Confidence in buy-to-let market slips due to tax hikes

By Marc Da Silva

Recent changes to tax for buy-to-let property has dented confidence among landlords with new research showing many are set to revise their situation and implement new strategies, with some consolidation expected among smaller investors.

The sixth edition of the Kent Reliance Buy to Let Britain report has launched revealing that just 41% of buy-to-let landlords currently hold a positive outlook for their portfolios, down from 67% three years ago, as investors face the prospect of higher tax costs and weakening property prices.

Higher costs are leaving many landlords with little alternative but to increase rents, which now stand at an average of £889 per month across Britain, up 1.9% year-on-year, according to the research.

Kent Reliance forecast that rents will rise further as the mortgage tax changes bite, with one third of landlords expecting to increase rents in the next six months, compared to just 3% who expect them to fall.

With rents rising, and house prices falling in the past two quarters, yields have edged up to 4.5%.  Across the PRS, steady growth in the number of households and monthly rents means landlords are collecting a record £4.9bn per month in rent.

 Overall, the value of the sector has risen by £68bn in the last year, climbing to a record of £1.3trn, up 5.5% on annual basis, although this is just half the level seen a year ago, owed in part to the slowdown in house price inflation.

 In total, there are now 5.5 million households in the PRS, but annual growth of 2.3% is now only a third of the level seen three years ago.

Tenant demand is still growing, albeit more slowly, with 27% of landlords seeing tenant demand increase in the last quarter, more than saw it decrease, but this was down from 39% a year ago, as first-time buyer numbers continue to recover.

On the supply side, there is a noticeable change too. In the first quarter of this year, the number of landlords expanding portfolios only slightly outnumbered those reducing them.


Some 19% of landlords now expect to reduce their portfolios, compared to 13% increasing, as amateur landlords leave the market in response to the new tax rules affecting higher rate taxpayers.

Additional pressure on supply has come from the Bank of England’s Prudential Regulation Authority’s new underwriting standards, introduced in January, with 24% of landlords who have sought mortgage finance this year have found doing so more difficult, with a further 6% seeing their application rejected altogether.

While there is likely to be consolidation in the market as tax costs rise, many landlords have  unsurprisingly reacted to tax changes and rising costs through not just rent rises, but also incorporation.

Running properties via limited companies means landlords are taxed as a company, rather than an individual, and can continue to offset all finance costs against rental profits.

Kent Reliance’s data shows six in ten applications for buy-to-let mortgages were via limited companies in 2016. Demand for limited company lending has not yet hit the heights seen last year, but limited company applications have still accounted for more than four in ten loans so far in 2017.  With 24% of landlords considering transferring their portfolio to a limited company or a partner or spouse, demand will strengthen in the long-term.

Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy-to-let, said: “A perfect storm of weakening house prices, higher taxes and lending restrictions have knocked investors’ confidence. On top of this, investors are now being buffeted by the winds of political uncertainty following the election, and its impact on the economy.

“Uncertainty will pass, but the impact of changes to mortgage tax relief and underwriting standards will leave a more indelible mark on the sector. We believe these changes will alter the mix of landlords, creating a more professional and stable sector in the long-term. There are already some signs of consolidation, with highly geared amateur landlords most likely to leave, and we are also seeing investors take action to protect their margins.

“The fundamentals supporting the PRS have not drastically changed. Yes, first-time buyer numbers have been recovering, but there is still an underlying supply and demand gap across the country. Given the inability of any party to win a clear majority in the election, the implementation of a strategy to create a necessary housing boom seems unlikely. Affordability issues will therefore remain, and rental accommodation will retain its importance to those unable to take their first step onto the property ladder.”

https://www.landlordtoday.co.uk/breaking-news/2017/6/confidence-in-buy-to-let-market-slips-due-to-tax-hikes

Why Britain has turned into a nation of storage keepers

By Rhiannon Bury

Britain is now home to almost half of all of Europe’s self-storage units CREDIT: CUSHMAN & WAKEFIELD

UK residents rent four times more self-storage space than the French, and nine times more than people in Germany, causing a boom in Britain’s storage sector.

Britain is now home to almost half of all of Europe’s self-storage units with almost 42.2m sq ft of space in total, according to a report from property advisory company Cushman & Wakefield, while growth in demand is continuing to outstrip supply.


Last year, 24 new self storage sites opened in the UK in 2016 – the greatest number in any European country. Occupancy increased by almost three percentage points in the last 12 months, to 75.8pc, despite more units being built.

Cushman & Wakefield’s report found that large self storage brands in particular have been expanding rapidly in recent years to ensure a larger chunk of the £540m UK market.

Safestore said last week that record enquiries for its space continued to boost its profits, while Big Yellow has spoken of expansion across the South East in particular.

81pc of self-storage users are between 35 and 70 years old CREDIT: CUSHMAN & WAKEFIELD

Two thirds of self-storage customers are aged between 40 and 65 years old, and 81pc are between 35 and 70, showing that younger people are the least likely to use storage facilities. This fits with the general trend among so-called millennials to settle down later in life.

Divorced or separated people are also more than twice as likely to use self storage as a single person.

Rents in London, which sit at £29.45, are almost twice that in the East Midlands and the North. Scotland, however, has shown the greatest increase, rising 23pc from £18.29 to £22.49 in the year, whilst the South East, East Midlands and the North all experienced a decline.

Rennie Shafer, chief executive of the UK Self Storage Association, said: “The longest standing customer in the survey began renting their unit in 1987. While that’s exceptional, 44pc of business customers have stayed for three years or more, compared with 31pc for personal customers.”

http://www.telegraph.co.uk/business/2017/06/20/britain-has-turned-nation-storage-keepers/

Will Britain ever build enough homes? More uncertainty as UK needs its FIFTEENTH housing minister since 2000 - after Gavin Barwell is voted out

By Myra Butterworth

• Gavin Barwell loses his Conservative seat in Croydon Central to Labour 
• Plans to build more homes expected to be delayed as the new housing minister gets to grips with the property agenda

Concerns abound over the future of Britain's homebuilding as Britain faces enlisting a new housing minister - the fifteenth since 2000 - after voters ditched Gavin Barwell in the General Election.
Housing minister Mr Barwell lost his Croydon Central seat after getting just 24,221 votes compared to Labour's 29,873.

It means the country's housebuilding policy faces further delays, as a new housing minister is appointed and gets to grips with challenges in the property market.

Mr Barwell was only appointed last year and published a housing white paper earlier this year

Housing experts warned that transactions in the property market may stay 'anaesthetised' as Britain faces getting a new housing minister.

Russell Quirk, the chief executive of estate agent eMoov, said: 'As we awake today to the opposite of a strong and stable administration, but to a rather unexpected hung parliament, I fear that the property market's post-election return to normality that I'd hoped for may be rather further away still.

'Political instability breeds procrastination on the part of homebuyers and sellers and for over a year now we have seen the effects of that on volumes, if not so much prices, as a consequence of the EU vote and then the snap general election.

'So while the UK voter may understandably develop electoral fatigue, transactions in the property market may also stay somewhat anaesthetised until it's re-awoken by something more politically and economically decisive than we have seen over the past 24 hours.'

He added: 'I suspect that the housing brief will take a back seat now, despite politicians' promises in recent weeks, given the combined weight of negotiating Brexit, stabilising our economy, button-holing political support across the aisle on every vote and, inevitably, campaigning again for the next poll.'

As housing minister since last year, Gavin Barwell was at the helm for a housing white paper, which had been expected to lay out bold plans to build more homes for Britain but was criticised for being a damp squib.

However, industry experts praised Mr Barwell himself for his determination in the role as housing minister.

Buying expert Henry Pryor said: 'If we could build homes like the Governments of all political persuasions can appoint new housing ministers then we wouldn't have a housing crisis.

'Gavin Barwell was, to his credit one of the most proactive and successful.He faced up to the vested interest groups, challenged house builders to actually build, and told letting agents to their faces that he was going to scrap tenant fees. I for one will miss his determination to get things done.'

The result in Mr Barwell's constituency saw him lose his seat to Labour's Sarah Jones

North London estate agent and former RICs boss, Jeremy Leaf, said: 'A hung parliament will result in an extended period of uncertainty with decision-making kicked into the long grass.

'Theresa May is correct - we need a period of stability as that will quash uncertainty which is bad for the housing market - but it is not clear at the moment whether she can deliver it. Stability is crucial in enabling people to make big decisions such as buying and selling property.'

Mr Barwell was only appointed minister of state for housing and planning last year.
During his tenure he published a housing white paper that aimed to fix the 'broken housing market' and boost housebuilding.

The paper examined issues such as cutting red tape on planning and encouraging smaller builders.

http://www.dailymail.co.uk/property/article-4587634/Britain-needs-new-housing-minister-Barwell-voted-out.html

Tenants actively reviewing letting agents across Britain on new website with plans for monetisation

By Rosalind Renshaw

http://hillerbypropertyservices.co.uk/wp-content/uploads/2012/09/letting-agents-300x217.jpg

Tenants are actively reviewing and rating local letting agents across Britain on a new website.

Marks out of Tenancy was launched in March by Bristol-based entrepreneurs Ben Yarrow and Tom Dickinson.

Renters can score agents, landlords and properties out of ten, and leave reviews.

Tenants can review agents overall, and also evaluate them on six different themes: communication, attitude, speed, value for money, quality of repairs, and check in/out.

Many of the reviews cover Bristol, but clearly tenants in other locations, from Aldershot and Guildford to Cardiff and Ormskirk, are becoming increasingly aware of the site.

Yarrow told EYE: “The site isn’t just being used to leave bad reviews – it’s a really useful tool for landlords, letting agents and tenants.”

He also said that new features will be launched shortly.

A letting agency product called House will enable agencies to customise their profile page, display their score on their website, and use an email marketing campaign tool to invite tenants, and have access to market statistics and analytics.

Yarrow said: “Agencies will be able to track changes in scores, reply to reviews, compare themselves against their competitors and make improvements based on that information.

“The cost for that will be £75 per month per branch.”

A cheaper product for landlords called Home will similarly allow landlords to reply to comments.

Yarrow said that the site had been well received by landlord associations.

He said checks are in place to ensure reviews are legitimate, and that new features will include allowing agents and landlords to respond to reviews.

Yesterday, reviews of letting agents were mixed. The Letting Game in Bristol had ten-star ratings and Moginie James in Cardiff had nine. Some agents got just one star.

EYE said back in March that this could be one for agents to watch: three months later, it looks as though that remains the case.

Marks out of Tenancy is now set to be rolled out overseas to Ireland and the United States in the next few weeks.

https://www.marksoutoftenancy.com/Tenants are actively reviewing and rating local letting agents across Britain on a new website.

Marks out of Tenancy was launched in March by Bristol-based entrepreneurs Ben Yarrow and Tom Dickinson.

Renters can score agents, landlords and properties out of ten, and leave reviews.

Tenants can review agents overall, and also evaluate them on six different themes: communication, attitude, speed, value for money, quality of repairs, and check in/out.

Many of the reviews cover Bristol, but clearly tenants in other locations, from Aldershot and Guildford to Cardiff and Ormskirk, are becoming increasingly aware of the site.

Yarrow told EYE: “The site isn’t just being used to leave bad reviews – it’s a really useful tool for landlords, letting agents and tenants.”

He also said that new features will be launched shortly.

A letting agency product called House will enable agencies to customise their profile page, display their score on their website, and use an email marketing campaign tool to invite tenants, and have access to market statistics and analytics.

Yarrow said: “Agencies will be able to track changes in scores, reply to reviews, compare themselves against their competitors and make improvements based on that information.

“The cost for that will be £75 per month per branch.”

A cheaper product for landlords called Home will similarly allow landlords to reply to comments.

Yarrow said that the site had been well received by landlord associations.

He said checks are in place to ensure reviews are legitimate, and that new features will include allowing agents and landlords to respond to reviews.

Yesterday, reviews of letting agents were mixed. The Letting Game in Bristol had ten-star ratings and Moginie James in Cardiff had nine. Some agents got just one star.

EYE said back in March that this could be one for agents to watch: three months later, it looks as though that remains the case.

Marks out of Tenancy is now set to be rolled out overseas to Ireland and the United States in the next few weeks.  (https://www.marksoutoftenancy.com/)

http://www.propertyindustryeye.com/tenants-actively-reviewing-letting-agents-across-britain-on-new-website-with-plans-for-monetisation/

Rents in Britain up by average of 5.75% year on year

Average rents in Britain increased by 5.75% year on year in the first quarter of 2017 to £770
although there is some regional variation, according to the latest index figures.

Some areas of the South East reported slight falls in rent and other areas, such as the East Midlands and Yorkshire saw increases of over 7% year on year in the first three months of the year compared with the same period in 2016.

The rental index from lettings agents Belvoir is based on average advertised monthly rents, which are obtained from property portal Rightmove and since it began in 2008 rents have moved broadly in line with wages and large movements over and above 5% rarely happen.

According to Belvoir chief operating officer Dorian Gonsalves there are several reasons for rental increases of over 7%. He said that they have been pushed up by a rise in HMOs and some Belvoir offices experienced an increase in premium properties, which can affect the data. For example, if the majority of an agent’s properties rent at £600 per month, and they take on a premium property at £2,200 per month, this impacts on the average.

‘Interestingly, a new, non-statistical trend has been observed. Belvoir offices are reporting a large rise in areas with low availability of properties, particularly in market towns. This is down to a lack of new landlords bringing new stock to the market, which we believe is directly related to recent tax increases such as the 3% stamp duty on buy to let homes and changes to the way mortgage interest tax relief is treated,’ Gonsalves explained.

‘As a result of this stock shortage, properties are often rented to the highest bidder, typically the wealthier tenant, which is raising rents beyond the traditional 4% to 5% plus or minus trend,’ he added.

Belvoir has found that the average number of offices seeing landlords add six to10 properties has fallen from 15% in the second quarter of 2016 to 10.9% an d the number of landlords selling property has also fallen. Gonsalves suggests that there has been a fall in new landlords entering the market but no big sell off by current landlords.

Belvoir offices reported that 43% of tenants are staying between 13 to 18 months, 29% are renting for 19 to 24 months and 18.2% are renting for over two years.

The report also shows that average void periods seem to currently be on the increase with more properties, some 60%, taking up to two weeks to let whereas less are being let within a week, suggesting a slight slowdown in tenant demand.

However, despite increases in rents in some regions, rent arrears are not increasing, and Gonsalves said this suggests that tenants are currently coping with landlord rent rises.

Looking ahead to the general election outcome, he pointed out that whilst some initiatives may help some tenants, the general view seems to be to ‘curb’ smaller buy to let investors in favour of large landlords.

‘This could cause a further decrease in stock levels, making it much tougher for tenants to secure a property, especially as demand is expected to continue to increase over the coming years,’ he explained.

‘All parties are promising an increase in the building of new homes, but the reality is that unless land is sold or developed at a discount, it will be quite difficult to provide rents at anything less than existing landlords are doing. This is already the case in London where large landlords, who are backed by the Government, or Housing Associations and are now entering into the private rented sector can make renting viable at existing market rents,’ he added.

http://www.propertywire.com/news/uk/rents-britain-average-5-75-year-year/

Buy-to-let landlords contribute £15.9bn a year to UK economy, study finds

By Marc Da Silva

Buy-to-let landlords currently contribute £15.9bn per year to the British economy through pre-tax spending on running their portfolios, which is more than double the estimated £7.1bn in 2007, owing to the rapid growth of the private rented sector and rising cost of acquiring property, according to a new report from Kent Reliance.

But as their tax burden increases, more than a third - 36% - of landlords surveyed by BDRC Continental on behalf of Kent Reliance are looking to cut their annual spending, a move that could reduce overall spending by more than £500m in total, which would hit the tradesmen and professionals that support the buy-to-let industry, the study by the specialist mortgage lender, which forms part of OneSavings Bank plc., shows.

Property upkeep and maintenance was the most popular area identified by 17% of landlords for potential cost cutting, followed by letting agent fees and mortgage costs - both 10%.

Those landlords anticipate they will reduce spending on letting agent fees by 28%, property maintenance and servicing by 21% and mortgage costs by 15%.

The new ‘Tracking landlords’ costs and economic contributions’ report, part of the lender’s ‘Buy to Let Britain’ research series, states that spending per property stands at £3,632 before tax or mortgage interest - a third of rental income - with the cost of property upkeep, maintenance, and servicing the largest outlay at a combined £5.5bn.

Landlords typically spend £2bn in service charges and ground rent, £963m on insurance, £904m on utilities, and a further £1.1bn on other associated costs of letting a property.

Spending on letting agents’ fees totals £4.7bn each year, with £644m spent on legal and accountancy fees, and £218m on administration costs. Altogether, landlords provide £5.5bn of revenue for these sectors.

John Eastgate, sales and marketing director of OneSavings Bank, commented: “Landlords may seem like an easy target for political point scoring, but they play a vital role in the economy. Not only do they house a huge proportion of the country’s workforce, bridging the housing demand and supply gap, their spending supports thousands of jobs - whether builders, cleaners, lawyers and accountants or letting agents.

“Trying to tackle the housing crisis by targeting landlords with punitive taxes is very simple and politically highly palatable, but has unintended consequences. Either it means less work for all those who support the property industry, or it means tenants will have to foot the bill for the government's tax raid, or both.


“One side effect of the recent changes, and rising running costs, will be the professionalisation of the sector as amateur and accidental landlords leave the market. There is nothing wrong with having fewer, bigger landlords, but that alone will not help more young people get homes.”

https://www.landlordtoday.co.uk/breaking-news/2017/5/buy-to-let-landlords-contribute-15-9bn-a-year-to-uk-economy-study-finds

Demand from buyers in UK falls in first few months of 2017

Property demand across the UK has fallen since the start of the year with Wales seeing less interest than the rest of the country, the latest analysis shows.

Demand from buyers is currently 33.8%, down by 17.56% since the end of 2016. It has reached 39.4% in England, 36.18% in Scotland and 27.35% in Wales, according to the national hotspots index report from eMoov.

The index, which measures demand in 150 towns and cities, shows that the highest levels of buyer demand is 68.29% in Rugby, followed by Portsmouth at 66.7% and Bristol at 64.43%, while the lowest is in Aberdeen at 14.11%, Hartlepool at 15.43% and Middlesbrough at 19.15%.

Stoke-on-Trent at 82.25%, Stockton-On-Tees at 77.75% and Walsall at 65.09% have all seen the largest increases in buyer demand in 2017 so far.

But demand has been falling on London commuter towns and cities including Guildford down 35.84%, Watford down 35.73%, Cambridge down 29.74%, Reading down 27.17% and Brentwood down 26.93%.

‘With many of the UK’s major cities becoming too expensive for homeowners in the region and travel infrastructure improvements allowing us to live further away from work, it is no surprise that places such as Rugby and Portsmouth have grown in prominence amongst UK buyers. It isn’t just those in London that are looking outside of the larger city boundaries and opting for more affordable towns in the surrounding area,’ said eMoov chief executive officer Russell Quirk.

He pointed out that at 32.31%, buyer demand across London is down 5%. The borough of Bexley has the most demand at 56.13%, followed by Newham at 51.82% and Havering at 50.51%. The biggest decreases were in the boroughs of Greenwich which was down 60.83%, Lambeth down 57.62% and Hounslow down 52.69%.

Westminster has the lowest level of London buyer demand at 10.14%, followed by Kensington and Chelsea at 11.49% and Hammersmith and Fulham at 13.15%. Since the end of 2016 demand has fallen in all three of these boroughs by 36.64%, 28.16% and 40.24% respectively.

Across Scotland the highest levels of current buyer demand are in South Ayrshire at 67.18%, Edinburgh at 56.47% and Glasgow at 56.42% while the biggest increases in demand are in Highland with a rise of 66.59%, South Lanarkshire up 47.69 and Fife up 40.47%.

Although demand is still low in Aberdeenshire, the area has seen an increase of 21.46% since the end of 2016. While the biggest declines in buyer demand since 2016 are Moray with a fall of 22.54%, Argyle and Bute down 14.2%) and Stirling down 6.33%.

In Wales Caerphilly at 47.12%, Newport at 46.92% and Cardiff at 42.89% rank as the top three hottest areas for property demand at present. But Cardiff’s popularity amongst Welsh buyers means the capital has seen some of the lowest upward growth in buyer demand, having increased by just 4.15% so far in 2017, whilst Rhondda Cynon Taf is up 31.57% and Swansea up 28.29%, the largest increases in buyer demand this year.

The Ceredigion, Pembrokeshire and Denbighshire regions have the lowest demand in Wales at 15.75%, 15.54% and 13.36% respectively while the biggest falls in demand in Wales are Bridgend down 13.47%, Monmouthshire down 9.63% and Neath Port Talbot down 3.22%.

http://www.propertywire.com/news/uk/demand-buyers-uk-falls-first-months-2017/

At last, a plan to tackle the housing crisis – Labour may just have the answer

By Owen Jones

By pledging to build more homes and regulate the private rented sector, Labour can boost the economy and offer hope to the younger generation

‘The postwar Labour government was committed to building council housing to a higher standard than the private sector: let’s bring that pledge back.’ Photograph: David Davies/PA

Britain’s housing crisis is bad news for a multitude of reasons. It is bad news for children, whose health, wellbeing, education and thus potential is damaged by growing up in an overcrowded home. It is bad news for a younger generation who fear that a decent home of their own – something their parents took for granted – is an impossible dream. It is bad news for parents who have to stump up cash (if they have it) for their children’s rip-off rent or deposit, or who have their 26-year-old offspring still living at home. It is bad news for taxpayers who spend over £9bn a year subsidising private landlords. It is bad news for communities, because a lack of affordable housing leaves people feeling as though they are in competition with each other for scarce resources. It is bad news for the economy, because building houses stimulates industries and jobs.

You get the gist. On the badness scale, the housing crisis is bad. Which is why Labour’s pledge to tackle the housing crisis can be presented as good news for kids, young people, parents, taxpayers, communities, and the economy. Here are the challenges. In Tory Britain, we’ve had the lowest levels of peacetime housebuilding since the 1920s: Labour is committed to building a million homes over the next five years. Then there are three prongs of the housing crisis. One: a lack of council housing, leaving hundreds of thousands of families on waiting lists, because we didn’t replace the stock that has been sold off. Two: an unregulated private rented sector defined by high rents and a lack of security. Three: falling home ownership, particularly among the next generation.

To those languishing on waiting lists, Labour can say: we will give councils the power they need to build you comfortable homes you can afford to live in. The postwar Labour government was committed to building council housing to a higher standard than the private sector: let’s bring that pledge back. To private tenants, Labour can say: we will regulate rents and give you secure tenancies, just like other European countries. To aspiring homeowners, Labour must have a compelling offer, too. Concrete policies that help people on the housing ladder: whether it be access to credit for those denied it, or reviewing a bad tax like stamp duty.

Britain should spend taxpayers’ money on building homes, not subsidising landlords: that’s what Labour’s offer means. In one of the richest countries on earth, every family should expect a decent, secure, affordable home as a basic right. Unlocking Britain’s potential: that should be at the heart of Labour’s vision, and resolving a housing crisis holding the country back has to be part of it.


https://www.theguardian.com/commentisfree/2017/may/09/labour-tackle-housing-crisis-building

Bristol, Oxford and Manchester lead annual house price growth in UK cities

House prices in key cities in the UK increased by 6.9% in the 12 months to January 2017, led by Bristol, Oxford and Manchester, the latest index data shows.

But the annual rate is down by 1% and London has seen growth fall to 6.4%, its lowest level for three and a half years, according to the figures from the Hometrack index.

Indeed, London is now in eighth place in the city price ranking. With a rise of 9.5% year on year to an average of £263,200 Bristol is top, followed by Oxford, up 9.2% to £430,200 and Manchester up 8.3% to £150,600.

The only city out of the 20 ranked to continue to see an annual price drop is Aberdeen where prices are down 3.7% to £186,200 but month on month they are up by 2.8%, one of the strongest monthly gains in the index.

Month on month Liverpool saw prices rise by 2.9%, Leicester by 2.5%, Bournemouth by 2.3% and Manchester by 2%. But Edinburgh prices were down 1.3% month on month, Belfast own by 0.2% and Sheffield down by 0.1%.

The index report says that the slight drop in annual price growth overall is due to weaker investor demand after stamp duty changes last year and the impact of the vote to leave the European Union in June.

London is being overtaken by large regional cities such as Birmingham, Manchester and Liverpool where prices are rising off a lower base and where affordability levels remain in line with their long run average, it also suggests. Manchester is the fastest growing city outside southern England where prices are up 8.3% in the last year on an average price which is a third that of London.

The report also says that slower growth in London is not surprising given house prices are 85% higher than they were in 2009 and this growth is primarily a result of rising incomes and strong demand with buying power fuelled by record low mortgage rates.

‘In our view there is material upside for house prices in the coming years in many cities where the recovery since 2009 has been limited. This is based on our analysis of previous housing cycles and the recent profile of the recovery in London,’ the report says.

‘The beneficiaries will be cities where investment in employment, infrastructure and regeneration will help stimulate the local economy. The timing and scale of future house price growth will, of course, depend upon the outlook for jobs, incomes and mortgage rates,’ it concludes.

http://www.propertywire.com/news/uk/bristol-oxford-manchester-lead-annual-house-price-growth-uk-cities/

Reports criticise UK Right to Rent checks one year after they were introduced

Foreigners and British citizens without passports, particularly those from ethnic minorities, are being discriminated against in the private rental housing market, a new report has found.

It claims that since landlords and letting agents were required a year ago in England to check that a new tenant has the right to live in the UK under a pilot scheme that is due to go nationwide, there is no evidence that it is working.

A second, separate report suggests that the Government is largely unaware of the impact of the pilot scheme and whether the checks are indeed being done regularly or if some agents and landlords are ignoring it completely.

The checks are part of a wider policy to deter illegal immigrants and landlords and agents who fail to fully comply with the rules face a fine of up to £3,000 or up to five years in jail.

The first report from the Joint Council for the Welfare of Immigrants (JCWI) found that 51% of landlords surveyed said that the scheme would make them less likely to consider letting to foreign nationals.

It also found that 42% of landlords stated that they were less likely to rent to someone without a British passport as a result of the scheme. This rose to 48% when explicitly asked to consider the impact of the criminal sanction.

An enquiry from a British Black Minority Ethnic tenant without a passport was ignored or turned down by 58% of landlords, in a mystery shopping exercise and the report suggests that the Government is failing to adequately monitor the scheme to measure whether or not it is working as intended, or whether it is causing discrimination.

It also says that it believes that enforcement under the scheme is low and there is no evidence to suggest that the scheme is encouraging irregular migrants to leave the UK and that it creates structural incentives for landlords to discriminate unlawfully against foreigners and ethnic minorities.

One prospective tenant from Brighton, Kirby Costa Campos who is a US citizen married to an European Union national described the process as awful. ‘Two days before we were supposed to move in, we get an email from the rental agency saying we’re not going to release the keys to you, you’ve lost your deposit with us, because you’re not legal in this country. It was awful. I was crying for that entire 24 hour period. I mean, I have a six year old. My child was going to be on the street,’ Campos explained.

Landlords have also hit out at the legislation as being unworkable. ‘How can we, as landlords, ever know really if someone has got the right to rent. Why should we be working as immigration officers when actually we haven’t got a clue and we certainly don’t have any information, or any training,’ said Clare Higson, a member of the Eastern Landlords Association.

‘I feel I have absolutely no way at all of telling whether or not someone has got legitimate immigration papers, how would I recognise a false passport or travel document,’ she added.
The Residential Landlords Association (RLA), said it shares the concerns outlined in the JCWI’s report. ‘The Government’s own figures show the Right to Rent scheme is not working so maybe it is time to scrap it and think again. With the threat of a jail sentence hanging over landlords if they get it wrong it is hardly surprising that they are being cautious,’ said RLA chairman Alan Ward.

‘There are more than 400 acceptable documents proving right to rent from within the EU alone and landlords are making risk-based decisions and only accepting documents that they recognise and have confidence in,’ he added.

Saira Grant, JCWI chief executive believes that landlords are being put in an impossible position. ‘The Right to Rent scheme is failing on all fronts. It treats many groups who need housing unfairly, it is clearly discriminatory, it is putting landlords in an impossible position, and there is no evidence that it is doing anything to tackle irregular immigration,’ she pointed out.

‘Creating a so called hostile environment that targets vulnerable men, women and children is bad enough, implementing a scheme that traps and discriminates against British citizens is absurd. Expanding the scheme to devolved nations without taking into account the discrimination it causes would be misguided and unjustifiable. It is time to stop the scheme before it does any more damage,’ she added.

Meanwhile, according to John Perry, a senior policy adviser at the Chartered Institute of Housing, the Government should rethink the scheme before rolling it out to Scotland, Wales and Northern Ireland as no one know if it is working or not.

‘The Home Office has admitted it cannot monitor the scheme and it’s a fair bet given the limited publicity that at least a proportion of England’s 1.8 million private landlords are still completely unaware of it,’ he said.

He revealed that organisations that the CIH works with, such as housing advice agencies and migrant advisory bodies, say it’s now harder for legal migrants to rent such as refugees and British people can also be affected if they have no passport or other accepted proof of UK residence.

‘It’s time for the Government to seriously reconsider the impact of right to rent on vulnerable tenants and would-be tenants before it is rolled out to Scotland, Wales and Northern Ireland. It’s simply not good enough to claim that the scheme has a deterrent effect when the proven benefits are so limited and there are regular reports of the damage being caused,’ said Perry.

Figures from the Home Office show that since the pilot was introduced a year ago some 91 landlords have been issued with civil penalties and fined a total of almost £30,000, with 667 enquiries made to the Home Office’s checking services.

http://www.propertywire.com/news/uk/reports-criticise-uk-right-rent-checks-one-year-introduced/

Britain’s highest yields: the best areas for buy-to-let returns revealed

By Marc Da Silva

Despite the recent tax crackdown, buy-to-let continues to look an attractive income investment at a time of low interest rates and volatile stock markets, but where in the country can the best yields be achieved?

Property peer-to-peer lender Kuflink has examined the average rental yield in 50 major towns and cities across the UK and found that properties in Manchester and Salford lead the way, providing average rental yields of 6.7% and 6.6% respectively, while Hull, Luton and Rotherham were among the areas that experienced the biggest increase in average rental yield over Q4 2016.

Despite the high rents achievable in southern England, especially in London, yields in the north are typically higher, reflecting the fact that properties cost significantly more in the south, meaning that buy-to-let landlords are left with relatively low returns.

The historic city of Cambridge – a popular commuter hotspot – provides the lowest average rental yield, just 2.7%.

The research also revealed that there are now less than 41,000 homes under £250,000 available in the UK, down from 58,000 available in October - a drop of 29%.

In London, somewhat worrying for first-time buyers and some buy-to-let investors, there are now fewer than 2,000 properties under £250,000 on the market as prices continue to soar.

Birmingham saw the biggest drop in properties available for under £250,000, with a decrease of 1,373 between October and December 2016, followed by Bristol, with a decrease of 1,017 properties.

Tarlochan Garcha, CEO at Kuflink, commented: “The rift between north and south continues, but this time the attention is turning north. Buy-to-let properties in the North can be a steady investment, attracting renters who cannot afford to step onto the property ladder and therefore choose to rent in good locations, which are well-suited to their lifestyle.

“Manchester and Leeds are both bustling cities, popular with young professionals and families, and can offer solid returns for landlords. While Birmingham, which has a growing business district and is soon to benefit from HS2, cutting journey time to London to just 49 minutes, is also firmly on the map as a strong buy-to-let spot.

“It could be time for landlords to turn their attention away from pricey London and look to the UK’s regional cities.”

The below table shows the ten towns and cities that provide the highest average rental yields:

https://www.landlordtoday.co.uk/breaking-news/2017/2/britains-highest-yields-the-best-areas-for-buy-to-let

Brexit creates opportunity for UK property investment says industry organisation

January 26, 2017

The property industry in the UK is being urged to look at and act upon the opportunities that could open up as a result of Brexit rather than focusing on the negatives.

According to the Property Industry Alliance (PIA), which brings together leading representative bodies from the UK’s commercial property industry, the Government also needs to take into account the real estate industry when formatting its Brexit deals.

The PIA has identified five key areas that it believes the Government should take on board and points out that while Brexit poses risks to the real estate industry, it also opens up opportunities if the Government takes the right steps.

It points out that overseas investment in UK commercial real estate is a highly significant driver of GVA and productivity and must not be put at risk by Brexit. Foreign investors own 28% or £135 billion of UK commercial real estate held as investments and more if housing and student accommodation are included.

They also often partner with UK investors and other organisations to drive UK regeneration. The PIA says that an effective and efficient commercial property market produces investment in the physical and digital, the fabric of towns and cities across the UK, creating jobs, improving environmental performance and generating at least £16 billion directly to Government through taxation.

It also explains that the real estate industry, including investment, asset management and construction, is highly reliant on the mobility of workers and is already experiencing a skills shortage. The PIA is calling for a post-Brexit response that focuses upon training, skills and the ability to attract and retain talent.


In term of positives it also points out that European Union public procurement rules are inefficient, often misunderstood and therefore uncertain and Brexit offers a real chance of streamlining the system, which will increase the velocity of investment by reducing unnecessary costs and delays.

The PIA reckons Brexit is an opportunity to improve tax in the real estate industry as a simplified and fairer tax regime for the real estate and infrastructure sector would increase domestic activity, retaining and improving a competitive position for investors. The most obvious opportunity is VAT, where the UK’s freedom of action has been constrained in unhelpful ways by European law and the case law of the European Court of Justice.

It also says that Brexit represents an opportunity to revamp the complex and somewhat inefficient environmental sustainability regulatory framework, to provide better more efficient long term solutions and green growth. The best outcome would be to retain some UK legislation derived from EU rules, reform other areas and remove particularly ineffective laws.

‘Real estate is a critical and enabling part of the UK’s economy, shaping our towns and cities and channelling productive investment into the real economy,’ said Bill Hughes, chairman of the. PIA.

‘The UK asset management industry is one of the largest in the world and a key contributor to the UK economy. Within it, real estate is a core investment asset for private and professional investors, both domestic and global, particularly for its income-generating characteristics. The ability of the industry to continue to undertake cross border activity from the UK and retain mobility of talent is crucially important,’ he explained.

‘The Property Industry Alliance plays an integral part in explaining the role that UK commercial property plays in the UK economy, its importance in improving the built environment and its wider social contribution to local communities. As such, it is critical that we do not sit and wait to see what a post-Brexit world might look like. We have the chance to shape our real estate industry for the benefit of the UK,’ he added.

http://www.propertywire.com/news/uk/brexit-creates-opportunity-uk-property-investment-says-industry-organisation/

Ireland’s decision to scrap buy-to-let tax is a warning to Britain

By Marc Da Silva
Last October 20, 2016

As the UK prepares to change the way landlords are taxed by scrapping the existing rules that permit them to offset all of their mortgage interest from property investments against tax, Ireland has announced that it is reversing its policy that prevented landlords from claiming full mortgage interest tax relief on rental income to help stop rents soaring out of control.

In his Budget statement made last week, Ireland’s minister for finance, Michael Noonan, said landlords would be able to claim 80% tax relief from next year, up from an existing level of 75%.

Tax relief will then increase by a further 5% a year until it reaches 100% again.

Noonan highlighted the fact that the policy, which is similar to the tax changes due to be introduced in the UK from April next year, was introduced in Ireland in 2009 to “rescue the public finances” but with investment in Ireland’s private rented sector falling now is an “appropriate time” to revisit it.

Around 440,000 basic-rate tax payers will be forced into a higher tax bracket from April next year once planned changes to landlord taxation comes in to force, according to the National Landlord Association (NLA).

The existing rules that permit landlords to offset all of their mortgage interest against tax will, from April 2017, be phased out, restricting the amount of mortgage interest landlords can offset against tax on their property investments.

By 2020, landlords will not be able to deduct any of their mortgage interest from their rental income before calculating their tax bill.

The changes to tax relief will make it harder to make a profit from letting property, which in turn could deter investment in the sector.

Campaigners against the mortgage interest relief changes argue that Ireland’s change of policy demonstrates that the levy does not work.

Rents in Ireland have increased significantly since 2013, with recent figures from the Irish Residential Tenancies Board revealing that rents in Ireland have risen by almost 10% since last year.

Here in the UK, many landlords will have no alternative but to recoup their losses through higher rents, with tenants paying the price of the government’s tax-grab.

Research conducted by Property118 earlier this year revealed how up to 4.6 million tenants could be affected by the now former chancellor George Osborne’s tax attacks on buy-to-let landlords.


Mark Alexander, founder of Property118, told the press this week: “Ireland has got a really big problem with reduced investment in property at the same time as rents have increased dramatically.”


https://www.landlordtoday.co.uk/breaking-news/2016/10/irelands-decision-to-scrap-buy-to-let-tax-is-a-warning-to-britain

Britain's rental crisis: Extra 1.8 million homes to rent are needed by 2025 but buy-to-let landlords are in retreat

• UK households renting doubled from 2.3m in 2001 to 5.4m in 2014
• A balance of 58% of estate agents saw a drop in buy-to-let sales since May
• 86% of landlords have no plans to increase their rental portfolio this year

Almost two million more households will need a property to rent within the next decade, new figures suggest, as they are squeezed out of buying by high house prices.

But a warning has been sounded that this could trigger a further crisis in the property market, as landlords are retreating after being hit with new taxes. 

The Royal Institution of Chartered Surveyors said the rise would occur as a result of home ownership becoming 'increasingly unaffordable', but warned that supply of rental homes is falling and that the situation will only worsen as demand increases.

In demand: But RICS said that 86%of landlords have no plans to increase their rental portfolio

It said that the number of households renting property had already doubled from 2.3 million in 2001 to 5.4 million in 2014.

RICS warned that within 10 years, there could be 'rental supply crisis' following changes to the buy-to-let sector that made it less attractive for landlords to invest.

These have included a reduction in tax relief that landlords can claim and higher stamp duty payable on buy-to-let properties.

RICS is urging the Government to back a new 'build-to-rent' sector where properties are built specifically for letting.

A balance of almost three in five estate agents have reported a drop in buy-to-let sales since May, according to the research, which follows the arrival of a new 3 per cent stamp duty surcharge for buy-to-lets and second properties.

RICS also found that 86 per cent of landlords have no plans to increase their rental portfolio this year nor over the next five years.

Jeremy Blackburn, RICS' head of policy, said: 'We are facing a critical rental shortage and need to get Britain building in a way that benefits a cross section of society, not just the fortunate few.

'With increasingly unaffordable house prices, the majority of British households will be relying on the rental sector in the future. We must ensure that it is fit for purpose, and the Government must put in place the measures that will allow the rental sector to thrive.

'Any restrictions on supply will push up rents, marginalising those members of society who are already struggling.'

In addition to tax rises, landlords are also finding that lenders are tightening borrowing criteria for mortgages, looking for bigger deposits, more rent to mortgage payment cover and checking landlords' own earnings not just rental income. 

Landlords face a further test after watchdog the FCA announced tougher rules to ensure they can survive a rise in interest rates. They will be stress tested against mortgage interest rates rising to a higher level than previously.

The measures mean investors will be forced to find larger deposits – or increase rents charged to tenants – if they want to take out a mortgage.

In some cases, landlords will have to put down an extra £15,000 deposit before they can get a home loan.

Thousands of borrowers could be prevented from buying rental properties when the changes come in next year. 

It could also affect existing landlords who want to borrow more money by cashing in equity on properties they already own. 

David Hollingworth, of mortgage broker London & Country, said: 'These rules could prove fatal for small landlords hoping to invest in buy-to-let properties to boost their incomes. Many are not going to be able to find the extra money they need for a deposit or increase rents by enough to cover the shortfall.' 

RICS is calling on the Government to address the current rental shortage by reversing the rise in stamp duty and pioneering a new build-to-rent sector for the long-term, where the private sector is encouraged to build properties specifically for residential letting.

The number of households renting property has doubled from 2.3m in 2001 to 5.4m in 2014

Helen Gordon, chief executive of residential property owner Grainger, said build-to-rent would increase housing supply at a quicker pace than traditional house-building and offer tenants more stability.

Grainger said they planned to invest over £1billion by 2020 in ‘high quality, long term rental housing’.

‘In order to support us in this ambition and many others with similar plans, the Government should recognise the important role we have to play and explicitly support build-to-rent in its policies.’

The RICS findings echo those of a separate survey by the Residential Landlords Association, which said that two thirds of landlords plan to increase rents to cope with recent tax increases. 

The survey of almost 3,000 private sector landlords carried also found that the same proportion do not plan on purchasing any additional properties for their portfolio.  

More than half surveyed landlords said they planned to increase rents in the next 12 months to offset the impact of changes to mortgage interest relief.

And almost two in five said they would cut back on improvements to their rental properties because of the new taxes. 

http://www.dailymail.co.uk/property/article-3820004/EMBARGO-UK-faces-renting-crisis-extra-1-8m-rental-homes-needed-2025-BTL-landlords-retreat.html

Landlords urged to remain calm after Brexit vote

There is no need for landlords to panic following Britain’s decision to exit the European Union, according to the National Landlords Association (NLA).

Landlords have already been hit in the pocket by various tax measures announced by the Chancellor George Osborne, including higher stamp duty rates, while mortgage tax relief will be cut from next year. Tougher buy-to-let mortgage lending criteria has also been announced. But the NLA does not necessarily believe that a Brexit should add to landlords’ woes.

The NLA does not necessarily believe that an exit from the EU will have an adverse in impact on the private rented sector, especially now that the Bank of England and the Treasury have confirmed that they have extensive contingency plans in place to ensure the country’s financial stability.

Richard Lambert, chief executive officer at the National Landlords Association (NLA), said: “Let’s just everyone, take a long, deep, calm breath.  Leaving the EU is completely unknown territory, and jumping to conclusions isn’t going to help anyone.

“We welcome the Mark Carney’s steadying words and his reassurance that the Bank of England and the Treasury have extensive contingency plans in place.

“Any knee-jerk reaction will have a real impact on our members’ mortgages, tenants’ rents and overall confidence in the market.  So we would urge the policy as regards to interest rates should be, to continue the Prime Minister’s analogy, one of steady as she goes.”  

https://www.landlordtoday.co.uk/breaking-news/2016/6/landlords-urged-to-remain-calm-following-brexit-vote

What impact will Britain’s vote to leave the EU have on the PRS?

Today marks a very important day in Britain’s history. The public vote in favour of Brexit is a shock to many people and has already resulted in a sharp decline in global markets and the value of the UK pound, while the David Cameron has announced that he is to step down as Prime Minister later this year. But what impact will the outcome of the referendum have on the private rented sector?

The economy

Early indications are that the fall in the pound’s value, as well as the stock market, could very well lead to a technical recession, higher unemployment, which in turn may result in a cut in interest rates and possibly even further quantitative easing.

Borrowing rates

A reduction in interest rates could actually lead to cheaper borrowing levels – although this remains to be seen as there are other factors at play.

Transactions

Most experts we have spoken with this morning estimate that there will be an immediate slowdown in housing market transactions, in the order of around 15%, resulting in downward pressure on property prices in the short-term.  

International investors

The dramatic drop in the value of the UK pound will alert many shrewd international property investors, with many buyers from Asia, as well as from the US, looking to take advantage of a more favourable exchange rate and snap up bricks and mortar in the UK.

Property prices

House prices could fall across many parts of the country in the near term as prolonged uncertainty and a potentially weaker economy has an adverse impact on the market. But the general housing shortage means that prices should rise in the medium to long term.

New housing supply

Based on recent comments from leading housebuilders, many residential developers will be less willing to commit to new property projects due to the uncertain economic climate. This will make it much harder for the government to achieve its target of building 1m new homes by 2020. This will add to the supply-demand imbalance, placing upward pressure on house prices and rental values in the longer term.

Rental demand

Both buyers and sellers are clearly anxious, as reflected by a noteworthy drop in sales market activity in recent weeks, and with uncertainty set to continue for the foreseeable future, as would-be buyers adopt a ‘wait and see’ policy, demand for rented accommodation is set to rise.

Rental prices

The cost of renting will rise across many parts of the UK as demand from tenants increases and new housing supply falls. The biggest affect could be in London, where rent prices have been pushed sky-high due to huge demand.

Conclusion

The rental market will carry on functioning healthily despite the UK’s decision to exit the EU. 

https://www.landlordtoday.co.uk/breaking-news/2016/6/what-impact-will-britains-vote-to-leave-the-eu-have-on-the-prs

Rental market to remain unaffected if Britain votes for Brexit

The EU referendum still remains too close to call, but whatever the outcome of today’s vote, letting agents do not believe that it will have much of an impact on the rental market.

A new report from the Association of Residential Letting Agents (ARLA) suggests that supply, demand, or rental costs will not be significantly affected if the UK votes to exit the 28-member state today.

Two thirds (65%) of ARLA agents expect supply to remain stable if the UK votes to leave the EU, compared to just a fifth (22%) who forecast that it will fall as international landlords pull out of the market.

A third (31%) see demand decreasing, as relocating to the UK becomes a less attractive prospect, but over half (55%) think it will remain as high as it currently is.

In London, almost half (43%) of agents expect the number of prospective tenants per property to fall in the event of a ‘Brexit’, as international demand weakens.

While one in five agents (19%) of agents expect a Brexit result will cause upward pressure on rent costs, the majority do not think it will have a major impact on tenants’ rents.

David Cox, managing director of ARLA, commented: “There is no avoiding the EU Referendum at the moment; and whatever the outcome, we are likely to feel the impact of the fallout of this debate in different ways. However, it’s important to put this into perspective and not get carried away in a zeitgeist. As outlined in our recent Brexit Report, the letting market hosts a large number of non-UK born citizens and any change in migration policy is likely to have an impact down the line, especially in London. However, our monthly report clearly shows the sentiment amongst members is that the immediacy of this effect is likely to be minimal.”

Meanwhile, ARLA report that a third (37%) of agents have seen a decline in the supply of buy-to-let properties since the stamp duty changes came into effect in April, with almost half of agents (48%) expecting supply to fall further in the coming months as more landlords walk away from the market as a result of the mortgage interest relief changes coming into force next year.

Cox added: “The EU referendum debate in many ways has stalled policy making and following the vote we need to move from political debate to action. We need supply to increase dramatically and quickly to really deal with the housing crisis as this is one of the most pressing problems facing UK society today.”

https://www.landlordtoday.co.uk/breaking-news/2016/6/rental-market-to-remain-unaffected-if-britain-votes-to-leave-the-eu

HSBC launches Britain's first fixed-rate mortgage below 1%

Customers lock in for two years at 0.99% interest, but they need a deposit of 35%, in deal described as new benchmark

HSBC has launched Britain’s first fixed-rate mortgage with an interest rate below 1%, as competition among lenders hots up and the cost of borrowing for banks and building societies falls to new lows.

The bank is offering customers the chance to lock in for two years at an interest rate of 0.99%, but they need a deposit of at least 35% and will pay a product fee of £1,499. 

David Hollingworth, of mortgage brokers London and Country, described the rate as “absolutely ridiculously low … It sets a new benchmark for two-year fixed rates.” He said the fee was “big, but not the biggest” and that repayments on a £150,000 mortgage would be £565 a month.

The deal is the cheapest fixed rate on the market, and the lowest ever recorded by the financial information firm Moneyfacts. It matches HSBC’s previous lowest rate, a 0.99% discount deal it offered in 2014, but undercuts Yorkshire building society’s current market-leading fixed rate of 1.14%. That loan has a slightly lower fee of £1,345.

Rachel Springall, finance expert at Moneyfacts, said: “As with any deal, applicants should always work out the true cost of the mortgage to decide whether it’s right for them.”

Hollingworth said the rate on the deal was one percentage point below the cheapest five-year fixed-rate, a 1.99% mortgage also offered by HSBC. “You have to weigh that up against the longer-term security of the five-year deal. Two years comes around pretty quickly, but for some people that suits them just fine,” he said.

Funds for the loan would be limited, so it was unlikely to be around for a long time, he added.

The launch comes as Moneyfacts data shows that rates on two-year fixed-rate mortgages have risen since May, from an average of 2.56% to 2.58%. However, five- and 10-year deals have fallen to all-time lows of 3.16% and 3.46% respectively.

Although the Bank of England base rate has remained unchanged since March 2009, mortgage rates have fallen in recent years as the cost of funding the loans has dropped. The recent dip in long-term fixed-rate deals has been driven by investors seeking a haven for their cash in the run-up to the EU referendum on Thursday. Concerns about a Brexit vote have driven money into government bonds, driving yields on them down to record lows.

The maximum available to borrowers who take out HSBC’s new mortgage is £500,000.

https://www.theguardian.com/money/2016/jun/21/hsbc-fixed-rate-mortgage-below-1-per-cent-interest-rate