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The National Landlords Association off from incorporating in case the Government tries to clamp down on limited

The National Landlords Association (NLA) is urging members to hold off from incorporating in case the Government tries to clamp down on limited companies being formed to mitigate income mortgage interest relief changes.
Richard Lambert, chief executive of the NLA, said the Chancellor hinted in his Autumn Statement that the Treasury is concerned by the drop in tax revenues as a result of businesses across the economy incorporating to reduce their tax bills.
He warned that landlords, many of whom are incorporating to preserve mortgage interest relief, should wait to see whether a consultation is launched in next week’s Budget before making a decision.
It comes as the proportion of landlords intending to take out commercial loans to fund their property purchases has doubled over the past 18 months as they look to mitigate the impending buy-to-let tax changes.
Research by the NLA shows that the proportion of landlords planning to use commercial loans has risen from 10% in July 2015 – when the changes to taxation were first announced – to 19% at the end of last year.
The changes to taxation will take place from April and, once fully phased in by 2021, will prevent landlords with buy-to-let mortgages from deducting their interest payments or any other finance-related costs from their turnover before declaring their taxable income.
This rise coincides with increasing numbers of landlords telling the NLA’s quarterly landlord panel that they would form a limited company to preserve the mortgage interest relief perks. One per cent of landlords said they would incorporate in January 2016 and the figures now stands at 6%, which the NLA says equates to a rise from 20,000 to 120,000.
Lambert said: “Over the past year more than one hundred thousand landlords have formed a limited company in order to beat the tax changes, and this overlaps with an increasing intention to look to commercial loans to fund future purchases.
“While commercial loans are available to non-incorporated landlords, they tend to be a source of funding more commonly used by limited companies looking to expand their property portfolios, so we’d expect to see this trend develop as the year plays out.”

The traditional 25-year mortgage could be on the way out

The traditional 25-year mortgage could be on the way out, with growing numbers of first-time buyers opting for deals lasting 30 or 35 years – suggesting that many will still be burdened with home loan debt in their 60s and 70s.
The Halifax said that in 2016, about 28% of all first-time buyers with a mortgage opted for a 30- to 35-year term – up sharply from 11% in 2006.
Meanwhile, the average price first-time buyers are paying hit a new high last year, passing the £200,000 mark for the UK as a whole, and rising above £400,000 in London.
With high house prices, student debts and a rise in the age at which couples have children, many people are tending to buy a home later and opt for a longer repayment term. According to the Halifax, the average age of a first-time buyer is now 30, though this disguises regional variations. The average figure for London is 32, but in certain boroughs, such as Barnet and Ealing, and locations such as Slough in Berkshire, it is 34.
Stretching the term of the loan reduces monthly payments, which can seem attractive to those with tight finances. The Halifax offers mortgage terms of up to 40 years and said that with a repayment mortgage, the longer the term, the lower the monthly payment. 
However, it warns potential borrowers: “It will take you longer to pay off the loan, so you will pay more interest. This means it will cost you more over the life of your mortgage.”
This trend means that mortgages that last into retirement are becoming more common. Traditionally, many lenders would only grant a mortgage up to an individual’s planned retirement date.
In its report, the Halifax said that as the cost of a typical first home has risen, there has been a growing trend towards mortgage terms longer than the traditional 25 years.
In 2006, almost two-thirds (64%) of first-time buyers opted for a term of between five and 25 years, while the remaining 36% were over 25 years. Ten years on, the picture is dramatically different: 60% of first-time buyer mortgages involve a term of at least 25 years.
In 2016, the average price paid by someone who had never owned a property before was £205,170 – the highest on record. At the height of the housing downturn in 2009, the figure stood at £135,254.
In London, first-time buyers have seen the average price rise by 81% since 2009 to reach £402,692 – again, the highest on record.

rent increases in 2017

Letting agents are anticipating rent increases in 2017 ahead of the tenant fees ban.
ARLA’s November Private Rental Sector Report found the number of tenants experiencing rent increases continued to decrease, at 16%, from 18%, but this could all be set to change.
Following the Chancellor Philip Hammond’s announcement to ban letting agent fees for tenants during his Autumn Statement, eight in ten agents expect to see rent hikes in 2017.
The report found the number of rental properties managed per branch was 185, an increase from 180 in October, but lower than the 193 recorded in September.
Demand from prospective tenants fell again in November to 32 prospective tenants registered per letting agent branch, compared with 34 in October, however 53% of agents expect to see a rise in demand next year.
David Cox, managing director of ARLA, said: “The number of rent hikes reported by letting agents continued to decrease in November, and it’s a shame the ban on letting agent fees will have the opposite impact on rent prices when the measure comes into force.
“The buy-to-let market is becoming less attractive for investors as the ban on fees, combined with the scrapping of mortgage interest relief and the stamp duty increase on second homes push costs up for landlords. So unfortunately, regardless of the uplift we saw in supply this month, we expect to see the number of properties available to rent fall next year.”

Sales volumes sharply reduced!

Sales volumes of prime homes right across the country have been hit hard, cutting the Government’s take from Stamp Duty Land Tax by millions. Asking prices have also been sharply reduced, as the top end of the London market has crashed.
In the six months from May to October there was a 75% reduction in sales of properties above £10m – down to just 15 from 61 in the same period last year.
There was also a 51% reduction in sales between £5m and £10m – a fall from 201 to 99.
There was also a 33% drop in sales between £1m and £2m (7,285 falling to 4,913) and a 36% drop in sales between £2m and £5m (down from 1,473 to 947).
Worst affected was the prime new-build sector where there was a 83% reduction in the number of sales of new homes above £5m. This equates to a fall from 52 in the same period last year to just nine in the six months from May to October.
According to analysis of Land Registry figures by investment firm London Central Portfolio, the reduction in sales activity above £1m between May and October could have cost the Exchequer nearly £500m.
The firm says that the fall could be as much as £1bn by the end of the financial year.
London Central Portfolio CEO Naomi Heaton said: “This slowdown in the luxury property market – a big contributor for the Exchequer and UK economy in general – is very concerning, particularly as the Government faces wider economic and financial instability in the face of Brexit.
“With an already increasing deficit to address and the Government’s declared intent to increase tax revenues, these statistics should make some worrying reading for Chancellor Hammond.
“Having missed the opportunity to reconsider Osborne’s strategy at the Autumn Statement, we hope the Government will now look to relax some of these measures before there are detrimental knock-on effects for developers, the Exchequer’s balance sheet and the wider UK economy.”
Most of Britain’s most expensive homes are concentrated in London, where high-end agents have made job cuts and developer Berkeley Homes has slashed its prices  by around 10%.
Separate research, by Propcision, has also shown huge cuts, of up to 46%, in asking prices of some London properties.
Michelle Ricci, co-founder of analyst firm Propcision which has an ‘add on to Rightmove’ which is neither approved nor authorised by the portal, said some of these properties had ambitious pricing to begin with. Her research shows that since June, the price cuts became more concentrated in central London as the Brexit vote compounded pre-existing problems in the market.
The blame on the central London housing market crash has been put on an increasingly harsh tax regime scaring off wealthy purchasers.
While there might not be much sympathy for this segment, there must nevertheless be concerns about a market that needs to flow freely from top to bottom.
Specifically, as agents know, what historically happens at the top end of the market tends to ripple down – and that what happens in London, tends to spread out.

Rent rises are likely to accelerate in 2017

Rent rises are likely to accelerate in 2017. A third of landlords expected to increase rents in the next 6 months alone, by an average of 5.4% - equivalent £571 per year for households. Two thirds cite higher future taxes, and 43% the strength of tenant demand. Indeed, twice as many landlords are seeing an increase in tenant demand as the number seeing a decline. The recent budget announcement to ban letting fees, while providing a welcome reduction in tenants’ upfront costs, will see any additional costs for landlords factored into rents.
Extra pressure will also come from the Prudential Regulation Authority’s new underwriting standards, due for implementation next year; these will see landlords needing to demonstrate higher yields to secure finance, unless they can provide larger deposits. As a result, Kent Reliance forecasts that rents will rise by an average of 3% in 2017.
Growth in the number of households has moderated, growing at 5.4% in September compared to 5.5% in the first quarter, with 5.3million rented households in total. Combined with strong house price growth, the value of the PRS in Great Britain has risen to £1.3trn, with £174bn added since September 2016.  
Andy Golding, Chief Executive of OneSavings Bank, had this to say: “Property investors have had to roll with punches in 2016. The stamp duty levy clearly took its toll on the market, and combined with the forthcoming tax changes, landlords have felt at the mercy of a political agenda. But confidence is returning as landlords take action to limit the damage to their finances. The use of limited companies is soaring, and rents are increasing, even after one of the biggest surges in rental supply in recent history.
There is still more to come for the buy to let sector next year. The PRA’s new underwriting standards are due to be implemented, the tax changes begin to take effect, and there is yet more potential intervention in the form of the FPC’s new powers. If the cumulative effect of constant change undermines the expansion of rental properties, this will simply exacerbate the housing crisis.
The raft of recent measures aimed at the buy to let sector singularly sought to increase home ownership levels. Ironically, they will achieve the opposite, with even greater upward pressure on rents combined with the prospect of declining real incomes likely to stretch affordability even further. We have warned all along that the tax changes will push up rents, and this is already starting to happen. The ban on often unjustifiably high letting fees is well intentioned. However, it also means landlords could pass higher costs onto tenants, doing little to bring down the overall cost of renting.  
Only through a substantive and long-term building programme across all tenures will we see an end to escalating house prices and rents. The Chancellor has moved to provide more support for house building, but it is not yet enough to see the step-change in supply that we need.”

The property rental market is booming

The property rental market is booming at the expense of the sales market, making it look as if house-buying will be outstripped for the first time in eight decades next year, as home-buyers face a continued struggle to find properties they can afford.
Activity in the sales market has cooled since June’s Brexit vote and a lack of property for sale combined with rising prices are set to lead to more new lets than purchases, the UK’s largest estate agency chain, Countrywide, said.
Johnny Morris, research director at Countrywide, said: “As some would-be buyers and sellers sit on their hands, Brexit-induced uncertainty has continued to boost the rental market … September saw record activity, with increasing numbers of lets agreed and tenants choosing to renew their contracts. On current trends 2017 could be the first time since the 1930s that more homes are let than sold.”
Separate reports suggest that affording a new home is becoming increasingly difficult for would-be buyers, with asking prices rising since the summer and borrowers having to find bigger deposits than in 2015.

Moving cost

Moving costs have increased £870 in the past year to £10,996, according to the research by Lloyds. The figure takes into account stamp duty, estate agency fees and home removal costs, as well as conveyancing fees and the price of an energy performance certificate.