By Stephen Maunder

New data shows landlords are increasingly reluctant to buy property in recent months, following a raft of new regulations – but are you up-to-date with your obligations?

Statistics from the Council of Mortgage Lenders (CML) show property transactions are slowing and buy-to-let lending has dropped by as much as 16% month on month. The slump in activity comes after significant changes were introduced over the last couple of years that have changed the way landlords operate. While it’s an uncertain time, property can still be a good investment in some instances – but you’ll need to get your head around the various new regulations and legal requirements. Here are a dozen things you need to be aware of as a landlord in today’s market.

1. Mortgage interest tax relief changes

Before April this year, landlords could deduct their mortgage interest costs from their income when calculating their tax bill. Now though, you can only offset 75% of your mortgage interest, and this figure is being gradually reduced to zero by 2020. Instead, landlords can claim a tax credit worth 20% of their mortgage interest – a change which will hit high-earning landlords hardest.

2. The end of the wear and tear allowance

Until 2016, landlords letting furnished homes could deduct 10% of the annual rent from their profits before they paid tax to account for ‘wear and tear’. This ‘wear and tear’ allowance was permitted regardless of whether they had actually spent any money on furnishings that tax year. According to the new taxation rules, landlords can only deduct the cost of replacing or repairing household items like-for-like.

3. Right to Rent checks

Under ‘Right to Rent’ legislation which came in to force in February 2016, landlords have to ensure their tenants have the legal right to live in the UK. This involves checking passport or visa paperwork before the lease is signed. If you use a letting agent to manage your property, they’ll usually deal with this on your behalf, but the consequences are severe – if you’re found to be letting to a tenant who is living in the UK illegally, you could face a fine of up to £3,000.

4. Landlord licensing

Some councils around the UK have introduced their own landlord licensing schemes. Councils can decide whether to adopt ‘selective licensing’ in their area. Those that have adopted licensing schemes require landlords to agree to property management rules, with the threat of significant fines if they fail to do so. 5. The letting fees ban As part of the Autumn Statement in 2016, the government announced plans to ban letting agent fees for tenants in England. Currently, tenants usually foot the bill for tenancy agreements, referencing and credit checks, but these costs will now be passed on to landlords. If the government proceeds with the ban, it is unlikely to come into effect until 2018.

5. The letting fees ban

As part of the Autumn Statement in 2016, the government announced plans to ban letting agent fees for tenants in England. Currently, tenants usually foot the bill for tenancy agreements, referencing and credit checks, but these costs will now be passed on to landlords. If the government proceeds with the ban, it is unlikely to come into effect until 2018.

6. Energy efficiency regulations

From 1 April next year, any properties rented out privately must have a minimum emergency performance rating of E or an Energy Performance Certificate (EPC). The rules will apply to new tenancies from April 2018 and for existing tenancies from April 2020. Fines of up to £4,000 can be imposed for landlords who breach the rules.

7. The Housing White Paper

In February, the government released a White Paper on ‘fixing Britain’s broken housing market’. Primarily, the paper focuses on freeing up land for housebuilding, encouraging construction of starter homes and addressing unfair rental practices. With the uncertainty caused by the recent general election, however, it remains to be seen which – if any – policies will be implemented.

8. A property market slowdown

Landlords need to be aware of market pressures caused by external events. We found that last year’s Brexit vote had little effect on house prices, and any talk of a house price crash has so far been unfounded. That said, transaction levels have been slowing in recent months – if value growth follows suit, property investors may see weaker returns.

9. Section 21 eviction process

In 2015, new regulations were brought in surrounding the Section 21 eviction process, requiring landlords to follow the rules around evictions more closely. While these requirements have existed for some time, some self-managing landlords may not be aware of the complexity of the process.

10. Tenancy deposit protection

Compulsory tenancy deposit schemes have been around for a decade, but there are signs that the deposit system might be beginning to change. From deposit free renting in the build-to-rent sector to apps offering tenancy insurance, a number of schemes are being touted as a new alternative – so it’s important for landlords to keep abreast of the latest trends and technology.

11. Stricter buy-to-let lending regulations

Last year, the Bank of England announced it would introduce tougher new requirements for buy-to-let borrowers. The new rules require landlords to bring in higher levels of rent relative to their mortgage costs. In addition, landlords with four or more properties will face additional stress testing, and be required to provide more information about their income and debts.

12. The continuing impact of stamp duty changes

The stamp duty surcharge – taking effect in April 2016 – is arguably the most divisive of the measures introduced to cool the private rental sector. The 3% surcharge means, for example, that a landlord buying a £200,000 home would now pay £7,500 in stamp duty, compared to just £1,500 before the changes. Landlords need to factor in these additional costs before making a new purchase.

SNJ Reporter   17th June

AN INTERNATIONAL estate agency has warned that house prices are set to grow by just one per cent this year.

A report by Knight Frank describes how house price growth has been slowing since the summer of 2014 and predicts that it will not pick up until 2018.

It expects prices to rise UK-wide by 2.5 per cent in 2018 and to have risen by 14.2 per cent by 2022.

The report highlights key factors behind the slowdown in housing market activity, including lack of available housing stocks for potential buyers. It also warns of challenges facing the housing market including the uncertainty surrounding Brexit and the potential for a slowdown in economic activity.

Meanwhile it also warns that affordability is becoming a challenge in many areas of the country and could lead to a slowdown in the market: “The shortage of housing stock available to buy coupled with ultra-low mortgage rates have put a floor under pricing across the UK, but the question of affordability is becoming more pressing in some areas.”

The report predicts that the slowdown in house price growth in London will continue for the rest of the year, however it expects prices in the capital to rise by two per cent next year, by 2.5 per cent in 2019, three per cent in 2020 and by 5.5 per cent in 2021.

31 MAY, 2017 by Paulina Carl

Mortgage broker Private Finance named the country’s 20 most desirable buy-to-let hotspots, leaving London out of the top three entirely.

The study named Liverpool as the best location for buy-to-let investment, followed by Nottingham and Coventry.

Liverpool offers rental yields of 8% after mortgage costs have been taken into account, as the area benefits from a low average house price (only £122,283) as well as strong rents (average of £1,021).

The Midlands are home to the list’s number two and three. Nottingham offers average rental returns of 5.6% and buy-to-let investors looking at Coventry can gain back 5.4%.

Greater Manchester, with a return rate of 4.3% and Portsmouth with 4.2% also made it into the top five.

Shaun Church, director of Private Finance, said:

“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.”

Here’s a quick overview of the best buy-to-let hotspots:

The FINANCIAL — New research released on May 24, the Barclays UK Property Predictor, provides a three-to-five year forecast of investment hotspots on the residential property market, revealing the areas across the UK where house prices and rental incomes are expected to rise.

The research uses factors including rental trends, employment levels and commuter behaviour as well as current house prices to create an index of property hotspots. The research also surveyed high net worth investors from across the UK, to reveal where and why they plan to purchase property in the future.

According to the research, and despite an uncertain economic and political climate, the UK property market remains buoyant with prices in areas across the UK set to rise by an average of 6.1% by 2021, bringing the average value of a UK property to almost £300,000.

Northern property hotspots emerge

Over the next five years, high employment rates, growth in private housing market levels and an increase in rates of average earnings will contribute to rising property prices across the UK. The South is expected to see the largest annual property price increase over this period, however property investors are looking north of the property hubs of London and the South East for good value for money and income stability. Over a third (38%) of high net worth investors (HNWI) looking to purchase property in northern regions think that property prices are going to rise there, with over a quarter (27%) who plan to purchase citing strong rental income as a reason to invest there.

The Midlands has the fourth highest expected annual price increase in the UK at 1.22%, behind London, the East of England and the South East. Warwick in the West Midlands has emerged as one of the top 20 areas of highest growth, with an expected annual increase of 5.31%, driven by higher-than-average earning rates and the highest level of business start-up rates in the region. Scotland has the fifth highest expected annual price increase at 1.15%. East Renfrewshire makes the top 20 areas of highest growth with an expected annual increase of 4.37%, with its large proportion of highly qualified residents expected to drive up prices.

Millennials reap the rewards of property investment

The research reveals that younger HNWIs will be a key driver in the growth of the UK property market over the next three-to-five years. The millennial investors surveyed have 41% of their investment portfolio tied up in property, compared to 23% amongst those aged over 55.  They are also more bullish in their approach to investing in bricks and mortar with 75% intending to increase the percentage of their portfolio in property over the next three-to-five years, compared to just 10% of over 55s.

Millennial investors are also more likely to own more than one property, compared to over 55s, and are reaping the financial rewards of multiple property ownership with almost half (48%) of their annual income generated from rent. Those under 55 (18-54 year olds) who are planning to buy new property are more likely to take advantage of a buy-to-let mortgage product to fund future property purchases, 23% compared to just 7% of over 55s.

Buy-to-let investment on the rise

Investors are leaning on buy-to-let to fuel their property portfolios, despite the recent changes to buy-to-let tax. Higher value investors are seeking to maximise returns through property purchases, with nearly two-thirds (65%) of those looking to buy doing so for rental income. Sixty-two per cent of those with rental properties expect the proportion of the income they receive from rent to increase over the next three-to-five years, with half predicting it will rise by up to 20%.

Dena Brumpton, CEO, Wealth & Investments, Barclays, said:

“It’s encouraging to see that property is still viewed as an important part of the investment portfolio with high net worth investors typically owning three properties and over a quarter planning to buy property because they believe that it offers long-term investment security.

“There is also increasing confidence among property investors, as many are taking a long-term view when it comes to putting money into property. It’s also interesting to see from our research how investment prospects are emerging outside of the established property heartland of London and the South of England, with economic growth and employment opportunity fuelling growth in hotspots across the UK.

“We are here to support our clients at various stages of their investment journey and we can help by offering a range of innovative and personalised mortgage solutions to meet their individual needs, whether they are a seasoned investor or a millennial looking to increase their income.”

The average overall UK price increase over the 2017-2021 period is expected to be 1.31% per annum. The overall increase expected over the 2017-2021 period is expected to be 6.1%.

Current UK average house price is £274,000 (Source: Barclays Local Insights). Based on an expected increase of 6.1%, by 2021 the average value of a UK house will be nearly £300k (£290, 714).

By Warren Lewis 22nd May 2017

The latest research from Halifax has revealed that flat prices have grown by 53% in the last seven years compared with growth of 39% for all property types – typically rising an average of £1,008 per month from £159,292 in Q4 2009 to £243,936 in Q4 2016.

According to the data, the 53% increase in the average price of a flat is significantly greater than the 39% rise for all property types over the same period. Terraced homes have recorded the next largest increase in average prices with a rise of 43% over the past seven years, and detached homes the smallest rise (19%).

A considerable proportion of the national rise in flat prices since 2009 is due to the rapid increase in flat prices in London (65%), where flats represent just under half (48%) of all sales compared with the UK average (excluding London) of 11%. The average price of a flat in London is £398,038, meaning that buyers are on average paying £230,894 more than flat buyers in the rest of the UK (£167,144).

If London performance is excluded, price growth is greatest for terraced homes (41%), followed by flats (35%).

Regionally, flats have been the best performing property type since 2009 in five out of the 11 regions: North (31%), North West (37%), Yorkshire and the Humber (30%), South West (33%) and Scotland (21%). Terraced homes are the best performing property type in London (73%), East Anglia (46%) and East Midlands (35%). Semi-detached homes have increased the most in value in the East Midlands (35%), West Midlands (30%) and Wales (20%) and bungalows are the best performing property type in the South East (55%). (Table 3)

Six in 10 home sales are either terraced or semi-detached properties.

Terraced homes (30%) and semi-detached (30%) continue to be the most popular property types, representing 60% combined of all home sales in 2016. There have been some minor changes to this composition in the past seven years with terraced homes falling (32% to 30%) and semi-detached homes increasing slightly (29% to 30%).

Whilst terraced properties remain the most popular property type with first time buyers, the proportion of sales has fallen over the past seven years from 42% to 37%. In contrast, semi-detached properties have risen in popularity with first time buyers, accounting for 30% of purchases in 2016, up from 28% in 2009.

Terraced homes are the most affordable for buyers.

At an average price of £215,690, terraced homes are the most affordable property type in the UK, followed by semi-detached (£225,070) and then flats (£243,936). Outside London, however, flats are the most affordable (£167,144) followed by terraced (£185,116).

A typical terraced home costs less than £125,000 – below the lowest stamp duty threshold – in the North (£121,363) and Wales (£123,095) and less than £150,000 in all other regions outside southern England.

Flats cost less than £125,000, on average, in the North (£116,855), Yorkshire and the Humber (£124,734) and East Midlands (£123,561). Whilst average flat prices are lower than any other property type in London, at £398,038 they are considerably higher than flat prices anywhere else in the UK.

Martin Ellis, Halifax housing economist, said: “Nationally, terraced and semi-detached homes are the most affordable and popular homes with buyers accounting for 60% of sales during 2016. However average price growth for flats, helped by the London market, have outperformed all other property types since 2009.

There has been an increasing trend for first time buyers to choose semi-detached homes over the past seven years, whilst terraced homes have shown a decline in popularity. The rise in the age of a typical first time buyer may partly account for this change in preference towards the family-friendly semi.”

Manchester witnesses resi construction boom

19 May 2017 | By Helen Crane

Residential units under construction in Manchester city centre have increased by 400% over the past two years, according to new research seen by Property Week.

The number of units being built increased from 986 across 12 sites at the end of March 2015 to 4,954 across 28 sites at the end of March this year.

The figures were collected by Manchester Place, the inward investment agency set up by Manchester City Council and the government’s Homes and Communities Agency.

Paul Beardmore, the chief executive of Manchester Place, said private rental sector apartments dominated, but flats for sale were in the mix too.

Beardmore said he was confident that the development boom would not result in an oversupply of housing. The figures represented a return to the city’s 2006 peak, he said, but occupier and investor appetite would be even higher now due to the “pent-up demand” caused by low levels of construction in recent years.

“The work we have done on population growth in the city shows that the demand is absolutely there,” Beardmore said. “All of our agents are giving us the same message: they can’t get their hands on new apartments quickly enough.” Investors from the Far East were “still very active” in the city centre market, he added.

Population growth

The city centre population stands at just under 54,000 and is expected to grow on average by 5.5% a year to exceed 80,000 by 2024. The current void rate is 0.4%.

Outside the city centre it was a different story. Units on site slipped from 2,131 at the end of March 2015 to 2,079 at the end of March 2017. However, completions rose by 65% from 667 in the year to the end of March 2015 to 1,100 over the past year, in contrast to the city centre where they decreased 19% to 554.

Next year, though, the spike in construction will begin to translate into city centre completions, which Manchester Place predicts will rocket by more than 220% by the end of March 2018.

By Will Leyland, 16 May 2017

The one year anniversary of the referendum on membership of the European Union is fast approaching. Following on from a 2012 promise by then-Prime Minister David Cameron, the referendum was to be held on 23rd June 2016 and an easy victory was expected for ‘Remain’.

As the vote approached it became clearer and clearer that the voting intention was going to be much closer than anybody had expected with ‘Leave’ polling better with every passing week. As the Leave vote started to become a reality and it hit home that the Downing Street press machine was failing to cut through to voters, the Government team decided to bring out the big guns and started to start a campaign warning of doom the likes of which would be even worse than 2008. Almost a year later we can see that the truth will broadly lie somewhere in the middle.

The Economy

In purely economic terms, thinking about Gross Domestic Product (GDP) the picture so far has been surprisingly upbeat. Bearing in mind that many were predicting immediate and noticeable drop offs for many headline economic indicators, we can say with a level of confidence that the UK has outperformed most of the predictions pre- and immediately post-referendum.

According to the Office for National Statistics (ONS): “The fall in the value of sterling has so far had little effect on prices. Prices of material and fuel purchased by producers – “input prices” – increased in July and August at about the same rate as in the previous two months; 12-month growth rates have accelerated but mainly as last year’s sharp declines fall out of the calculation. There is also little sign yet of an effect on factory gate or consumer prices. In addition, house prices continued to grow strongly in July, albeit at a slightly slower annual rate due to last year’s price changes, with annual growth falling from 9.7% in June to 8.3% in July.”

GDP growth since the referendum has varied anywhere between 0.6% in July 2016 to 0.7% In January 2017, whilst growth for the next quarter has been predicted at 0.3%. Meanwhile, unemployment sits at an almost historically low 4.7% whilst inflation is showing at a slightly higher than desirable 2.7%.

All in all, economic performance has been better than predicted and job growth and economic output as well as overall national confidence remains high. Overseas investors are showing no signs of pulling their money from the UK and it’s safe to say that UK property remains a mainstay of most foreign investment portfolios.

Property

UK property has been performing very well indeed. For instance, residential properties have been seeing price rises on average of over 8% annually. Manchester in particular has seen its property market outperforming the whole of the UK. Research compiled by Hometrack shows that the average house price in Manchester is now £153,600 with the surge in growth at 8.8% compared to a year earlier. It also said that in Manchester, Newcastle and Birmingham, annual house price growth had lifted to levels not seen in these cities since 2005.

It’s not just residential property seeing a surge of interest, with off-plan properties and new constructions becoming increasingly popular since the referendum as well. One of the country’s largest house builders, Persimmon, has reported ‘excellent’ trading for the year to date, with its new builds around regional communities such as around York, Leeds and Sheffield attracting a lot of interest in comparison to last year. The York based company reported 6% more visitors to its show homes and development sites across the UK compared with the same stage last year. Total forward sales revenue is predicted to be £2.56bn, 11% higher than the same stage last year. In terms of actual sales, the group said it had sold 8,928 homes to private owners with an average selling price of £229,500, an increase of 4.1% from the last 12 months.

New build apartment developments have seen popularity soaring too, with overseas investors now piling in to the UK property market as the good value Sterling exchange tempts them into one of Europe’s most reliable performers.

Negotiations

It looks set to be a rocky road, with Prime Minister Theresa May and European negotiators trading angry rhetoric with the lead up to the general election in June. May has accused the EU of trying to interfere in the general election by releasing reports that her dinner with Jean-Claude Juncker, one of the heads of the EU, had been very frosty with Juncker accusing May of being ‘from another galaxy’.

So far there has been quite a lot of wrangling surrounding the so called ‘divorce bill’ that the UK will be expected to pay to separate itself from the Union. Some in the EU have been reported as demanding 100 billion Euros, whilst the UK government insists it won’t pay that much.

There is expected to be fierce negotiating regarding the rights of UK and EU nationals in each other’s territory as each side seeks to retain the best possible rights for their citizens.

So far, it must be said, it has gone exactly as expected with both sides trading strong rhetoric about getting the best deal but it’s still very early days and little should be read into the posturing until things get properly underway later this year and early next year.

Still to come

The upcoming General Election on 8^th June is likely to set the tone for EU negotiations with Theresa May insisting that a vote for her will strengthen her negotiating hand against Europe. There’s a grain of truth in it too as the EU cannot claim that May has no mandate to demand certain terms from the negotiations.

However, it should be stressed that these are uncharted waters and aside from an educated guess it’s really quite hard to say how both sides will respond.

Aside from all this though, the UK has performed strongly so far and there aren’t really any significant indicators that this is set to change. Investors who already have interests in the UK and those pondering whether to get involved should see the figures above as a strong indicator that the UK should continue as it’s started post-referendum strongly.

15 MAY, 2017 by Paulina Carl

House prices have grown more in locations close to public transport improvements, particularly trams, a new research has revealed.

The effect an improved transport network has on house prices is especially noticeable in cities like Edinburgh, Manchester,Birmingham and Nottingham. On average, house prices increased by 12% in these cities during the first two years of opening the new lines.

The research was put together by Lloyds Bank and whilst taking a closer look at London’s house prices it also focused on tram routes across Greater Manchester.

The report finds that house prices along Greater Manchester’s tram route saw an increase of 11% between 2013 and 2015, which is shortly after a big part of the network first opened. This increase is almost double the 6% rise which was recorded during the two years prior.

Birmingham is another city that saw dramatic house price changes come hand in hand with a growing tram network. Midland Metro operates between Birmingham and Wolverhampton and first opened in 1999. In the two years following its opening, house prices in areas served by the new line saw an increase of 25%, from $42,253 to £52,720.

The report also suggests that this effect continues well past the first couple of years after opening a new line. Especially in Birmingham. Average house prices along the line have grown to £130,041 in 2016, representing an increase of 208%. Birmingham as whole has only seen an increase of 175% over the same period of time.

Lloyds Bank mortgage products director, Andrew Mason, said:

“A new and modern transport system is potentially a great catalyst to urban regeneration and can be a game changer for cities investing in improved links. An excellent tram system can stimulate inward investment for the local economy, unlock previously hard to reach sites for development and make it easier for people to move around the city.”

Published: 00:00 May 17, 2017

What are specialist real estate assets?

Non-traditional property assets could be the answer for investors seeking a long-term secure income in the UAE

Despite the geopolitical uncertainty, the appetite for long-term investment has remained positive. In the UK, investors are seeking out long-term, safe investments and this in turn is driving the demand for specialist property assets. Investment in UK commercial property volumes dropped by 35 per cent last year to £46 billion (Dh217 billion), however, £10.5 billion (22.7 per cent) of investments were in specialist property — a new high.

The demand for specialist property is expected to continue going forward. Investors will be drawn to these types of assets, which offer relatively longer lease terms and index-linked rents. Income returns within the sector reached 5.7 per cent last year, exceeding the traditional commercial sectors, a characteristic which will be particularly important in ensuring specialist property’s pace as a highly sought after commodity.

According to Shaun Roy, head of specialist investment at Knight Frank who authored the Specialist Sector report 2017, “A diverse pool of major players from across the investor spectrum, have been drawn to the opportunity presented by the specialist sectors.”

The sectors are all, in their unique way, benefitting from the changes in demographics and a shift in consumer behaviour. While disruptive technologies have in some ways impacted many commercial property sectors, the business-critical nature of specialist property will ensure that the attraction is preserved.

The UK setting

The UK’s commercial property volumes decline represented the end of three consecutive years of growth. This reflected growing uncertainty surrounding the UK’s decision to exit the European Union and forced some investors to reassess the pricing of acquisition targets. However, the slowdown in the investment market during the summer months did inadvertently create a catalogue of available assets marketed at “Brexit-factored” prices. This was pivotal in delivering the strong uplift seen in the fourth quarter, which represented the fastest quarterly growth in investment volumes for three years.

The changes in the wider market last year was telling, in that a number of vendors were reluctant to deploy their income-generating specialist assets into the market. This was instrumental in preventing further transactional activity. However, four of the specialist sectors (see box) saw investment volumes equal or exceed their five- and ten-year averages, which suggest that transactional activity last year continued to outperform preceding years.

Additionally, the automotive sector recorded its highest level of investment, with £800 million transacted last year, which is up by 82 per cent on 2015. Student property recorded its second-highest level of investment with £3.1 billion transacted. When contextualised against the wider commercial property investment market, specialist property accounted for 27.5 per cent of the total last year.

Overseas investors continued to dominate, with £24 billion directly invested in UK commercial property last year, accounting for 49 per cent of all investment. The devaluation of the pound against other major currencies in the second half last year was key in providing some relief for many foreign investors who have found buying opportunities extremely limited, particularly in London, and for those who have overlooked the UK market altogether.

Going forward, the competition for yield in a low-growth and low-yielding environment is likely to propel UK property, particularly across the key regional centres, to the top of the shopping list for many investors.”