Posted on

Tax clampdown on second homes announced by government

Owners of second homes who abuse a tax loophole by claiming their often-empty properties are holiday lets will be forced to pay under new measures announced by the government today.

The Department of Levelling Up, Housing and Communities says the changes will target people who take advantage of the system “to avoid paying their fair share” towards local services in popular destinations such as Cornwall, Devon, the Lake District, Suffolk, West Sussex and the Isles of Scilly.

Currently, owners of second homes in England can avoid paying council tax and access small business rates relief by declaring an intention to let the property out to holidaymakers.

However, concerns have been raised that many never actually let their homes and leave them empty and are therefore unfairly benefiting from the tax break.

Following a consultation, the government says it will now bring changes to the tax system, which will mean second homeowners must pay council tax if they are not genuine holiday lets.

From April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year to access small business rates relief, where they meet the criteria.

Holiday let owners will have to provide evidence such as the website or brochure used to advertise the property, letting details and receipts.

Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

Housing Secretary Michael Gove says: “The government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.

“However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.

“The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

Posted on

Plans to force buy-to-let owners to pay up to £10,000 to boost energy efficiency

  • Campaigners are calling for plans to charge landlords up to £10k to be scrapped 
  • Plans are for all new rental homes to have an energy rating of C or above 

Campaigners are urging the Government to scrap proposals to make landlords pay up to £10,000 to improve the energy efficiency of their rental homes.

The National Residential Landlords Association suggested that landlords could not reasonably be expected to pick up the tab in the way that the Government is suggesting for stringent new rules affecting buy-to-let properties.

In an official statement, NRLA said that the plans were based on the ‘misguided assumption that all landlords are property tycoons with deep pockets’.

In a consultation that closed in January, the Government proposed that from 2025 where a new tenancy agreement is signed, the property will need to have an Energy Performance Certificate rating of C or above.

From 2028, all rental properties will need to meet the new standard, even where it is not a new tenancy agreement.

The Government has suggested that, in meeting these targets, landlords should be expected to pay up to £10,000 to make the necessary improvements.

However, the NRLA said that this imposed cap fails to accept the realities of different property and rental values across the country.

It follows research from NRLA that showed private landlords making an average net income from property of less than £4,500 a year. (Scroll down for more information about how this figure was calculated.)

The National Residential Landlords Association is calling on the amount that landlords should be expected to contribute to be linked to average market rents in any given area – known as broad rental market areas – as calculated by the Valuation Office Agency.

Under the NRLA’s proposals, this would mean the amount a landlord would need to contribute would gradually taper from £5,000 to £10,000, taking into account different rental values – and by implication, property values – across the country.

VAT and council tax reductions

Alongside this, the NRLA is calling for a package of fiscal measures to support property investment.

It said these should include the development of a decarbonisation tax allowance, where VAT would no longer apply to energy efficiency and low carbon work.

And it said council tax should not be charged where energy improvements are being made to rental properties when they are empty.

Ben Beadle, of the National Residential Landlords Association, said: ‘We all want to see as many energy efficient rental properties in the sector as possible.

‘Besides being good for tenants, improvements made to rental properties ensure they become more attractive to prospective tenants when being marketed by landlords and agents.’

However, he added: ‘The Government’s proposals for the sector are not good enough.

‘They rely on a misguided assumption that landlords have unlimited sums of money and fail to accept the realities of different property and rental values across the country.

‘Ministers need a smarter approach with a proper financial package if they are to ensure their ambitious objectives are to be met.’

David Reed, of Richmond estate agents Antony Roberts, said: ‘We all want to see improvements to energy efficiency but If these proposals come to fruition, there’ll be a rush of landlords with property in vast swathes of suburbs – where older, less efficient properties make up a greater proportion of the stock – selling rather than incurring what could be considerable costs in retaining an investment in property.

‘With yields so low, returns barely meet costs as they are, especially as the latter have grown significantly in recent years either directly (Tenant Fees Act and electrical regulations) or indirectly (unable to offset mortgage interest).

‘Tenants love charming period conversion flats in good commuter territory and seldom is efficiency/an EPC rating at the forefront of the search criteria, whereas location and provision of attractive accommodation win hands down. There are simply not enough newer, in theory more efficient, properties being constructed to meet tenant demand.

‘The private rental sector vitally needs a healthy supply of good property and landlords who own one or maybe two rental properties make up a large sector of the market. Many are already disgruntled by recent changes and longer-term plans are under question. If they leave, the effect on tenants will be hard felt – a further restriction of supply giving more upward pressure on rental and lack of choice.

‘Hopefully consideration will be given to where there is no easy-fix or realistic programme of improvement to achieve grade C status or better.’

How much do landlords make?

Private landlords make an average net income from property of less than £4,500 a year, according to the The National Residential Landlords Association.

Here is how the NRLA reached that figure… 

The English Private Landlord survey said that the average – median – gross rental income for a landlord before tax and other deductions is £15,000.

 Average costs for landlords would be:

– Repair and replacement of furnishings – based on the previous tax exemption for 10% of annual rent (£1,500)

– Cost of a gas safety certificate (average £80 required annually – checkatrade average)

– Electrical safety check (average £265 performed every 5 years. £53 annually – checkatrade average)

– Deposit protection (£13 from TDS)

– Tenant referencing cost (for two tenants £49 NRLA tenant referencing)

– Interest-only mortgage for the average UK property (£250,000) with a 20% deposit (cheapest available £6,096 annual)

– Insurance (£531.15 for building and contents insurance from Hamilton Fraser using average floor space for PRS property https://www.statista.com/statistics/292206/average-floor-area-size-of-dwellings-in-england-by-tenure/)

– Agency fees (£1200 based on 8% agency fees)

The NRLA based its calculation on an average landlord of a house let to a couple with an interest-only mortgage, and assumed that tenants move annually.

Total gross rental income – £15,000

Repair and replacement costs – £1,500

Tenancy management costs – £726.15 (includes average cost of insurance, gas safety certificates, 1/5 of the EICR cost, deposit protection and tenant referencing)

Agency fees – £1,200

Total deductions before tax and mortgage costs – £11,573.85

Amount that can be taxed – £2,314.77 (£11,573.85 x 0.20)

Tax after mortgage interest relief accounted for – £1,095.57 (£2,314.77 – (£6,096.00 mortgage costs x 0.20)

Remaining balance after Tax – £10,478.28 (£11,573.85 – £1,095.57)

Mortgage costs – £6,096.00 (based on cheapest available 80% Loan to Value mortgage on the average property in the UK of £250,000)

Remaining balance after all average costs deducted – £4,382.28 (£10,478.28 – £6,096.00)

Posted on

New portal reveals charges to agents plus extra for multi-listing service

New portal reveals charges to agents plus extra for multi-listing serviceThe new portal OpenBrix, which is powered by Blockchain, has revealed its fee structure ahead of its formal launch on September 1.

It’s going to charge £75 per branch per month, plus £1 per property upload fee. If agents then want to join a multi-listing system it will operate, they will be expected to pay another £55 per month on top.

“We think this is fair and transparent. Our pricing is sensible and affordable and provides justifiable value and, importantly, agent pricing won’t be hiked as we grow because the agent community controls that – not shareholders” claims chief executive Adam Pigott.

He continues: ”We are pioneering the UK’s first multi-listing service … This feature will be a significant hook to gain client instructions and will open up agents’ inventories to other agents as they so choose, and theirs to others, resulting in revenue opportunities that otherwise do not exist for smaller independent agents.”

Pigott – who boasts over 30 years in property and was the founder of CHK Mountford Letting Agents back in 1989 – goes on to say this makes OpenBrix “a great value platform that agents and consumers alike will love.”

It utilises blockchain to create a linked network of agents to upload listings, and to create a voting and decision-making structure so that all agents have a say in pricing and the direction of the portal.

Pigott believes this taps in to the current apparent dissatisfaction with ‘big’ portals.

Some months ago it was announced that former Countrywide lettings veteran John Hards was joining the new portal’s board.

Posted on

Here we go again – Help To Buy looks likely to be extended

Here we go again - Help To Buy looks likely to be extended

Government leaks to mainstream and building trade media suggest the controversial Help To Buy scheme will be extended beyond its end-of-2020 deadline.

An announcement is expected shortly.

Some suggestions say the extension could be just three months, to allow the clearance of as many as 18,000 H2B purchases delayed by Coronavirus, while other suggestions put the extension as considerably longer because of wider concerns about the economy and unemployment in the construction sector.

Either size extension would probably be controversial.

On the one hand, some agents and almost all housebuilders see the scheme as a means of improving their sales figures, especially to younger or first time buyers. Between its introduction in early 2013 and March this year – before the housing market was frozen – some 272,000 purchases had taken place via Help To Buy.

On the other hand, a slew of reports and analyses suggest that H2B does little to improve the quantity of housing stock and possibly increases prices – ironically making homes less affordable rather than more.

Last year a National Audit Office analysis revealed that 63 per cent of people buying a home under the scheme could have afforded to do so anyway; more households with incomes for £80,000 and above purchased via H2B than households with less than £30,000.

Bruce Burkitt, founder of the Property Experts consultancy, wrote last year in Estate Agent Today: “Developers are aware that Help to Buy is a closed market, and many properties are sold for premiums of 15 to 20 per cent, a surprising statistic that may come to harm first time buyers perhaps more than it is helping them.”

Recent figures suggest that the average price paid for a H2B property across the UK is some £307,000.

Posted on

Faster conveyancing? Land Registry accepts electronic signatures

Faster conveyancing? Land Registry accepts electronic signatures

HM Land Registry is now accepting witnessed electronic signatures on documents for the  transfer of ownership of property, the creation of leases, and on securing mortgages.

It says this should allow a substantial simplification and faster execution of conveyancing – although it warns that some electronic signature providers may need to make some minor changes to meet its security requirements.

It will work like this: a conveyancer must  upload the deed to an online platform which sends a link to the signatories.

Once they have completed the necessary authentication checks, they would then ‘sign’ the document electronically in the physical presence of the witness who then also signs.

The conveyancer is then notified that the signing process has been concluded and, once they have effected completion of the deed, can submit the completed deed to HM Land Registry with their application for registration.

In every case the online platform would need to include two-factor authentication to authenticate the signatories and witness accessing the deed and provide assurance that unique individuals have signed.

A link to the document is emailed and then an authentication code sent to the individual’s mobile phone.

“What we have done today is remove the last strict requirement to print and sign a paper document in a home buying or other property transaction. This should help right now while lots of us are working at home, but it is also a keystone of a truly digital, secure and more efficient conveyancing process that we believe is well within reach” explains Simon Hayes, the Registry’s chief executive and chief land registrar.

“The more sophisticated qualified electronic signatures are a part of that vision and encouraging those is where our attention will be directed next” he adds.

Posted on

Is the housing market really storming ahead as some say?

Is the housing market really storming ahead as some say?

Agents have almost unanimously been reporting a big surge in business since the reopening of the housing market, but new figures from HM Revenue & Customs suggest there is still some way to go before normal volumes are seen.

A total of 68,670 residential properties were sold in June according to HMRC data.

While this was predictably a huge 50 per cent up on May, it was still 31.5 per cent down on the same month a year ago.

The figures obviously pre-date the stamp duty holiday and other purchase tax changes in different parts of the UK, introduced only this month.

“Transactions, not more volatile house prices, are always a better indicator of market strength. These figures show activity is moving in the right direction but will clearly take time to be reflected in the figures as we emerge from lockdown and associated restrictions” notes former RICS residential chairman Jeremy Leaf, who also runs his own London estate agency.

“Nevertheless, we have noticed at street level that many buyers and sellers are bringing forward moving decisions to take advantage of the stamp duty holiday and continuing lower interest rates. There is still concern that improved conditions will be relatively short-lived as economic news deteriorates and furlough support falls away” he adds.

The chief analyst at online agency Yopa, Mike Scott, says it’s possible that these HMRC figures may be worse than reality.

“Note that these are provisional figures. Transaction data may be being processed more slowly than usual due to the effects of the pandemic, which means that there may still be more June sales to be reported and the true year-on-year fall may not be as bad as it is in this report” he suggests.

And Tomer Aboody, director of property lender MT Finance, says: “We are still below last year’s numbers, which in turn were down on the previous year, but confidence is creeping back up.

“If the government increases capital gains tax on principal home sales, it will push us back again so any progress made  by the stamp duty reduction will be swiftly lost. We need more stimulus via reduced stamp duty to the upper end of the market and hope for this in the autumn Budget.”

Posted on

Portal says mortgage applications much faster with new software

Portal says mortgage applications much faster with new software

The mortgage arm of a regional property portal has launched pre-approval software which it claims will significantly speed up the initial stages of the mortgage application process.

PropertyPal Mortgages says the software works “in a way never done before” and within minutes can complete an ID Check, credit check, affordability and eligibility checks across multiple lenders.

“With the added benefit of only leaving a soft footprint on the credit check, the outcome is essentially a multi-lender indication of acceptance” says the company, which works with the eKeeper PropTech firm to develop the product.

PropertyPal is a Northern Ireland-focussed property portal.

“We wanted to build software that would allow users to accurately establish how much they could borrow and at what Loan to Value band they will likely be accepted for a mortgage. Now we can essentially obtain a very accurate indication of pre-approval across multiple lenders within minutes” says the portal’s mortgage managing director, Owen Peden.

Posted on

Government set to finally kill off the High Street

Today could be the final nail in the coffin for the High Street, which has been slowly withering away for the last 2/3 decades, firstly due to increasing losses to out of town shopping malls, then increasing loss of business to online stores and finally the lockdown. Matters have been made much worse of course as unscrupulous local authorities have used town centres as their personal cash machines, charging motorists more and more to park. Instead of incrementally reducing the number of long-stay parking spaces to force workers to gradually adapt, making more short-stay spaces available to shoppers for free, they have exploited it so much that shoppers have abandoned town centres in their masses.

On top pf that, the gradual increase in business rates has not helped, along with the number of Charity shops, Banks and large chain stores which have nothing more to offer than other stores in easier to reach, locations. Taking Northampton as an example, the closure of British Home Stores and Marks & Spencer had a massive impact in the town centre, but these enormous buildings still sit there empty.

A few years ago, they even had ‘Mary Queen of Shops’ out to rescue the High Street for a not insignificant fee, but in reality, it is not rocket science. Town centres need to go back to their roots, lots and lots of small shops that local shopkeepers can afford, units of between 200 & 1,000 sq ft that are so affordable, that they could even be run by one person single-handed. That is when we would see a ‘Tea-Pot shop’ a ‘Bonzai Shop’ and all the interesting shops that would attract people, but no, instead they have decided to bring in the commercial Guillotine.

The government is tearing up planning red tape from today to allow boarded up shops and abandoned offices to be turned into homes without the need for full planning permission, under new laws being introduced today. Changes to the planning system will make it easier for business owners and developers to ‘repurpose’ premises that are no longer needed and bring them back into use.

In a further move to support town centres, families will be offered a new fast-track system allowing them to add up to two storeys to their homes. The rule shake-up will mean full planning applications will not be required to demolish and rebuild unused buildings as homes, allowing commercial and retail properties to be quickly repurposed, according to the Ministry of Housing, Communities and Local Government.

The latest changes, which will come into force in September, are designed to help breathe new life into high streets hit hard by the lockdown, as well as opening up a new route for housing provision. At present, firms need full ‘change of use’ planning permission to convert a shop or office into a new type of business or into housing.

From September, they will be offered a fast-track process for approval. Developers will also be allowed to demolish vacant buildings for new purposes without full planning permission.

This will open the floodgates for inner-city ghettos, centred around hastily converted monstrosities with little more than profit as their motive, which does beg the question, who will benefit most from this urban suicide?

Posted on

Big day for Leasehold reform as Law Commission issues reports

Big day for Leasehold reform as Law Commission issues reports

It’s a big day for leasehold reform today with the Law Commission due to publish three residential leasehold and commonhold reports.

They will be formally launched at an All-Party Parliamentary Group on Leasehold and Commonhold Reform taking place at 10am.

The Commission’s brief, given to it by the Ministry of Housing, Communities and Local Government, was to conduct a full review of enfranchisement law and procedure.

The reports today are expected to build on one issued by the Law Commission in January, and still said to be “under consideration” by Housing Secretary Robert Jenrick.

The January report gave three options for the future of leasehold, each using a different method to determine the price of enfranchisement and – in the words of the commission to allow further reforms to make the process simpler and to reduce uncertainty.

That report made much of using simple formulae – such as a multiple of ground rent – in delivering reforms

Alongside the three schemes, the Law Commission put forward a range of other options for reform. These included:

– Prescribing the rates used in calculating the price, to remove a key source of disputes, and make the process simpler, more certain and predictable;

– Helping leaseholders with onerous ground rents, by capping the level of ground rent used to calculate the premium;

– The creation of an online calculator for determining the premium to make it easier to find out the cost of enfranchisement, and reduce uncertainty around the process; and

– Enabling leaseholders who are collectively enfranchising a block of flats to avoid paying “development value” to the landlord unless and until they actually undertake further development.

Posted on

RICS figures confirm short-term bounce but supply is very low

RICS figures confirm short-term bounce but supply is very lowThere’s more confirmation this morning that the housing market is enjoying a short-term bounce – and that’s before the effect of yesterday’s stamp duty initiatives.

The latest market snapshot from the Royal Institution of Chartered Surveyors, out today, shows a net balance of 61 per cent of its monthly survey respondents seeing a rise in new buyer enquiries over the past four weeks.

The number of new properties being listed for sale also rose over the month, with a net balance of 42 per cent of survey participants noting an increase rather than decrease.

As agents continue to deal with a backlog of sales held up by lockdown, the number of newly agreed sales moved into positive territory for the first time since February, with a net balance of 43 per cent citing an increase in completed transactions.

However, the average number of properties on agents’ books remain close to all-time lows – just 39 on average per branch, says RICS. And on prices, for the third successive report respondents have reported a decline in house prices.

“Key activity indicators in the RICS survey suggest that the market is enjoying a short term bounce following ending of the lockdown, with sharp spikes in the metrics tracking both buyer enquiries and new instructions” explains Simon Rubinsohn, RICS chief economist.

“However, there are worrying signs that this rebound may quickly run out of steam against the backdrop of a tightening in lending criteria by mortgage providers, and the uncertain macro environment particularly with regard to the employment picture. Respondents to the survey highlight both of these issues in explaining the broadly flat picture regarding sales expectation beyond the immediate uplift.

“Meanwhile, the issues around the sales market appear to be shifting sentiment in the lettings market with, somewhat ominously given the prevailing economic climate, rent expectations beginning to edge upwards once again.”