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Brexit uncertainty creates opportunities for holiday-let landlords

Brexit uncertainty could create opportunities for UK landlords in the holiday lets sector as fewer Brits vacation abroad, a lender claims.

Andrew Turner, of specialist lender Commercial Trust, says “possible Brexit scenarios” could mean many people have less money to travel abroad and choose to holiday closer to home.

At the same time, if it becomes more laborious and possibly costs more to travel to Europe after Brexit, this too could have an impact on holiday destinations,” he said.

The upshot is that landlords who use their rental homes as holiday lets, could potentially do very well out of Brexit, as a result of growing demand.

Furnished Holiday Lets are viewed as businesses by HM Revenue & Customs and consequently, the tax treatment is different to traditional buy-to-let income.

FHLs have not been damaged by recent changes to buy to let mortgage interest tax relief, meaning an FHL landlord can currently still claim 100 per cent of the interest paid on their mortgage.

Turner says income from FHLs may be invested into a pension, where it may benefit from tax relief under present law.

Landlords of FHLs are also able to claim capital allowances on wear and tear and furniture replacement, whilst also having the ability to claim capital gains tax relief as a business.

Net yields on FHLs can also be competitive, compared to returns on buy-to-let investments. In June 2018, property fund Second Estates indicated that FHLs had an average net yield of 6.1 per cent, compared with 5 per cent for residential buy-to-lets. It stated that the average weekly income on a holiday let was £563, whilst it was £161 for a typical buy-to-let.

Some lenders will also allow the landlord to live in the property, for a restricted proportion of each year, which is something not permitted with buy-to-let.

Turner says that lenders will expect landlords who borrow to fund the purchase of a new FHL to have a separate income and will often set a minimum amount, which has to be proven. Lenders will also expect a prospective FHL landlord to have prior landlord experience.

The property must be furnished and commercially let, with the objective of making a profit and in addition to legal requirements, lenders will set a minimum number of days each year when the property must be available for letting – and typically they will also set a minimum number of days per year that it is let out for.

Source: Simple Landlords Insurance

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Is buy-to-let investment poised to rebound in 2019?

Could buy-to-let be THE contrarian investment sector to buy into right now? Concerns over the health of the housing market mean that home purchases for rental purposes have basically dried up, while a great many landlords have been selling up amid fears of a property price crash. Fresh data, though, suggests that the market may be about to improve.

A survey of 500 landlords and real estate investors carried out by Experience Invest revealed that 39% of respondents plan to increase the size of their buy-to-let portfolio in 2019. This compares with the 11% who expect to reduce the size of their holdings.

Of the remaining participants, 35% said that they plan to neither buy or sell property this year, while 15% disclosed their intention to sell some existing bricks-and-mortar assets to then reinvest in new properties.

Where are the investing hotspots?

Also surprising was that respondents to Experience Invest’s poll seem to dismiss fears that the London property market in particular is in danger of sinking.

Some 35% of those who said they are intending to buy this year told the property investment specialist that they were intending to buy in London in 2019, putting the capital city in top spot on the list of most popular cities. And as a region Greater London also claimed prime position with 37%.

The North West of England was the second-most popular region on the list, with 30% of real estate investors intending to invest there this year. Manchester and Liverpool, which commanded 33% and 25% of respondents respectively, came in in second and third place respectively in terms of the most attractive cities.

Is landlord appetite recovering?

I can certainly see why many respondents to Experience Invest’s poll would be feeling upbeat right now. Because of the outflow of landlords over the past couple of years, the UK’s already-bulging shortage in rental accommodation has worsened still further, in turn pushing rents ever higher.

Latest data on buy-to-let lending suggests that a recovery in appetite is yet to become apparent, though. According to UK Finance, mortgage products taken out for rental purposes fell 5.6% year-on-year in December to 5,100. Addressing the causes for this decline, Jackie Bennett, director of mortgages at the body to commented that “demand for new buy-to-let purchases continues to be dampened by recent tax and regulatory changes.”

It wouldn’t surprise me one bit if buy-to-let demand continues to languish in 2019. Those cost increases and regulatory hurdles aside, the peril that Brexit poses to the homes market — whether it be in respect of an economically-destructive ‘no deal’ withdrawal, or a prolonged Article 50 extension lasting months or even years — threatens to continue sapping landlord appetite in the near-term and beyond. I certainly don’t believe buy-to-let is an attractive investment class right now; I’d rather put my money to work elsewhere.

By Royston Wild

Source: Yahoo Finance UK

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Buy-to-let gives better returns than gold, cash and fine art

Buy-to-let has given greater returns than gold, cash and fine art for investment in the last decade, combined lettings inventory and property compliance specialists VeriSmart has found.

When considering the annual gain in house prices along with the increase in rental yields, an investment in the sector a decade ago would have brought a 92% return today, higher than the 60% return that investing in gold would have brought and the 16% increase in cash or the -4% drop in fine art.

Jonathan Senior, founder of VeriSmart, said: “Last week’s Spring Statement was a missed opportunity for the Government to backtrack on their previous attacks on the buy-to-let sector, attacks that have done little to solve the UK housing crisis and if anything, have caused further restrictions in the level of suitable stock while keeping rental prices buoyant as a result.

“However, the buy-to-let sector remains the backbone of the UK property market, helping to support aspirational homeowners as they work to overcome the sometimes impossible financial barriers of homeownership. The need for this support is clearly evident as it remains one of the most lucrative investments one can make.

“With little being done to address property supply or affordability on a meaningful scale, this is likely to continue going forward and despite the government’s best efforts there will always be demand for a good, honest landlord providing above the board accommodation to those that need it.”

It’s also important to note that the growth in the property market has been by far the most reliable option with the FTSE 100, gold or cash providing a far more volatile option that is also open to a larger degree of impact from political and economic factors as well as influence from other foreign countries.

While classic car investment sits ahead of property, that too is made or broken on the car itself rather than the overall market and while a nice art collection may brighten your walls, it is also harder to find a buyer for – even when compared to the current Brexit property market slowdown.

Despite successive numerous legislative penalties including an increase in stamp duty, a reduction in high rate tax relief for landlords and a higher rate of capital gains tax on residential property profits, property remains one of the best and most stable investments available.

By Michael Lloyd

Source: Mortgage Introducer

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First-time buyer activity up while buy-to-let drops again

There were more first-time mortgages in January than that of the previous year, while remortgages and buy-to-let home purchases saw a decline, UK Finance’s Mortgage Trends Update for January has found.

There were 25,100 new first-time buyer mortgages completed in January, 4.6% more year-on-year and 25,300 homemover mortgages completed in the month, 2.8% more year-on-year.

There were 5,500 new buy-to-let home purchase mortgages completed in January 2019, 1.8% fewer than in the same month a year earlier. However, the rate of decline is less than in January 2018, when there was a 5.1% year-on-year decrease in the number of buy-to-let home purchases.

Matt Andrews, managing director of Mortgages at Masthaven, said: “Despite the current political uncertainty, the first-time buyer market appears largely unaffected.

“Whether this be attributed to government initiatives such as the extension of the Help to Buy scheme, the ‘gifting’ of wealth from parents to children, or an increase in flexible products offered by lenders, this segment of the market is in good stead for whatever political and economic decisions are made in the coming weeks.

“More could still be done for the buy-to-let market to encourage greater purchase activity. The slight softening in remortgaging figures for this sector suggests landlords remain committed to the market, greater product innovations, alongside a range of housing tenure that meets consumer needs, would certainly be welcomed so the sector can reach its full potential.”

Gareth Lewis, commercial director at specialist lender MT Finance, added: “There was always a worry that the lending market would be depressed at the beginning of the year as we edged ever close to the March deadline for Brexit, with this preventing people from buying and selling.

“But these figures are actually very positive and show that people have come out and continued to buy, so sentiment is pretty good.

“There is still pressure on the buy-to-let space and this will continue unless something is done to ease all the restrictions that have been placed on landlords in terms of taxation and higher stamp duty.

“A review of stamp duty at least could stimulate movement in this area but perhaps this is wishful thinking, with the government loathe to make any changes.

“First-time buyer numbers remain strong and encouragingly, loan-to-values have been consistent so it is not as if they are over-stretching themselves. With the average LTV around 85%, sensible lending is being done rather than chasing volume.”

There were 47,400 new homeowner remortgages completed in January 2019, 2.7% fewer than in the same month a year earlier.

Remortgaging in the buy-to-let sector saw a similar drop-off in activity, with 15,800 new remortgages, a 4.2% drop from the year before.

While this amounted to a year-on-year fall, it is worth noting that January 2018 was a particularly strong month, with the highest number of residential remortgages in nine years and the highest number of buy-to-let remortgages on record.

Overall, UK Finance expected the remortgaging sector to see continued strength in 2019, as more tranches of fixed-rate deals come to an end.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The year has got off to a remarkably good start on the lending front despite ongoing political uncertainty. Clearly, people have had enough with situations they can’t control and are getting on with their lives.

“Lenders are keen to lend and rates are extremely competitive. Several lenders have trimmed rates this year in an effort to encourage more business, while innovative tweaks here and there are increasing as an alternative to offering the cheapest rate in the market.

“Swaps have dipped further over the past few days on the back of heightened uncertainty around Brexit which is likely to continue to result in lenders offering perks such as cash back and free valuations, and going down the innovation route, which is good news for borrowers.

“The all-important first-time buyer numbers continue to grow in numbers as lenders offer more products at high loan-to-values and the Help to Buy scheme remains popular, despite its critics. This is good news for the market as a whole.”

By Michael Lloyd

Source: Mortgage Introducer

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Buy To Let Property Investors £3.8 Billion Income Tax Bill

Buy to let property investors in England pay a minimum of £3.8 billion in income tax on their rental property earnings every year.

Further to our article last week confirming that UK landlords contribute as much as £16.1 billion per year to the UK economy, it seems that their income tax bill is huge as well.

New research carried out by the National Landlords Association has shown that the combined taxable income for landlords in England on a yearly basis in 2018 was recorded at £19.1 billion – when costs paid for regular maintenance, finance costs, and miscellaneous legal and management expenses are taken into account.

If the tax is simply calculated at the basic rate of income tax – and many landlords will pay much higher rates – this would equate to an estimated minimum of £3.8 billion in income tax annually.

This has become particularly pertinent as changes to the way landlord income is taxed were phased in by the government over the last few years, changes that are likely to push many landlords into a higher income tax bracket.

The huge income tax liability figure also excludes additional mandatory fees such as stamp duty land tax, capital gains tax, VAT, and the additional property levy

NLA chief executive Richard Lambert commented: ‘Far from being subsidised by the taxpayer, private landlords make a significant contribution to the public purse. Furthermore, changes to landlord taxation made in 2015 are forecast to increase HM Treasury’s receipts from landlords by almost £2 billion – pushing total estimated Income Tax contributions to £5.7 billion in years to come.

‘These dramatic increases in landlords’ tax liabilities in the UK has led many to conclude that it is no longer possible to achieve a reasonable return on investment, prompting them to sell their properties and close their businesses.’

Source: Residential Landlord

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Buy To Let Investors Contribute £16.1 Billion To Economy

Buy to let investors in the private rental property sector contribute a huge £16.1 billion to the UK economy.

Through their spending over the year, landlords in the UK contribute towards thousands of jobs from builders and tradesmen through to accountants and letting agents. This figure has nearly doubled from £8.5 billion a decade ago, following the long-term expansion of the rented sector and rising costs per property.

Property maintenance and servicing represents the largest running cost for landlords across the private rental sector (PRS), totalling £5.8 billion. The next largest outlay is for those landlords that use a letting or management agent and contribute a collective £5 billion.

Investors spend a total of £567 million on accountancy and legal fees, £341 million on administration and registration costs, contributing an additional £908 million of spending solely dependent on the PRS’ existence.

Landlords also contribute £2.3 billion on service charges and ground rents, £848 million on utilities, £791 million on insurance, and £618 million on other associated costs of running a property.

The average landlord now spends £3,571 per property in annual running costs, before tax or mortgage interest – equivalent to 32.9 per cent of rental income. These costs have risen by 5.6 per cent in the last two years without factoring in increasing taxes. Since the start of 2009, costs have jumped by 28 per cent, a rise of £771.

£1,086 is currently spent on maintenance, repairs and servicing, and £935 spent on letting agent fees per property. A typical landlord spends £426 per property each year in ground rents and service charges. Insurance typically costs £149, and legal and accountancy fees £107, while administrative and license fees add another £64 per year.

A further £528 is lost in void periods each year, a figure that has climbed in recent years as a result of higher rents, and a slightly longer gaps between tenancies.

Faced by rising costs, and higher tax bills following the recent changes to mortgage interest tax relief, landlords are now looking to cut the amount they contribute.

36 per cent of landlords, surveyed by BVA BDRC on behalf of Kent Reliance, are already reducing or planning to reduce their spending. Overall, a typical landlord reviewing their outlay would cut spending per property by around 6 per cent. If replicated across the PRS, this would reduce their total spending by nearly £1 billion each year, reducing the revenues of the industries that depend on the PRS.

Sales Director of OneSavings Bank, Adrian Moloney, commented: ‘The political discourse around the private rented sector has been one-sided to say the least. Overlooked is the significant economic contribution landlords make, supporting thousands of jobs through their spending and housing a large portion of the country’s workforce. Instead, landlords have faced punitive tax and regulatory changes, at a time when running costs are climbing.’

Source: Residential Landlord

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Biggest choice in buy-to-let mortgages since 2007 for landlords

The number of buy-to-let mortgages has soared to 2,163, the highest since before the financial crisis hit in October 2007, according to research from Moneyfacts.co.uk.

In March 2017 the average two year fixed rate was 2.96 per cent and that has now gone up to 3.12 per cent following the Bank of England rate rise last year.

The average five year fixed rate in March 2017 was 3.77 per cent and but that has now fallen slightly to 3.61 per cent.

Darren Cook, finance expert at Moneyfacts.co.uk, said: “It is encouraging that buy to let landlords have more mortgage choice than they have had at any time in almost 12 years.

“Total product numbers have increased by 397 over the past year and by 706 over the past two years.

“Despite ongoing uncertainty in the property market, providers are not shying away from offering landlords a greater choice of products, although it is also evident from our research that heightened competition to try and attract buy-to-let business has not resulted in a fall in interest rates, as has recently happened in the residential mortgage sector.

“Indeed, the average two year fixed buy-to-let mortgage rate has increased by 0.20 per cent to 3.12 per cent since September 2018 and the average five year fixed rate has increased by 0.15 per cent over the same period.”

He argued that the recent increases to buy-to-let mortgages interest rates have been a result of mortgage providers attributing a little more to risk into their product rates due to uncertainty over future economic conditions.

Source: Simple Landlords Insurance

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Buy-to-let landlord numbers are plummeting!

It hasn’t been an easy time for buy-to-let investors over the past two-and-a-half years. First came the European Union referendum of summer 2016, an event whose result led to fears of collapsing house prices amid a meltdown in the UK economy.

We may still be waiting for this slump to happen, and is something I believe won’t occur given the scale of the supply imbalance in the homes market. But one thing is sure. The breakneck property price boom of recent decades has ground to a painful halt and is showing no clear sign of returning in the near future.

Landlord are evacuating With the stunning house price growth of yesteryear now seemingly over, a trend that had created a great number of buy-to-let millionaires, there seems little reason to take the plunge right now. With tax relief for landlords also being tightened, costs rising, and the sheer quantities of paperwork for these property owners increasing, well it’s little wonder that the rental market is in sharp decline.

This phenomenon was underlined by recent data from estate agent haart released this week. This showed the number of landlords registering to buy property over the past year plunged 37.4% on a nationwide basis.

The widening of the supply shortage in the rentals market has pushed rents up all over the country, and particularly so in London where the agency advised the average has jumped 6% over the past 12 months to a fresh record of £1,924.

Rents to keep rising? Haart chief executive Paul Smith commented: “The lack of new homes to buy has, in turn, pushed up rental prices… as Londoners scramble for rental accommodation as an alternative to buying a home.”

Smith blamed the “misguided efforts” of government to reform the property market by hiking the tax liabilities of landlords, and tipped that the cost of renting will continue rising for tenants. “Until buy-to-let taxation is relaxed, we can expect rents to rise throughout 2019,” he added.

The punitive tax changes that have hit both proprietor and renter hard in the pocket are here to stay too. Government is desperate to be seen to be helping first-time buyers get onto the housing ladder by reducing the number of homes hoovered up by the buy-to-let sector, even if in reality this is resulting in higher near-term costs for those aspiring to own their first home.

If anything, the financial and practical headaches for landlords in particular are only likely to rise in the years ahead as demand for new homes steadily booms. This imbalance makes the housebuilders great places to invest in for the years ahead, in my opinion. I for one would much rather invest in the stock market right now than to take the plunge in the increasingly-challenging buy-to-let market.

Motley Fool UK 2019

Source: Investing

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Demand from landlords wanting to purchase rental homes plummets by over a third

Haart is urging the Chancellor to relax the buy-to-let taxation crackdown after its data showed the number of landlord registrations was down by more than a third during January.

The agent’s data showed the number of landlords registering to buy rose by 2% between December and January, but fell 37.4% annually.

In London, the number of landlord registrations was down 41.3% annually.

Its branches did, however, report that the number of national sales to landlords was up 13.9% annually in January.

In sales generally, branches reported a 15.2% annual boost in new listings, a 2.6% rise in buyer registrations and a 5.5% yearly increase in exchanges.

Paul Smith, chief executive of haart, said: “There is a clear appetite to move amongst buyers and sellers.

“Just one month from Brexit, buyers are continuing to act in ignorant bliss, ignoring formidable predictions that are still dominating headlines.

“With increased confidence in activity, we can expect price rises over the coming months.

“But January was very much a tale of two halves. The London market did not pick up in the same way that the rest of the UK did, and the number of new instructions for sale in the capital dropped by 2.6%.

“The lack of new homes to buy has, in turn, pushed up rental prices by 6% on the year to a record £1,924 as Londoners scramble for rental accommodation as an alternative to buying a home.

“This is a not a fault of Brexit, but rather a consequence of the Government’s misguided efforts to reform the property market with taxation on buy-to-let landlords.

“Until buy-to-let taxation is relaxed, we can expect rents to rise throughout 2019 and tenants will increasingly be faced with difficulty when finding a new home in the capital.”

Source: Property Industry Eye

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Buy-to-let investors! Why London is a rental market that could still make you rich

The three words ‘London housing market’ have been enough to send a chill down the spines of many a property owner over the past 12 months or so.

We all know the stresses that Brexit, and its current (and future) consequences, have had on home values since the EU referendum. The stratospheric home price growth of yesteryear has seemingly been consigned to history, and in the case of the capital, has been replaced by stagnating, if not receding, prices.

Latest figures from Hometrack UK indicated that home prices in the capital had risen just 0.2% in January on an annual basis. And Foxtons warned just this week that a range of factors, including political ones, mean that low transaction levels were likely to persist “in the short-to-medium term.”

Capital gains for landlords

You can come out from behind the sofa, though, because things aren’t all bad. Well certainly not if you’re a prospective or existing landlord. According to Foxtons, “there is momentum in the lettings business” and the estate agency consequently saw revenues rise here in 2018.

Indeed, a recent report from ideal flatmate showed one sub-sector of the rental market that is performing particularly well: the market for tenants seeking single rooms.

According to the online property website, the average price of a room advertised on its boards sailed 13% higher in 2018, to £855 from £781 in the prior year, thanks to “a continued lack of suitable stock and a reduction in buy-to-let investors.” And prices have continued to rise in 2019, ideal flatmate said. The average price currently sits at a whopping £902, with the most expensive average in London sitting at £1,045 for a room in Westminster.

“We’re currently seeing the price of room rentals in London increase at a rate of at least one per cent a month on average,” co-founder of ideal flatmate Tom Gatzen said, who also attributed the jump to “a reduction in the number of landlords and letting agents with rooms to rent as a result of the stamp duty shake-up, changes to tax thresholds and the impending ban on letting fees.”

The Top 10 Most Expensive London Boroughs

Borough Average Room Rent (Per Month)
Westminster £1,045
Camden £999
Kensington and Chelsea £997
Hammersmith and Fulham £959
Islington £910
City of London £900
Hackney £898
Wandsworth £810
Tower Hamlets £809
Southwark £807

Source: ideal flatmate

Alive and kicking

Talk of the demise of the buy-to-let market is clearly overdone. The London market still provides plenty of scope for landlords to make huge returns.

And while home prices are currently under some pressure, this isn’t something that long-term proprietors need to worry over, in my opinion. The capital remains one of the world’s most popular cities for both native and foreign homebuyers and it always will, meaning that property values are bound to make a comeback.

Would I invest in the rentals market myself, though? No. The sea of tax changes in recent years means that buy-to-let isn’t the lucrative investment opportunity that it was just five years ago, whilst increasing regulation makes it a much more complicated endeavour. There are much better ways to make your money work for you, in my opinion, and for this reason I’m using my cash elsewhere (like investment in the stock market) to help me make my fortune.

Source: Yahoo Finance UK