LinK-UK

EDP Property

PUBLISHED: 16:23 24 July 2017 | UPDATED: 16:23 24 July 2017

Joe Pattinson

Election manifestos for (nearly) all parties claimed that they would build more houses in the years running up to 2020. I would love to think of a politician picking up a trowel and laying a few bricks but perhaps their skills lay elsewhere.

In 2016 the top six house builders; Barratt, Persimmon, Taylor Wimpey, Bellway, Redrow and Bovis built 45% of the 140,660 new homes completed in the UK.

The late Sir Lawrie Barratt started in 1962 and floated his company on the stock exchange in 1968 and by the 1970s was building 10,000 houses a year. Steve Morgan founded Redrow in 1974, floated on the stock exchange in 1994 and by 2006 had built and sold 50,000 homes. Tony Pidgley CBE, left school at 15, sold his first company at 19 and went on to start Berkeley Homes in 1975. The company regularly builds between 3,000 and 4,000 homes a year, mostly in London. Tony Pidgley is considered to be a pioneer amongst property developers and is currently investing in modular homes, which will be essential as labour shortages grow and construction costs continue to rapidly escalate.

It may be an unpopular truth but it is visionary entrepreneurs who build houses and if we want to increase the number of new homes they will need to be encouraged. The concerns of national house builders, regional and local builders about the tortuous planning process are well known. What is perhaps not quite so well recognised is that high street banks, who not unsurprisingly, are concerned about another banking crisis and are now much more cautious in their lending to developers. This makes the sort of growth created by Sir Lawrie Barratt, Steve Morgan and Tony Pidgley more difficult to replicate. This caution is imposed by The Bank of England put this together with George Osborne’s usurious rates of Stamp Duty imposed in 2015 and this all goes to restrict housing growth as London prices are set to fall by 3% this year.

We are still 100,000 new homes a year short of what even the most conservative of commentators believe is needed to get house price inflation anywhere near under control. If all builders increased production by 10% year on year it would take until 2023 to get to 250,000 by which time the target will no doubt have moved on.

At Newbury New Homes we have come a long way in a short time and will be completing more than 139 new homes this year and expect to be doubling that over the next couple of years. We are already looking for our next sites in and around Norfolk and if you can help us to find them then please give us a call.

A trade organisation representing landlords in the UK has welcomed changes in the requirements from some small businesses and landlords below the VAT threshold to process their tax affairs digitally.

The Making Tax Digital requirements are being delayed for a year and there will be a longer lead in period with those with a turnover below the VAT threshold of £85,000 not having to switch until the system has been proven to work well.

Under the new timetable announced by Financial Secretary to the Treasury Mel Stride only those with a turnover above £85,000 will have to keep digital records from 2019 and only for VAT purposes.

Business will not be asked to keep digital records, or to update HMRC quarterly for other taxes until at least 2020 and Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes.
‘This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system,’ said Stride.

‘As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now. All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes,’ he added.

The move to digital filing was announced by the now former chancellor George Osborne in the 2015 Autumn Statement, with a view to digitising the tax system with the self-employed, small businesses and unincorporated landlords needing to keep digital records and use software to update HMRC quarterly.

But the plans have faced criticism from MPs, the Treasury Select Committee, business and professional bodies, with various bodies, such as the National Landlords Association (NLA), raising a number of concerns and reservations.

The NLA said during the consultation process that it believed that the £10,000 income threshold for unincorporated property businesses should be raised, had concerns with the workability of the software and IT systems and recommend a longer lead-in period before the scheme becomes mandatory for small businesses, the self-employed and landlords.

It also called for there to be a backup option for those landlords who genuinely could not take part, with sufficient financial and educational support needed to help landlords meet the deadline.

Stride said the changes mean that three million of the smallest businesses and landlords will be able to move to the new digital system for keeping tax records at a pace that is right for them. ‘Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms,’ he pointed out. ‘We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses,’ he added.

‘We are pleased that the government has finally listened to the concerns raised by the NLA on behalf of landlords who would have been dragged into a system of tax reporting rushed into being before they or it are ready,’ said Richard Lambert, chief executive officer of the NLA.

‘While we have always supported simplifying the tax system, we were concerned by the issues raised by the Making Tax Digital programme, and welcome the changes as they address exactly the points we’ve been raising since the initial announcement,’ he added.

The changes mean that landlords will each have a single digital account with HMRC to which they will have to submit an update of our income and business expenditure every quarter. They will have to do this online, either using their own software or using software provided by HMRC.

But it seems that many landlords are likely to be ready to go digital. A study from the Residential Landlords Association that 48% use spreadsheets for record keeping, 13% already use specialist software with just 38% using paper records.

The benefits including being able to see how much tax is owed at any point throughout the year, rather than having to wait until filing the annual end of year tax return. For landlords who are genuinely unable to submit digital updates, such as those who can’t get online or haven’t fathomed how to use new technology, HMRC has promised extra help and support.

INDEPENDENT.co.uk

Continued robust growth in large and vibrant regional cities such as Birmingham, Manchester and Leeds is behind the raised expectations

House price growth across the UK’s biggest cities is set to be stronger this year than previously predicted, according to an index.

Values across the 20 biggest cities are now expected by property analysts Hometrack to increase by 6 per cent to 7 per cent over the course of 2017, higher than its previous prediction of 4 per cent made in December 2016.

Continued robust house price growth in large and vibrant regional cities, such as Birmingham, Manchester and Leeds, despite uncertainty over Brexit, is behind the raised expectations.

While annual house price growth in London has slowed to 2.6 per cent, its lowest level in over five years, Birmingham is now the fastest-growing major city for house prices, with a 7.8 per cent annual increase.

Hometrack expects growth to continue over the remainder of 2017 as prices are rising off a lower base.

The average price of a property in Birmingham, at £154,900, is less than a third of that in London, at £492,700.

Other large regional cities outside the South of England, such as Manchester and Leeds, continue to register consistent and robust house price growth, supported by the same economic factors that are driving growth in Birmingham, Hometrack said.

Like London, Bristol, Oxford and Cambridge have all seen a marked slowdown in the rate of house price growth over the past 12 months.

Record low mortgage rates and falling unemployment are generally continuing to help support price growth, Hometrack added.

Richard Donnell, research and insight director at Hometrack, said: “Despite a material slowdown in the rate of house price growth in South Eastern England, the headline rate of city house price inflation is holding up, despite the squeeze on real incomes and uncertainty around Brexit.”

He said in London, the Brexit vote appears to have had a greater impact on buyer sentiment, and, combined with affordability issues, has led to a slowdown in the annual growth rate over the last 12 months.

He continued: “However, although house price inflation has fallen sharply in the capital, it is starting to flatten out and the rate of growth is likely to avoid year-on-year price falls in the coming months.”

Here are average house prices in the UK’s 20 major cities in June and the year-on-year change, according to Hometrack:

Aberdeen, £184,300, minus 2.7%

Belfast, £130,600, 4.3%

Birmingham, £154,900, 7.8%

Bournemouth, £280,400, 5.2%

Bristol, £270,900, 5.6%

Cambridge, £425,500, 1.9%

Cardiff, £195,800, 4%

Edinburgh, £211,100, 6.5%

Glasgow, £117,700, 3.3%

Leeds, £161,400, 5.4%

Leicester, £164,500, 5.8%

Liverpool, £118,300, 4.8%

London, £492,700, 2.6%

Manchester, £155,700, 6.4%

Newcastle, £126,600, 2.4%

Nottingham, £146,000, 6%

Oxford, £424,800, 2.1%

Portsmouth, £229,700, 5.6%

Sheffield, £133,700, 4.7%

Southampton, £228,100, 5.7%

Buy to let landlords have dismissed concerns about the impact of changes to mortgage tax relief and consider long term growth as more important, new research has found.

They believe that property is a secure, long term investment and are prioritising long term growth rather than looking for tax efficiency, according to the research from buy to let investment platform Property Partner.

Overall 57% of landlords have not changed their view of the buy to let market despite April’s cut in mortgage tax relief and last year’s stamp duty increase.

The survey also found landlords are half as likely to consider risk avoidance as a priority in property investment decisions at 7% compared with other investors at 12%. This is likely to be because they feel assured the long term trend will continue with residential property proving its stability despite political upheaval.

The research points out that since records began in 1972, there has been no five year period showing a negative total return for investment into UK residential property.

However, despite this bullishness about UK property over the medium term, Property Partner’s experts are surprised at how few investors are diversifying into property.
Only 19% of investors sees property as a good way of diversifying their assets, something analysts say is key in today’s economy.

The research also looked to the future of the traditional buy to let market and found the vast majority of potential landlords believe there are difficulties in investing in residential property.

Amid the historic barriers to entry, just 11% of would be landlords believe investing in property is easy and the majority of those, 51%, are put off by having to manage tenants.

‘This research underscores the confidence being shown in the buy to let sector across the UK. It really highlights that, despite efforts to increase the tax take from landlords, investors continue to be bullish and see property as a secure, long term investment,’ said Dan Gandesha, chief executive officer of Property Partner.

‘With no end in sight to the acute shortage in housing stock, there is an inevitability to the continuing upward pressure on prices. In the long term, prices are expected to rise faster than the rate of inflation, economic growth and wages, despite recent political uncertainty,’ he added.

IFA Magazine

Matthew Sarson, Researcher & Market Analyst at Emerging Property, provides an expert’s eye on the UK student property sector:

Once a rather niche property asset predominantly available to investment funds, the UK student property sector has gone from strength to strength in recent years.

Investment levels have been on a steady upward trend since 2010, with record levels in 2015 – the £6bn invested was twice as much as the previous high in 2014 and saw the UK overtake the US for the first time as the world’s largest student property sector.

James Harrington, business development manager at Emerging Property – a specialist UK property investment consultancy with a focus on purpose built student accommodation – talked us through some of the key reasons behind the sector’s emergence as a World Class Asset.

Consistently increasing student numbers

Of course, the major catalyst of high yields in any property sector is demand, and purpose built student accommodation is certainly not short of that.

The UK student population has increased almost every year since the turn of the century – part of a decades-long trend.

This has been part-catalysed by the increase in international student mobility, with 25% of the UK’s student population coming from overseas – 80% of these from outside the EU.

The removal of previous intake caps by the UK government in 2015 opened up the sector for further growth, and 2016 was a third consecutive record year in terms of total student numbers.

As for any Brexit fears, EU students too hit a record level in 2016, with any future potential impact being seriously restricted by the fact that they make up just 5% of the total student body.

Accommodation in critical undersupply

While the number of students has increased, the number of rooms have not – or at least not at anywhere near the same pace.

The UK still currently has an average 74% shortfall of purpose built student accommodation in university towns and cities across the country, with the vast majority having to rely on the severely stretched private residential sector.

This undersupply has huge regional variations, with some cities only able to provide purpose built accommodation to less than 20% of their students. Others, on the other hand – predominantly large and fashionable cities, such as Liverpool and Manchester – are closer to the 50% mark and thus considered saturated.

The approach we have long adopted of targeting prime regional locations, such as Stoke, Preston and Leicester, is thus being increasingly adopted as the accepted sector strategy – maximising both sustained percentage yields and capital growth.

The residential housing crisis

According to RICS, 1.8 million new homes are needed in the UK by 2025 – this figure shoots up to 25 million when we look ahead to the next quarter of a century.

This shortage had led to escalating rents and has meant that many first-time buyers are priced out of the housing market – and with short supply comes premium prices.

Unusually, and rather uniquely, the purpose built student accommodation sector actually benefits from this shortage – with an estimated 65% of the UK’s students living in residential housing, local councils see the funnelling of them into purpose built accommodation as a simple way to address housing issues.

On top of freeing up more homes for local families, this process also provides students with a far better standard of housing – purpose built student properties are developed in prime close-to-campus spots, come with a range of convenient onsite facilities and benefit from 24/7 onsite management.

Local councils also benefit financially from this process, through an increase in the number of properties liable for council tax – from which students are exempt.

With all stakeholders benefiting from the development of purpose built student accommodation, especially in critically undersupplied towns and cities, demand is high and sustained.

The end of buy-to-let property investing

Buy-to-let landlords, on the other hand, are on the wrong side of undersupply issue. Previously a lucrative property investment approach, new legislation is increasingly making decent yields hard to come by.

Indeed, we have become increasingly aware of a shift in landlords from buy-to-let towards our UK student property investments.

The abolition of tax relief and automatic wear and tear allowances, changes to Capital Gains Tax and increased Stamp Duty have all had a major impact on potential profits.

To put this into perspective, in numerous scenarios, investor profits will be down by as much as 400% – making mortgage-leveraged uneconomical (especially for higher rate taxpayers).

The simple fact is that, with the amount of time and effort required to manage a profitable buy-to-let property, the increasingly compressed yields are simply no longer worth it.

The effortless nature of the investment

Anyone who has ever been a landlord will soon testify to the fact that buy-to-let property investment soon becomes a part time job – with extremely unsocial and unpredictable hours.

On top of that, there is the constant stress of unforeseen costs and costly void periods. Anything from a broken boiler to a leaking tap can soon see several months’ profit wiped out.

Purpose built student accommodation, on the other hand, is fully managed by professional onsite teams – in the case of our properties, this is at no extra cost to the individual investors.

This is enabled by beneficial economies of scale, with the cost of the management split between 100+ unit owners. The same is true when it comes to replacement furniture, fixtures and fittings – with bulk buying reducing costs.

Not only is this management approach cheaper, it is also far more effective. Having a team onsite 24/7 enables constant preventative and reactive maintenance, while tenants can be monitored and any bad behaviour halted efficiently.

Liverpool has taken the crown as the UK’s top spot for buy-to-let rental yield.

According to mortgage broker Private Finance, the city offers a rental yield of 8% for landlords after mortgage costs have been deducted.

Its closest competitors were Nottingham at 5.6%, Coventry at 5.4% and Greater Manchester at 4.3%.

According to the company the average house price in the city is £122,283 and average rent is £1,021 a month.

It said the areas with the highest yields tend to be those with the lowest house prices, with six out of 10 of the cities with the highest rental yields also have some of the lowest house prices in the country.

Cities with a strong student let market and coastal towns that benefit from holiday rentals also dominate the list.

Shaun Church, director of Private Finance, says: “It’s not only the residential property market that’s all about location, location, location.

“Many landlords will treat property as a long-term investment, looking for reward in the form of capital gain. Succeeding in making a long-term profit depends on buying an affordable property and being confident its value will appreciate at a higher rate than mortgage borrowing.

“Investors should look for areas with strong rental demand. Larger cities and university towns generally have better performing rental markets: this will help to avoid lengthy void periods that can damage landlords’ profitability.”

Top 10 property hotspots according to the report

1. Liverpool
2. Nottingham
3. Coventry
4. Greater Manchester
5. Portsmouth
6. Cardiff
7. Blackpool
8. Lincoln
9. Bournemouth
10. Southampton

Whether you’re a first-time property buyer or you’re looking to expand on your property portfolio within the rental market, it’s important to go into every investment venture with the right information so that you can avoid any common pitfalls (and, more importantly, maximise your ROI).

From assessing your finances to embarking on renovations and choosing the right location, we’ve got 5 essential tips for property investment that are sure to stand you in good stead.

Assess your finances

With any property investment, it’s crucial to assess your finances before you take the plunge, as there are a range of associated expenses – so start by setting a realistic budget.

On the whole, most property investors will look to secure a mortgage – with interest rates and lending terms varying, depending on your personal circumstances and the type of investment. Don’t forget to factor in other crucial costs, such as stamp duty rates (which are even greater with buy-to-let properties), legal fees, surveyor and estate agent fees and land tax.

There will, of course, be other financial considerations once the purchase has gone through, including house and landlord insurance, utility bills, general maintenance and repair costs – as well as any renovation costs and marketing fees, if you intend to rent out the property.

Renovate before you sell

If you’re planning on making a profit through selling your property, it could be worth investing in property renovations in an aim to increase its value and, as a result, generate a greater return on your investment.

Ideally, renovation costs should be as low as possible, so that you can avoid eating into your profits – but larger renovation projects, such as kitchen refits, loft or garage conversions and extensions, are known to boost a property’s value considerably. Of course, minor renovations can also offer an effective solution, as well as a more affordable alternative. Redecorating, fitting the bathroom with a new suite or renovating the exterior to give it more kerb appeal can all work wonders when it comes to making a powerful and lasting impression during viewings.

If your investment is tied up in the property itself, options for raising additional finance are out there, including loans. There are even loans for people with bad credit, which offer a cash injection that will allow you to reap the rewards of an up-to-date home when your property goes onto the market.

Find the right location

To maximise your return on investment, it’s vital to research locations – as this factor plays a huge part in the value of a property – and making the right decision could prove extremely lucrative for you.

Firstly, set yourself a budget so you know which areas you can afford, before shortlisting preferred locations. Focus on the infrastructure and transport links – as these factors have the potential to add real value to a property – but also look for areas undergoing redevelopment, as this can be a sign of up-and-coming neighbourhoods with the potential for greater profits. It’s also vital to understand your target demographic when it comes to prospective buyers or tenants; look at areas that satisfy their checklist in terms of providing convenient access to local amenities, services and attractions – as well as reputable schools, public transport and a vibrant social scene.

If you’re struggling to reconcile your budget with your preferred area, don’t be afraid to explore nearby locations, as these may improve over time while still holding plenty of appeal for your target demographic.

Know your competition

As well as researching locations, researching your competitors is also recommended. Whether you’re renting the property out or looking to sell it on, gaining a deep understanding of the local property market – including prices, lead times on sales and tenants, and what your competitors are doing to get ahead – will prove invaluable in your mission to get an edge on the competition.

Understand your responsibilities

If you’re planning on investing in a rental property, you’ll need to consider not only the associated costs, but also how involved you’d like to be as a landlord. The easy option is to use a letting agent who’ll find tenants, carry out property checks and manage general maintenance – but this service comes at a price.

Alternatively, you can take this responsibility on yourself – but you’ll need to make sure you’re prepared to get stuck in and fix problems such as repairs and maintenance yourself (or, at least, find someone who can do the job). Knowing your responsibilities as a landlord and either taking these on or outsourcing them as needed will be absolutely crucial – and it all starts with deciding what level of involvement will work best for you.

With these essential tips, you can go into your property investment armed with the information you need to enjoy gratifying returns.

By PAUL THOMAS FOR THE DAILY MAIL

PUBLISHED: 22:01 BST, 27 June 2017

Landlords and letting agents are to be banned from charging tenants more than one month’s rent as a deposit.

The move was announced in the Queen’s Speech last week as part of government plans to make the home rental market more affordable and competitive.

Letting agents will also be banned from charging rip-off fees for administration costs and reference checks.

And there are plans to introduce a cap of one week’s rent on deposits, which some firms demand to reserve a property.

The only other fees letting agents should be allowed to charge are for late payment of rent, ministers say.

However, letting agents say the proposals will cost landlords about £300million a year and push up rents by more than £100 a year per tenant.

Rents are already at record highs, averaging £889 a month, according to buy-to-let lender Kent Reliance.

At the same time, the number of households in privately rented housing is rocketing every year. There are now 5.5 million people renting, up 121,000 on last year.

David Cox, of the Association of Residential Letting Agents, says: ‘The ban [on lettings fees] contradicts the Government’s stated aim to encourage longer-term tenancies, as tenants who stay in their homes for the long term will end up shouldering the costs of those who move more frequently.’

22 JUNE 2017 • 10:45AM

Get connected: if a landlord is unhappy with the service, the first step is to speak directly to the agent CREDIT: SHUTTERSTOCK

Lack of communication ranks high among the complaints landlords have about their letting agents.

As one London lettings agent puts it, there are three elements that make the lettings business “a toxic mix”. There is the landlord, who wants the highest rent and lowest spend on repairs and maintenance. There’s the tenant, who wants the highest quality for the lowest price. And there’s the property, which is prone to have leaks and other problems.

“That is why it’s vital to have open communication and a good lettings agent. The main issue I hear from landlords is lack of communication from their agent,” says Mark von Grundherr, lettings director at Benham & Reeves.

“Agents are all over the landlord when agreeing the let, but after that – and if things go wrong in the property – many agents will back off and try to keep out of the loop.”

The Property Ombudsman, a government-approved organisation that protects homeowners, landlords and tenants, sees around 1,000 complaints a year from landlords about letting agents. Lack of communication ranks high among the reasons.

“Landlords often feel the agent fails to keep them informed of issues or doesn’t carefully explain their fees,” says ombudsman Katrine Sporle. “Management issues are another top cause for complaint – failing to conduct quarterly inspections or deal with repairs needed at the property. Referencing is another. Landlords sometimes feel the agent hasn’t informed them of issues disclosed during the referencing process,” says Ms Sporle.

Landlords often feel the agent fails to keep them informed of issues or

doesn’t explain their fees

Katrine Sporle, ombudsman

If a landlord is unhappy with the service from their letting agent, the first step is to speak directly to the agent. “A poor agent can cause long rent voids or poor-quality tenants, which can be very costly to a landlord,” says Louis Assheton, property consultant at The Red Property Partnership.

“We have seen cases where agents take unauthorised actions due to the landlord being out of the country. This can lead to damage, lack of rent and the eventual need to get the authorities involved in order to evict unauthorised tenants.”

Landlords should read and understand anything they sign, “to avoid surprises down the line, particularly with landlord fees and what the landlord is expected to have organised prior to a tenancy starting”, says Lucy Morton, head of residential agency at JLL. “Most problems we see stem from the landlord’s lack of understanding of the lettings process. They are not always aware of current legislation that ensures they are fully compliant.”

If an attempt to resolve matters directly with the agent gets nowhere, the landlord can ask the Property Ombudsman to assist, provided the letting agent is a member, as 85pc of agents are.

“As a genuine alternative to the small claims courts, we offer free, fair and impartial redress to consumers – landlords, tenants, buyers or sellers – who have been unable to resolve a dispute with their agent. A member agent can be held to account for their actions thanks to the scheme’s codes of practice,” says Ms Sporle.

There is one further action that disgruntled landlords can take: find another letting agent. “It’s the biggest power a landlord has, to dismiss the agency and instruct another in their place,” says Lisa Simon, head of lettings at Carter Jonas. “The terms of business they sign should clarify how they can serve notice, which is typically three months if the property is managed.”

Disputes aside, for landlords who have full-time jobs and little time to keep on top of new legislation and maintenance issues, having someone else to manage the property is undoubtedly the easiest solution.

Some landlords make sure their lettings agent earns their crust too, such as one based in China who was told the tenants in his London property had reported mice. His reply to his agent? “Tell them to get a cat.”