Residential sales in UK up by almost 5%

Residential sales recorded in the UK increased by almost 5% between May and June 2016, according to the latest estimated figures to be published.

The residential transaction count was 94,550 and while this is up 4.9% month on month, it is 10.2% lower compared with the same month last year.

The large increase in transactions for March 2016 followed by the substantial reduction in April is likely to be associated with the introduction of the higher rates on additional properties in April 2016, according to HMRC which publishes the figures.

However, whilst April and May 2016 are lower than the corresponding months in 2015, it should be noted that the total for March to May 2016 is still substantially higher than the corresponding period last year, it pointed out.

The additional property rates were announced in the Autumn Statement 2015 for England, Wales and Northern Ireland, and in the Scottish Government’s draft 2016/2017 budget for Scotland.

Non-tax factors may have played a role as well, for example the Bank of England’s plans to curb buy to let mortgages resulting in a rush to purchase before April 2016, and the European Union referendum affecting transactions in recent months.

The residential count includes properties paying the main and additional rates. For June 2016 the number of non-adjusted residential transactions was about 21.2% higher compared with May 2016. The number of non-adjusted residential transactions was 11.1% lower than in June 2015.

According to Doug Crawford, chief executive officer of My Home Move, June’s figures show a market returning to health after a very quiet April and May which was due to investors doing business earlier in the year to avoid the stamp duty changes.

“While the number of property transactions remain below the levels seen a year earlier, a 4.9% increase between May and June is very encouraging. My Home Move’s own data suggests that the number of completions in June 2016 was actually 2.7% higher than in June 2015,” he said.

“The June increase shows that the property market mostly shook off the uncertainty from the Brexit referendum at the end of the month. This reflects our experience as most purchases went ahead without any issues. The big question now is what the impact will be for the rest of the year,” he explained.

“While this is less clear, our view is that the fundamentals of the property market are strong enough that there will not be a significant impact. There have been anecdotal reports of a slight slowdown in July from the estate agents we work with, but it is impossible to tell how much of this is actually Brexit related and how much is down to a normal summer slowdown. The picture will only start to be clearer in September after the holiday season,” he said.

Source: Property Wire

To read more, see Property Wire.

Rate of house price growth in UK starts to plateau

Latest index data suggests that the rate of house price growth in key cities in the UK is starting to plateau after a strong first half of the year. London in particular is likely to see slower growth ahead.

Month on month the Hometrack Cities Index recorded growth of 6.9% in June and year on year growth is running at 10.2%, the same level as the previous month.

Market attractions

The index report suggests that double digit year on year growth has been sustained by the surge of investor demand ahead of the stamp duty change in April. Low mortgage rates and improving economic conditions have continued to attract households into the market against a backdrop of dwindling supply with the net result being continued upward pressure on prices.

In June, Bristol remained the fastest growing city with year on year price growth of 14.7% taking the average price to £253,400. London followed close behind with annual growth of 13.7% to £476,800 and then Cambridge up 11.5% to £411,800.

The report points out that any impact from the decision by the UK to leave the European Union will not be reflected in the index for two to three months.

“That said, we have reported signs of slowing growth in some cities, particularly in southern England where affordability levels are close to record highs. The slowdown might have been more apparent by now had the stamp duty change not been introduced,” it says.

Supply and demand

A new analysis looking at listings also shows that for selected cities new supply has grown faster in the last three months than the average increase in supply seen over the last 12 months. For all cities in England and Wales excluding London new supply has grown 10% faster than the 12 month average, this rises to over 15% in London.

“This analysis shows how recent sales momentum in regional cities, and higher house price growth, appears to have held up over the referendum period. In contrast, the headwinds facing the London market ahead of the vote have resulted in more supply and relatively fewer sales pointing to slower house price growth in the months ahead,” the report says.

Hometrack explains that this is something that is clearly evident at a more granular level across London’s localised markets where the highest value markets in central London are registering low single digit growth. In lower value, outer areas of London growth is still 15% to 20% per annum although showing clear signs of losing momentum.

“While this listings analysis provides a snapshot of the last quarter, the reality is that it is still very early days to assess the true impact of the EU referendum vote on activity and house prices. Our view remains that sales volumes are likely to slow and price growth will moderate over the second half of the year,” the report adds.

“The severity of a slowdown will depend upon the response of consumers and businesses to the uncertainty created by the decision to leave the EU and the impact this has on the economy. The early market activity data confirms our view that London will bear the brunt of any slowdown,” it concludes.

Source: Property Wire

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A step by step guide to becoming a successful landlord

A step by step guide to becoming a successful landlord

Whether you’re a property mogul with a to-die-for portfolio of houses, or you’re just renting out your wife’s old flat – you’ll need to get your head around the simple steps of being a landlord.

Getting into buy to let can be a great way to boost your income. And if you play your cards right, you may even be able to make a career of it.

Of course, there’s more to it than just buying a property and finding some tenants to pay the rent – you have legal responsibilities to make sure the home is safe and suitable for the tenant.

This handy visual guide from specialist mortgage providers, Commercial Trust, will help point you in the right direction.

guide-to-being-a-landlord-for-web

Commercial Trust guide to being a landlord

 

Turkey – an attractive overseas property investment hotspot

Turkey’s omission from the European Union together with its bullish economy and buoyant property market should make it an attractive destination to foreign investors both, said Spot Blue International Property in June, adding that Istanbul remains the country’s key investment hub.

“Whatever the outcome of the referendum, foreign buyers in Turkey know their asset or ownership rights won’t be directly affected to the extent that owners of property in the EU could be,” said Julian Walker, director at Spot Blue International Property. “Being outside the EU means the country has escaped much of the financial volatility caused by the media storm around the Referendum, seen in the UK and Europe.”

Here are four key reasons why investors should consider Istanbul in 2016:

Strong GDP

Turkey’s economy is out-pacing most countries in the European Union and Members of the OECD. According to the Turkish Statistical Institute, the country’s GDP soared at a rate of 4.8 per cent in the first quarter of 2016 compared with the same period in 2015. A forecast in May by international ratings agency Fitch predicted the Turkish economy would grow at a rate of 3.5 per cent this year and 3.6 per cent next year. Of all G20 countries, only China and India recorded higher GDP growth than Turkey during 2015.

Currency advantage

Volatility in the £/€ exchange rate and how it will react after the Referendum are bringing uncertainty to UK investors buying in the EU right now. Property in Turkey is sold in Turkish lira, euros, dollars and sometimes Sterling, giving an international buyer flexibility and presenting opportunities to minimise exposure to currency rates. Turkey not being in the EU means the Sterling/Turkish lira rate will be less affected by whatever the outcome of the Referendum.

Property sales underpinned by non-EU market

The largest groups of property investors in Istanbul and wider Turkey are from the Gulf States, in particular Saudi Arabia, the United Arab Emirates and Kuwait. They will remain interested in Turkish property, continuing to drive the market and bring foreign money into the country, whatever the outcome of the Referendum.

More benefits for foreign workers, businesses and homeowners

Turkey is making serious efforts to entice more overseas workers, firms and residents in 2016, in particular to Istanbul. This in turn should have positive effects on demand for residential and commercial real estate. In June Deputy Prime Minister Canikli revealed draft laws to improve investment conditions, which included reduced tax rates for foreign firms setting up and purchasing real estate. Canikli also announced plans for a series of regulations that would improve employment conditions and opportunities for foreigners. Elsewhere, in the same month Economy Minister Nihat Zeybekci said that the Turkish Cabinet was set to offer citizenship to foreigners who buy a number of properties in Turkey.

Spot Blue International Property sells a range of property in Istanbul, including one, two, three and four-bedroom apartments at a residential development in the popular district of Halkali, with prices from £118,000.

Three in 10 property purchases fall through

New research from Which? Mortgage Advisers reveals that three in ten (28%) homebuyers have had a house purchase fall through after their offer was accepted, and on average homebuyers were left nearly £3,000 out of pocket as a result.

The survey of 2,000 homebuyers – who bought their home in the previous two years – found that it takes over 4.5 months on average, from starting a property search to having an offer accepted. However, 28% of purchases fell through after that point.

The main reasons for a property purchase falling through were:

  •     The seller decided not to sell their home after all (27%)
  •     The buyer pulled out, as their own property sale had fallen through (21%)
  •     The buyer found somewhere else to buy (21%)
  •     The buyer was ‘gazumped’ (21%)

Of those who had lost money and knew how much they were out of pocket, the average loss was £2,899. This included conveyancing, survey, mortgage valuation or brokerage fees paid and not recovered.

Many homebuyers experience failed transactions due to problems in the ‘property chain’ – the line of buyers and sellers linked together because each is selling and buying a property from another.

For more advice on managing a property chain and keeping things moving, visit Which

Millennials most likely to fall victim to rogue landlords

As the popularity of renting continues to rise, a professional property buying company based in the UK has taken a survey to determine the public’s opinion on rental landlords and the current state of renting in 2016.

Since 2011, nearly 3,000 landlords have faced prosecution under the Housing Act 2004. In London alone, the data reveals 2,006 individuals and companies in the UK were fined a total of £3m for housing offences.

Openpropertygroup.com found that it is the millennial generation that have suffered the most from criminal landlords. Over half (62%) of the age group in ‘generation rent’ have had trouble retrieving their deposit back at the end of their tenancy.

In November 2015, The Guardian suggested millennials should ignore advice and stick to renting, however new survey results suggest they should think again. Shockingly, the majority (51%) of people aged 25-34 surveyed had to take legal action against their landlords or admitted to living in unsatisfactory living conditions.

Figures provided by the Ministry of Justice show that the number of evictions is increasing year on year, rising by 53% since 2010. This is reflected in Open Property Group’s own findings, where over half (54%) of millennials surveyed felt that they had been unfairly evicted with another half had in fact had their rented properties sold by their landlord without notice.

Jason Harris-Cohen, director of Open Property Group, says “thanks to Shelter Housing, there is a renewed focus on landlord prosecution with an additional 5 million GBP to be shared out amongst councils to take action against landlords. Here at Open Property Group, we have teamed up with experts to create an advice guide for those who are renting and in danger of falling victim to seemingly common landlord scams. The graphic, which can be found on our site, is filled with advice from London the City of London Police, Leeds City Council and Advice 4 Renters to help struggling renters.”

Read more

Advice guide for renters

Buy-to-let lending critera – and the Brexit

Brexit has sent shock waves throughout British industry, but even before Britain voted to leave the EU, tougher buy-to-let mortgage lending criteria had been announced.

Anne Wilson, senior tax manager of the tax department at Pierce Chartered Accountants, pointed out that that the rules will require lenders to carry out stricter stress tests on prospective borrowers or those wishing to re-mortgage to ensure that they have sufficient capital to cover repayments if interest rates increase to 5.5%.

In the future, there will also be changes to the way that tax relief for interest payments on the purchase of residential lettings will be given in the tax computation. This will affect individuals, partnerships and limited liability partnerships which let out residential properties. At present there are no proposals for this restriction to apply to furnished holiday lettings nor to companies with residential lettings.

Wilson explained that currently, rental profits are reduced by any loan interest paid and therefore a top rate taxpayer could receive tax relief at 45% on their finance costs. However, under new legislation the loan finance costs will be relieved by way of a reduction of the tax liability, rather than a reduction in the rental profits, and is restricted to relief at the basic rate of income tax.

Those with substantial rents and interest costs, thus with low net profits, who are currently basic rate taxpayers, could see their income pushed into the higher rate band as the interest costs will be added back to the rental income.

For example, an individual whose only income is rents of £50,000 and interest costs of £20,000 would have net income of £30,000, and so within the basic rate tax band. Under the new rules the same individual would be a higher rate taxpayer because their income would be £50,000 with a deduction for interest relief given at the basic rate only.

As a result of the way in which the net rent will be calculated those whose income is close to the £50,000 threshold for the withdrawal of child benefit, and those with income near £100,000 for the withdrawal of personal allowance could be adversely affected even though their income has not actually increased.

To ‘soften the blow’ these measures will be phased in gradually over four years and will apply to 25% of the interest costs in the 2017/2018 tax year, 50% in the 2018/2019 tax year and 75% in the 2019/2020 tax year before being implemented in full in the year to April 2021.

‘If you have a relatively modest portfolio of properties which are let out as residential lettings, it maybe that you will simply have to accept that your income tax liability in respect of those lettings may increase in future as taking any steps to mitigate the interest restriction could be costly. Sharing income with family members or family trusts may be worth considering but capital gains tax issues will need to be addressed,’ she explained.

She added that those with a substantial portfolio of residential lets may wish to consider incorporating their business, however, there could be a substantial capital gains tax liability if they incorporate their property portfolio because moving the properties into a company could trigger capital gains tax.

‘However, if you have a large property portfolio that you devote a substantial amount of time to managing, it may be possible to claim capital gains tax roll-over relief on incorporation of a business to mitigate the capital gains tax liability arising. If you have no gains in your property portfolio it may be possible to transfer the properties into a company without triggering capital gains tax,’ she explained.

But there is likely to be a substantial stamp duty liability on the property transfers to a company, unless specific reliefs are available, and she advises that incorporation of a property business should not be undertaken without specialist advice.

Source: Property Wire

Landlords in UK urged to stay calm in face of EU exit vote

Residential landlords in the UK are being urged not to read too much into the decision by the country to leave the European Union, having gone through a turbulent period recently.

Buy-to-let landlords are now paying a 3% surcharge in stamp duty on each additional property they buy to add to their portfolios and are also facing further tax changes. Now there are concerns that Brexit could affect their businesses.

However, according to Richard Lambert, chief executive officer of the National Landlords Association (NLA), while leaving the EU is completely unknown territory, jumping to conclusions isn’t going to help anyone.

‘We welcome governor Mark Carney’s steadying words and his reassurance that the Bank of England and the Treasury have extensive contingency plans in place to ensure the country’s financial stability,’ said Lambert.

‘Any knee-jerk reaction will have a real impact on our members’ mortgages, tenants’ rents and overall confidence in the market. So we would urge the policy as regards to interest rates should be, to continue the Prime Minister’s analogy, one of steady as she goes,’ he added.

In a joint statement, David Cox, managing director of Association of Residential Letting Agents (ARLA) and Mark Hayward, managing director of National Association of Estate Agents (NAEA), said that in the short term the market can weather the uncertainty.

‘The outcome of the EU referendum will create a period of uncertainty among home owners, buyers, investors, landlords and developers. We can expect international investors to look a lot harder at the UK as a market and this will have a consequential impact upon the house building sector as investment may be stalled,’ the statement said.

‘In the short term we believe that both prices, and rents, will remain stable, but we cannot be certain about the next quarter as political instability, and market unrest, could lead through into prices in the housing market,’ it pointed out.

‘We believe that the UK housing market is resilient, as is the supply chain that drives it.  But as we indicated in our Brexit report last month, the bigger impact may well be in the skills necessary to drive UK housing development, and this is now a major concern for UK buyers and renters,’ it added.

Source: Property Wire

Research reveals nearly five million renters at risk

Research reveals nearly five million renters at risk

Results from a survey by YouGov, commissioned by Royal London, reveal almost five million renters in the UK have no plans in place to cover their rent if they became too ill to earn for three months or more, even though recent cuts to housing benefits could leave them at risk.

This is despite the fact that over a quarter of renters in paid employment (27%) said they knew someone who had struggled in this situation.

More than one in three renters in paid employment (34%) admit they don’t know how long they could survive, and six in ten people (60%) who had some idea said they could only survive on their savings for three months or less.  Their first port of call would be to apply for state benefits (53%), followed by reducing their household expenses (47%) and then dipping into their savings (39%).

Worryingly, fewer than one in ten (7%) renters in paid employment have ever consulted a financial adviser. The most common place people turn to for financial advice is their family and friends.

Debbie Kennedy, Head of Protection for Royal London Intermediary, said:

“Renters who assume that housing benefit will be there when they need it could find the reality is very different.  A series of cuts to housing benefit means that more people would not get their rent paid in full if their income fell unexpectedly.

“It would be bad enough to be taken ill without the added anxiety of getting behind with the rent and facing possible eviction.  Income protection may be more affordable than people realise and can provide a financial safety net and enable people to focus on getting better.”

Economists predict over the next ten years the UK will experience falling levels of home ownership and rising levels of private renting.  In ten years’ time, 59% of 20-39 year olds will rent privately, up from 45% in 2013. A further 15% are in social housing, renting from housing associations or local authorities.

Source: Royal London

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Surge in investors buying student property

New data has found that the first quarter of 2016 has seen a surge in investors acquiring student property, to beat the new stamp duty legislation, which comes into force in April 2016.

Research, conducted by The Mistoria Group – student property investment specialists, reveals investors have been flocking to complete their student property purchase by the end of this month, to avoid the 3% stamp duty surcharge coming in for second homes.

The research shows that sales of student property in the North West have leapt by over 30% between January-March 2016, compared with the first quarter of 2015.  More than 50% of student property investors are from the South, while a third are overseas investors.  The remaining 20% of investors are from the Midlands and the North.

Over the last few years, student housing has undergone a significant amount of change, with rising rents and a higher level of expectation from the occupying students, many of whom are looking for high-spec accommodation with luxuries like plasma TVs, Wi-Fi and built-in white goods.  The removal of the cap on student numbers have also triggered many universities to anticipate an increase in enrolment over the coming years, which is driving demand for more high quality, affordable student accommodation.

Mish Liyanage, managing director of The Mistoria Group comments: “We have seen a rush of investors wanting to purchase student property over the last quarter and we anticipate that demand for student property will continue to grow significantly in 2016 and beyond.

Since the birth of the buy-to-let mortgage 18 years ago, student accommodation has outperformed all other traditional property assets and has been the strongest growing investment property market in the UK.

Over the last five years, student properties in the North West have generated yields in excess of 13% and geared yield in excess of 35% in Salford and Liverpool.  Our research shows that the North West provides greater returns than any other city in the UK. This is fuelled by the massive regeneration taking place in Manchester, with the proposed High Speed 2 (HS2) high-speed railway between London Euston and the North West to be completed in the next 15-20 years.

A HMO (House in Multiple Occupation) property can provide an 8% minimum cash rental yield and a typical 13% total cash yield, including 5% capital appreciation.  The average gross cash rental yields for the student property sector in the North West of England were 8.1% for the 2015.”