Marijana No Comments

Not all gloom for rental market

It has been widely reported in the media how Brexit uncertainty has slowed down both the buy-to-let and residential housing market.

However, closer examination suggests other factors may have as much or more influence on current market activity.

Undeniably there has been a slowdown in both residential and buy-to-let markets over the past 12 months.

UK Finance recently reported that while buy-to-let remortgage activity has soared, the total number of buy-to-let purchase completions in 2018 was 11.2 per cent less than in 2017.

Meanwhile, their figures for January 2019 showed a 1.5 per cent reduction in the volume of residential lending, compared to the start of 2018. Put simply, people were choosing to sit tight and rely on the private rental sector rather than buy their own homes.

Key Points

  • There has been a slowdown in the buy-to-let sector
  • There has been intervention by the government in the buy-to-let market
  • The number of buy-to-let products shows lenders are positive about the outlook

For many who are renting, the prospect of saving for a deposit remains an almighty challenge.

The Ministry of Housing, Communities and Local Government’s recently-released English Housing Survey for 2017-18, indicated that the private rental sector has remained unchanged for the past five years at 4.5m households, which equates to 19 per cent of the total.

The latest survey revealed that 58 per cent of renters expected to buy a property eventually, with 26 per cent anticipating this will happen within the next two years, while 41 per cent suggested it will take five years or more to accomplish this goal.

Those timescales suggest that Brexit is not a major consideration.

Meanwhile, landlords have been dealing with more immediate and tangible concerns.

The past three years have seen substantial government intervention in the buy-to-let market, with the introduction of stamp duty on additional properties and the reduction and gradual replacement of mortgage interest tax relief perhaps the biggest financial changes.

But factor in the new house in multiple occupation licensing laws and crackdowns on living standards, plus the imponderable consequences of the imminent tenant fees ban and it is easy to see why some landlords have decided to sell up or not invest.

In particular, it has been the smaller landlord, perhaps with less time to keep abreast of the changes or adapt their strategy, that has struggled with the changes.

Many landlords with larger portfolios may already operate with more organised strategies in place, particularly in light of the Prudential Regulation Authority changes that came into effect in October 2017.

These required a more rigorous approach to the underwriting of portfolio borrowing and resulted in such investors having to provide more detail at the application stage.

It is too simplistic to simply lay current property investment levels purely at the feet of Brexit. There are too many other elements at play.

Adopting a pragmatic approach to investment

There are still plenty of reasons why buy-to-let investments can offer opportunities to those looking for solid financial returns.

Firstly, depending largely on property location and type, many landlords continue to turn a profit, which currently outweighs those available from other types of investment.

Here are a few positive factors to consider if your clients are contemplating a buy-to-let investment:

• At the moment, there is a general sense of stagnation within the property market. This means that property prices are, in many areas, no longer accelerating at previous rates.

Consequently, there may be opportunities available on the market. If you come across a property that has historically been rented out, this might mean there is less work to do upon purchase to have it ready to let.

• Market sentiment, as highlighted by the government’s survey, suggests no reduction in demand for rental homes, as thousands put on hold their dreams of home ownership in favour of renting for the foreseeable future.

In February, London estate agent Foxtons reported that in 2018 there was an 8 per cent increase in renter registrations in London, compared to 2017.

• There are big regional disparities in buy-to-let performance – and landlords are not bound geographically by where they own property. Buy-to-let yields and capital growth prospects vary across the UK, with the North West and the Midlands figuring prominently in recent data.

Since June 2016, when the Brexit vote took place, 10 UK cities have achieved double-digit house price growth, with seven located in the north of England.

• While Brexit has arguably had a negative effect on London and the South East, so too has the price of property for would-be buyers and, likewise, rent for would-be tenants.

With government investment in infrastructure, in particular the Northern Powerhouse, businesses have relocated to other parts of the UK and workers have followed suit. That has helped to create vibrant micro-economies for buy-to-let.

• Historically, house prices have recovered from any short-term economic or political unrest and proved resilient in the face of the financial crisis of a decade ago. Investment in bricks and mortar should always be regarded as a long-term strategy, in this context, well beyond Brexit.

• The sheer volume of buy-to-let products in the market place (1,162 in late February 2019, according to Moneyfacts), reflects a positive buy-to-let outlook from lenders. But the choice also comes with all sorts of incentives and competitive mortgage rates.

The Bank of England base rate remains historically low and rates for five-year fixed rate buy-to-let mortgages, for example, are more than 2 per cent less than in 2010.

The big question is how long lenders can sustain these low mortgage rates? By delaying investment in buy-to-let, some borrowers could run the risk of missing out on the lowest deals, should rates rise in the future.

We live in extraordinary times and Brexit presents its own unique set of challenges, but should not be confused with wider property market issues.

Perhaps never before has there been as much need for a buoyant private rental sector that serves the country’s escalating needs.

With low interest rates, infrastructure investment and growing tenant demand, Brexit may not present as big a challenge as recent tax and legislative changes. But, with a sound and responsive investment plan in place, buy-to-let landlords can prosper and Brexit offers no reason why that should not continue.

By Andrew Turner, interim chief executive of Commercial Trust

Source: FT Adviser

Marijana No Comments

UK labour market remains strong in face of Brexit uncertainty

Levels of employment in Britain increased 179,000 to a record high in the three months to February, official data confirmed on Tuesday, but economists see ongoing headwinds for households and businesses.

The ILO unemployment rate remained at 3.9% in February, the Office for National Statistics said, with an estimated 32.7m people in some form of paid employment, keeping the employment rate at 76.1% of all people between 16 and 64 years of age.

Excluding bonuses, wages grew 3.4% compared to a year earlier, driven higher as firms in several sectors find it harder to attract and retain staff. Weekly earnings excluding the effect of inflation were up 1.5%, ONS said. Total pay including bonuses stayed steady at 3.5%, while normal pay growth for January was revised up to 3.5%.

By another measure that is watched by members of the Bank of England’s monetary policy committee, wage growth excluding-bonuses on a three-month annualised basis fell below 2% for the first time in almost two years.

Employment numbers, the unemployment rate and wage growth were all pretty much as economists expected.

More timely data from March revealed that the number of unemployment claimants had risen by a larger than expected 28,200, with the claimant count rising to 3.0% from 2.9% in February.


ONS deputy head of labour market statistics Matt Hughes said: “The jobs market remains robust, with the number of people in work continuing to grow. The increase over the past year is all coming from full-timers, both employees and the self-employed.”

While employment growth was solid, economist Thomas Pugh at Capital Economics, suspect that this “could mark the peak of employment growth as the Brexit uncertainty reached its crescendo”, for now, seeing the surveys turning down sharply in March.

At the same time, annual regular pay growth in the three months to February ticked down to 3.4% from 3.5%, but total pay (including bonuses) stayed steady at 3.5%, and the unemployment rate remained at 3.9%, the lowest since 1975.

He noted that the annual rate of employment growth slipped to 1.4% from 1.5%, suggesting that with employment growing more slowly than the 2.0% output growth in February, that productivity growth should have picked up. “This could ease some of the recent upward pressure on unit labour costs and give the MPC more confidence to hold off raising rates until Brexit has been resolved,” he said. “Indeed, we do not expect the Bank to resume raising rates until the second half of next year.”


Although earnings have now been growing ahead of inflation for over a year now, in real terms, Hughes noted that wage levels have not yet returned to their pre-downturn peak.

Wage data is indeed only half the story, with inflation data on Wednesday due to confirm the degree to which pay is rising ahead of costs. Consumer price inflation printed at 1.8% at the last reading.

Ed Monk, an associate director at Fidelity International, said the decade of lost wage growth means “it may be a while before households feel like they’re getting any richer”.

Monk added: “The state of the UK economy now kind of depends whether you’re a half full or half empty sort of person. Looking on the bright side, it’s a comfort that the pressure on households is easing. On the other hand we know that growth is under pressure and a fall in foreign investment since the Brexit is storing up problems for the future.

“The Bank of England appears unlikely to tightening interest rates in this environment. That helps UK stock market investors in two ways – it gives consumers and companies a hand with lower borrowing costs and it makes returns on risk-free assets like cash less attractive.”

With Brexit uncertainty set to persist, even though it is contributing to the skill shortages that are continuing to boost pay growth, economist James Smith at ING agreed that it is unlikely to be followed up with a BoE rate hike later this year.

Looking at the robust wage growth he saw few reasons to expect this trend to fade imminently, although amid all of the uncertainty, he observed that the number of people on the unemployed claimant count has begun to exceed the number of job vacancies, which was “perhaps a sign of some weakness ahead”.

Smith does not expect a substantial rebound in economic growth over the next few months, with business still facing headwinds including staff shortages, slower global growth and Brexit uncertainty.

He was another who felt it a MPC rate rise was “pretty unlikely” this year – “unless some form of deal is approved earlier than most people expect”, with further gradual tightening impossibly to rule out in the medium term if wages growth rises higher.

By Oliver Haill

Source: ShareCast

Marijana No Comments

The effect of uncertainty on UK business over the past two years

Brexit is the great big British nightmare of the past two years that we can’t seem to be able to wake up from. The ongoing nightmare has been an endless question mark for the entire world. What is more terrifying is that fact that even in the end game of Brexit, when we are still unsure what the British are planning on. They just asked for another extension and the parliament is stubbornly saying a resounding “No” to everything. This climate has had a strong effect on the world, but most of all, it has had an interesting effect on the startups and new business of England.

The big and old are in no hurry to leave

It seems that the biggest companies, financial or otherwise, are in no hurry to get out of Britain. Over the past few years, barely any of the office jobs associated with the big financial companies have moved to the EU. While the companies are still keeping an eye out for the jobs, it seems that they are hoping for something. After all, the outlook on Brexit has been more and more leaning towards people believing it might not happen at all. The latestpredictions made by the bigger players in the financial fields only shows that more and more companies are expecting a more favorable outcome for the business.

So there is no surprise when we find out that the companies are in no hurry to move to the EU. Some of them are taking their chances, hoping that the people and the parliament might change their mind about what is best for Britain. So this leaves them being comfortable where they are, not risking any of the capital they have dedicated to moving, thinking it might be a gamble. This might be good, for now, but there are dangers associated with this. The biggest danger being how much harder and more expensive it will be for these companies to move, once Brexit does happen. In the worst case scenario, it might take them a long time to deal with the fall out of not taking the prudent step and prepping new offices in the EU.

Unfortunately, big companies are not the ones who decide whether Brexit is happening or not. It is the parliament. The sentiment among the smaller scale businesses and potential business owners is that there is a possibility that Brexit might actually happen.

The rate of new business, slowing down

The sentiment is reflected in the simple fact that there are fewer new businesses being founded in the UK then there was last year. The trend over the past few years has been that of growth. More and more startups and new businesses have been founded in the optimistic context of Britain as it has been up to now. Even in 2017, a year after Brexit, the rate of new companies that were being founded was growing. The optimism of the people and the momentum of those who wanted to found new businesses seemed unstoppable at the time. The government took this as a vote of confidence from their people.

Though now, it seems the lack of confidence is finally having the effect that it should have had initially. The number of new businesses being founded in the UK fell, even if by a small amount, for the first time in years. The people who would be founding companies are instead choosing to go the safer route of finding employment with a private company. There are no specific studies currently, but this is an attitude that goes hand in hand with a lack of faith in the future of the economy. The people are saving the money they would be spending on new business because they are expecting to be needing these savings in order to survive in the short and mid-term.

Employment in the private sector has grown, as a result. Some may even believe this to be a positive sign, as the spending of the private sector increases. But this is positive only as so far as the ability of the people to save goes. The people being employed are the people who, in a more optimistic setting, would be spending their resources on starting new projects and businesses, and this is harmful to the economy. The simplest way to think about this is this – private investment has fallen in the UK over 2018. The rate of the fall has also been the most dramatic since the 2003 recession.

This goes to show: while big companies might be paying more money to their employees, there is less money going around in investing in private business. So, even if people are working and companies continue to hire, the country is spending less and it is getting less of a benefit out of its highly educated, highly skilled human capital. The problem lies with the fact that people don’t know what is going to happen. There has been little to no framework created over the past two years, and now, as the deadline approaches and the parliament is having trouble deciding what to do, the people have lost faith.

Lack of faith, lack of business

A safe economy is what leads to investment, especially risky investment. When a society is more or less confident of the future of its county, it is more likely to take risks. Creating a startup and founding a business usually, entail huge risks. There is the risk of losing all of the money you invest in building the startup, and the risk of never getting the clients you need to run the startup. There is the risk of being unable to find employees, as they consider startups to be less safe options in an unfavorable economy. And Britain looks more confused right now than it ever has before.

What is the result? All of this is going to cost the UK economy a lot of money. As large businesses refuse to prepare for the move and new businesses stall in creation, the economy is slowing down. If the no deal Brexit does happen it will be catastrophic for the country. The idea is simple – the day large businesses start letting people go, there will be no space for employment to shift, so the rate of unemployment will rise, dramatically. Savings will have to be dipped int and spending will decrease. Without new businesses to high skills workers, the unemployment rate will not recover for a while. In the end, Britain ends up with a highly skilled, unemployed workforce that is having trouble emigrating simply because Brexit has imposed restrictions on their travel. While some might call this speculation, there are indications that business has slowed down over the past year and that some of the worst predictions might be coming true. Let’s hope not.

Source: Finextra

Marijana No Comments

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

Marijana No Comments

Housing market spring season off to subdued start amid Brexit uncertainty

The usual spring bounce in the housing market is being delayed by Brexit uncertainty, reports show.

The average house price is 0.8% lower than it was a year ago, with Rightmove saying the average asking price in March stands at £302,002.

Despite this, prices have edged up by 0.4% – or £1,287 – month on month.

Rightmove said this was the lowest month-on-month increase seen at this time of year since 2011 and “considerably lower” than the 0.9% average increase seen over the past seven years.

It said the usual spring bounce in the housing market is, at best, being delayed by Brexit uncertainty.

Rightmove director Miles Shipside said: “While March marks the start of spring, temperatures have yet to rise in the housing market.

“Buying activity remains cooler than usual, with hesitation as some buyers await a more settled political climate.

“There’s greater resilience the further away you get from the London market, and there’s a sound bedrock of demand for the right property at the right price, reinforced by ongoing housing needs combined with cheap mortgage borrowing.”

In Scotland, asking prices have jumped by 3.1% month on month – the biggest increase in March of all Britain’s nations and regions, followed by the North West of England with a 2.2% increase.

In Wales, asking prices are up by 1.4% month on month.

Asking prices in London are down by 1.1% on the previous month, while the only other English region to record a monthly fall is the North East of England, down by 1.3%, with elsewhere in Britain seeing an increase.

London asking prices are 68% higher than they were 10 years ago, while those in the North East of England have increased by 8% over the past decade.

Mr Shipside said: “London and some of its commuter belt are suffering from a post-boom hangover, with prices now having to be far more sober to attract buyer interest.”

Rightmove said the number of sales agreed by estate agents in February was 7% below the same period in 2018, compared with a year-on-year fall of 4% recorded in January.

But search activity on Rightmove remains steady, with the number of visits to the website staying level in the year to date.

It said this indicates that home movers are “keeping a watching brief” which could lead to an eventual bounce if and when the uncertainty subsides.

Mr Shipside said: “The closer you get to the wire without the clarity of an agreed way forward, the greater the propensity for buyers to wait and see rather than acting now.

“This could be a temporary pause, and indeed market slowdowns at election time and around the original referendum result bounced back pretty quickly.

“Markets and people do not like uncertainty, though, while sales agreed numbers are down by 7%, that means they are still running at 93% of last year’s levels.

“Most potential buyers are getting on with their lives or seeing a price lull as an opportunity to get on to the housing ladder or move to the next rung, with average national asking prices being 0.8% cheaper than a year ago.”

By Kirsty Bosley

Source: Kent Live

Marijana No Comments

UK house prices: Ongoing Brexit uncertainty will hurt housing market, says RICS

UK house prices will continue to plunge this year as prolonged Brexit uncertainty weighs on the market, according to the latest forecasts.

Buyer enquiries, agreed sales and instructions to sell have fallen for the sixth month running, according to the Royal Institute of Chartered Surveyors’ (RICS) latest housing market survey.

Buyers and sellers are both waiting for a resolution to Brexit before committing to a sale, according to the survey conducted in February and released today, with 77 per cent of respondents blaming the political uncertainty.

Buyer demand fell for the seventh month in a row in February as 41 per cent of respondents said buyer enquiries are falling, while agreed sales have been flat or negative since March 2016.

Simon Rubinsohn, RICS chief economist, said: “The latest RICS survey makes it pretty clear that the ongoing uncertainty around how Brexit will play out is the critical factor influencing both buyers and sellers.

“And with little sign that the issue will be resolved anytime soon, it could prove to be a challenging spring for the housing market and the wider economy.”

He added that while it is a buyers’ market now, sellers reluctant to give up higher prices must face reality if they want to agree a sale.

“This environment requires a greater degree of realism from those looking to move,” Rubinsohn said. “A reluctance from some vendors to acknowledge the shift in the balance of power in the market will compound the difficulty in executing transactions.”

Meanwhile the Office for Budget Responsibility (OBR) curt its five-year house price forecast from 20 per cent to 17 per cent yesterday, saying prices will fall in 2019.

By Joe Curtis

Source: City AM

Marijana No Comments

Prolonged Brexit uncertainty will damage UK housing market

Prolonged Brexit uncertainty will likely further damage the UK housing market, according to the latest research by the Royal Institution of Chartered Surveyors (RICS).

The most recent results from RICS’ UK Residential Market Survey show a continued decline in activity across the UK housing market in February, with new buyer enquiries, agreed sales and instructions all falling.

This is the sixth consecutive month all have fallen together, and the headline price balance also slipped to its lowest reading since 2011.

According to the body, continued lack of political resolution on Brexit after Theresa May’s latest deal was thrown out of Parliament on Tuesday could mean the housing market will continue to take a hit, with sales activity dropping off further.

In an additional question in the survey this month, over three quarters (77%) of respondents said Brexit uncertainty was holding back activity in the market, as buyers and sellers sit tight, resulting in near-term activity indicators pointing to further declines.

The RICS survey has long highlighted the impact Brexit uncertainty has had on the housing market, as stock levels hit all-time lows, activity stalled and sales took longer to complete.

But in recent reports the twelve-month outlook has remained broadly positive, reflecting the hope that greater clarity will emerge after 29 March.

Looking at the key activity measures in detail, buyer demand fell for the seventh consecutive month in February as 41% more respondents reported a fall in the number of new buyer enquiries, and the volume of agreed sales also slipped, with the indicator now having displayed a flat or negative trend since March 2016.

According to the report, this near-term uncertainty is set to linger for the coming three months, with sentiment for sales remaining subdued. Looking further ahead, however, its twelve-month sales expectations suggest a slightly more positive outlook.

As the lack of stock, in addition to Brexit, appears to be holding back buyer demand, 29% of contributors reported a decline in new instructions being listed over the month.

This is the eighth consecutive month where respondents have reported a fall in the number of new properties being listed for sale. Average stock levels are now back to record lows, and respondents cited this as the next biggest challenge after Brexit.

Following Theresa May’s latest Brexit deal defeat, regardless of whether the UK now leaves the EU with or without a deal, the impact of further uncertainty is expected to be felt across all tenures of the housing market, RICS said.

Simon Rubinsohn, RICS chief economist, said: “Although activity in the housing market continues to be weighted down by the lack of available stock, changes in the tax regime affecting property, and affordability; feedback to the latest RICS survey makes it pretty clear that the ongoing uncertainty around how Brexit will play out is the critical factor influencing both buyers and sellers.

“And with little sign that the issue will be resolved anytime soon, it could prove to be a challenging spring for the housing market and the wider economy.

“It is clear from professionals working in the market that this environment requires a greater degree of realism from those looking to move. A reluctance from some vendors to acknowledge the shift in the balance of power in the market will compound the difficulty in executing transactions,” he added.

By Abigail Fenton

Source: Yahoo Finance UK