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Renting costs twice as much as owning a home in US cities
People renting a home in the United States can expect to pay twice as much of their incomes on their rent than an owner on mortgage payments, new research has found. It means that it is more affordable to buy a home now in most US metros than it was 15 years ago, even for those putting down less money on a home, according to a Zillow analysis of third quarter income and home value data. Renters, however, continue to pay an increasing share of their income to their landlords as rents soar and incomes remain flat. On average, US home buyers making the nation's median income and purchasing the typical home spend 15.3% of their income on their monthly house payment, down from the historical norm of 22.1% during the pre-bubble period from 1985 to 1999. On the other hand on average, US renters spent 29.9% of their monthly income on rent in the third quarter of 2014, up from 24.9% historically. Younger buyers, earning less money in many areas and making smaller down payments on a home, should expect to spend slightly more of their income on mortgage payments at around 17.4%. The Zillow report says that homes for younger buyers remain affordable thanks to continued low mortgage interest rates and their tendency to shop for less expensive properties. However, the report warns that continuously rising rents across the country could drive more people into the home buying market, but they also make it more difficult for first time buyers to save for a down payment. A breakdown of the figures shows that Washington DC renters can expect to spend 27.1% of their income on rent, up from 16.2% historically while in Miami, rent as a percentage of income has risen from 26.5% before the bubble to 44.5% currently. ‘Despite rising home values, homeownership remains very accessible for buyers that can scrape together a down payment, even if that down payment is relatively modest, find a home to buy and secure financing,’ said Zillow chief economist Stan Humphries. ‘But what keeps me up at night is the fact that it still remains so difficult for so many potential buyers to make those particular stars align, largely because renting is so unaffordable these days,’ he explained. ‘It's very difficult to come up with a down payment when so much of your monthly pay cheque, especially on an entry level salary, is going to your landlord instead of into your savings. Buying conditions are getting better every day, and in time the allure of fixed housing payments and building wealth through home equity will draw more buyers out of rentals and into home ownership,’ he added. The report also points out that home ownership rates in the US have steadily declined, even as the housing market has recovered, in part because millennials have delayed their entry into the housing market. But it is likely that by the end of 2015, millennials aged 23 to 34, will overtake Generation X as the biggest… Continue reading
Number of Scottish households facing higher moving costs set to rise
More households in Scotland could potentially see the upfront cost of moving rise when the new Land and Building Transaction Tax rates come into force in April 2015, a new analysis suggests. In October, during the draft Scottish Budget, John Swinney, the finance secretary, announced that from April next year Scotland would be scrapping the current stamp duty system and replacing it with a LBTT. At the time the Scottish government said that up to 90% of home buyers would be better off under the new regime but this was before Chancellor George Osborne announced stamp duty reforms last week. Following the LBTT announcement real estate firm Knight Frank looked at the numbers and found that, based on the rates announced and compared to the stamp duty system that was in place across the UK at that time, the new LBTT would favour buyers of properties at £325,000 or less, where less tax would be payable. Sales above £325,000 would incur a higher rate of tax. However, the firm has now re-done the calculations based on the stamp duty changes which will apply in Scotland until the change and the point at which it now becomes more expensive to buy a property under the new LBTT system has fallen from £325,000 to £254,000. Knight Frank says that this means that a lot more households could potentially see the upfront cost of moving rise when the LBTT rates come into force in April. According to figures from the Registers of Scotland, the average price of a detached property is higher than £254,000 in nearly a third of all the local authorities in the country. Under the current system, a house costing £390,000 will incur a stamp duty payment of £9,500, whereas the upfront costs under the new LBTT system for the same property will be 72% higher at £16,300. ‘Prior to the introduction of the new levy in four months’ time, we expect to see an increase in the number of prime sales and homes coming to the market as both buyers and vendors look to move before costs rise,’ said Oliver Knight. ‘Homes worth £250,000 plus accounted for 72% of the total £215 million stamp duty take in Scotland last year. The new regime could hit receipts at this end of the market if there is a slowdown in transactions, and perhaps raise questions among policy makers about the rate structure,’ he added. Continue reading
Landlords facing serious court delays on evictions due to cuts
Under resourced county courts in England are exasperated by the number of possession claims being put forward, resulting in costly delays for landlords, it is claimed. According to tenant eviction service Landlord Action it has become such a problem in the last three months that chasing up cases with the courts is now a full time role for one member of their in-house legal team. The vast majority of residential possession claims are dealt with in the county courts and enforced by county court bailiffs. However, government spending cuts, an ever growing number of possession cases which have increased around 15% on last year, are leading to overload. On top of this the firm points out that some courts are insisting that bailiffs must no longer act alone, only in pairs, and this has added to serious delays in the eviction process. ‘We are forever chasing courts for updates on possession orders, Notice of Issues or bailiff appointments. By the courts' own admission, cases are getting overlooked, administrative errors are being made and there are simply not enough bailiffs to support the number of cases, leading to long delays,’ said Julie Herbert, head of legal at Landlord Action. This is having serious implications for landlords who are not only losing thousands of pounds in unpaid rent but racking up more legal costs the longer a case goes on. Some landlords, who are unable to meet mortgage payments as a result, even face possible repossession, in addition to the added risk of their property being left uninhabitable by current tenants, where communication has broken down. One landlord, Mr Waller, has had severe delays with his case as a result of the courts losing his claim, twice. Landlord Action finally obtained a hearing date, which took place on 24 November. ‘Our eviction case has been delayed for almost a year due to severe maladministration by the courts. Files were repeatedly lost and the inefficiency we and Landlord Action encountered was astounding,’ said Waller. ‘This has been a deeply frustrating experience for us as landlords, but an even more harrowing one for our tenant who desperately wants to be rehoused by the council and needs a court order. We're in an impossible catch 22 situation, which only the courts can resolve. The negligence and insouciance of certain individuals are quite literally destroying people's lives,’ he added. Herbert of Landlord Action said another common frustration is when a possession order has been granted and a bailiff appointment confirmed, but the tenant makes a last minute application because they have nowhere else to go. ‘The standard procedure is that a hearing has to be considered by a judge. We recently learnt that many of these applications don't even reach a judge, who would have the authority to strike out an application based on the information already provided,’ she explained. ‘Instead, the knee jerk reaction of court staff is to set down a hearing date, in which everyone is dragged to court,… Continue reading
