Posts with tag: tax changes

Buy-to-Let Investment Plummets Following Government’s Attack on Landlords

Published On: December 9, 2016 at 11:33 am

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Buy-to-let investment has plummeted following the Government’s “attack on landlords”, according to a new report from estate agent haart.

The agent found that the number of buy-to-let transactions across England and Wales has dropped by 63.7% over the last 12 months, following the introduction of an array of measures that are putting many prospective investors off the private rental sector.

Buy-to-Let Investment Plummets Following Government's Attack on Landlords

Buy-to-Let Investment Plummets Following Government’s Attack on Landlords

The report claims that the volume of buy-to-let investment, which has fallen by 8.2% in the past month alone, is unlikely to increase any time soon, unless the Government reverses recent tax increases and regulations in the sector.

The CEO of haart, Paul Smith, says: “The scale of decline in buy-to-let in just 12 months is deeply worrying – landlords have clearly pulled out of the market and are unlikely to return any time soon. However, this is entirely the result of Government policy, with Theresa May now picking up George Osborne’s baton and proceeding to bash landlords with renewed vigour.”

It has been a difficult year for buy-to-let landlords. Alongside stricter lending criteria, a 3% Stamp Duty surcharge for additional properties was introduced in April, while the 10% Wear and Tear Allowance has been scrapped, leaving landlords only able to claim for the amount that they have actually spent.

In addition, mortgage interest tax relief is due to be reduced to the basic rate of tax from April 2017.

“The Government’s attack on investors adds up to a war on landlords and a buy-to-let market crippled by tax hikes and unnecessary regulation,” Smith adds. “The effect has been to more than halve the number of buy-to-let sales in England and Wales, and the inevitable consequence will be fewer properties available to renters next year and higher rents.”

A leading housing expert has warned that families may even lose their homes as a result of the changes: https://www.justlandlords.co.uk/news/families-lose-homes-landlord-tax-changes/

Rather than punish buy-to-let landlords for a property market that is not working for first time buyers or generation rent, Smith believes the Government should channel more investment into housebuilding and increasing the supply of much-needed rental homes.

He continues: “Tenants are stuck in an intensely competitive market where rents are often more expensive than mortgages, because there are simply not enough properties available for lettings, and many landlords now have no choice but to pass the extra costs onto tenants.

“It is time for the Government to end this damaging war on landlords and instead create a market that genuinely works for everyone. The Government is casting landlords as the pantomime villains of the property market, but we need a more grown-up and serious approach to policy-making, as well as a recognition of the contribution that landlords make.”

Have your buy-to-let investment habits changed following the Government’s so-called attack on landlords?

Housing market to be hit by low stock in 2017

Published On: December 8, 2016 at 11:18 am

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New analysis from RICS has revealed that despite a rise in sales activity in the residential sector, a sluggish sector is predicted as a result of a lack of housing stock.

The firm suggests that the number of prospective buyers in the UK housing market rose for the third month during November. This figure though still remains historically low, with 13% more surveyors recording a rise in new buyer enquiries, as opposed to a fall.

Agreed sales rise

This increased demand is also leading to further rise in agreed sales throughout Britain. 9% more respondents said they had seen more activity during November, the highest reading since February.

RICS’ data shows that the growth in sales activity, despite only being modest, has lead to a further decline in homes for purchase. The majority of respondents to the survey believe the beginning of 2017 to be quiet as a result of the lack of properties coming onto the market.

With stock continuing to fall, regions bucking the trend were the West Midlands and the North West of England.

When asked to look at the next three months, 14% more surveyors predict an increase rather than a decline.

However, respondents were less confident in the prospects for London prices in comparison to other areas, with tax changes still impacting massively on this part of the market.

Housing market to be hit by low stock in 2017

Housing market to be hit by low stock in 2017

Slowdown

Simon Rubinsohn, Chief Economist at RICS, noted: ‘A key issue for the housing market is the slowdown in transaction activity since the spring which is clearly being reflected in the RICS Agreed Sales data as well as in official figures. Although there are some signs that the numbers may begin to edge upwards in the new year, the combination of macro uncertainty, the on-going supply shortfall, with stock levels around historic lows, and the myriad of tax changes impacting on buyers suggest that any pick-up in activity will be relatively modest. This is significant not just for the housing market itself but also for the wider economy given how much of consumer spending is tied in with home purchases.’[1]

Brian Murphy, Head of Lending at Mortgage Advice Bureau, also commented: ‘The report released from the RICS today is based on sentiment of its members, so provides us with a good snapshot ‘from the coalface’ in terms of what Surveyors are observing on a daily basis. The survey suggest that activity from buyers in most parts of the country is increasing, albeit modestly, although this is of course reliant on available stock. As a result, RICS members in many areas expect to see prices remain steady, if not potentially increase in the next three months, although this will of course depend on continued applicant levels.’[1]

[1] http://www.propertyreporter.co.uk/property/lack-of-housing-stock-to-hamper-recovery-in-2017.html

 

Paragon Refines Mortgage Affordability Criteria Ahead of Tax Changes

Published On: December 8, 2016 at 9:34 am

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Specialist lender Paragon is refining its mortgage affordability criteria for buy-to-let landlords, ahead of landlord tax changes next year.

From 6th April 2017, some landlords will face higher costs as a result of the reduction in mortgage interest tax relief.

Paragon Refines Mortgage Affordability Criteria Ahead of Tax Changes

Paragon Refines Mortgage Affordability Criteria Ahead of Tax Changes

While the tax changes will only be gradually introduced from April next year – and will not be fully implemented until April 2020 – Paragon is refining its affordability assessment now to ensure that its loans remain affordable in the future.

The lender is adopting an approach that seeks to assess the tax status of individual landlords and reflect this in the affordability calculation.

As a result, the interest coverage ratio (ICR) will not change for landlords who are unaffected by the tax changes. Those paying the basic rate income tax and corporate landlords will continue to be assessed at an ICR of 125%. If a landlord will be paying a higher rate of tax, an ICR of 140% will be used.

This revised approach to affordability also includes changes to the reference interest rate used in the affordability calculation. For all products other than longer-term fixed rates, the reference (or stressed) rate will be set at 2% above the product rate or 5.5%, whichever is higher.

For longer-term fixed rates, the current stressed rate of 4% or the product rate, whichever is higher, will be used.

All applications will continue to be subject to a background, forward-looking affordability assessment to ensure that products remain affordable when a fixed or discounted rate term comes to an end.

The Director of Mortgages at Paragon, John Heron, explains the need for the revised approach: “Government policy towards the private rented sector will increase costs for landlords, and it is clear that this will need to be reflected in lender affordability assessments.

“The Prudential Regulation Authority’s supervisory statement released in September this year is helpful in ensuring that lenders approach this in a consistent fashion.

“The changes that we’re announcing today are designed to tailor affordability to each landlord’s individual circumstances, whilst keeping the application process straightforward for brokers and their customers.”

Buy-to-let valuations down by 18.5% year-on-year

Published On: December 7, 2016 at 9:53 am

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The number of buy-to-let valuations have fallen sharply since the introduction of the 3% stamp duty surcharge in April. In addition, the proposed ban on letting agent fees have moved to further unsettle the market, according to research from the Connells group.

Tax changes

Undoubtedly, 2016 has been a tough year for buy-to-let landlords, given the raft of tax changes introduced by the Government. These changes have raised concern that those investors with low profit margins could end up making a loss as a result of these alterations.

In fact, some could be pushed out of the sector altogether.

Unsurprisingly, the number of valuations carried out for the buy-to-let sector slipped by 6.1% month-on-month and by 18.5% on a yearly basis to November.

John Bagshaw, corporate services director of Connells Survey & Valuation, observed: ‘2016 has been something of an annus horribilis for landlords. They have had to contend with the reverberations of the 3% stamp duty surcharge and the removal of the 10% wear and tear allowance.’[1]

Buy-to-let valuations down by 18.5% year-on-year

Buy-to-let valuations down by 18.5% year-on-year

Remortgaging rise

However, despite the number of buy-to-let valuations being down by 18.5%, remortgaging actually rose by more than 20% during the period.

Bagshaw observed: ‘Homeowners want to lock into deals before rates rise. There’s no doubt that remortgaging is driving the mortgage market at the moment.’[1]

During November, there was a surge in people looking to remortgage. Valuations rose by 4.9% in comparison to October, and by 24.6% annually.

[1] https://www.landlordtoday.co.uk/breaking-news/2016/12/buy-to-let-valuation-instructions-plummet-18-5

High-end letting market in Home Counties is rising

Published On: December 6, 2016 at 11:39 am

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New research has revealed that the top end of the lettings market in the Home Counties of England is picking up.

According to Knight Frank, this is due to the influx of tax changes and greater flexibility from landlords. The firm believes that supply and demand in the region have risen due to higher purchase costs at the top of the market making buyers more price sensitive.

Increases in rent

The analysis from Knight Frank assess the prime sector in the counties surrounding London, looking at where tenants spend at least £15,000 per month. Data from the report reveals that the number of properties available to rent in these regions have increased by 56% so far in 2016, in comparison to last year.

In addition, the number of viewings conducted for these properties by Knight Frank offices has more than doubled year-on-year.

Jemma Scott, partner in Home Counties Lettings, noted: ‘When you consider that the stamp duty on the purchase of a £10 million in the Home Counties is £1.1 million, rising to £1.4 million if it is a second home or additional residence, that’s equivalent to more than three years rents.’[1]

High-end letting market in Home Counties is rising

High-end letting market in Home Counties is rising

Scott observed that the increase in stock levels has led to increased negotiations for tenants and in some cases, landlords have been flexible in terms of rents.

‘This flexibility can make renting look like an increasingly attractive option, although best-in-class properties, which are in a ready to move in condition with the latest fixtures and fittings are holding their value,’ she added.[1]

Concluding, Scott observed: ‘The Home Counties are often the first destination for individuals moving out of London, while excellent transport links back to the capital and the wealth of outstanding schools mean they’re also favoured by international tenants looking to relocate to the UK, attracted by the abundance of green spaces and a vibrant social and sporting scene.’[1]

[1] http://www.propertywire.com/news/europe/top-end-lettings-market-englands-home-counties-picking/

 

Demand for New Homes Slumps Following “Attack on Buy-to-Let Landlords”

Published On: December 5, 2016 at 9:37 am

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Categories: Property News

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One of Britain’s largest housebuilders warns of a slump in demand for new homes following the Government’s “attack on buy-to-let landlords” and Brexit uncertainty.

Demand for New Homes Slumps Following "Attack on Buy-to-Let Landlords"

Demand for New Homes Slumps Following “Attack on Buy-to-Let Landlords”

Berkeley Group reports a decrease in reservations of 20% in the six months to the end of October. The firm’s Chief Executive, Rob Perrins, believes this is largely due to “heightened global macro-economic and political uncertainty”.

However, he claims the slump in demand is ultimately down to “higher Stamp Duty” and the “extraordinary attack on buy-to-let landlords”, who play a large part in sustaining the housing market, particularly in London, alongside increasing the supply of new homes.

So far this year, the attack on buy-to-let landlords has included stricter mortgage lending criteria, the 3% Stamp Duty surcharge for additional homes and the scrapping of the 10% Wear and Tear Allowance. What’s more, landlords will face a reduction in mortgage interest tax relief from April next year.

Shares in Berkeley Group fell by more than a fifth since the introduction of the higher Stamp Duty rate in April, along with the EU referendum in June, as housebuilding stocks were hit by uncertainty.

However, despite the slump in demand, Berkeley has recorded a 34% increase in pre-tax profits to £393m for the first half of the year. The firm says it is well positioned to withstand the uncertainty.

The company sold 2,076 homes in the first six months of 2016 – little changed on the same period last year – at an average selling price of £655,000 – up by 29%.

Last week, Bank of England data suggested that the UK housing market is recovering from a post-referendum slowdown, as mortgage approvals rose to the highest level since March.

A separate report from Nationwide shows that house prices are continuing to slow.

Do you believe that the Government’s attack on buy-to-let landlords is having a widespread effect on the housing market?