Weekly Property Newsletter April 16

Is the Government killing off buy-to-let?

APRIL 16, 2016

From the end of mortgage interest relief to extra Stamp Duty surcharges, there is plenty to suggest the Government is trying to kill off the buy-to-let sector.

That was one of the key themes of this week’s ARLA conference as housing minister Brandon Lewis told the crowd he wanted a buy-to-let sector that is more professional.

Does that come at the expense of smaller landlords and lettings agents?

Mr Lewis spoke of the importance of institutional investment in the sector through the build to rent fund and insisted that any new legislation or regulation was there to cut out rogue landlords.

But tell that to Betsy Dillner, director of campaign group Generation Rent.

An audible gasp emerged in the conference centre during a panel debate when she said her landlord had put up her rent up 12%.

It later turned out that her landlord was an institutional firm rather than a rogue.

ARLA vice-president warned on the same panel that we are dealing with a “different animal” when it comes to institutions.

But that is where the government focus as well as the incoming money seems to be.

More than £30bn has been invested in the private rental sector through the Build to Rent fund, according to the British Property Federation.

According to a report released last week by DAC Beachcroft, 30,000 private rental units were granted planning permission in the last year.

In London alone, the research company Molior, recorded the completion of just over 5,300 private rental units and a further 8,900 under construction in 2015.

The private rented sector now accounts for 15 per cent of all private housebuilding in London, according to the report and around a quarter of the new units are believed to be directly backed by institutional investment.

For example, Legal and General Capital in partnership with Dutch pension fund manager PGGM, have recently launched a £600 million build to rent fund seeking to provide over 3,000 homes across the UK.

So you could still benefit if you have a pension invested with one of these firms.

But is this bad news for smaller developers and those landlords who may want to buy up housing stock.

Andrew Boulton, author of the DAC Beachcroft report told EYE it could potentially shut out the smaller landlords particularly when it come to the extra stamp duty charges.

He said: “Smaller investors have tighter margins.

“The institutional investors are looking at a bigger investment to start with and they have more firepower.”

As well as the firepower they also have more purchasing power, which is a worry particularly when the National Landlords Association says members are looking to sell 500,000 properties. She said: “It is new investors buying these units though, not first-time buyers (as intended by the government.”

But ARLA managing director David Cox insists there is room for everyone and doesn’t seem worried, he explains: “I don’t see institutional as a threat. There is a big shortage of housing stock. Even if institutional landlords build 100,000 a year extra, we would still be 150,000 short.”

Credit: http://www.propertyindustryeye.com/is-the-government-killing-off-buy-to-let/

Most landlords considering hiking rent after tax ‘assaults’ on sector

APRIL 15, 2016

According to a survey by the Residential Landlords Association (RLA), 84% of landlords are likely to consider increasing rents following the Chancellor’s recent tax assault on the buy-to-let sector.

The survey also found that 78% of landlords felt that the changes would discourage them from investing in more properties to rent with half considering getting rid of properties.

The RLA says this is in the face of rising demand for rented housing with Savills predicting that 1m new homes to rent will be needed by 2021.

The RLA said that whilst fewer buy-to-lets being bought might meet the Chancellor’s desire to free up some properties for home owners, for the increasing number of people who cannot afford to buy or who prefer not to, the tax changes will make it more difficult and more expensive for them to access housing.

The RLA claimed that in forcing rents up the Government is hitting those it is keen to support into home ownership through making it more difficult for them to save for the deposit they need.

Steve Povall , Managing Director of Residential Estates said “all the new tax policies will have secondary effects on tenants as more than four in five will face rent increases and furthermore, half of landlords may be selling their currently rented-out property, which might lead to tenants being given notice to leave their properties.”

It’s all set to go very quiet on the sales front, says RICS

APRIL 15, 2016

House prices are set for a slowdown following the buy-to-let buying rush as the RICS reports that uncertainty will be fuelled by Stamp Duty changes, a weaker pound, Brexit and devolved elections.

The RICS says that only 17% of its members expect to see house prices rise over the next three months, compared with 44% in December.

However, the RICS still expects house prices to rise by over 4% per year for the next five years across England and Wales.

Weather you like it or not, most property damage is elementary

APRIL 15, 2016

Storm damage, burst pipes and damage from break-ins are the top reasons why landlords make insurance claims – with conservatories looking especially vulnerable.

Analysis of over 100,000 policies showed that storm damage costs an average of £1,500 to repair.

Next was damage to ceilings, walls and carpets caused by burst pipe with an average £4,500 repair bill. The third most common reason for making a claim was property damage caused by burglars with an average claim of £2,300.

Vandalism was in fourth place, followed by accidental damage to the building, excessive rain, collapsed drains and vehicles crashing into the property (average claim £4,600).

The single most expensive cause for claims relate to damage caused by electrical fire, averaging £25,000 to put right.

The figures are from Simple Landlords Insurance, which says that one claim by a landlord last year was to replace a conservatory roof where every single pane was punctured by hailstones last July.

In another claim last year, a landlord claimed over £11,000 to repair a conservatory after two panels were ripped off in high winds, ruining solid oak floors.

Top 10 reasons that landlords make an insurance claim

The damage Average repair cost

1 Storm damage £1,500

2 Burst pipe £4,500

3 Damage from break ins £2,300

4 Vandalism £1,900

5 Accidental damage to the building £2,200

6 Excessive rain £2,100

7 Collapsed drains £2,600

8 Vehicle crashing into the property £4,600

9 Electrical fire £25,000

10 Leak from the Property £2,000

Average

£4,600

The report makes interesting reading, warning that many landlords do not include accidental damage in their cover.

Credit: http://www.propertyindustryeye.com/26866-2/

Landlords to weigh up costs of changing to company status

APRIL 14, 2016

Landlords will need to determine whether changing to a company status to avoid the changes in the buy to let sector is worth it.

Speaking at ARLA’s 2016 conference, David Cox said: “Landlords will make losses. They have to do the maths to see if incorporating would make them better off.”

He said there is still an opportunity for lettings agents, especially with so much regulation and legislative changes.

Cox predicted a lot of properties will come onto the market in the second quarter of this year as a result of the Stamp Duty changes but suggested the market could get quieter until early next year as landlords regain losses from the extra tax paid.