the Autumn Statement, which come into force on 1st April 2016.

Lender Together said it has already seen record levels of lending since Mr Osborne altered conditions for landlords earlier on in the year. The rise was recorded following the Chancellor’s move to reduce the amount of tax relief property investors are able to claim back on their mortgages.

Increases

The latest upcoming changes have led the lender to urge landlords keen to add to their portfolio to complete their next purchases in Q1 of 2016, or face considerable tax rises.

Mr Osborne is trying to address what he calls, ‘the growing crisis of home ownership,’ in Britain by raising £1bn by 2021, to fund the construction of new homes.

Gary Bailey, sales director at Together said, ‘this is a double-whammy for buy-to-let landlords who feel they’re being penalised for being entrepreneurial. The hike in stamp duty, together with the previous announcement that reduced landlords’ ability to offset mortgage interest costs against rental income, will certainly have a major impact on the buy-to-let market.’[1]

Landlords urged to add to portfolio quickly

Landlords urged to add to portfolio quickly

‘That said, this might well fuel opportunities,’ he continued. ‘For example, we could see a rise in demand for semi-commercial properties, since this latest levy is specifically for residential. Keen property investors will look at the alternatives or will simply build these new costs into their model.’[1]

‘As a lender, we’re likely to see an increase in demand as a result of this announcement. We’ve already seen a significant upturn in lending since the Summer Budget and this is set to increase in Q1 of 2016 as savvy investors aim to avoid the new 3pc levy that will kick in on 1 April 2016,’ he concluded.

[1] http://www.propertyreporter.co.uk/landlords/btl-landlords-must-grasp-window-of-opportunity.html

 

 

 

House Prices Could Rise Faster if Base Rate Rise is Delayed

Published On: December 9, 2015 at 5:06 pm

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Categories: Finance News

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House prices could rise by almost 7% next year if an interest rate rise is postponed, according to BNP Paribas.

Researchers at one of the world’s biggest banks warns that while the delay of a rate increase until 2017 could be good news for homeowners, it might lead to higher property prices and force the Bank of England (BoE) to further restrict mortgage lending.

House Prices Could Rise Faster if Base Rate Rise is Delayed

House Prices Could Rise Faster if Base Rate Rise is Delayed

BNP Paribas expected house prices to rise by 4.4% in the UK in 2016 if the base rate started to increase slowly from its current rate of 0.5%, followed by 6.7% growth in 2017.

This level of growth would put the average house price, as measured on Nationwide’s monthly index, at £206,256 by the end of 2016, from £197,582 this year. It would then reach £220,116 in 2017.

BNP Paribas reports that improved household finances and confidence in the overall economy will strengthen demand for homes and the prices paid, but the lack of supply of property for sale continues to be “a serious concern”.

If the base rate rise is kept on hold, the bank forecasts a price rise of 6.9% in 2016 and 11.5% in 2017, putting prices at £211,215 and £235,500 respectively.

Head of Residential at BNP Paribas Real Estate, Adrian Owen, says: “While on the face of it a deferral would be good news for homeowners, we believe this scenario is a cautionary tale for the UK economy as a whole.

“There is already concern at the BoE over the pace of house price growth, and while the current lack of housing supply is a significant driver, the sustained low cost of finance is also a major contributor.”

Mortgage rates have dropped to record lows this year, with an average rate of 1.87% on a two-year fixed rate mortgage at 75% loan-to-value (LTV), and the average five-year rate is 2.78%.

In some parts of the country, house prices are now at a higher multiple of earnings than ever before. However, restrictions by the BoE in 2014 have reduced the amount of lending at more than four-and-a-half times an applicant’s salary.

Governor of the BoE, Mark Carney, has suggested that rates could remain as they are well into 2016 and that other measures could be introduced to cool the market.

Owen comments: “Even under our central scenario that base rates rise next year, it is likely that the BoE will seek to place a brake on house price growth by introducing further restrictions on the availability of finance.

“This may achieve the desired dampening effect, although does not address the underlying structural issue in the market of insufficient supply.”1

The bank forecasts house price growth of around 27% in the UK by the end of 2019. In the South West, researchers say that prices could increase by 40.2% by 2020. Meanwhile, in the South East (excluding London), the rise could be 36.1%. In the capital, values are predicted to grow by 25.1% over the same period.

Chancellor George Osborne’s recent announcement in the Autumn Statement – that buyers of a buy-to-let property or second homes will pay an extra 3% in Stamp Duty – has been factored into the forecasts.

The bank found that this measure would have little national impact, but could reduce house price growth in regional town centres and London. As a result, BNP Paribas has cut its house price expectations for the capital from 5.6% to 4.7%. It now forecasts the average London house price to be £468,893 in 12 months’ time.

Read more about the Stamp Duty changes here: /16883-2/

1 http://www.theguardian.com/money/2015/dec/07/holding-base-rate-house-prices-rising-faster-bnp-paribas-bank-of-england

House prices to rise by 7% after Stamp Duty rise?

Published On: December 9, 2015 at 2:00 pm

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Categories: Property News

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Economists have today warned that buy-to-let lenders seek to avoid paying additional stamp duty from next April could be the catalyst for a 7% rise in UK house prices.

This warning comes despite a fall in property prices during November.

Rises

IHS Global Insight said that it expects a substantial rise in the price of housing in the coming months. The group forecasts increases of between 6% and 7% during 2016.

The Chancellor shocked the industry by announcing the 3% stamp duty hike on buy-to-let and second homes during last month’s Autumn Statement. IHS feel that these changes, ‘could lead to an increase in housing demand and exert upward pressure on prices as prospective buyers look to beat the increase’ in the short term.[1]

House prices to rise by 7% after Stamp Duty rise?

House prices to rise by 7% after Stamp Duty rise?

However, the Halifax reported that property values actually slipped by 0.2% between October and November. This said, prices in the three months to the end of November were 9% higher than at the same time in 2014.

Average property prices last month totalled £204,552.

Martin Ellis, Halifax housing economist, commented, ‘the increasingly acute imbalance between supply and demand is causing prices to rise at a robust pace.’[]

[1] http://www.standard.co.uk/business/house-prices-could-rise-7-thanks-to-stamp-duty-hike-a3132451.html

 

 

 

Stamp Duty hike will redraw BTL investment map

Published On: December 9, 2015 at 11:44 am

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Countrywide is the latest group to raise concerns over the forthcoming three percent hike in stamp duty on buy-to-let properties.

The company believes that the changes will effectively redraw the map for investors looking for the greatest returns.

Increases

Fionnualla Earley, Countrywide’s chief economist, said, ‘the effect of the new duty will be to effectively increase the price investors pay and hence reduce the yield they achieve. New landlords must do their sums more carefully to make sure returns on investment add up.’[1]

Research by Countrywide published in the Sunday Times shows their offices in the West Midlands sold 16.7% of their homes to buy-to-let investors-the greatest proportion of any region in England.

However, some individual cities outside of this area saw much bigger shares of their on-sale stock purchased by investors. These are likely to see their markets more significantly affected should the stamp duty hikes deter many from buying next April.

Stamp Duty hike will redraw BTL investment map

Stamp Duty hike will redraw BTL investment map

Regional concern

There is certainly concern amongst buy-to-let landlords that the rises in tax will have a substantial negative effect on the sector. In Leeds, 41% of the total number of Countrywide’s sales in the year to October were to buy-to-let investors. In Southampton, this proportion was 38% and in Harrow 35%. Plymouth and Calderdale followed with 34%.

Earley noted that, ‘while the region with the higest proportion of investors is the West Midlands, the highest concentrations of investors are spread more widely across the country.’[1]

Investors concerned about the rising stamp duty costs should visit Landlord News’ Stamp Duty Calculator to see just how much the changes will affect them.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2015/12/new-stamp-duty-may-redraw-buy-to-let-investment-map-says-countrywide