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Number of landlords falls to seven year low

The number of landlords in the private rental sector has fallen to a seven year low, according to Hamptons International’s monthly lettings index.

Hamptons International estimate that there were 222,570 fewer landlords in the private rental sector in 2019 than in 2017.

The number of landlords peaked at 2.88 million in 2017, but tax and regulatory changes have caused some landlords to sell up and leave the sector.

By 2019 there were 2.66 million landlords in Great Britain, 8% fewer than the 2017 peak.

This means that the number of landlords has fallen to the lowest level in seven years when there were 2.58 million landlords in Great Britain..

Despite this decline, the average landlord now owns more properties.

The average landlord in Great Britain owned 1.93 buy-to-let properties last year, the highest level since 2009 when the average landlord owned 2.02 properties.

Last year, 30% of landlords owned more than one buy-to-let property, the highest proportion on record.

This is up from 21% in 2016 when many of the tax and regulatory changes were announced and is double the proportion recorded a decade ago when 15% of landlords owned multiple buy-to-lets.

Landlords in the North East had the biggest portfolios.

The average landlord based in the North East owned 2.05 properties last year, closely followed by landlords based in Yorkshire & Humber (2.03 properties per landlord) and London (2.01 properties per landlord).

Investors in Wales and Scotland were least likely to have big buy-to-let portfolios, with the average landlord letting out 1.83 properties in each region.

Average rents for new lets rose to £998 pcm in January, up 3.6% on the same time last year.

Rents continued to increase the most in the South West (6.0%), followed by the East (4.1%) and Greater London (4.1%).

Rents rose in every region, but Wales recorded the weakest rental growth at 1.2%.

Over the past two years the rental sector has shrunk, with the number of privately rented homes falling by 156,410 since its peak in 2017.

Aneisha Beveridge, head of research at Hamptons International, said: “The number of landlords in the private rented sector has fallen to the lowest level in seven years.

“While 222,570 landlords have left the sector since 2017 due to tax and regulatory changes, those who have stayed tend to have bigger portfolios – a further sign that the sector is professionalising.

“The average landlord in Great Britain owned 1.93 properties last year, the highest level since 2009.

“Rents rose in every region across Great Britain in January to stand 3.6% higher than at the same time last year.

“The number of new homes purchased by landlords remains low, which is feeding through to fewer homes available to rent.

“This is particularly true in the South, where rents are rising the most.”

By Jessica Nangle

Source: Mortgage Introducer

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Avoiding Problems When Renting Property To Tenants

We are at the start of a new decade and many landlords are panicking. New regulations, lots of new regulations, are making renting property harder. However, so long as you take care to keep up to date and follow the rules, you should be fine.

People will always want somewhere to live, and your investment should hold its value.

Using a good letting agent is of course one way to go. However, although many agents are great, others are not, and it is often hard to tell good agents from bad. There is really no substitute to learning as much as you can yourself about the renting regulations, so you can check that your agents are doing things properly. Or so you can save money by doing things yourself.

Here is a list of some of the preliminary things you need to do before you start advertising for tenants:

1. Protect your property at the Land Registry

This is probably the most important thing of all. If you rent a property to tenants but the contact address for the property at the Land Registry is the property itself, it is easy for dishonest tenants to borrow money on the security of the property, or even sell it without your knowledge.
Find out more from the video here https://youtu.be/uX6K-HIe1ZU featuring landlord and tenant solicitor David Smith, speaking at the Landlord Law Conference.

2. Check you have permission to let

There are a number of things to consider here:

  • Does your mortgage allow renting? If you do not have a ‘buy to let’ mortgage you need to check this out.
  • Is your property leasehold? For example, are you are planning on renting out a leasehold flat? If so, you need to check the terms of your lease. Some leases forbid subletting which means that you could be at risk of forfeiting your lease if you rent to tenants.
  • Does your insurance permit you to rent out the property? You need to be careful here as if you are using the wrong type of insurance your insurance company may refuse to pay out on claims. Check out my free Insurance Mini-Course here to find out more.
  • Is your property an HMO? It will normally be an HMO if you rent to three or more sharers who are not family members. If your property is an HMO you may need to obtain an HMO license – and there are fierce penalties if you rent a licensable HMO property while it is unlicensed. Find out more in our Free HMO 101 course here.

3. Make sure your property is in a proper condition

Once you are sure that you have all the necessary permissions, you need to make sure that the property is in a fit and proper condition before advertising it to let.

Landlords now not only have to comply with the repairing obligations (set out in section 11 of the Landlord & Tenant Act 1985) but also with the new legal obligations requiring property to be ‘fit for human habitation’.

Here are some of the other checks and inspections you need to do:

  • If the property has gas you need to get it inspected by a gas installer registered with the Gas Safe Register. They will provide you with a certificate which must be handed to tenants before they move into the property
  • You will need to obtain an Energy Performance Certificate which must also be given to tenants before they rent the property. Your property must have an energy rating of not less than E.
  • You must carry out a fire risk assessment and ideally keep a record of this. Find out more in the RICS Clear Guide to Fire Safety.
  • You must install a working smoke alarm on every storey of the property which is being used for ‘living accommodation’ and a carbon monoxide alarm in every room used as living accommodation where solid fuel is used (e.g. coal fires and wood burners). These need to be tested and shown to be in good working order on the first day of the tenancy. There is government guidance here. Note that at present this is only a legal obligation in England, but landlords in Wales are advised to fit alarms also.
  • You need to carry out risk assessments for legionella disease and keep records to show that this has been done.
  • You must ensure that all furniture provided complies with the furniture regulations.

4. Ensure that you comply with Data Protection rules

This is something that is often overlooked. However, it is important and there are hefty penalties for non-compliance.

Compliance is not hard though:

  • All landlords need to register with the Information Commissioner’s Office, and
  • Ensure that tenants data is kept safely in compliance with the data protection legislation (which applies to landlords)
  • Tenants also need to be given suitable data protection notices.

Find out more about this here.

5. Make sure you keep up to date

Law, rules and regulations change. For example, parts of this article could be out of date if you are reading it months after it was first published. So, it is really important that you keep up to date with developments.

By Tessa Shepperson

Source: Residential Landlord

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Landlords to allow pets in rented homes unless they are badly behaved

Landlords should no longer stop renters from having pets if they are well behaved, according to the government.

Currently it is almost impossible to find a rented house which will allow you to keep a dog or cat – just 7% of landlords advertise their homes as suitable for pets.

Renters often find themselves forced to give up their beloved pets to find accommodation.

But today (January 4), Housing Secretary Robert Jenrick has called on landlords to make it easier for responsible tenants to have well behaved pets in their homes.

MP Robert Jenrick announced an overhaul to the model tenant contracts earlier today, with pets at the heart.

His calls came as figures show more young people and families than ever before are renting.

He said they should be able to enjoy the happiness that a pet can bring into their lives.

The government’s model tenancy contracts for renters, which can be used as the basis of lease agreements made with tenants, will now be revised to remove restrictions on well behaved pets.

This is to ensure more landlords are catering for responsible pet owners wherever possible.

The government emphasised there should be a balance between rights for renters to keep their pets and landlords’ properties should be protected from damage.

But they said total bans on renters with pets should only be implemented where there is good reason, such as in smaller properties or flats where owning a pet could be impractical.

Housing Secretary Robert Jenrick said: “Pets bring a huge amount of joy and comfort to people’s lives, helping their owner’s through difficult times and improving their mental and physical wellbeing.

“So, it’s a shame that thousands of animal-loving tenants and their children can’t experience this because they rent their homes instead of owning property.

“So, I’m overhauling our model tenancy contract to encourage more landlords to consider opening their doors to responsible pet owners.

“And we will be listening to tenants and landlords to see what more we can do to tackle this issue in a way that is fair to both.

“This is part of this new government’s mission to improve life for tenants, recognising that more are renting and for longer in life.

“We’ve already taken action, banning unfair letting fees and capping tenancy deposits, saving tenants across England at least £240 million a year, and I will continue to take more steps to secure a better deal for renters up and down the country.”

More news for renters

The government will be bringing forward a bill to update the relationship between tenants and landlords as well as to introduce a Lifetime Deposit scheme, to make moving between properties easier and cheaper.

The government is also working to establish First Home, a new programme for first time buyers, enabling them to purchase a new build property in their local area at a 30% discount.

The national model tenancy agreement is the government’s recommended contract for landlords to use when signing on new tenants for their properties in England.

It sets out the minimum requirements and can be altered by landlords to cater for specific circumstances, tenants or properties.

A revised model tenancy agreement will be published by the government this year.

By Vicky Castle

Source: Kent Live

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A third of landlords looking to grow portfolio

Although landlords are pessimistic about the economy, a third are looking to grow their portfolio, Monmouthshire Building Society has found.

Nearly half (45%) of landlords believe the economy will worsen and 53% think legislation around tenancy and eviction will get worse for landlords.

However, nearly two-thirds (71%) think demand for rental properties will increase and a fifth (20%) are considering growing their portfolios.

Holiday lets were highlighted as a growth area with 64% of new landlords having a holiday let property in their portfolio.

Dan Goulding, product development manager at Monmouthshire Building Society, said: “It’s been a difficult time for landlords recently, and our survey has highlighted that the majority don’t expect things to improve anytime soon.

“However, the survey also shows that many landlords believe there are opportunities to be found in the market, such as investing in holiday lets and diversifying their portfolios.

“At Monmouthshire Building Society we will continue to support landlords by offering a wide range of buy-to-let mortgage products, including holiday let, portfolio and limited company mortgages.”

By Michael Lloyd

Source: Mortgage Introducer

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Landlords facing tax increases

One of the biggest life events to provoke a conversation about protection is when people buy a house and take out a mortgage.

This has been a constant for a long time in the UK.

Residential mortgages are a big catalyst for people taking out some form of protection cover.

Sometimes though, advisers find it a bit more difficult to position the idea of protection to landlords because the protection need is not quite as obvious.

People who purchase properties which they intend to rent out typically use buy-to-let interest only mortgages.

Often, their long term expectation is that property prices will increase and they will eventually cash in by selling them.

In the meantime, the rental income will fund the monthly mortgage payments and will also provide them with additional income.

Many landlords see the value of a property portfolio as a crucial part of their retirement planning.

However, in 2017, we saw the implementation of some new tax rules that meant over the next four years, the amount of mortgage interest which could be offset from rental profit reduces.

In this current tax year (2019/2020), landlords can offset 25 per cent of their mortgage interest from their rental profit.

From April 2020, this reduces to zero.

There is a tax credit relief available based on basic rate tax, but landlords will have to pay income tax on all of the rental income they receive meaning that many of them will pay more tax.

This new tax rule is going to change the landscape of the buy-to-let market.

How it normally works

For example, let’s say a landlord has five properties in their buy-to-let portfolio.

The properties are worth about £700,000 in total, but there are 5 lots of £100,000 interest-only mortgages, a total of £500,000.

Let’s say the interest rate on each buy-to-let mortgage is 3 per cent.

The total interest-only mortgage payments each month would be £1,249 or £14,988 each year.

Let’s say the income received on each property is £600 each month – in total this is £3,000 each month or £36,000 a year.

Clearly we can see that despite the large amount of mortgage debt and mortgage payments that need to be paid; the rental income will fund these mortgage payments and still yield a generous profit to the landlord.

A private landlord would typically complete a tax return each year and on it they would detail the income from their property portfolio and then detail all of their expenditures such as management fees and repairs, along with other expenses including the mortgage interest.

Income tax on the rental income profit is then charged at the normal rate of income tax.

But as you can guess, from April 2020, many private landlords with buy-to-let mortgages will simply pay more income tax on their rental income.

What if interest rates go up?

We know that we have been experiencing record-low interest rates for the past decade but inevitably, at some point, they are going to go up.

With this same example, let’s say the interest charged on those buy-to-let properties goes up to 6 per cent. I would imagine most people reading this would have experienced paying something close to that rate at some point in the past.

In my example scenario, the mortgage interest payments would increase to £2,501 each month or £30,012 each year.

This scenario looks a lot less attractive for a landlord.

If they can not offset interest-only mortgage payments from their rental income profit; this will result in significantly lower returns and then they will inevitably have to consider alternative options.

How will landlords adapt?

Let’s say a landlord runs their property business through a company rather than as a private venture; would these new tax changes I mentioned above apply? The answer is no.

If a company owns the property portfolio then the tax which is paid on the profit of the business is corporation tax.

At the moment, the corporation tax rate is 19 per cent but this is going to drop to 17 per cent in the next tax year (2019/2020) making the idea of holding properties within a limited company or specifically a SPV (Special Purpose Vehicle) quite attractive.

This is because a lot less tax will need to be paid which means a much greater net profit.

I must caveat that any landlords who do decide to move their private property portfolio across to a SPV would need to take proper advice because there are lots of implications to consider including stamp duty, lending criteria for new mortgages and various other considerations.

That said, at face value, it feels like these tax changes will nudge many landlords to move across to this type of model going forward.

Partners in business

Let’s look at a scenario where landlords set up a business to hold their property portfolio.

What are the protection opportunities that could arise for situations where people work together on a property venture?

Let’s say three skilled tradesmen get together with the idea of setting up a rental business.

They set up an SPV and they each invest £50k of their own money to buy their first property from an auction.

They buy the property with the cash they have pooled together with the intention of renovating it and putting it on the rental market.

Bob is a builder, Eric is an electrician and Paul is a plumber.

They do all the necessary work themselves and when the property is complete, they put it on the rental market.

The value of the property has increased, so they mortgage it and using those funds, they return to the property auctions to find their second property.

Their plan is to carry on doing this and build up their property empire.

Opportunities for Protection conversations?

What are the immediate protection opportunities up for discussion?

Control – Each partner will have a shareholding in the business to the value of how much they invested, so there is a question of how they keep control of their business if one of them dies or gets sick.

How would the surviving business owners feel if someone came into the business that they did not want to work with, because they had inherited their deceased business partner’s shares?

What if this new person has no useful skills but wants a say in how the business is being run?

Would the surviving business partners like to have control of their own destiny?

The answer to fix this problem is simple business protection.

This could be life insurance or critical illness cover, which would provide the necessary funds to allow the remaining shareholders the ability to purchase the shares of the other shareholder who might have died or been diagnosed with a critical illness.

Part of this solution would include a legal agreement which is designed to protect both parties – the business but also the family of the deceased or sick director.

Key people? – A scenario like this also suggests that all three business owners are key people.

If they perform duties which are essential to the running of the business, then sickness or death of one of them could affect profitability.

The answer to this problem is simple protection cover for each key person.

This could be life cover, critical illness cover or income protection; all of which are designed to allow the business the funds to protect their profits and perhaps bring someone into the business to perform the duties of their sick or deceased business partner.

Debts? – Another problem is those mortgages.

Simple loan protection in the shape of life cover or critical illness cover could be used to repay part or all of those debts – just like normal mortgage protection.

I also mentioned the initial funds that each partner put into the business when they set it up.

Each of those £50,000 deposits which were used to buy the first property are directors’ loans to the business.

In the event of the death of one of the business owners, how quickly would the family want that money back?

It is payable immediately, but it would be a problem if the surviving business owners did not have that kind of money available and they would not be in a position to pay it back.

Would this result in the surviving business owners needing to sell one of their properties to release equity? How will this affect things?

Future prospects

I think that over the next few years we’re going to see more landlords moving across to the SPV business model purely for tax reasons but this will open up a whole world of protection opportunities with buy-to-let landlords who have often been a tough nut to crack.

The trick for advisers is to not over complicate your process. Keep it simple and keep things clear.

Build your conversation around two key points: what is the problem and how do we fix it?

Problem: what specifically is the problem? What would happen if? What would the effect be?
Solution: what is the solution to fix this problem?
It does not need to be complicated, but this is another example of where proper financial advice is crucial for your clients.

By Vincent O’Connor

Source: FT Adviser

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‘Temporary relief’ for tenants as fewer landlords hike rents

The number of landlords increasing rents declined last month but is still “worryingly high”, ARLA Propertymark warns.

The trade body’s October Private Rented Sector Report found that the number of tenants experiencing rent rises fell by eight percentage points in October, with 50% of letting agents witnessing an increase in rent prices, down from 58% in September.

This is the lowest figure since June, when the number of tenants experiencing rent rises was 55%, but it is still up compared with the 22% recorded in October 2018.

Agents reported that more tenants successfully negotiated rent reductions last month, at 1.6% from 1.2% in October.

Despite this increase, the figure is down year-on-year from 3.7% in October 2018 and 2.5% in October 2017.

Agents also reported an eight percentage point increase in stock per branch to 201 in October, from 193 in September.

This is up from 198 in October 2018 and 182 in October 2017.

Demand from prospective tenants remained the same with 72 registered prospective tenants per member branch.

David Cox, chief executive of ARLA Propertymark, said: “This month’s figures show some temporary relief for tenants. However, while the number of landlords increasing rents has fallen, year on year the figure remains worryingly high.

“Even looking at the increase in the number of tenants negotiating rent reductions, which should be a positive thing, when comparing year-on-year it is less than half of what it stood at in 2018.

“For far too long, successive governments of all political persuasions have passed significant amounts of complex legislation for landlords, making the buy-to-let market a less attractive investment, and this coupled with Brexit uncertainty and a looming General Election has left the sector strained.

“Unfortunately, rents are likely to remain high and tenants will continue to feel the pinch.”

By MARC SHOFFMAN

Source: Property Industry Eye

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Landlords fear election could ‘end’ buy-to-let

Landlords are fearful the buy-to-let sector will be used as a political football in the upcoming election, with politicians competing with pledges that could “end the market”.

A number of mortgage brokers said they have been contacted by their landlord clients with concerns about a Labour majority government and its potential ‘right to buy’ scheme.

The right to buy scheme replicates the scheme introduced by the Thatcher government which allowed social housing tenants to buy their homes at a discounted price.

Under the Labour proposal, the government would set a discounted price for private property, likely based on how long the tenant had lived there.

Dan White, director at Champion Hall & White, said: “I’ve had people call me about the scheme and I do think landlords will opt to exit the market.

“I think this could be catastrophic for the housing market and an outrageous ruling. Enforcing a right to buy would seriously damage the integrity of the property market and encourage the wrong message.”

Mark Bailey, director of property asset manager Landwood, warned a right to buy scheme could result in a negative outcome for renters if landlords chose to sell up and rental supply diminishes.

He said: “If politicians of any leaning are serious about fixing the housing crisis then this ridiculous policy is not the way to go about it.

“The solution is to build more social housing, more starter homes and get more people on the property ladder and reduce the number of renters that way.”

Sarah Drakard, IFA at Cruze Financial Solutions, said landlords thought they would be “even more attacked” under a Labour government than they already are.

She said: “Landlords already feel quite hard done by and hit by government policies over the past few years, but many think a Labour government would potentially bring changes that would make being a landlord no longer viable economically.”

The buy-to-let market grew rapidly after the financial crisis but its growth has since stalled after a number of tax and regulatory changes introduced by the Conservative government hit landlords’ pockets.

How the rules changed:
An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

Chris Sykes, a mortgage broker at Private Finance, said his landlord clients were concerned the election would mean “something else” would happen which would mean “the end of the buy-to-let market”.

He said: “I think landlords are generally worried and concerned as to whether their investment will end up being a financial asset or a burden.

“It used to be more of a safe investment but now it’s become less attractive and if any further political changes come in, it will become even less so.”

David Hollingworth, director of communications at L&C Mortgages, agreed, adding that anything that put a further squeeze on landlords could ultimately cause prospective investors to rethink their plans or ultimately see existing landlords considering scaling back or exit.

By Imogen Tew

Source: FT Adviser

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Chancellor urged to revisit stamp duty for landlords

The government is being urged to “do more” to ensure the housing market is able to overcome the impact of Brexit.

Online mortgage broker Mortgages.online is calling on the Chancellor to take further steps in his Spending Round to stimulate the market amid Brexit uncertainty, pointing to the buy-to-let market as the one that requires focus.

Stamp duty in particular needed revisiting it stated after a surcharge of 3 per cent was introduced for second homes in April 2016, closely followed by cuts to mortgage interest tax relief for landlords.

Paul Flavin, managing director of mortgages.online, said: “The increased stamp duty payable on buy to let purchases, and the removal of the ability to offset mortgage costs has put many investors off the property market, with a knock on effect of reducing the stock of rental properties.

“We would encourage the Chancellor to look again at the negative impact these measures have.”

He added that Brexit fears had helped create a general lack of confidence and depressed values, exacerbated by valuers being cautious.

Mr Flavin said: “We have two basic messages for the Chancellor. Relief for buy to let investors and measures to stabilise the economy with clarity once and for all on Brexit, are both needed urgently.

“The alternative is for a continuance of a depressed housing market which is healthy neither for the economy nor the government if an election is on the horizon.”

The call comes after research found a record number of landlords are planning to sell rental property in the next 12 months as their profitability has fallen for the third successive quarter.

Meanwhile yesterday (August 28) the government announced measures to make it easier for people to get on the housing ladder with Help to Buy.

Under the changes, which are taking effect immediately, people will be able to take out longer mortgages than the current 25-year terms.

The move reflects change in the wider mortgage market, where the number of first-time buyers taking out a mortgage of more than 30 years has doubled in the last decade.

Housing minister, Esther McVey MP, said: “We are determined to open up the dream of home ownership to the next generation and our Help to Buy schemes have already been used more than 500,000 times by families to get a leg up onto the property ladder.

“I want our Help to Buy scheme to work for homeowners so we are giving people the freedom and flexibility to take out longer mortgages, if it suits their needs.”

Mr Flavin said: “The extension to 35 years will help many borrowers as their monthly payments will reduce but the Chancellor will need to do more in the Autumn Statement on 4 September if the housing market is to overcome its Brexit blues.”

The government also announced reforms to shared ownership rules that allow homeowners to increase their share at increments of 1 per cent rather than the current 10 per cent.

Mark Hayward, chief executive of NAEA Propertymark, said: “We support thinking creatively about ways to help first time buyers on to the housing ladder and consumers will welcome the opportunity to increase their share of ownership more easily and to simplify the process by which they can sell their homes.

“Government must be careful of the unintended consequences that any changes to Help to Buy could have on the rest of the market as in many cases these are not properties that feed into the general market place but into a ‘cul de sac’ with no assistance to upward activity”.

The Treasury has been approached for comment.

By Jennifer Turton

Source: FT Adviser

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‘Record’ number of landlords to leave the market

A record proportion of landlords are planning to sell rental property in the next 12 months as their profitability has fallen for the third successive quarter, according to research.

Research firm BVA BDRC’s Q2 Landlords Panel report, seen by FTAdviser, found more than a quarter (26 per cent) of landlords were planning to sell at least one property from their portfolio in the next year.

According to the report, this was up 8 per cent from the tally measured in the first quarter of this year, three times higher than at the start of 2015 (9 per cent) and the highest level of planned sales the report had ever measured (since 2006).

On top of this, out of the 738 landlords polled in June, just one in seven intended to purchase additional property over the next year.

The most commonly cited reason for wanting to divest property was that it was no longer financially viable or profitable, followed by an increasing burden of legislation alongside “too much hassle/stress for too little return”.

The report also found that net profitability for landlords had fallen for three successive quarters — the first time since tracking began in 2006.

Although net profitability remained high at 80 per cent, this was down from 81 per cent in Q1 of this year, from 84 per cent at the end of 2018 and from 85 per cent in Q3 2018.

This decline was partly down to a fall in rental yields which, according to the report, fell to 5.5 per cent in Q2 — the lowest in nine years. Landlords managing houses of multiple occupancy derived the highest average yield alongside student properties.

But profitability has also been affected by tax and legislative changes which have hit the buy-to-let sector over recent years.

An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 the relief will be limited to the basic rate of tax, currently 20 per cent.

Consumer site Which predicted landlords’ incomes could drop by up to 57 per cent due to the changes.

Since the changes, purchasing a buy-to-let property through a limited company has become more than twice as popular as buying as an individual as it is seen to be more tax efficient.

Landlords took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The government has since announced a proposed abolition of Section 21 orders — so-called ‘no-fault eviction orders — and has banned all tenant fees, meaning estate agents now charge landlords for the entire cost of letting agreements.

Joanna Leyden, director at Monument Financial, said: “The increased regulation for landlords is likely to be a driving factor, although we are still seeing people buying property as an investment.

“It’s possible too that falling property prices in London have made some decide to increase the diversification of their investment portfolio and reduce their exposure to real estate.”

Shaun Church, director at Private Finance, said the number of landlords selling up was a “trend that will continue”.

He thought there were fewer buy-to-let landlords coming into the market and that those within it will looked to move properties into limited companies.

He added: “I think the people coming out the market will be those ‘accidental landlords’. And I do think it will continue as it’s not going to get any better.

“The market has definitely fallen, for us anyway. We’re not doing very many of buy-to-let purchases at all.”

But Craig McKinlay, new business director at Kensington Mortgages, said although there had been many government imposed changes over the last few years, there was still room to be successful in the buy-to-let space.

He said: “The remortgage market remains strong and limited companies are going from strength to strength.

“Brokers and landlords who focus on the right areas can still be successful and access some of the lowest rates ever seen.”

By Imogen Tew

Source: FT Adviser

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Over half of landlords letting to Universal Credit tenants experiencing arrears

Universal Credit is causing tenants to fall behind with their rent, according to new research for the Residential Landlords Association.

It reports that 54% of private landlords who have let to tenants on Universal Credit in the past 12 months have seen them fall into rent arrears.

Of these, 82% said that the arrears only began after a new claim for Universal Credit or after a tenant had been moved from housing benefit.

Almost seven in ten (68%) landlords said that there was a shortfall between the cost of rent and the amount paid in Universal Credit.

Private landlords renting to Universal Credit claimants can apply to have the housing element paid directly to themselves when a tenant has reached two months of rent arrears.

This is known as an Alternative Payment Arrangement (APA).

The RLA’s research shows that it took landlords an average of almost 8.5 weeks for an APA to be arranged – meaning that landlords can be left with almost four months of rent arrears before they begin to receive the rent they are owed.

The research further found that 36% of landlords said that they had buy-to-let mortgage conditions which prevent them from renting to benefit claimants.

The RLA is calling on the Government to do more to prevent rent arrears occurring in the first place, including:

Giving all tenants from the start of a claim for Universal Credit the ability to choose to have the housing element paid directly to their landlord.
Ending the five week waiting period to receive the first Universal Credit payment.
Ending the Local Housing Allowance freeze to ensure it reflects the realities of private sector rents.
David Smith, policy director for the RLA, said: “Today’s research shows the stark challenges the Government still has in ensuring Universal Credit works for tenants and landlords.

“The system only provides extra support once tenants are in rent arrears. Instead, more should be done to prevent tenants falling behind with their rent in the first place.

“Only then will landlords have the confidence that they need that tenants being on Universal Credit does not pose a financial risk that they are unable to shoulder.

“Without such changes, benefit claimants will struggle to find the homes to rent they need.”

By ROSALIND RENSHAW

Source: Property Industry Eye