Category: News

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Leeds BS launches 10-year fixed rate mortgage range

Leeds Building Society has this morning launched a new range of 10-year fixed rate buy-to-let products. There is a product available at 2.49% up to 60% loan-to-value (LTV) and 3.29% deal up to 70% LTV. Both products are subject to a £999 product arrangement fee and come with free standard valuation and fees assisted legal services.

Matt Bartle, director of products at Leeds Building Society, commented:

“Our new ten-year buy-to-let products provide additional choice for landlords, and follow our recent rate reductions and the introduction of new cashback incentives in our range.

“Longer term fixes provide landlords with the opportunity to budget for their mortgage costs over a decade, as well as saving any fees associated with remortaging during the period.

“In the current rate environment, fixing for a longer term offers landlords some security at a time of economic uncertainty.”

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25% of private landlords do not meet safety standards

A quarter – 25% – of homes rented from private landlords fail to meet the national Decent Homes Standard when taking into account hazards, costs and other characteristics, analysis of the English Housing Survey reveals.  Households containing several million people are currently living in unsafe or unsuitable rented accommodation, according to the research by VeriSmart.  The study by the independent property inspectors details how 19.5% of homes in the country, which works out at about 4.5 million properties, failed to meet the government’s Decent Homes Standard, when taking into account hazards, costs and other characteristics.

The assessment of the English Housing Survey, which dates back to 1967, shows that the social sector had the lowest proportion of non-decent homes at 13%. 

The most common Category 1 hazards – the most dangerous type of hazard – were falls and fires. Falls on stairs, on a level and between levels accounted for the three most common types of hazard, with fires in fourth place. Converted flats were deemed the most hazardous property type, with 21% of such homes likely to contain hazards, while private homes were the next most dangerous by this measure (14%).

Houses were close behind (12%), with flats proving safer (8%), though social rented homes were least likely to play host to a hazard at just 6%. Some 1.1 million homes had a serious fire hazard – for example no smoke alarms, old or faulty electrical systems, missing fire doors – and other hazards included damp and mould, electrical safety faults and hot surfaces. Jonathan Senior, chairman of VeriSmart, commented: “The figures are worrying when one considers that one in five homes is sub-standard as far as safety, costs and other measures are concerned.

“Some may fret at the average cost to fix a property so that it meets the required standard, but when these properties are falling below expectations in part due to hazards, safety surely has to take priority.

“We recently looked at the tragic number of home accidents – many involving children and many leading to fatalities – and it’s clear that chances can’t be taken in this area.”

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Overseas Investors piling money in to London

Many buy-to-let investors in the UK seem to be sitting on their hands at the moment, owed mainly to the tax and regulatory changes seen in the past few years, not to mention Brexit uncertainty. But Overseas buyers appear to view existing market conditions as ideal for acquiring property in the UK and London in particular, according to James Pendleton. The estate agency reports that there has been a significant increase in demand from foreign investors and funds, with international buyers hoovering up dozens of London homes at a time.

Property values in the capital have been falling for well over a year but demand from foreign investors buying in bulk is stronger than ever, the agent says.

Lee James Pendleton, the founding director of the firm, has called the bottom of the London housing market, at a time when international investors are benefiting from a weak UK pound along with a softening in the attitude of developers to discounting.

Pendleton believes that a no-deal Brexit would only serve to spark a more intense ‘feeding frenzy’, as large players ‘pile in’ to take further advantage of further weakness in the value of the pound. The estate agent is currently handling the purchase of 75 units in south-west London as part of a single transaction worth in excess of £40m.

Combined with a currency dividend, if these investors can get a 25% discount from a developer, they can be looking at a 40% discount on value overall, the agent says. However, Pendleton warns there is still very little demand for anything over £1,500 per sq ft — with bulk buyers favouring anything under £800 per sq ft.

James Pendleton has responded to growing demand from foreign property buyers by launching a new investment advisory service for institutional and bulk investors. Pendleton said: “Anyone who thinks foreign investors and funds have beat a retreat from London are mistaken. The only people who have backed away are UK investors.

“Developers can see the market has softened and they are willing to give bigger discounts than at any point in the past 10 years. 

“They are hoovering up dozens of homes at a time and their behaviour clearly indicates to us that the bottom of the London market is at hand. The prospect of a no-deal Brexit is a concern to some but, in reality, it would only spark a feeding frenzy among these large players who will pile in as the pound falls.

“As a result, there are a lot of big overseas funds and investors looking for freehold buildings that have a mix of commercial and residential in them. 

“This is the perfect time to launch our new department, which will cater to patient investors who believe London property at current prices will pay huge dividends over the long term and are so confident in that belief that they are committing vast sums of money.  “The smart money is now looking at the London market, reading the cycle and deciding this is the time to get in.”

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Are you entitled to a stamp duty rebate

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Primas Law is urging landlords and property developers to seek legal advice about potential stamp duty rebates on ‘uninhabitable’ second properties after a landmark tribunal case. A recent ground-breaking case, between P N Bewley Ltd and HMRC, held that properties that are not immediately habitable at the time of completion do not constitute as a “dwelling” for the purpose of the Finance Act 2003.

This finding could have major implications for the UK housing market, according to Primas Law, as the decision meant that P N Bewley was not liable to pay the additional 3% stamp duty surcharge applicable to second homes. It could mean that those who have paid stamp duty on similar uninhabitable properties – including potentially thousands of landlords and developers – may have paid an inappropriate level of tax and could seek to reclaim them.
Consequently, Primas Law is being instructed to act for a large and growing number of landlords and developers seeking to recover stamp duty paid for properties that, potentially, should not have attracted the additional tax.

Daniel Thomas, Head of Litigation at Primas Law, said: “To provide more context to this particular case, the property that P N Bewley purchased was a bungalow and a plot of land in Western-super-Mare.

“The company’s intention was to demolish the bungalow and build a new dwelling on the land with planning permission already being granted. The bungalow was essentially a derelict building that had been unoccupied for around three years.

“The tribunal was provided with photographs of the derelict building and these demonstrated the heating system, radiators, floorboards and pipework had been removed, and that the property – both internally and externally – was in a very poor condition.

“It was also provided with reports from surveyors that concluded asbestos was present in the property and urgently needed removing.”

COMMENT

If you are a developer and are buying property unfit for habitation, then this law could definitely apply, but you may need to use a solicitor who is up to date with property law, as most who simply deal with run of the mill conveyancing may not be aware of this law, or not familiar with the process of appeal, meaning that you could potentially pay out many thousands that you need not pay.

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Rental rate freeze could sink UK property market

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Germany’s rent controls place strong restrictions on in-tenancy rent increases, while the ‘rent brake’ introduced a couple of year ago makes it harder for landlords to charge higher rents when re-letting a property. But would a similar system work as far as the UK’s rent control system is concerned?

Last week the German finance minister Olaf Scholz voiced his support of a controversial five-year rent freeze to tackle the increasing cost of living in the city.

The aim, according to Scholz, is to ensure that Berlin does not ‘end up like London’.

In the last five years, London rents have increased from an average of £1,530 a month to £1,679 – an increase of 2.44% annually.Should this growth trend persist for a further five years, it would push the average rent in the capital to £1,894 a month.

However, the implementation of a five-year rental rate freeze would see London tenants save a total of £7,620 in rental costs, according to the research. Tenants in Newham stand to save the most, with rents increasing by 6.95% on average in the borough over the last five years, an increase of £329 in the monthly rent. If this continues, the average rental price could hit £1,977 a month in five years, but a freeze would see tenants save a notable £19,413 as a result.

A five-year rental rate freeze would also see a five-figure saving for tenants in Barking and Dagenham, Hackney, Waltham Forest, Tower Hamlets, Redbridge, Kensington and Chelsea, the City of London, Havering, Lewisham, Southwark, Enfield and Ealing.

Oxford tenants would benefit with a rental freeze saving totalling £17,746 over the next five-years. The average rent in Oxford over the last five years has increased at an average of 7.3% a month, second only to Manchester at 8%, which could see Oxford’s rental costs hit £1,741 a month.

Bristol has also seen a sharp increase in rental prices, up 6.75% annually over the last five years. A similar growth trend would see the average monthly rent hit £1,489 however, a five-year rental freeze would save tenants a total of £14,294. Tenants in Manchester, Oxford, and Newcastle would also enjoy a five-figure saving.

Tom Gatzen, co-founder of ideal flatmate, said: “The figures suggest that should such a rental rate freeze be introduced in London and the wider country, the saving for tenants could be considerable. This saving could go some way towards a mortgage deposit and a foot on the ladder, while at the same time helping to alleviate some of the pressure on the rental sector.

“Any pro-tenant initiative can, of course, be viewed as a positive, but the mere suggestion of a rental rate freeze in Berlin seems to have sent the property market into meltdown. There is every chance that the same could happen here as a recent string of government changes to the buy-to-let sector have already diminished landlord confidence levels.

“This further dent on profitability could see more opt to invest elsewhere, however, the meteoric rise of the build-to-rent sector is providing a viable alternative to traditional stock supply and could therefore be the answer, stomaching a static rate of rental growth far better without any detriment to the tenant.”

COMMENT

The massive increase in the build to rent sector is beginning to filter through, but there needs to be more money made available for this. As it stands, there is not enough private funding of build to rent, but with amendments to tax rules, this could change rapidly. If legislation were introduces to allow people to plough their pension funds in to build to rent, but under strict return guidelines, to ensure affordability, this could not only give our ageing population a source of income, but it would also help to create more housing stock, thereby distributing demand and curbing spiralling rents. As build costs on a large scale are less than property on the open market, this would give the investors a fair return, without the need for excessive rent costs.

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Holiday rental market looks set to boom this summer

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The holiday rental market in this country looks set for another busy summer as the weak pound persuades millions to opt for a staycation.

The fall in the UK pound since the Brexit vote three years also means Britons get less for their money abroad.

Meanwhile, more tourists than ever before are visiting the UK. VisitBritain figures show that 2018 was a good year for inbound tourism to the UK, with spending by overseas visitors to the UK reaching almost £27bn.

The strength of the UK tourist industry is paying dividends for holiday property owners, according to Bournemouth-based holiday letting agency, Bournecoast Holiday Agents, which reports that holiday lets are on the rise.

 It has been known for a long time that owning a holiday let can be very advantageous in the holiday letting industry. Not only can it provide a potentially lucrative additional income for buy-to-let landlords, but it also offers certain tax advantages to holiday let owners.

There are specific requirements a property needs to meet in order to be classed as a furnished holiday let, such as its availability, actual bookings and level of furnishings.

Capital allowances can be claimed on a furnished holiday let property. This means the cost of kitting out a holiday property to a luxury standard (and in return, increasing the potential rental income) can be deducted from pre-tax profits. This is not an option available for long-term rental properties.

Income generated from a furnished holiday let property is classed as ‘relevant earnings’ which means a landlord can also make tax-advantaged pension contributions.

If the landlord should come to sell the furnished holiday let property, they may be able to claim certain Capital Gains Tax reliefs. These are unavailable to long-term rental properties and include Entrepreneur’s Relief, Roll-over Relief and Hold-over relief.

With long-term rental properties, profits would be distributed according to the official ownership split (e.g. if they owned 50% of the property, they would share 50% of the profits). With a FHL property, they can portion the profit however they decide.

A self-catering property which is available for short-term lettings for more than 140 days in any given year, is subject to Business Rate property tax. Since all furnished holiday let properties must be available to let for a minimum of 210 days, they fall into this category. However, this isn’t necessarily bad news as the landlord can claim Small Business Rate Relief, which can be up to 100%, dependent on what area you are in.

Des Simmons, Bournecoast’s managing director, said: “The holiday let market has gained considerable momentum over the past year, as evidenced by the growing number of lenders now offering mortgages suitable for this type of investment.”

Phil Wadham, director of Elite Financial, added that “the range of products for holiday letting is improving and more borrowers are thinking it’s a market to look at.”

 

COMMENT

Personally speaking as a small private Landlord, after the difficulties I have faced with the last possession, which is still not finalised as I write this,  I can say that the days of my letting out on AST are over…..at least under the current  anti-landlord legislation. It appears that I am not alone, many landlords have sold up, are planning to sell up, or have decided to switch to other options, either rooms on a licence or short term holiday lets.

I am sure it is only a matter of time before they try to pull the rug from beneath the short term letting market, but it will be very difficult to enforce. I for one, believe that the measures taken over recent years to punish landlords is having a detrimental effect. In the first instance, those at the bottom end are now very unlikely to find a property to rent, certainly in the South East, where there is demand, because there is increased likelihood that they may have problems, the local authorities advise them to ignore notice to leave, because they will consider them to have made themselves homeless, this means that the landlord has no other option but to go through the courts, which is expensive, the tenant finds themselves with a CCJ against their name as well as the likelihood of them finding another property will then be zero, and then, the landlords may well decide not to re-rent on AST, as I have.

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Government attacking Landlords

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Earlier this month the Tenant Fee Ban was introduced, after much fanfare from the Government. However, it is not the only piece of regulation and policy change set to affect the landlord market this year. It joins what can only be described as a slew of restrictive government policies – including tax changes, tougher HMO requirements and the recent announcement / threat to ban ‘no fault’ evictions– which many would agree amount to an unfair and sustained attack on the landlord market.

It is clear the government seems to have forgotten landlords are often just ordinary, hardworking people and savvy investors,who have saved to buy an additional property as a nest egg or source of income. A report from the Institute of Economic Affairs (IEA) recently criticised the government’s approach, concluding landlords are unfairly being discriminated against and scapegoated for the rental housing crisis.

By squeezing profit margins and pushing landlords to exit the market, there is a very real danger that the recent government policies will start to undermine the UK rental sector altogether. The fact of the matter is, the rental market is growing, and landlords fulfil an incredibly important role in providing essential property stock. Instead of increasing red tape and making it harder for landlords to turn a profit, the government should be supporting and encouraging the sector.

Appropriate planning is now incredibly important to ensure you avoid any financial, practical or legal ramifications of new and upcoming legislation. So, as a landlord, what should you be doing to navigate this new regulatory landscape and make sure your assets are protected?

As most will know, the Tenant Fee Ban means the only payments that can now be levied at tenants by landlords or agents are rent, dilapidation deposits and default fees, with the deposit limit reduced from 6 weeks to 5.However, the biggest danger for landlords is the removal of an agent’s ability to charge for tasks like reference checks. Nightmare tenants can wipe out profit through property damage or failure to pay rent. It is therefore vital to commit to paying for reference checks and a rent guarantee to ensure all parties are fully protected. Alternatively, make sure you are using a reputable agent who will continue to carry out these tasks properly, potentially by using deposit replacement schemes that include these as standard.

Another significant change has been to HMO licenses, traditionally required in any property where five or more people live over three floors but are not part of the same family. Non-compliance can result in unlimited fines, a criminal record and a ban from acting as a landlord in the future. What many don’t realise is that HMO rules can be different for each borough, and numerous councils are getting much stricter about enforcement (encouraged by the fact they now profit from any fines!). For example, in Camden, London, HMOs are now required for any property with three unrelated persons, and also within properties on a single floor. Tenants are also being invited to report non-compliance, encouraged by the fact that landlords can be forced to repay all rent to tenants for the length of their contract. In just one of the London boroughs, there have been 1,200 prosecutions of landlords and agents for HMO breaches in the last five years, so ensuring you are HMO compliant by checking your borough’s specific rules is an absolute must.

On 20th March this year, the Homes Act 2018, or ‘Fitness for Human Habitation Act’, also came into effect. While not entirely new, rather a clarification and bringing into line of previous legislation, it is harsher in a number of ways. There are now 29 hazards that landlords are responsible for monitoring – including damp, mould, cold, asbestos, heat, and radiation to name a few. Tenants can take landlords to court and sue if it is found they have failed to maintain standards in one of these areas. The problem here is that it can be incredibly difficult, as an independent landlord, to both have the necessary knowledge on these matters and make sure you are compliant. This is where a knowledgeable and reliable agent or adviser is key.

Finally, the government have also announced that they intend to end ‘no fault evictions’, by removing the Section 21 notice. Although their proposals presently lack any real detail, this will make it even harder for landlords to get rid of disruptive tenants. Their current suggestion that Section 8 notices should be used instead, by which grounds such as failure to pay rent must be provided for eviction, are little comfort thanks to a backlogged court system thatwith three-to four-month delay in hearings can make this an incredibly lengthy and costly option. Given the lack of detail, there might still be opportunity to adjust this law, and so lobbying MP’s and Parliament members on this could provide some relief.

Rental yields are improving and buy-to-let can still prove to be a good investment for many, so you should not necessarily be put off. However, it is vital to remember the onus is now on you to put the necessary precautions in place to protect both your property and rental income.

COMMENT

Increased costs, devastating changes to Tax allowances, ridiculous legislation designed to create many ways for landlords to trip up and be unable to evict tenants. The end of the S21, it is time for Landlords to fight back. I am in favour of AST properties to be removed from the market EN MASS. It is not difficult to cover a long term rent with short term yields and it will finally turn the table on this spitefully draconian attitude towards Landlords.