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UK seeing a crisis in private rented sector due to tumble in landlord confidence
Landlords’ confidence in the buy to let sector in the UK has collapsed to an all-time low and is now worse than levels witnessed during the financial crash, according to the country’s biggest landlord association. Richard Lambert, chief executive officer of the National Landlords Association (NLA), told delegates at the Building Societies Association’s (BSA) annual meeting for mortgage professionals that the situation is worrying. He explained that confidence in landlords’ business expectations has tumbled by more than a third over the past year, down from 67% to an all-time low of 43% and the current level of confidence in the sector is now 5% lower than levels witnessed after the financial crash in 2007. He pointed out that the actions taken by the Chancellor in last year’s Summer Budget and Autumn Statements has led the NLA to reverse its previous prediction of the continued growth of the private rented sector (PRS) by another million more households over the next five years. It now forecasts that, if landlords follow through on their intentions, there will be a dramatic sell-off of 500,000 properties in the next 12 months, followed by another 100,000 sold each year to 2021. The net effect will be that the PRS be smaller by up to 136,000 properties. The data, from the latest NLA quarterly landlord panel survey, also shows that the proportion of landlords looking to sell in next 12 months has more than doubled since July 2015, up from 7% to 19%. Over the next few years some 28% of landlords don’t plan purchase any more properties, 10% plan to reduce their portfolio and 5% plan to sell up completely. ‘Two speeches from the Chancellor in 2015 have led to a crisis in confidence greater than when all but a few buy to le products were immediately withdrawn from the market following the 2007 financial crash,’ Lambert said. ‘Up to half a million properties could come onto the market as a result of the Summer Budget and Autumn Statement, which the Chancellor will no doubt deem a success. But there is no guarantee that these will be the one or two bedroom flats or small houses that will appeal to first time buyers, especially as landlords are more likely to offload less desirable stock in less desirable areas,’ he explained. ‘We’ve always said that Mr Osborne is blinded to the impact of his decisions by his commitment to homeownership. He may have intended to focus on the small scale part time investor, but it’s the larger and more professional landlords who will be hit worst by cuts to mortgage tax relief and increases to stamp duty, and who appear most likely to leave the sector,’ Lambert told the meeting. ‘What happens to the people these landlords house if they still can’t buy and there are fewer and fewer properties available to rent?’ he added. Continue reading
Draft code of practice for lettings agents released in Scotland
The Scottish Government have released a draft code of practice for letting agents which will mean a huge shake up in the industry before it comes into force in 2018. The Letting Code of Practice (Scotland) Regulations 2016 has been structured in eight sections to mirror the lettings process and sets out the standards expected of letting agents operating in Scotland in how they manage their business and provide their services. It covers key areas such as standards of practice, engaging landlords, lettings, management, maintenance, ending tenancies, communications, complaints, deposits and insurance. Under the code Scottish ministers will establish and maintain a register of letting agents. The regulations will also allow them to remove a letting agent from the register if they are no longer ‘fit and proper’. The Association of Residential Lettings Agents (ARLA) welcomed the introduction of a statutory code of practice for letting agents and said that it will help to further professionalism in the industry and drive up standards. ‘We contributed to the Scottish Government’s consultation on the code last year and we are pleased that they have taken on board a number of our recommendations over procedure and wording,’ said ARLA managing director David Cox. ‘It is also very pleasing that the code has a requirement for agents to have professional indemnity insurance and client money protection. These are two requirements of ARLA membership and mandatory CMP is something we are campaigning for in England to provide greater protection for landlords and tenants if things go wrong,’ he explained. But ARLA believes that there should be more detail about what agents should do if disputes occur around tenancy deposits. This is because an agent may be required to co-operate with any investigation by an independent body if a dispute is raised between either the landlord or tenants and this is not always clear in the relevant scheme’s rules for disputes. ‘On the issue of training and qualification ARLA has long campaigned for greater regulation for letting agents and believe that mandatory qualifications will promote professionalism and basic standards within lettings that will benefit businesses and consumers. We look forward to seeing more detail from the Scottish Government in this area,’ added Cox. Kaira Massie, solicitor in the Law Society of Scotland’s professional practice team, said that there has been very little scrutiny of letting agents until now and having a new, statutory code of conduct will improve the situation for both landlords and tenants. ‘Solicitors in Scotland are already subject to stringent rules of admission and detailed practice rules covering professional ethics and conduct and many other aspects of practice. While solicitors will still be subject to the new letting agency scheme, there will be less duplication than was in the original proposals,’’ she pointed out. We’re pleased that the Scottish Government has considered many of the points we raised. The regulations now take into account that solicitors are required to have indemnity to… Continue reading
CML warns of negative impact of new 3% tax on second homes on UK housing market
The UK property market is facing a slowdown in buy to let activity due to tax changes for private landlords, says a submission to the Treasury over the extra surcharge on second properties. The Council of Mortgage Lenders is urging reform of the plans to charge an extra 3% for buy to let landlords and second home buyers from April this year to mitigate potentially negative impacts on the housing market as a whole. It says in its submission that even without the new surcharge, the forthcoming adverse tax changes for private landlords and the potential macro prudential interventions in the buy to let market will result in a slowdown. It points out that there is a risk of overkill in dampening investor sentiment to the extent that the flow of available private rented property could be disrupted, without any necessarily corresponding increase in the ability of households to become home owners. In addition, with around a fifth of households currently renting in the private sector, there is the perverse risk that the stamp duty increase could cause landlords to charge higher rents, and so actually make it harder for tenants who want to buy to save the deposit needed to do so. Under current proposals, some people will be caught by the requirement to pay the 3% surcharge even when they are buying their main residence, for example, if they have a short term overlap between owning their previous home and acquiring their new one, perhaps as a result of problems in the housing chain, the CML points out. ‘It would be better to allow people to defer their payment of stamp duty for 18 months subject to conditions, rather than require them to pay it upfront and then potentially reclaim it in the form of a rebate. This would be both fairer and more efficient,’ the submission says. ‘The government should clarify whether its policy intention is to favour institutions facilitating new build activity, or new build activity more generally. If the policy focus is on the perceived benefit arising from the economic activity, then the proposal should recognise the potential for even small scale and individual investors to contribute to this through off-plan purchases, and should not discriminate against them,’ it adds. Director general Paul Smee said that the CML’s longstanding view is that stamp duty is a blunt policy lever. ‘Given the complexity of the proposals, we also suspect that in practical terms the surcharge could cause more problems than it solves,’ he pointed out. ‘We urge the government at least to move away from a position where people will have to pay and then potentially claim back to one where payment is deferred, and only triggered if the buyer genuinely falls into the intended target category,’ he explained. ‘If the surcharge proposal is designed to promote home ownership, we think that there should be better evidence as to why this requires a reversal of growth in the private rented sector,’… Continue reading
