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Tax break to help the housing crisis is making things worse

New figures released today by leading flat and house share site SpareRoom, reveal that the Rent a Room Scheme tax threshold increase, introduced in 2016 to encourage more people to let out their spare rooms to lodgers, has actually done more to boost the short term lets market.

The Rent a Room Scheme tax threshold was increased from £4,250 to £7,500 per year on 6th April 2016, following a six-year campaign by SpareRoom, backed by Shelter, Generation Rent and the National Landlords Association. There are around 19 million empty bedrooms in owner-occupied properties in England alone – if just 3% of these (570,000) were let out on a residential basis, it would unlock housing equivalent to a city the size of Liverpool.

Yet the failure to restrict the scheme to residential lets has meant a boost in short term lets rather than residential. According to SpareRoom data, there were 68,604 new lodger adverts in 2017 – 8% lower than the number in 2016 (74,684). This decline, which came on the back of seven years’ consecutive growth, continued into 2018, as demonstrated in the table below.

At the same time short term lets via holiday sites like Airbnb have seen a huge spike, rising 200% in ten UK cities between 2015 and 2017[1]. In London particularly, there has been a fourfold increase in Airbnb listings since 2015, this reduces residential housing supply and pushes up rents for people looking for long-term homes[2].

Matt Hutchison, SpareRoom Communications Director, comments: “These figures clearly show that the benefits we hoped to see from the government’s Rent a Room Scheme have been undermined by a new surge in short-term rentals. Given the fact we’re not building new homes in anywhere near the numbers we should, we have to do more to better use existing stock. The UK has a housing crisis, not a hotel room crisis.”

A chart showing the changes in the number of listings on SpareRoom from homeowners looking for a lodger

[1] According to the Residential Landlords Association, Airbnb listings in ten UK cities increased by almost 200 per cent between 2015 and 2017 https://www.citymetric.com/business/regional-english-cities-are-suffering-rise-short-term-rental-services-airbnb-4177

[2] https://www.theguardian.com/technology/2019/may/05/airbnb-homelessness-renting-housing-accommodation-social-policy-cities-travel-leisure

Source: Property118

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Average property values up £2,000 in first half of 2019 but London home owners have lost £13,000

London home owners have seen the value of their properties slide by £13,035 on average in the first six months of the year, Zoopla claims.

Analysis of house price data by Zoopla – using its valuation tool that regularly collates property data on all 29m homes in the country – found that an average of £11 a day has been added to home values since the start of the year or £2,046 in total.

But home owners in the capital are not benefiting and have seen their property valuations fall by £71.23 a day.

Scotland also saw a £20.59 daily drop or £3,768 in total.

The west midlands was Britain’s best-performing region, with the average value of homes increasing by £36.58 per day, or £6,695 in total, since the start of the year.

The south-east was close behind, where home owners have seen their properties gain on average £35.32 each day and £6,463 in total over the past six months.

Zoopla also analysed who in the UK at a local authority level uses its house price tools to research the value changes in their local property market the most.

The research found that those in Birmingham are the most frequent users of the house price pages, whilst three London boroughs also made up the top ten most viewed locations, with those living in Wandsworth, Bromley and Croydon featuring in the list.

Laura Howard, spokesperson for Zoopla, said: “The UK housing market gained £60bn in value during the first six months of the year.

“An increase in the total value of housing was recorded across nine of the 11 regions analysed, with average property values in the west midlands making the most money for home owners.

“Perhaps then, it is no coincidence that in the past six months residents in the west midlands, more specifically those in Birmingham, have been the most regular visitors to Zoopla’s house prices tool, which gives a price estimate for the value of homes, down to a single address.

“At the other end of the spectrum, residential values in London have continued on the downward trajectory of the last three years.

“However, a patchwork of micro-markets in the capital means there are a number of neighbourhoods – from Notting Hill to Forest Hill – that are bucking the trend of price falls and registering price rises.”

RankRegionJanuary value (£)July value (£)£ total change£ change per day
1West Midlands230,676237,371£6,695£36.58
2South East England406,821413,284£6,463£35.32
3North West England198,446202,177£3,731£20.39
4Wales190,610193,910£3,300£18.03
5Yorkshire and The Humber181,918184,181£2,263£12.37
6East of England360,707362,823£2,116£11.56
7East Midlands224,352226,177£1,825£9.97
8North East England192,388193,663£1,275£6.97
9South West England309,333310,165£832£4.55
10Scotland194,942191,174-£3,768-£20.59
11London670,535657,500-£13,035-£71.23

By MARC SHOFFMAN

Source: Property Industry Eye

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Let’s get the property market thriving again

Keith Street, chief commercial officer at The Mortgage Lender, says people are fed up with B word and instead of holding out to see what happens are now making moves in the property market.

At the beginning of this year I said 2019 was going to be an interesting year in the mortgage market, and that was probably an understatement.

Seven months into 2019 and we’ve failed to leave the European Union, the property market looks like it’s on the up and competition among lenders is fierce.

And home sellers, buyers and buy-to-let investors who were watching but not doing much for the first three months of the year, choosing instead to see what happened when Brexit was out of the way – have started doing something in the last three months.

Fed-up with uncertainty and fed-up with politicians more interested in playing politics than delivering on an instruction from their paymasters, the collective house owning/buying and selling public appears to have decided to get on with their lives irrespective of Brexit and what’s going on in Westminster.

House prices
Mortgage approvals are up, Zoopla is predicting house prices will rise over the next six months and the decline in property prices in the capital is slowing. One removal company, reallymoving, has suggested the market could see a 9% surge in property prices over the next three months based on the number of bookings it has received from people who are planning to move home.

The latest figures from Rightmove show online asking prices are beginning to rise again. The average price of a property coming onto the market in June 2019 was £309,348 compared to £309,439 a year ago.

The overall UK house price is being held up by all-time price highs recorded in the East Midlands, North West, Wales and Yorkshire and the Humber, which saw rises of 0.7%, 1.2%, 0.9% and 0.5% respectively.

In contrast, London saw monthly average asking prices fall by 0.4% where buyers were also more reluctant to commit with a yearly fall of 7.1% in sales agreed compared to a 1.7% fall in the North.

And it does feel like things are changing, landlords are telling us that properties which were sticking on the market are now being sold and properties coming onto the market at the right price are under offer within a week.

Mortgage applications
We’ve also seen it in the applications we’re receiving for residential and buy-to-let. Volumes are significantly up and landlords are refinancing portfolios to raise cash so they can invest in more properties.

Research we carried out among landlords found 84% are looking to maintain or increase the number of properties they own over the next 12 months compared to just 16% who are looking to reduce their portfolios.

Where people were uncertain, they’ve become fed up and decided it’s time to get on with their lives and plans irrespective of the uncertainty around Brexit.

And there couldn’t be a better time for people to be buying with a mortgage or remortgaging. Competition on rates is fierce and so is the appetite in the wholesale market for mortgage backed securities.

LendInvest has securitised £259 million of buy-to-let mortgage loans, Foundation Home Loans £329 million and we also completed our first UK mortgage-backed securitisation of residential assets for £238.5 million.

Competition
Overall the remainder of 2019 is likely to mirror what’s happened in the first half of the year.

Lenders have been tweaking their mortgage products and shaving their margins to gain ground in the residential and buy-to-let lending markets.

For us the remainder of the year will also be more of the same. Through innovative product developments and testing, to gauge market response to rate and criteria changes, we’ve seen record volumes in the first half of the year.

We’ve also added expertise to the sale team with the appointment of Steve Griffiths as sales director and we’ve now got a four-strong team of onsite underwriters to support our introducer partners.

At the beginning of the year I said: “Increased competition will mean lots of activity and innovation as lenders jockey to find their sweet spot and ensure visibility of their proposition to the widest market possible.”

We’ve seen that play out in the first half of the year. What’s left of 2019, I believe, will see those lenders who are investing in the quality of the relationships with their introducer partners pull further ahead of those who rely on sourcing systems and best buy tables to generate new business.

Source: Mortgage Finance Gazette

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More landlords shift to 2-year fixes

More landlords are shifting to 2-year fixed buy-to-let deals, broker Commercial Trust has claimed.

At the end of 2018, 68% of its buy-to-let applications were for 5-year fixed rate terms and 26% for 2-year fixes. 

However, by the end of Q2 of 2019, 5-year fixed-rates account for 59% and 2-year fixed rate deals are at 39%.

Andrew Turner (pictured), chief executive of Commercial Trust, suggested this could be because of political and economic uncertainty.

He said: “5-year fixed rate buy-to-let deals have proved dominant over several quarters, notably since the introduction of the PRA rules, which tightened lending criteria for shorter-term products in 2017.

“5-year applications remain predominate, but there has been a definite shift to two-year applications during the first half of 2019.

“There could be a number of factors at play here, with the obvious explanation being that the first half of 2019 has seen political and economic uncertainty, largely as a result of Brexit negotiations.

“The Bank of England has at different times hinted at rates rises, should the economy grow in line with their forecasts, but then suggested that a no-deal Brexit could see the base rate cut.

“Many landlords are perhaps looking to hedge their bets for the short-term, with a competitive, low rate buy-to-let mortgage, which will hopefully last beyond all of the uncertainty, without locking them into a long-term agreement.”

Turner said that at the same time, many experienced landlords have had two years to digest the implications of the PRA changes and have perhaps already made a move to a 5-year deal.

He added: “Of course locking in for two years gives a landlord the opportunity to reassess the market much sooner and to consider remortgaging in two years’ time, without necessarily incurring additional early repayment charges.

“It will be interesting to see whether this trend towards shorter term deals continues, particularly given data that suggests the gap between 2-year and 5-year fixed rates has reduced.”

Turner said three regions in the UK have seen consistent growth in their overall proportion of buy-to-let purchase application business, with the South West leading the way.

He said: “After five consecutive quarters where year on year, the South West’s proportion of applications fell, this region made considerable ground up in Q2 of 2019 with a 3.5% increase.

“Other areas to see gains in overall proportion so far in 2019, compared to the whole of 2018, are the East of England and the East Midlands, while there has been a fall in the overall percentage of applications from London and the South East.”

In London, there has been a 3.7% fall in the overall proportion of buy-to-let applications, from Q1 to Q2 of 2019.

The capital was on a par with the North West, contributing 12.4% of buy-to-let application business during the most recent quarter.

Turner added: “During Q2 of 2019, the East of England proved the leading region, responsible for 12.9% of applications.

“The South East saw a notable fall in its proportion of buy-to-let applications from Q1 (14%) to Q2 (7%).

“Affordability may still be an issue in London and the South East and regional house price variation and the effects of stamp duty, may be encouraging buy-to-let investors to investigate potentially cheaper properties and better yields elsewhere.”

By Michael Lloyd

Source: Mortgage Introducer

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Demand for retail property in London plummets

Demand for retail property in London is approaching lows last seen after the 2008 financial crash, according to new research.

The latest UK Commercial Property Market Survey results published today by the Royal Institute of Chartered Surveyors (RICS) showed that demand for retail property in London fell for the second quarter of the year.

In an indication of the ongoing malaise in the sector, retail was found to be responsible for pulling the overall figure in terms of demand for property down below zero, with a net balance of -61.

The retail property sector also posted the highest rise in terms of availabilities, with 52% of respondents reporting a “significant rise in availability”.

The survey also found demand from overseas investors continued to drop during the quarter as Brexit loomed, with respondents reporting -9% growth. This represented the third quarter in a row where overseas investor demand fell.

However, the RICS report found a rise in demand for industrial buildings – in particular warehouses for ecommerce.

Rents on prime and secondary retail sites are predicted to fall 3.5% and 7% respectively over the next 12 months.

RICS economist Tarrant Parsons said: “The overall picture remains little changed across the UK commercial property market in Q2, with the disparity between a strong backdrop for the industrial sector and weakness in retail still very evident. While expectations continue to point to solid rental and capital value growth in the former, further declines are expected in the latter.

“Brexit uncertainty also remains a notable headwind, causing caution across both occupiers and investors while they await clarity on the UK’s future trading relationship with the EU.”

By Hugh Radojev

Source: Retail Week

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The government fails to meet housing target

A select committee has warned that the government has failed to meet its target for releasing land for new homes by  “a wide margin”.

Under its Public Land for Housing Programme, the government aims to “increase housing supply by releasing surplus public sector land for at least 160,000 homes” in England between 2015 and 2020.

The Public Accounts Committee however argued in their latest report that by the end of the programme, the government will have failed to sell the land needed for 91,000 of the homes promised.

This is equivalent to 57% of the overall target.

Meg Hillier MP, the chair of the committee, said: “The nation’s housing crisis has been prolonged by the government’s failure to develop a strategy for public land disposal. We are frustrated that this unique opportunity has been wasted.

“The UK needs more houses. As a major land holder, the government is in a unique position to release land for new homes; and yet the objectives of its land disposal programmes are chaotic and confused.

“We are baffled that the programmes were not designed with a view to how many homes were needed of what type, and where – nor how the proceeds will be used.

“Land disposal targets were set without a rigorous evidence base of what could actually be delivered. It is no real surprise, then, that the government will now fail to meet its target to sell enough land by 2020 for 160,000 homes.

“But with a gap of 91,000 fewer potential homes than anticipated, we are extremely concerned that the nation’s housing shortage will only get worse.

“Building affordable homes should be a key part of the objectives of the government’s land disposal strategy. However, we are concerned at the Department’s disregard for how the release of public land could be used to deliver affordable homes, particularly social homes for rent.

“We call on the government to set out a decisive course of action for how it will execute its land disposal strategy so that it translates into actual homes for the people that need them most.”

The select committee said this target was ‘clearly unrealistic’ from the outset and lacked a sufficient and rigorous evidence base when it was originally set.

The Cabinet office is expected to achieve its proceeds target of delivering “£5bn of receipts between 2015 and 2020 through the release of surplus public sector land and property across the UK.

This is despite almost all departments being on course to miss their individual targets.

However, this is because of one large unplanned sale that contributed almost £1.5bn of the £5bn target.

The committee said it is unacceptable for the outcomes of these crucial programmes to be reliant upon luck instead of judgement.

It said that despite just 40,500 homes having been built since 2011, the loose definition from the ministry of housing, communities and local government (MHCLG) of what constitutes a new home has artificially inflated the number of new homes that have been created.

A spokesperson from MHCLG added: “We have an urgent mission to build more homes for the next generation so they can realise the dream of home ownership.

“Last year saw us deliver 222,000 new homes, more than in all but one of the last 31 years.

“Government departments have identified enough surplus public sector land for 160,000 new homes and our development accelerator Homes England is providing expert assistance to get these built more quickly.”

By Michael Lloyd

Source: Mortgage Introducer

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More than one in ten homes now let by company landlords

The proportion of homes let by a company landlord in the UK has been rising steadily since 2016 to reach the highest level in eight years, according to new figures.

In H1 2019, 12% of homes were let by a company landlord, reaching the highest level since 2011 and up from 9% in 2015 (before the tax changes).

Residential estate agent and property services company Hamptons International estimates that company landlords own 641,480 homes in Great Britain this year. This is 42% more than in 2015 when 452,600 homes were let by company landlords. The increase is partly due to the rise in the proportion of homes let by company landlords, but also due to the increase in the overall size of the rental sector.

% of homes let by company landlords1Y changeChange since 2015
London13%1%1%
Scotland12%3%6%
South (exc. London)12%1%3%
Midlands12%1%1%
North11%3%5%
Wales8%2%-1%

Percentage of homes let by company landlords by region (H1 2019)

Source: Hamptons International

London landlords are most likely to own a buy-to-let property in a company structure. In H1 2019, 13% of new lets were owned by a company landlord, up from 12% in 2015 and 2018.  Meanwhile, landlords in Wales are least likely to own a buy-to-let in a company name. Scotland has seen the biggest increase in the proportion of homes let by a company landlord since 2015 (+6%), followed by the North (5%) and South of England (3%).

Rental growth continues to accelerate, reaching the highest level since April 2016. The average cost of a new let in Great Britain increased to £986 pcm in June, up 3.1% year-on-year. The South West recorded the strongest rental growth, with rents rising 4.5% annually.  Rents in London increased by 4.3% year-on-year. However, June 2019’s figures are compared with a period of weak rents in June 2018 when rents in the capital started falling for three consecutive months. Meanwhile, average rents on newly let properties rose in six out of eight regions, with Wales (-0.4%) and the East (-0.2%) recording small year-on-year falls.

RegionJun-19Jun-18YoY
Greater London£1,737£1,6664.3%
South West£821£7864.5%
South East£1,078£1,0413.6%
Scotland£655£6392.6%
Midlands£685£6790.9%
North£631£6280.5%
East£950£952-0.2%
Wales£668£671-0.4%
Great Britain£986£9563.1%
Great Britain (Excluding London)£787£7741.7%

New lets (pcm) Source: Hamptons International 

Aneisha Beveridge, head of research at Hamptons International, said: “More than one in ten rental properties are now owned by private companies, an indication that the sector continues to professionalise. Increasing taxation for private landlords combined with the growth of the build to rent sector has meant that more companies are letting homes than at any time since our records began.

“London, where landlords tend to have higher levels of debt and often the most to gain from corporate ownership, has the largest proportion of homes let by a company. However, it’s not always more profitable to put a buy-to-let into a company as other associated costs come into play.

“Strong rents in the South drove rental growth in Great Britain in June.  Low stock levels, particularly in the South, continue to put pressure on rents.  Rents rose in six out of eight regions in Great Britain, with the East and Wales recording small falls.”

Source: Scottish Housing News

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UK house sales plummet in June, held back by Brexit ‘ball and chain’

House sales crashed 16.5 per cent in June, as the property market took a “wait-and-see” attitude to transactions amid Brexit uncertainty.

Monthly HM Revenue and Customs (HMRC) figures showed British residential property sales fell to 84,490, more than one-sixth down on the same period last year.

The figure represents a 9.6 per cent monthly drop between May and June this year.

Analysts were quick to point out the figures are reported with several months’ lag, meaning the transactions relayed are those accepted in March.

Benham and Reeves director Marc von Grundherr said: “With many of us, perhaps foolishly, believing we would be exiting the EU at the end of March, it stands to reason that the vast majority of buyers may have refrained from a sale until this event had passed.

“Therefore any dip in transactions should be viewed as a momentary stutter and with many other market indicators suggesting a return to form and growing levels of buyer demand over the last few months, we should start to see the number of properties being sold climb from here on in.”

Non-residential transactions were also down 7.2 per cent month-on-month.

‘A fragile market landscape’
Springbok Properties founder Shepherd Ncube added: “A lull in transactions will come as a cause for concern in what is currently a rather fragile market landscape, however, the broader picture simply doesn’t suggest a market that is on its knees.

“Homebuyer appetite is alive and well and while many may not want to fill up on bread until the main course of Brexit is finally served, we are on course to see a healthy level of properties transact this year regardless.

Joseph Daniels, founder of modular developer Project Etopia, added: “Sales volumes have walked off a cliff, crashing hard as the Brexit deadlock becomes the ball and chain fixing the housing market to the spot.

“What you’re seeing is a wait-and-see attitude among sellers and many buyers becoming endemic.”

By Alex Daniel

Source: City AM

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More homes let by company landlords since 2016

The proportion of homes let by company landlords have risen steadily since the removal of mortgage interest tax relief for non-company landlords was announced in 2016, Hamptons International has found.

It estimated that company landlords own 641,480 homes in Great Britain this year. This is 42% more than in 2015, when 452,600 homes were let by company landlords.

Aneisha Beveridge, head of research at Hamptons International, said: “More than one in 10 rental properties are now owned by private companies, an indication that the sector continues to professionalise.

“Increasing taxation for private landlords combined with the growth of the build to rent sector has meant that more companies are letting homes than at any time since our records began.

“London, where landlords tend to have higher levels of debt and often the most to gain from corporate ownership, has the largest proportion of homes let by a company.

“However, it’s not always more profitable to put a buy-to-let into a company as other associated costs come into play.

“Strong rents in the South drove rental growth in Great Britain in June.

“Low stock levels, particularly in the South, continue to put pressure on rents. Rents rose in six out of eight regions in Great Britain, with the East and Wales recording small falls.”

The increase is partly due to the rise in the proportion of homes let by company landlords, but also due to the increase in the overall size of the rental sector.

London landlords are most likely to own a buy-to-let property in a company structure. In H1 2019, 13% of new lets were owned by a company landlord, up from 12% in 2015 and 2018.

Meanwhile landlords in Wales are least likely to own a buy-to-let in a company name. Scotland has seen the biggest increase in the proportion of homes let by a company landlord since 2015 (+6%), followed by the North (5%) and South of England (3%).

Rental Growth Rental growth continues to accelerate, reaching the highest level since April 2016. The average cost of a new let in Great Britain increased to £986 per month in June, up 3.1% year-on-year.

The South West recorded the strongest rental growth, with rents rising 4.5% annually. Rents in London increased 4.3% year-on-year.

By Michael Lloyd

Source: Mortgage Introducer

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House prices up but region is still popular

The West Midlands is predicted to see the highest house price inflation over the next two years of all UK regions, behind only Wales.

PwC’s latest UK Economic Outlook projects the region will see average house price growth of 3.4 per cent in 2019 and 4.2 per cent in 2020, compared to the UK average of 1.2 per cent and 2.1 per cent.

The average house price in the West Midlands is estimated to rise from £194,000 in 2018 to around £223,000 by 2022, according to PwC’s projections.

This comes at a time when the cost of private renting is proving to be a significant challenge for tenants, with those working in certain key public sector professions increasingly unable to afford rent.

PwC’s report warns that this will potentially lead to a shortage of employees, such as NHS workers, teachers and police officers in these regions, impeding both economic and social mobility.

Using the conventional benchmark that renting must cost less than 30 per cent of gross annual income for it to be considered affordable, the report finds an employee would need an annual salary of £23,800 to afford the median private rent in the UK, up £400 from 2017/18.

This means that the country’s median private rent has just crossed over the 30 per cent rental affordability threshold.

Currently, workers in the West Midlands between 22 and 29 years of age are spending 27 per cent of their monthly earnings on rent, just below the 30 per cent threshold generally considered affordable.

Continue
Matthew Hammond, Midlands region chairman for PwC, said: “House price inflation in the 12 months to April 2019 was strong in both the East and West Midlands at 2.9 per cent and 2.2 per cent respectively.

“The Midlands was in the top five of the UK regions for the underlying house price growth. Growth rates are forecast to continue strongly through 2019 and 2020 at between 3.1 per cent and 4.1 per cent, with the medium term average for 2021 and 2022 settling at the lower end of this range at 3.2 per cent.

“Whilst average house prices are higher across London, the South East and South West, by 2022, if the growth is as forecast, average house prices will break through the £200,000 threshold, reaching £223,000 in the West Midlands and £214,000 in the East Midlands by 2022.

“By comparison the average London house price could reach £508,000 by 2022 and £344,000 across the South East, making affordability of rented property a disproportionate cost of almost 40 per cent of the median salary for 22-29 year olds in the South East and more than 50 per cent in London.

“Affordability remains key in rented segments of the market. In the Midlands with its young population in major cities, for our 22-29 year olds, rental costs are estimated to account for between 23 per cent and 27 per cent of median salary.

“The relative affordability compared with London and the South East, alongside growth across key strategic sectors of the economy, is driving the increasingly popular choice of locating and developing careers across the Midlands. Medium and longer term infrastructure investment is creating conditions for good growth for the Midlands’ cities, fuelling investment.”

By James Pugh

Source: Shropshire Star