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Residential property sales jump up to hit a three-year high for January

HMRC has recorded the highest number of transactions for the month of January for three years.

The taxman’s provisional UK property transaction data for January, based on Stamp Duty returns, records 102,810 sales for the first month of the year on a seasonally adjusted basis.

This is up 5.2% annually and the highest level for the month since 102,880 were recorded in January 2017.

The figure is up 12.7% annually on a non-adjusted or ‘actual’ basis to 88,850.

Sales volumes were up annually across all regions, increasing 13.2% in Northern Ireland, 12.3% in Wales and 12.7% in both England and Scotland.

Stamp Duty returns must now be sent to HMRC 14 days after a property sale completes and the taxman takes a snapshot of the data two weeks into a month.

This means that many of these sales will have been completed around the time of the General Election in December, although some may have been through the exchange and completion process before then.

HMRC has warned that its latest figures need to be treated with caution because of the element of estimation.

Commenting on the data, Andy Sommerville, director of conveyancing software provider Search Acumen, said: “The start of the year saw a slight uplift in the property market as the backlog of transactions that were put on hold at the end of 2019 start to be unleashed, given the improved political climate at the very end of last year.

“As the market picks up, we need to look at one of the chief impediments to the transaction process, namely the length and complexity of the conveyancing process.

“Smart solutions and better use of data can help. With the right technology, property lawyers can process more orders faster and with greater accuracy.

“We can’t just hope for better days. We need to capitalise on the technology available now and shake up the sector.”


Source: Property Industry Eye

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Time to close the residential property advice gap

At £1.4trn, the UK buy-to-let market is well over twice the size of retail investors’ assets under advice.

A national obsession by international standards, buy-to-let in the UK has always been an amateur endeavour; one which has so far remained outside the remit of financial advisers.

This can present a problem.

Buy-to-let typically requires large sums for a single investment, meaning that even one asset can dwarf an individual’s managed investments.

Furthermore, the typical buy-to-let landlord will have one or two properties, often situated very near to their primary residence, meaning that the balanced portfolio advisers aim to provide can seem deeply undermined.

With the emergence of new investment solutions, combined with new changes to taxation prompting landlords to re-evaluate their position, now is the time for financial advisers to take the opportunity to close the residential property investment gap.

What’s changing in the market?

Buy-to-let investment has always had its issues, but changes to taxation since 2015 (as well as predictions about future legislation concerning tenant rights) mean Britain’s amateur buy-to-let landlords are questioning whether buy-to-let still makes investment sense.

Research from mortgage lenders continually shows that investors are aware of changes taking place, but do not understand them in detail, nor how they relate to their specific circumstances.

Financial advisers can help their clients to take a clear eyed-view of their buy-to-let investments.

What is their true financial position, after tax? Once time and risk are taken into account, does it really look like they’re paying off?

Do these investments meet the suitability and capacity for loss tests that are standard in other asset classes?

For many, the numbers will show that investing in individual buy-to-let properties no longer makes sense.

What alternatives can advisers consider? 

Even when taxation, hassle and lack of diversification mean the business case doesn’t add up, investment in bricks and mortar is viewed in a different light, to the extent that 49 per cent believe property is the best way to save for retirement, according to the Office for National Statistics.

We believe the solution to this impasse is for advisers to offer products which allow clients to retain exposure to the residential property market, but in unitised vehicles that can complement existing portfolios, rather than dominating them.

Funds can be held in Sipps and Isas, making them much more tax-efficient than buy-to-let, as well as more flexible. These funds provide targeted exposure to a portfolio of residential properties, passing on property fundamentals without equity market distortion.

The entrepreneurial adviser can not only show their clients that direct buy-to-let isn’t working but allow them to retain property exposure as part of their risk-managed portfolio – clients can sell down their buy-to-let holdings, keep a foot in the property market through new products, and reallocate the rest of the proceeds into existing managed portfolios.

With £1.4tn of assets now potentially on the move, there has never been a better time for advisers to address the huge wealth stored in buy-to-let.

By doing so, not only can they demonstrate their value by solving huge problems for their clients, but they can also bring more assets from existing clients under their purview, and potentially win new clients with significant property wealth, ripe for reallocation.

With the raft of changes in the market, both relating to punitive taxation and innovative new products emerging, advisers have never had a better opportunity to close the residential property advice gap.

Source: FT Adviser

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Should You Convert a Commercial Property into Residential?

Altering a commercial property – such as a former office, a shop with flat above, a pub or even an old library – into a residential property, may sound ambitious, especially if you’ve never done it before. But this has proved a popular property investment strategy for many savvy investors for some time now.

In fact, upmarket estate agents Savills say the number of office to residential conversions increased by 40 per cent in 2017 alone.

So, why are previously die-hard buy-to-let investors turning to commercial properties?

Well, as you’ll have read in Simples Emerging landlord report, the property market is changing. And savvy landlords are changing with it looking for opportunities, and diversifying their strategies

The commercial property sector has been somewhat depressed in recent years – with many businesses changing their business models and vacating their traditional business environments. Consequently, there is an abundance of empty commercial properties with owners willing to sell. Whats more, the government introduced a little something called ‘Permitted Development Rights’ – meaning certain commercial properties can be converted to residential properties without the need for full planning.

All together this makes a great and attractive opportunity for landlords willing to look at things a little differently.

So, what do you need to know about converting a commercial property into a residential property?

Check out the list of pros and cons right here and judge for yourself.

Pros for converting commercial property into residential

  • You may not require planning permission (many shops and offices come under Permitted Development Rights, for instance).
  • Even if you do need planning permission you’re likely to get it since the government’s National Planning Policy Framework makes the reuse of empty buildings a priority
  • You’re getting a much bigger property for your money (in many cases)
  • Offices tend to be pretty centrally located and therefore attractive residential lets.
  • You won’t have to pay higher Stamp Duty for your ‘second’ home since non-residential and mixed-use properties are exempt from this.
  • There’s no property chain to delay your purchase so it should all be much smoother sailing
  • You won’t have to pay VAT (currently 20 per cent) on the purchase if you issue the seller with a 1614D form.
  • You can also save on VAT (from 20 per cent to just 5 per cent) if you need to spend money on construction works in order change your commercial property into residential accommodation.

    Cons for conversion: commercial into residential

  • In some cases you will have to apply for planning permission, this may involve architects and therefore fees!
  • You’ll need to take out a specialist buildings survey on the structure of the commercial property prior to any conversion, again increasing costs
  • Conversions can become money pits of not managed carefully.
  • You’ll need to get a specialist commercial property solicitor for the purchase
  • Often you will need development finance to do the project and this can prove more costly than a typical buy-to-let mortgage

Source: Simple Landlords Insurance

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Why British residential property remains a good bet in 2018

British residential property has long been viewed as a very strong asset class for investment. While there have been ups and downs along the way, such as the price crash in the early 90s, it has generally offered excellent long-term returns.

The market’s reputation has taken something of a knock recently, however, which has been driven by Brexit-related uncertainty and a slight cooling in price growth. This is a temporary blip and is unlikely to dampen the market in the long-run. Rather than be deterred, I firmly believe that investors should embrace some of the excellent opportunities this market presents.

The Brexit vote in June 2016 is the starting point for this slight faltering of faith in the residential market. In the run up to the referendum vote, both house prices and foreign investment in the UK were at record highs. However, a somewhat surprise result  signified a break with the status quo and ushered in economic uncertainty, and this soon led to concerns about whether price growth could be sustained.

UK inflation: where’s it heading in the long term?

However, these anticipated shockwaves failed to materialize. House prices have continued to rise ever since the referendum, illustrating that demand for residential property remains high and providing investors with strong capital returns. Rental yields across much of the country have also continued to perform well, with ever greater numbers of tenants looking to the private rented sector to meet their needs.

For some investors, the vote has actually opened up new opportunities. The devaluation of Sterling against currencies like the Euro, Dollar, and Renminbi has meant that UK assets offer better value than they did before the vote. This provides overseas investors with excellent value for money, and has also kept important capital flowing into the country’s property market – ensuring that developers can successfully finance the projects that increase the UK’s housing stock.  Similarly, a sustained low Bank Rate has also kept investors’ mortgage costs down.

While Brexit might not have been the doomsday event for the property that some expected, there are also concerns in several quarters that the market has run out of steam. There has been some evidence that the London market has cooled off slightly in recent months – particularly at the upper-end, which has been heavily affected by the changes to stamp duty on second homes. However, other parts of the country also offer world class property investment opportunities. Manchester, Liverpool and Leeds continue to provide strong returns, and our recent Global Real Estate Outlook found that Birmingham is set to become a global property investment hotspot. This is due to a combination of low prices, high yields, and a rapidly growing local economy. The UK residential property market therefore continues to offer investors with a variety of different portfolio sizes, risk appetites and capital availabilities a diverse range of different propositions.

Which way will property prices go in 2018?

While the additional stamp duty levy on second properties and recent changes to landlords’ tax relief remain in place, the political environment towards property investment is less highly-charged than it was pre-Brexit. The recent Autumn Statement, for example, was notable for the absence of significant policies directed at landlords. While punitive pre-Brexit policies remain in place, policymakers’ attentions now appear to be more focused on improving first-time buyers’ prospects and increasing housebuilding than cracking down on investment portfolios.

Looking forward, there are a few risks facing the UK’s residential sector, but many of these look increasingly unlikely to come to fruition. While economic turbulence resulting from the UK and EU failing to agree upon a divorce bill could have derailed the economy, it now appears that a reasonable deal that works for both parties in in sight. This will encourage stability in the market. Furthermore, the imbalance between supply and demand in the property market will support both a baseline of rental yields and house prices. With the UK’s population continuing to grow, this trend is unlikely to be reversed anytime soon.

Although the economic outlook often changes in the short-term, the reality is that the UK will continue to be a great long-term destination for residential property investment for some time.

Source: Money Observer

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House price gap widens as overall sales slump

Residential property transactions have fallen 9.8 per cent year on year, according to latest figures from the HM Land Registry.

In June 2016, the number of transactions was 961,048, dropping to 866,684 in June 2017. This is the lowest number since June 2013, when levels were at 686,961.

This was most marked among flats and maisonettes, which decreased the most, at 16.7 per cent year on year.

Moreover, according to the Office for National Statistics (ONS), the nominal value of residential property transactions in England and Wales fell 7.6 per cent over the same period, reaching £248bn, compared with £269bn in June 2016.

The figures showed that popular areas such as the London 2012 Olympic Park have seen an eight-fold increase in property transactions over the past two years, while outside of London, the volume of transactions was much lower.

Graph: Number of transactions by property type 1997 to June 2017 (ONS)

While some pockets of the UK remained buoyant, others saw greater price disparity. According to the ONS, the median price paid for residential properties in ‘middle-layer super output’ areas in England and Wales ranged from £29,000 (within County Durham) to £2,555,000 (within Westminster).

Shaun Church, director at mortgage broker Private Finance, commented: “From a median house price of £2.6 million in parts of Westminster to just £29,000 in County Durham, the astonishing range in house prices between small geographic areas highlights the vastly different experiences of homebuyers around the country.

“With average wages in Westminster not even double those in County Durham, yet house prices being 88 times higher, there are clear affordability challenges for those trying to join the property ladder in areas at the upper end of the house price scale.”

But while London did well in terms of price sustainability and transactions, overall, only 29 per cent of middle-layer, super output areas saw an increase in the number of property transactions since the previous year.

Overall, transactions in these areas are significantly lower than the 64 per cent recorded for the year from July 2015 to June 2016.

A statement from the ONS suggested this was largely due to new tax changes brought in during various Budgets, which may have caused a slowdown in buy-to-let transactions. It said: “This was the first time it has been below 30 per cent since year ending June 2009.

“Since the changes to Stamp Duty Land Tax rules came into effect on 1 April 2016, there has been a continued period of reduced property transactions.”

Mr Church added: “There has been a notable slowdown in residential property sales this year, with sales of flats and maisonettes worst affected. With these types of properties popular among buy-to-let investors, the decline in sales is likely to stem from recent stamp duty and other regulatory changes dampening activity in the property investment sector.

“However, the rest of the market is holding reasonably steady, demonstrating its resilience in the face of political and economic uncertainty.”

He said there was hope, however, for housebuyers, especially if the government fulfills its pledges to improve housebuilding efforts across the UK.

In his most recent Budget announcement, chancellor Philip Hammond told the House of Commons: “Put simply, successive governments over decades have failed to build enough homes to deliver the home-owning dream this country has always been proud of.”

He cited the coalition government’s Help to Buy scheme, which has helped more than 320,000 people buy a home, and the 1.1m new homes built since 2010, 350,000 of which fall into the ‘affordable homes’ category.

He pledged at least £44bn of capital funding, loans and guarantees to support the housing market, to “create the financial incentives necessary to deliver 300,000 net additional homes a year on average by the mid-2020s”.

Source: FT Adviser

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Property sales in UK confirm housing market is moving ahead steadily

Residential property sales in the UK increased by 1.7% between September and October 2017, some 9.2% higher than the same month in 2016, official figures show.

The data from HMRC also shows that there were 105,260 residential property sales and 11,280 non-residential sales.

It is more evidence that the property market is progressing at a steady pace despite political and economic uncertainty and the decision to leave the European Union with Brexit having no impact.

Stephen Wasserman, managing director of West One Loans, pointed out that stamp duty hikes have had more of an impact on the housing market and believes that further change to the property tax paid by buyers could boost the market.

‘The uptick in property transactions demonstrates the underlying stability of the sector, and is a positive message to the market ahead of Wednesday’s Budget, which is expected to be largely housing focussed,’ he said.

‘It will take some time for the market to fully recover from the upheaval of stamp duty hikes and economic uncertainty caused by Brexit negotiations, but if Hammond scraps stamp duty for first time buyers, as it’s rumoured he may do so, we could see the market grow at a faster rate,’ he added.

According to Shaun Church, director at mortgage broker Private Finance, while there have been no impressive monthly increases in the number of property transactions this year, annual comparisons are favourable. ‘Transaction levels are also now back to where they were before the stamp duty changes which came as a shock to the system in 2016,’ he explained.

‘High demand for housing and low mortgage rates will continue support activity in the long term, but for a markedly improved performance next year issues surrounding property supply and the stamp duty system must be addressed. The industry will be hopeful that tomorrow’s Budget unveils decisive action on these two fronts,’ he added.

Source: Property Wire