Wealth gap rises as home ownership falls, says study

By Michael Savage
Resolution Foundation finds that half the nation’s wealth belongs to a tenth of adults as property ownership declines

Falling homeownership is behind growing wealth inequality in Britain. Photograph: Getty Images

A fall in home ownership is fuelling the return of rising wealth inequality across Britain, it has emerged.

Booming house prices in the run-up to the financial crisis had led to a decade-long fall in the uneven distribution of the country’s wealth. However, comprehensive new analysis of the UK’s wealth divisions has now found that the trend has gone into reverse.

The study by the Resolution Foundation thinktank found that just a tenth of adults own around half of the nation’s wealth. The top 1% own 14% of the total. It warned that even this figure may be an underestimate because of the difficulties in calculating the assets of the super-rich.

By contrast, 15% of adults in Britain have either no share of the nation’s record £11.1 trillion of wealth, or have negative wealth. The study found that wealth is distributed far less evenly than earnings or household income.

The thinktank measured wealth inequality using the “Gini coefficient”, with 0 being perfect wealth equality and 1 representing a society where a single person has it all. Wealth inequality was almost twice as high as earnings inequality. Despite the perception that wealth inequality has been rising for decades, the research found that the inequality of net financial and property wealth fell steadily between 1995 and 2005, with the Gini coefficient falling from 0.71 to 0.64.

The fall was driven by high and rising home ownership, with more households benefiting from the pre-crisis property price boom. As a result, the proportion of property wealth owned by the bottom four-fifths of adults grew from 35% in 1995 to 40% in 2005.

However, home ownership has been falling steadily since the mid-2000s, with the wealth held by the bottom four-fifths of the population dipping as a result. Since the financial crisis, home ownership among the least wealthy 50% of the population has fallen by about 12%. Meanwhile, it has risen by 1% for the wealthiest tenth.

The shift in property ownership further towards the richest has contributed to the widening of wealth inequality. Including private pensions, the Gini coefficient rose from 0.67 to 0.69 from 2006-08 to 2012-14.

Total wealth across Britain, which includes private pensions, property, financial and physical wealth, rose in the wake of the financial crisis from £9.9tn in 2006-08 to £11.1tn in 2012-14. This has been fuelled by rising pension wealth.

While Britain as a whole has become wealthier, the wealth of a typical adult has fallen since the financial crisis from £99,000 in 2006-08 to £84,000 in 2012-14.

Private pensions account for 40% of the wealth total – the largest share at £4.5tn. The report forms part of the Resolution Foundation’s intergenerational commission. Conor D’Arcy, policy analyst at the foundation, said: “The accumulation of wealth over the course of our lives is arguably the most important driver of lifetime living standards, and yet it has been largely ignored in the public debate. Given the hugely unequal distribution of wealth across Britain, it’s time we looked into how the nation’s wealth is divided up and what the consequences are for those who never build up assets of any significance.

“With wealth inequality now rising again, the progress of the pre-crisis period has gone into reverse.

“At £11.1tn and growing, Britain has a lot of wealth to share around. It’s vital that policy makers ensure that the key drivers of wealth in Britain today – property and pensions – are accessible to as many people as possible, young and old.”

https://www.theguardian.com/inequality/2017/jun/17/wealth-gap-rises-as-uk-home-ownership-falls-resolution-foundation

Rented sector in Scotland has sound outlook despite political uncertainty in UK

The private rental sector in Scotland will continue to offer sound investment opportunities despite current political uncertainties and recent industry legislation, it is suggested.

Prices remain competitive in Scotland compared to the rest of the UK and the rental sector in continues to show signs of growth at a time of low interest rates and volatile stock markets, according to the latest report from property consultancy Galbraith.

Bob Cherry, head of lettings and partner at Galbraith, believes the rental market is still an attractive investment alternative with yield levels remaining strong at around 4% to 5%.

The latest Registers of Scotland monthly house price statistics publication shows that the average price of residential property in Scotland rose by 2.6% in April 2017 compared to last year.

Cherry said that this increase could spell good news for landlords seeking capital appreciation on their investment. With rents remaining high Galbraith believe now is an optimum time for buy to let investors to consider the Scottish private rental market.

Galbraith has experienced an 11% increase in tenant demand for rental property in the first quarter of 2017 compared to the same quarter in 2016. The firm has also brought 28% more properties to the rental market throughout the last three months compared to the previous quarter.

The number of applicants registering to let a property was up 79% from January to March this year in comparison to the previous three months and the firm also witnessed a surge in viewings from interested tenants, with agents conducting twice as many rental viewings over the same period.

The figures also show that the firm-wide average rental achieved was £658 per calendar month, some 15% higher than the national average.

‘Both UK and foreign investors are looking at property opportunities outside of the over inflated property markets of London as well as other prosperous cities south of the border, and Scotland is an attractive option due to the affordability aspect combined with the level of demand from across all rental segments including families, professionals and retiree couples,’ said Cherry.

‘Landlords have been impacted by a range of legislative changes over the past couple of years, not least the introduction of a 3% tax on buy to let properties and the new tenancy act passed last year,’ he explained.

‘However, rents are continuing to perform well with improvements in tenant finances meaning fewer incidences of late or non-payment of rent therefore we have experienced a 50% drop in rent arrears over the past 12 months,’ he added.

‘Market conditions including landlord supply and tenant demand, determine rental prices and this must be carefully considered but with property prices in Scotland currently on the up, I believe the buy to let property market is proving a viable investment option for those looking to invest in bricks and mortar, as well as offering exciting potential for landlords wishing to grow their portfolio,’ he concluded.

http://www.propertywire.com/news/uk/rented-sector-scotland-sound-outlook-despite-political-uncertainty-uk/

Number of UK landlords who believe tax change will affect them rises

More landlords than previously thought now believe that they could be pushed into a higher tax bracket due to changes to mortgage tax relief which is being phased out in the UK.

Some 16% think they will pay more tax, an increase of 7% compared to the fourth quarter of 2016, according to the latest research from the National Landlords Association (NLA).

By the time the changes are fully implemented in 2021 landlords’ mortgage finance costs will count towards their taxable profit. The current average annual mortgage finance costs for a single property landlord is £5,600.

The NLA says that this means that those currently earning just below the upper limit of the basic income tax threshold of £43,500 could be pushed into the higher bracket of 40%, and therefore exposed to significantly more tax liabilities.

Individuals who only let out a single property are by far the most prevalent type of landlord, representing approximately 62% of the UK’s landlord population, around 1.5 million.

The NLA believes that as landlords may end up selling rather than continuing for financial reasons, this could affect 368,000 homes, with young couples and families potentially at the greatest risk if landlords sell.

The NLA also says that any single property landlords forced up a tax bracket would need to increase the rent by more than 11% in order to continue to make a steady yield from the property, which equates to as much as £116 per calendar month more for the average rental property.

‘Single property landlords are responsible for providing a huge proportion of the UK’s private rented homes, and these findings show that, slowly, more and more are waking up to the fact their tax bills could be significantly higher in the coming years,’ said Richard Lambert, NLA chief executive officer.

He explained that 21% of landlords with just one property do not make a profit, and over the next few years those bumped up a tax bracket will find that their ability to continue to provide good quality housing will be seriously affected.

‘More and more families and young couples are making their home in the private rented sector because they cannot either access social housing or afford to buy their own home. Affected landlords will have the choice of either increasing rents or selling up, so either way it’s the people they currently home who look likely to suffer the most as a result of this damaging tax change,’ Lambert added.

http://www.propertywire.com/news/uk/number-uk-landlords-believe-tax-change-will-affect-rises/

Rental demand in Scotland falls as EU migrants leave

By Marc Da Silva

The rental market north of the border remains strong, but demand fell across all regions, especially in areas with high numbers of migrants from European Union countries as an emerging trend for European Union migrants – particularly from Poland – to leave the country and seek employment elsewhere starts to have an impact across the country, new figures from Your Move Scotland shows.

The average property in Scotland now rents for £575 per calendar month, up from the £571pcm recorded a month earlier, but this headline figure masks divides between the five regions surveyed.

The strongest performance came in the south of Scotland where prices increased by 4.2% in the last 12 months to hit £560pcm.

“The Scottish rental market continues to grow as a whole, despite variations on a regional basis,” said Brian Moran, letting director at Your Move Scotland.

But rental demand across all areas surveyed has weakened, especially in the Glasgow and Clyde and Highlands and Islands regions, which have been particularly affected by this ‘Brexit effect’.

The steepest decline in rental values was seen in the Highlands and Islands region, where rents have now fallen by 3.3% over the past 12 months and now stand at £586pcm.

Aside from a fall in demand from EU migrants, the rental market in the Highlands and Islands region has also been affected by the Scottish government’s LIFT Scheme (Low-cost Initiative for First-Time buyers).

The initiative promotes 0% deposit mortgages and has helped more people move from being renters to homeowners. Some of the most popular areas are within Dingwall and surrounding villages – all of which are within easy reach of the major employment centre of Inverness.

Moran continued: “This month we have continued to see demand reduce in several areas – particularly those with high numbers of migrants from European Union countries,” Moran added.

“Government schemes have also had an impact on the rental market with more people being able to purchase their first home and leave the rental arena.”

The East of Scotland remained the cheapest place to rent in Scotland in February. The average property let for £535 a month – 2.3% higher than the same point in 2016.

Despite the overall dip in rents, yields remain solid, with buy-to-let landlords continuing to see strong returns from the Scottish rental market in February.

The average yield in February was 4.9%, the same level seen both last month and in February last year, Your Move Scotland found.

This yield also compares strongly to property investment in other parts of the UK, with landlords in Scotland continuing to see significantly better returns than the average investor in England and Wales, where the average yield in February stood at 4.1%.

Only landlords in the North East and North West regions of England enjoyed better returns – 5.3% and 5% respectively in February.


“For landlords and investors yields have remained strong – particularly when compared to the returns on property in England and Wales,” Moran added.

https://www.landlordtoday.co.uk/breaking-news/2017/3/rental-demand-in-scotland-falls-as-eu-migrants-leave

Rental market slows in February as supply crunch continues

By Marc Da Silva

The UK’s rental market showed signs of weakness last month, as the number of homes to let fell as uncertainty and a lack of supply restricted choice for potential renters.

The latest Property Activity Index from Agency Express shows that there were lower levels of activity in the private rented market in February.

Across the UK, the number of new listing ‘to let’ sat at -13.8%, marking the largest month-on-month decline for February since the index’s first records in 2012.

The data appears consistent with the Council of Mortgage Lenders director general Paul Smee’s view that buy-to-let property purchase activity "continues to be weak".

But properties ‘let’ during the period did rise, sitting at 3.4%. However, looking back over the Index’s historical data, records show figures in previous years were more robust, sitting at 4.5% in 2016 and 5.5% in 2015.


Looking at performance across the UK, only two of the 12 regions recorded by the Property Activity Index reported increases in new listings ‘to let’, while five regions reported increases in properties ‘let’.

Properties ‘To Let’
•    East Midlands 10%
•    West Midlands 3%

Properties ‘Let By’
•    South East 40.2%
•    West Midlands 7.6%
•    Scotland 6.3%

The West Midlands was the only region in this month’s index to record increases in both new listings at 7.6% and properties ‘let’ at 3%.

The largest decline in this month’s Index was recorded in East Anglia. Figures for new listing ‘for sale’ dropped to sit at -25.5%.

Stephen Watson, managing director of Agency Express, said: “The Property Activity Index historically shows us a drop in figures throughout February. However, this month we have seen a greater fall than in years previous, an impact of the buy-to-let changes which will undoubtedly affect the market ongoing.”

https://www.landlordtoday.co.uk/breaking-news/2017/3/rental-market-slows-in-february-as-supply-crunch-continues

Supply of rental stock falls

The supply of rental housing stock on letting agents’ books fell in March, to the lowest level since the start of last year, according to the Association of Residential Letting Agents (ARLA) March Private Rental Sector (PRS) report.
 
Demand also dropped in March; ARLA agents had 33 prospective tenants registered per branch on average, down 11% from 37 in February. This stands below the figure recorded in March last year – when agents registered 36 on average.
 
Supply has also fallen year on year. In March 2015, the average number of properties managed per branch was 192, which is down 12% this year with just 169 rental properties managed per branch – the lowest level since records began in January 2015.
 
It’s a brighter picture in Scotland, where agents had on average 273 properties on their books, and Yorkshire and Humberside, where 207 properties were recorded on average per branch. In London however, agents had just 122 properties on their books per branch.

In March, two thirds (65%) of ARLA agents predicted that current and prospective BTL landlords will walk away from the market following the April stamp duty changes, causing a decrease in the supply of rental properties. Rent costs rose in March for a third of tenants (32%), and three in five (61%) ARLA members fear they will increase further as a result of the changes – a growing sentiment since last month, when 57% of agents agreed on this. 
 
ARLA managing director David Cox said: “We don’t expect falling supply to stop here – the recent stamp duty changes are very likely to cause supply to decrease even further, as landlords withdraw from the market.

“Not only do our agents predict that rent costs will increase further, but rental homes may also face a decline in quality over time, as landlords struggle to keep up with maintenance costs alongside the higher stamp duty charge. Whilst landlords adjust to the increase in costs we can expect to see one of three outcomes prevailing in the buy to let market: landlords absorbing the cost and taking the hit; landlords withdrawing from the market causing supply to fall; or landlords regaining those costs through hiking rents. Next month we can start to assess the damage.”

https://www.landlordtoday.co.uk/breaking-news/2016/4/supply-of-rental-stock-falls