Buy to let stamp duty surcharge and other related news

[MarillionFan]

Taken from Mortgage Strategy

The average rent in England and Wales was £874 in July, according to the latest Your Move buy-to-let index.

Of the regions studied, eight saw rents rise month-on-month in July, with the South West seeing the biggest jump of 0.49 per cent to an average of £667.

Rents in the East of England, the North East and Wales all fell.

The lowest rents in England and Wales were found in the North East, averaging £542 pcm.

The highest were in London where it costs an average of £1,283 to rent a property, an increase of 1.2 per cent in the last 12 months.

The average property in Travelcard Zone 2 in London cost tenants £1,831 a month compared to a typical price of £1,161 in Zone 4.

Your Move director Richard Waind says: “We are now starting to see the real impact of the government’s Stamp Duty revision, plus the additional tax changes which have hit landlords hard.

“The outcome has been a decline in the number of rental properties on the market and this has had the effect of pushing up prices for tenants.

“Tenants in London face a different issue as rapidly rising travel costs are increasing the overall cost of living in the suburbs, despite rents generally being cheaper than central areas.”

However, he says the PRS “could still be seen as an attractive opportunity for investors,” with the North East and North West in particular seeing strong growth.

“Although buy to let investors are preparing for the new PRA changes coming into effect in September, it’s clear that there are still people who believe that, property remains a viable investment option,” says Waind.

"andlords with four or more buy-to-let mortgages have been warned to prepare for a major headache when new rules next year force lenders into tougher lending assessments."

Had missed this previously. Also didn't realise that lenders had capped at 4 BTL per lender.

Agreed additional borrowing for some new BTLS today, but unable to get them through an SPV until I have completed one full year as a contractor on my SAR. That means even though I have contracted all year and have an extension in place until Feb next year, I need to wait until April and possibly longer to complete my SAR. Slightly annoying.

[_V_]

Upscale that nationally, I bet we are talking half a million tax evaders...

But BTL landlords are doing a public service, letting the poor have a house to live in, they shouldn't have to pay any tax, obviously.

[Martin@AS Financial]

Lenders fail to get to grips with Airbnb

Taken from Mortgage Stategy:

Mortgage providers are still failing to get to grips with Airbnb despite the rising popularity of the holiday let site.

Mortgage Strategy last year investigated lender attitudes to the growing trend of homeowners renting out their homes and following our latest investigation, we find there has been little change since then.

House and Holiday Home Mortgages director Mark Stallard says: “Airbnb is growing in popularity. But it is not a concept that fits comfortably with most UK residential lenders as many deem it too commercial.”

The majority of lenders still refuse to allow homeowners to let their home on a short-term basis. Of 14 providers contacted, most say they will ‘not allow any subletting of a residential property.’

Some lenders take a particularly tough stance, with one saying: “We want nothing to do with Airbnb.”

Another says: “[We] do not like Airbnb in any capacity”. Another adds: “We won’t touch properties linked with Airbnb”.

Another provider says it is “uncomfortable” with Airbnb lets and will not accept applications from borrowers looking to use the site.

Lenders are concerned that bookings under the website mean many people could have access to the property. It’s deemed to be a riskier arrangement than a formal long-term letting to one person.

Others say any letting is classed as commercial use of the property and therefore not eligible under a residential mortgage.

Another lender says that, because of this, it would allow Airbnb rentals on a holiday let property.

But lenders seem more relaxed when a homeowner is letting a single room rather than the entire property. One says: “We allow lodgers and we would effectively treat this scenario under the same category.”

Another says it allows one tenant under the Government’s rent a room scheme. But for renting the entire property, the same lender says a formal tenancy agreement needs to be in place.

Opportunities available

But there are options available to homeowners looking to rent their property.

Metro Bank last year revealed it would allow customers to rent their home for up to 90 days a year through AirBnb with no pre-approval. The bank says it has received positive feedback from borrowers on its stance and will continue to ‘eliminate more stupid bank rules’.

Metro Bank chief commercial officer Paul Riseborough says: “Allowing customers to rent out their property on Airbnb and similar sites without asking permission is common sense. Life is busy enough and we want to make things simple and straightforward for our customers.”

London & Country director David Hollingworth says there are other lenders which are flexible too. Nationwide, for example, may allow borrowers to rent up to two rooms in their home for on a bed and breakfast type arrangement. Other lenders may be comfortable with a long-term lodger, where the homeowner remains resident in the property.

He adds: “Where there is likely to be more consternation is where the homeowner wants to let the whole property out while they are away.”

Lender consent

Most lenders will expect the homeowners to seek consent for any rental of their home. But that isn’t practical where there are a number of very short-term lets, which might be at short notice.

Hollingworth says: “Homeowners increasingly want to use Airbnb to let their home on an occasional basis. Recognising this, some lenders have adapted criteria to allow it.”

As well as Metro Bank, Market Harborough Building Society can accommodate owners using Airbnb up to 24 weeks a year.

Stallard adds: “Borrowers considering letting a room or property must check with their lender first. They should also check with their buildings and contents insurer. What could be seen as lucrative extra earner could prove a costly error.”

[Martin@AS Financial]

Budget 2017: The small-print – Chancellor ‘tidies up’ 3% BTL surcharge loopholes and

Taken from Mortgage Solutions:

Changes to the stamp duty surcharge and plans to overhaul rent-a-room relief were buried in the small print of the Budget - and not mentioned by Philip Hammond in his speech.
The chancellor is cracking down on people who try to avoid the 3% additional stamp duty by making amendments with immediate effect.

The main change will be to stop people disposing of small parts of their main residence to avoid the levy.

It means that people must now dispose their entire main residence to someone who is not their spouse or they will pay the surcharge.

Changes will also help people who are caught out by the surcharge in a divorce case, when buying additional equity in their main property, and in cases where properties are held in trust for children subject to Court of Protection orders.

It means, for example, a landlord who is extending the lease on a main residence will not have to pay the additional surcharge.

Jonathan Evans from Deloitte real estate said the change “tidied up” the 3% surcharge.

He said: “The changes are generally good news and show the Government has listened to people who claimed some areas of the policy were unfair.”

It was also revealed that the Government will review the rent-a-room relief scheme.

Hammond wants to make sure the relief is targeted at longer-term lettings and evidence will look at how the initiative is currently being used.

Under the scheme up to £7,500 a year can be made tax-free from letting out a room in your home.

A consultation on taxing gains made by non-residents on UK property was also released alongside the Budget.

And a small olive branch was extended to embattled landlords, the Government announced it would extend mileage rates to people operating a property business.

It was also announced that the Government will launch a £2m competition to support Fintech firms developing solutions that help first‑time buyers ensure their history of meeting rental payments on time is recognised in their credit scores and mortgage applications.

[barrydidit]

And a small olive branch was extended to embattled landlords, the Government announced it would extend mileage rates to people operating a property business.

Best nip round every week to make sure they remember to put the bins out then

[Martin@AS Financial]

20% of landlords to sell up in 2018: NLA

Taken from Financial Reporter:

Research from the National Landlords Association shows that 20% of its members plan to reduce the number of properties in their portfolio in the next year – the highest level of intended property sales in 10 years.

The NLA believes this is due to recent tax changes including the withdrawal of mortgage interest relief for higher and additional rate tax payers, the 3% surcharge on additional property purchases, and the banning of upfront letting fees.

The NLA says landlords and tenants will "pay more than their fair share in tax as a result of changes made by the Government to curb buy-to-let activity in the private rented sector".

Richard Lambert, CEO of the National Landlords Association, said: “The Government needs to look at the impact these policies will have on the PRS.

“More and more people are relying on this sector for a home, so it is vital that landlords not only provide a high standard of accommodation, but are incentivised to do so by the prospects of a reasonable return on investment.

“It is our view that these policies are undermining the viability of many landlords’ businesses and removing the incentives to invest in residential property for business purposes.”

Simon Heawood, CEO and Founder of Bricklane, commented: “We will see steadily increasing outflows from the buy-to-let market, in favour of a continual consolidation of portfolios around professionalised, large scale landlords, who in turn benefit from scale advantages, tax-efficiencies, and professionalised approaches to investing and driving up tenant service provision.

“A perfect storm is brewing for landlords looking to property simply as a financial asset. Policy makers across the political spectrum are acknowledging that home ownership is valuable because it affords permanence and security, and not just for the financial returns which placated constituents of yesteryear.”

[BrilloPad]

“A perfect storm is brewing for landlords looking to property simply as a financial asset. Policy makers across the political spectrum are acknowledging that home ownership is valuable because it affords permanence and security, and not just for the financial returns which placated constituents of yesteryear.”

Squeeze the selfish f**kers until the pips squeak.

[The Spartan]

Squeeze the selfish f**kers until the pips squeak.

Brillo play nice, I'd rather have another property as pension that way there's more chance I could offload before it gets raided for tax like Brown did with pensions. Look at how that turned out is it any wonder people look for alternatives and no I'm not a Landlord I just wish I was

[Martin@AS Financial]

The impact of rent control

Taken from Bloomberg:

Rent control is one of the first policies that students traditionally learn about in undergraduate economics classes. The idea is to get young people thinking about how policies intended to help the poor can backfire and hurt them instead. According to the basic theory of supply and demand, rent control causes housing shortages that reduce the number of low-income people who can live in a city. Even worse, rent control will tend to raise demand for housing — and therefore, rents — in other areas.

Rent control, the Econ 101 student learns, helps a few people, but overall does more harm than good.

Over the years, rent control has acquired a special bogeyman status among economists. Assar Lindbeck, a Swedish economist who chaired the Nobel prize committee for many years, once reportedly declared that rent control is “the best way to destroy a city, other than bombing.”

In the real world, of course, things rarely work exactly as they do in Econ 101. Labor markets don’t seem to follow the basic supply-and-demand model. Minimum wages don’t seem to throw many people out of work. Building more highways often increases traffic. Given the existence of all these cases where simple models break down, might economists’ negative view of rent control be unjustified?

As with so many questions, the answer can only come from looking at data. Economists Rebecca Diamond, Timothy McQuade and Franklin Qian have a new paper that looks at the effects of rent control in San Francisco, a city notorious for high housing costs. They find that the effects of rent control are pretty much what economics textbooks would predict.

Many studies rely on patchy or incomplete data, but not this one. Diamond and her colleagues used data from a private company that was able to combine public records to track the addresses of all San Francisco residents between 1980 and 2016, even if they moved out of California. This allowed them to study the effects of a change in San Francisco’s rent control policy in 1995. Previously, all small multi-family buildings were exempt from rent control, but since 1995, only buildings built after 1980 are exempt.

How did this large increase in rent control affect renters? Predictably, people subject to the new policy became less likely to move — between 8 and 9 percent less likely, over the medium to long term.

But not all renters benefitted equally. The new policy created a powerful incentive for landlords either to convert rental units into condominiums or to demolish old buildings and build new ones. Either course forced existing tenants — especially younger renters — to move. Landlords affected by the new 1995 policy tended to reduce rental-unit supply by 15 percent.

Being forced to move is traumatic. Not only is it expensive, it can take people out of their longtime communities. It also tends to hurt the most vulnerable members of society the most, since it often forces them to move to poorer neighborhoods with lower education levels and higher unemployment.

There are two other important but invisible groups of people who were hurt by San Francisco’s rent policy. First, there are people who want to move to the city, but can’t. Second, converting apartments into condos reduces the supply of rental housing and raises rents. The authors’ model estimates that the 1995 policy raised rents in San Francisco by 5.1 percent. That is certainly an unwelcome development in a region plagued by high housing costs:

So rent control helped some people and hurt others. How can these effects be weighed? Diamond and the others constructed an economic model of the demand for housing that let them measure the utilitarian consequences of the policy, and found that the benefit to those who get to stay in their homes almost exactly balances out the various harms the policy causes. Ultimately, they say, rent control is a wash.

But few people are likely to believe strongly in the assumptions of this particular model — there’s the risk that rent control could be more harmful than the authors realize. For example, if greater housing density increases citywide productivity, as is probably the case, the effects of rent control are even more pernicious. And policymakers who believe in an ethos of “first do no harm” have reason to be skeptical of a policy whose effects are so ambiguous.

In the end, the strongest argument against rent control is that there are better ways to protect vulnerable renters. Diamond and her coauthors suggest an idea that I’ve also endorsed in the past — a citywide system of government social insurance for renters. Households that see their rents go up could be eligible for tax credits or welfare payments to offset rent hikes, and vouchers to help pay the cost of moving. The money for the system would come from taxes on landlords, which would effectively spread the cost among all renters and landowners instead of laying the burden on the vulnerable few.

[DimPrawn]

Taken from Financial Reporter:

Research from the National Landlords Association shows that 20% of its members plan to reduce the number of properties in their portfolio in the next year – the highest level of intended property sales in 10 years.

The NLA believes this is due to recent tax changes including the withdrawal of mortgage interest relief for higher and additional rate tax payers, the 3% surcharge on additional property purchases, and the banning of upfront letting fees.

AND because it's pretty obvious that Korbyn will be in power in a few years time, it which case the collapse in property prices will be total and final.