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London’s Rental Market Heats up According to Chestertons

London’s rental market is witnessing a strong recovery in spite of the pandemic, according to Chestertons’ latest analysis. Comparing May to April, the agency’s 31 branches across London confirmed a cumulative 17 per cent increase in new tenant registrations and 10% increase in agreed lettings.

Whilst demand is up, the number of properties available to rent at the end of May 2021 was down, with Chestertons registering a 3 per cent reduction in supply compared to end of April 2021 and a staggering 24 per cent reduction compared to May 2020. With demand outstripping supply, fewer landlords are now willing to drop their rents which is a stark contrast to this time last year when high numbers of London landlords dropped their rents by up to 20 per cent.

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In fact, Chestertons confirms that in many London postcodes, rents increased in May vs April. Some of the areas that have seen the biggest rental increase are Barnes (+17 per cent), Wandsworth (+15 per cent), Mayfair (+23 per cent), Westminster (+18 per cent) and South Kensington (+12 per cent).

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Richard Davies, Head of Lettings at Chestertons, says: “The majority of tenants registering with us now see their return to the office as imminent; whether that’s full or part-time. With that in mind, and with rents at the lowest level they have been in years, tenants are rushing to snap up a London rental property at a reduced cost. At the same time, as lockdown restrictions are easing and travel becomes possible again, we are also seeing the return of overseas student demand. With the continuous increase of tenants wanting to move back to London, we expect London’s rental market to become increasingly competitive over the next few months; particularly during the summer, which has always been a key season for tenants to move.”

BY PETE CARVILL

Source: Property Wire

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The Best Property Rental Yields in the UK

The latest research by nationwide Build-to-Let specialist, Sequre Property Investment, has revealed which major cities across England and Wales have seen rental yields stand the test of recent times, despite the government’s attempts to dampen investor appetite through a number of legislative changes.

With changes to buy-to-let tax relief, an increase in the rate of stamp duty on buy-to-let and second homes, and more recently, talk of changes to capital gains tax, you could be forgiven for thinking the government wants to deter investment into the rental sector.

However, the sector continues to prove a lucrative one for those investing in the right areas, and Sequre Property Investment’s analysis found that seven cities, in particular, have performed very strongly in recent years.

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Sequre Property Investment analysed the average rental yield across 21 major cities in England and Wales over the last five years and found that across the nation, rental yields have averaged 5.1 per cent per year since 2015.

The best performing has been Manchester, with rental yields sitting at an average of 5.5 per cent a year.

Sunderland has also performed well at an average of 5.4 per cent per year, with Nottingham (5.3 per cent) and Newcastle (5.2 per cent) also putting in a strong performance.

Cambridge has seen the lowest average rental yield since 2015 at just 3.2 per cent, while Bournemouth is the only other city to also slip below the 4 per cent mark.

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Daniel Jackson, sales director at Sequre Property Investment, said: “The increasing cost of property coupled with current uncertainty within the rental market can make investing into the rental market a daunting business. However, it remains a lucrative venture for those who know where to invest and what to invest in. The key is to know your market and to appreciate that property investment should be undertaken with a long term view, rather than a smash and grab mentality. The historic market health of a given location can provide you with good insight in this respect but top-line rental yields can only take you so far. Utilising the knowledge of those in the sector is the best way to maximise your endeavours, whether it be through a tailored investment to suit your individual circumstances, the ability to access bulk deals that can minimise the initial cost of investing or even access to off-market opportunities that aren’t open to the average buy-to-let investor. All of these approaches can see you secure a far higher yield in any location when compared to the general market.”

BY PETE CARVILL

Source: Property Wire

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Average UK rent jumped 4% in the last year – HomeLet

The average UK rent jumped 4 per cent in the last year, according to statistics just released by Homelet, and now stands at £997 per month.

The company also found that every region apart from London saw an increase in recent prices year on year. Within the capital, rents dropped by 0.9 per cent. Meanwhile, the average price across the country is up by 6.4 per cent year on year, now reaching an average of £864 per month.

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Andy Halstead, chief executive officer of HomeLet, said: “We’ve seen from sharp house price spikes across the country that the Coronavirus pandemic changed what Britons are looking for in a property. Many said to be looking for properties offering more living space; for those working from home as an example, that’s also the case in the private rented sector. Rental properties continue to play a crucial role in meeting the demands of people up and down the country, and the flexibility and responsiveness shown by the private rental sector will be vital in the coming months as the country opens up again. As rents increase, we’ve also seen an increase of over 10 per cent in suspicious and fraudulent applications for let property; with backlogs and delays in processing evictions, the demand for high-quality tenant reference and insurances has never been higher.”

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He added: “The overwhelming success of the vaccination drive brings hope that returning to some form of normality could be on the horizon. However, we would still caution that millions could be made unemployed at the end of the furlough scheme – posing considerable problems in tandem with an unbalanced rental market. Whilst the Government looks to stimulate homeownership, the importance of the private rented sector can’t be understated and should not be overlooked.”

BY PETE CARVILL

Source: Property Wire

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The Best Areas in London for Buy-to-Let Yields This Year

Buy to Let – Since the onset of COVID-19, investors have turned away from many of the asset classes whose presumed security and capacity for long-term value creation were once thought unimpeachable. With international lockdowns accelerating existing trends towards flexible working practices and e-commerce, investors have seen billions wiped off the value of commercial property assets.

However, while commercial property has suffered, the value of residential assets has fared well during the pandemic. Thanks to the extended stamp duty holiday, the sales market is buoyant and price growth has exceeded expectations, while a surprisingly robust lettings market benefited from permission to continue operating during later lockdowns and a flurry of activity as renters seek out housing that more closely aligns with their post-COVID priorities.

At Home Made, we have analysed data from thousands of property listings across London to create an up-to-date guide on buy-to-let rental yields for investors in the capital. Here are the top 10 postcodes in London offering investors the best rental yields for 1, 2, and 3-bedroom properties.

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1-bedroom properties

  1. IG11 (Barking, Upney) – 6.12 per cent
  2. N9 (Lower Edmonton) – 5.89 per cent
  3. TW13 (Feltham, Twickenham) – 5.65 per cent
  4. EN8 (Cheshunt, Waltham Cross) – 5.57 per cent
  5. IG1 (Ilford) – 5.56 per cent
  6. EN3 (Enfield) – 5.50 per cent
  7. RM6 (Chadwell Heath, Goodmayes, Marks Gate, Little Heath) – 5.46 per cent
  8. RM1 (Romford) – 5.43 per cent
  9. RM7 (Romford, Dagenham, Hornchurch) – 5.39 per cent
  10. IG2 (Gants Hill, Newbury Park, Aldborough Hatch) – 5.35 per cent

2-bedroom properties

  1. UB1 (Southall) – 5.93 per cent
  2. IG11 (Barking, Upney) – 5.64 per cent
  3. EN3 (Enfield) – 5.52 per cent
  4. RM6 (Chadwell Heath, Goodmayes, Marks Gate, Little Heath) – 5.48 per cent
  5. N9 (Lower Edmonton) – 5.42 per cent
  6. TW5 (Hounslow) – 5.39 per cent
  7. N18 (Upper Edmonton) – 5.39 per cent
  8. IG1 (Ilford) – 5.37 per cent
  9. IG3 (Ilford, Cransbrook, Loxford) – 5.35 per cent
  10. RM1 (Romford) – 5.33 per cent

3-bedroom properties

  1. RM8 (Dagenham, Beacontree) – 5.13 per cent
  2. RM9 (Dagenham, Beacontree) – 5.01 per cent
  3. RM10 (Dagenham, Beacontree) – 4.90 per cent
  4. IG11 (Barking, Upney) – 4.80 per cent
  5. EN3 (Enfield) – 4.76 per cent
  6. RM3 (Harold Wood, Harold Hill) – 4.64 per cent
  7. N9 (Lower Edmonton) – 4.61 per cent
  8. CR0 (Croydon) – 4.56 per cent
  9. N18 (Upper Edmonton) – 4.54 per cent
  10. CR7 (Thornton Heath) – 4.54 per cent

Overall

  1. IG11 (Barking, Upney) – 5.13 per cent
  2. RM10 (Dagenham, Becontree) – 4.97 per cent
  3. RM9 (Dagenham, Becontree, Castle Green) – 4.94 per cent
  4. RM8 (Dagenham, Becontree, Becontree Heath, Chadwell Heath) – 4.91 per cent
  5. SE28 (Thamesmead, Greenwich, Bexley) – 4.88 per cent
  6. E13 (Plaistow, West Ham) – 4.59 per cent
  7. RM3 (Harold Wood, Harold Hill, Noak Hill, Harold Park) – 4.54 per cent
  8. N9 (Lower Edmonton) – 4.44 per cent
  9. E6 (East Ham, Beckton, Barking) – 4.40 per cent
  10. RM6 (Chadwell Heath, Marks Gate, Little Heath, Goodmayes) – 4.35 per cent

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What does the data show and why?

As the data indicates, the most attractive investment prospects right now are mainly clustered in London’s outermost Eastern boroughs: Barking and Dagenham, Redbridge, and Havering. A review of our previous yields analysis (published in late 2019) suggests that there has been a sustained eastwards shift in the location of postcodes offering the best potential ROI for buy-to-let landlords.

There are several likely reasons why this is the case, with trends established both before and during the pandemic responsible for the continuing eastwards shift.

Improvements to transport infrastructure

As was the case in our original 2019 analysis, improvements to London’s transport infrastructure mean that residents in high-yield areas can commute into the major economic hubs of the city centre with relative ease. The forthcoming Elizabeth line will drastically improve transport connections between many of this year’s best performing locations to the rest of the TfL network, with stations opening in Ilford, Goodmayes, Chadwell Heath, and Romford. We know that rental prices react more quickly than sales values to infrastructural improvements, so investors should expect to see an even greater spike in rental yield value in these East London suburbs.

The impact of urban redevelopment

Urban redevelopment schemes that introduce thousands of units of high-specification housing and modern amenities tend to change the profile of tenants, making them more attractive to working professionals on higher incomes. This increases the value of nearby property, leading to a sustained rise in rental yields over the medium term as rental price growth outpaces the growth in sales prices.

East London’s outer boroughs are currently further behind in their redevelopment journey than many of the more central neighbourhoods that have already been transformed by various urban renewal projects (e.g Stratford, Royal Docks). Ambitious redevelopment plans underway in the East, particularly in Havering, are set to have a similar impact, and investors should expect to see consistent growth in rental yields along with significant appreciation in the sales value of any property.

Consumer and renter behaviour

Tenant migration patterns have been altered significantly by COVID-19. Since the onset of the pandemic, the widespread adoption of flexible working practices has meant that renters have had more freedom to move across the city without as much concern for the impact on their daily commute. When we analysed enquiry data for rental properties in TfL travel zones 4, 5, and 6, we found that 40 per cent of the renters enquiring on properties in these areas were currently based in zones 1, 2, and 3, suggesting a significant spike in the number of tenants moving towards London’s suburbs. Similarly, 64 per cent of the renters logged in our database in 2020 were moving to a completely new area of the city, with an average travel time of 44 minutes between their previous property and prospective new home.

As well as having the flexibility to stray further away from the workplace, tenant priorities have changed drastically following our collective experiences of successive lockdowns. The so-called ‘race for space’ is well documented, with many tenants moving to the suburbs or leaving the city altogether in search of larger properties with more access to green space and better suited to pet ownership – features which are now a higher priority for many than proximity to the workplace.

Many have also moved further away from the centre to reduce costs during a period of sustained economic upheaval. For many of London’s working professionals, it no longer makes financial sense to pay a premium for expensive central property when there is no need to maintain a daily physical presence in the workplace. Properties in high-yield areas are able to satisfy both the post-COVID lifestyle priorities and affordability criteria of London’s renters.

Overall, the residential lettings market has proven remarkably adaptable when faced with unprecedented economic and social circumstances, along with various existing trends that disrupt the way people rent and let property. As a result, buy to let rental yields in outer zones have remained high, and even increased in the last 18 months, as renters expanded their search radius to include the new areas that they would now consider living in.

BY PETE CARVILL

Source: Property Wire

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Falling buy-to-let rates make property a ‘tempting’ investment

Interest rates for buy-to-let mortgages are beginning to decrease, according to the latest data from Moneyfacts.co.uk.

Its figures revealed, since the start of May, the average buy-to-let two and five-year fixed rates for all loan-to-values (LTV) have fallen by 0.04% and 0.05% respectively.

What’s more, since March 2021 they have tumbled by 0.10% and 0.11%. At 2.95% and 3.30%, both rates are now the lowest they have been since January 2021 when rates were at 2.89% and 3.27% respectively.

According to Moneyfacts the largest reductions since the start of this month have been seen at 65% LTV.

In this tier the two and five-year fixed averages have dropped by 0.20% and 0.15% respectively to 2.68% and 3.17%, since the start of the month.

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This, said Moneyfacts, was great news for landlords with the required level of deposit or equity.

However, for those landlords with lower levels of deposit or equity the news is not so welcoming as the average two-year fixed rate at 80% LTV has slightly increased over the course of this month to sit at 4.20%.

There are more options available to borrowers in this tier, though, where rates are traditionally higher due to the higher level of risk, have also risen.

And those happy to lock into a five-year fixed rate at 80% LTV will benefit from average rate drops of 0.04% since the start of the month.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “As lockdown restrictions begin to ease, the prevailing sentiment in the UK seems to be that of optimism.

“For a sector that has been beset by various changes and challenges over the last five years or so, the buy-to-let market is exhibiting remarkable resilience.

“While it goes without saying that the last year has presented great challenges to many investors in the sector, the latest Lettings Index from Hamptons illustrated that rents have risen by 5.9% in Great Britain in April 2021, the fastest rate of growth it has recorded since January 2015.”

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Williams added that the rate drops demonstrated an appetite from lenders to cater to borrowers who are keen to invest.

She revealed, as providers continued to tweak their ranges, Moneyfacts had seen rate reductions of as much as 0.90% from TSB, while Virgin Money made cuts of up to 1.06% on a selection of its products this month.

“Hampton’s indicated that the rise in rental growth may well be linked to the fact that there were 45% fewer homes available for rent in April 2021 compared to April 2019,” Williams added.

“For investors contemplating an expansion into the buy-to-let sector, demand from tenants is booming and while it remains difficult to earn a decent return on many forms of investment, it’s understandable why rental property could be a tempting option.”

Source: Mortgage Finance Gazette

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A third of landlords have expanded buy-to-let portfolios

Buy to Let – The ‘opportunity to buy at a discount’ is driving many landlords to increase their portfolio a new survey has revealed.

In a study of more than 300 landlords, 34% said they had either recently purchased another buy-to-let property (BTL) or intended to buy one within the next nine months.

While the most common reason for their additional purchase was the opportunity to buy at a discount, other key factors included long‑term investment (35%), stamp duty savings (34%) and diversification by either location (26%) or property type (23%).

The survey also revealed how 43% of landlords surveyed said that they had temporarily lowered rents during the pandemic to help tenants, with 22% saying they had refinanced their mortgages since the arrival of coronavirus.

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Paul Fryers said: “Understanding the purchasing motivations behind professional landlords is an essential factor for Zephyr and our mortgage broker clients.

“It’s equally important to recognise and appreciate some of the challenges landlords have been facing during the past year and how they will affect their current and future applications.

“During the pandemic we saw a significant rise in the use of limited companies to buy and manage property portfolios, and it seems a significant proportion of landlords have made the most of the opportunities provided by the buoyant market conditions we have experienced over the past six months.”

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The survey also revealed only 7% of landlords had taken a mortgage holiday and 13% had sold a property during the pandemic.

Those landlords who did not purchase additional buy-to-let properties over the last year cited ‘declining rental yields’ (51%) and ‘concern about economic stability’ (42%) as their main reasons.

Matt Trevett added: “Although the buy-to-let market has remained more buoyant than some predicted, the last year has not been without its challenges for many tenants and landlords.

“The survey suggests a large proportion of landlords have been acting to support their tenants, with a significant proportion saying they had temporarily lowered rents during the pandemic.

“A recent survey also showed that the pandemic has triggered movement from cities to towns and the countryside, so landlords seeking to rebalance their portfolios may look to make purchases that reflect that trend.”

Source: Mortgage Finance Gazette

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Govt’s proposals on renting reforms expected to improve BTL reputation

Government proposals on renting reforms could improve the buy-to-let sector’s reputation, brokers have said, although a warning has been sounded on their effect on the investment appeal for landlords.

In yesterday’s Queen’s Speech (May 11) the government said it would ‘enhance’ the rights of those who rent, in addition to helping more people own their own home.

Measures proposed by the government in its policy paper included bringing forward reforms this year to drive improvements in rented accommodation standards, well targeted enforcement that drives out criminal landlords, and exploring the merits of a landlord register.

The government also said the reform package was expected to require all private landlords to sign up to a redress scheme for tenants.

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Ben Beadle said the government’s proposals amounted to some of the biggest changes in the private rented sector in 30 years.

Beadle added: “We welcome the government’s ambitions to drive out bad landlords from the sector without penalising those who do the right thing. We want to root out all those who bring the sector into disrepute.”

Bob Young likewise said “proportionate and fair” measures would benefit both tenants and ‘good’ landlords.

Young said: “For decades now a small minority of landlords have effectively got away with properties that are not suitable for habitation and as a buy-to-let lender we’ve seen some appalling examples of this.

“This minority is damaging the reputation of the vast majority of landlords who look after their properties and are responsive to their tenants’ requests.”

In its policy paper the government also said it would publish its consultation response on abolishing ‘no fault’ evictions and strengthening repossession grounds for landlords when they have valid cause.

Paul Brett commented: “There is an absolute need for landlords to be able to retake possession of their properties when circumstances dictate that they need to, but tying this with changes to drive up standards is the right thing to do.

“This will support responsible landlords, which in turn will enable them to help more tenants.”

In 2019 the then-government announced proposals to prevent private landlords from evicting tenants at short notice and without good reason before launching a consultation.

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Under section 21 of the Housing Act, private landlords can repossess their properties from assured shorthold tenants without having to establish fault on the part of the tenant.

Angus Stewart said: “Landlords have been bracing themselves for the Renters Reform Bill for some time now, so we welcome the fact we now have a way forward.”

Stewart added: “Landlords need to know they can take back properties when they have a legitimate reason for doing so and tenants need to be able to plan their futures.

“We should not forget mortgage lenders who will be looking for reassurance as to their rights as creditors. Getting the balance right will be crucial and as ever the devil will be in the detail.”

But Bulent Kandemir said the renters’ reforms come after private landlords have been “hit very hard” in the past few years, such as with restrictions to income tax relief.

Kandemir added: “I would question whether these landlords have the appetite to keep doing this going forward, as the profitability of owning a property to let is arguably no longer there.”

By Chloe Cheung

Source: FT Adviser

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More Than a Quarter of Landlords Plan to Expand Portfolios

Just over one in four buy-to-let landlords are planning to expand their portfolio within the next 12 months, according to fresh research.

With buy-to-let continuing to deliver solid returns that outstrip many other asset classes, a survey by Knight Knox shows that 27% of buy-to-let landlords are currently planning to add to their portfolios in the near term.

The poll of 500 UK landlords by the property investment consultancy found that 27% of respondents are planning to expand their property portfolio in the next 12 months – influenced in part by the stamp duty holiday extension.

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Of those looking to invest in property at the moment, 35% say that the stamp duty holiday extension has influenced their decision.

Knight Knox’s commercial director, Andy Phillips, said: “The last 12 months have been a total rollercoaster for the housing market. Lockdown 1.0 temporarily halted activity before Rishi Sunak’s announcement of the stamp duty holiday led to the industry facing one of the busiest periods for a decade.

“For landlords, the incentive has provided a welcome opportunity to purchase more properties while making significant savings. Appetite for rental property is high – particularly given that the financial impact of the pandemic could be affecting people’s plans to purchase – so buy-to-let is a fantastic investment in the current climate.”

The research also found that on average, UK landlords earn over £20,000 net income per year from renting out properties and 88% are feeling confident or very confident about the buy-to-let market outlook for the next 12 months.

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Two-thirds of landlords said the pandemic had had no impact on tenancies within their properties and just 4% were planning to reduce their portfolio over the next year.

Phillips added: “The property market plays a crucial role in the country’s economy, so it’s encouraging to see that during times of crisis, the government has been forthcoming with lifelines to help keep the wheels of industry turning.

“As long as developers can continue to bring high quality property to market and landlords have the confidence to invest, the sector will remain buoyant and consumer demand for rental housing can be fulfilled.”

By MARC DA SILVA

Source: Property Industry Eye

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Brokers warn of buy-to-let issues with new fire safety law

Mortgage brokers have warned of difficulties for buy-to-let landlords in selling and remortgaging flats, after a majority in the House of Lords voted against an amendment to the new Fire Safety Act.

The amendment sought to prohibit tenants and leaseholders from being liable for the remedial costs of meeting fire safety requirements if they exceeded £500, until a statutory scheme is implemented.

MPs disagreed to four versions of the amendment, as the issue of remediation costs was “too complex to be dealt with in the manner proposed” by the Lords.

The act, which clarifies where responsibility for fire safety lies in multi-occupied buildings in England and Wales, became law last week.

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Amid a ban on evictions, which is currently due to end on May 31, brokers have warned that without this amendment, the act will prevent buy-to-let landlords from refinancing – particularly if they are leaseholders in a block of flats.

Hiten Ganatra said this was particularly due to the fact many lenders now insist on an EWS1 form, which is an industry-agreed way for a building owner to confirm that an external wall system on residential buildings has been assessed for safety by a suitable expert.

Ganatra said: “This is an incredibly delicate situation, which will negatively impact many buy-to-let landlords who have invested in flats, especially if these landlords are already facing financial challenges from non-paying tenants as a result of the Covid eviction ban.”

He added: “Their investments could become unsellable and the problem could be exacerbated even further with tenants being worried about moving into flats in the absence of having confirmation that remedial works have been completed.

“This could also severely hinder buy-to-let landlords’ ability to refinance, as most buy-to-let lenders are insisting on EWS1 forms giving the building a clean bill of health, before allowing the mortgage to go through.”

Dominik Lipnicki questioned the fairness of buy-to-let landlords potentially being required to cover remedial costs of any affected leasehold properties.

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Lipnicki said: “How can it be right that innocent buy-to-let landlords who have invested in leasehold properties will now be responsible for a huge potential liability to correct fire and safety issues that they were simply unaware of, rendering many of these properties unsellable and impossible to remortgage?”

In February the government announced it would fully fund the cost of replacing unsafe cladding for all leaseholders in residential buildings in England that are at least 18m high.

Meanwhile, a scheme was announced to enable leaseholders of lower-rise buildings (between 11m and 18m) to pay for any necessary cladding removal through a long-term, low interest, government-backed financing arrangement.

But in a report published last week (April 29) the Housing, Communities and Local Government Committee said proposals to fund cladding remediation on buildings below 18m through a loan scheme should be “abandoned”.

It called for an “enhanced” fund open to all buildings with existing fire safety issues, without barriers based on height, types of tenure or the nature of fire safety defects.

By Chloe Cheung

Source: FT Adviser

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Rise in Landlords Purchasing BTL Properties through Limited Companies

Rising numbers of UK and international landlords are choosing to register as a limited company to manage their BTL portfolios and to take advantage of sizeable tax benefits.

Thirlmere Deacon has seen a spike in international investors enquiring about forming a limited company, up 62 per cent year on year. It claims that further findings reveal that there were a record number of new limited companies set up in 2020, with 228,743 buy-to-let firms up and running.

Last year, there were a total of 41,700 buy-to-let incorporations, an increase of 23 per cent on 2019. The numbers have more than doubled since 2016, rising 128 per cent, when tax changes for landlords were introduced. Between the beginning of 2016 and the end of 2020 more companies were set up to hold buy-to-let properties than in the preceding 50 years combined. Companies set up to hold buy-to-let properties were the second most common company founded during 2020, with companies selling goods online or by mail order in first place.

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More than a third (34 per cent) of all companies set up to hold buy-to-let properties in 2020 were in London. Together, London and the South East accounted for almost half (47 per cent) of all incorporations.

Stuart Williams, founder and CEO of Thirlmere Deacon, said: “If landlords hold property in a limited company, they have the ability to offset 100 per cent of mortgage interest against profits, while those holding a property in their own name can offset just 20 per cent. Investing in property through a company provides landlords with higher levels of tax relief and personal tax savings. Landlords can grow their BTL portfolio more quickly, as there is no income tax on the retained profit, thus allowing more cash to re-invest. Although corporation tax is payable on trading profits, this is lower than the higher income tax rate.”

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He added: “However, running a portfolio through a limited company is not right for everyone. One of the main benefits of remaining a private landlord is that any post-tax profits can go straight into their pocket. Profits can be used then for anything they choose – all paid for by the tenants.”

BY PETE CARVILL

Source: Property Wire

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