Tag Archives: europe
New report highlights lasting changes in UK home ownership
The recent economic downturn has had a lasting effect on the pattern of home ownership in the UK with more people now renting a home, new research shows. According to data in the latest economic review report from the Office of National Statistics the proportion of households who rent their home from a private landlord increased slowly from 6% to 11% in the 20 years between 1988 and 2008, before rising to 16% in 2014. By contrast, the proportion of households who own their own home increased gradually from 56% to 71% between 1981 and 2008, but fell back to 67% in 2014. This fall in home ownership, and the marked increase in private renting, have reversed a three decade long trend towards increased home ownership, and partly reflects constrained mortgage lending and the relative performance of house prices and household incomes during the recovery, the report says. It also points out that this combination of effects has also helped to reduce the fraction of households which own their own home with a mortgage which has fallen from a peak of 43% in 1991 to just 31% in 2014. While trends in aggregate home ownership have started to reverse in recent years, the impact on sub-groups of the population has been considerably larger. Not only has the number of people choosing to live at home with their parents increased markedly, but patterns of tenure among independent householders have also changed. The number of young people living in privately rented accommodation has risen markedly, both since the economic downturn and over the past four decades. In 1987, just 9% of those aged 26 to 30 were private renters but rising to 19%, 30% and 39% in 1997, 2007 and 2014 respectively. Almost one third of those aged 31 to 35 were private renters in 2014, and one in five of those aged 37 to 41 were renters, markedly higher than in 2007. Much of the recent rise in the incidence of private rentals is reflected in the sharp fall in home ownership and in particular in the lower fraction of mortgagors. The proportion of individuals of all ages living in mortgagor households increased between 1977 and 1987. Over the following two decades, the proportion of young people in mortgagor households fell, while the mortgagor proportion among those aged between 45 and retirement increased, likely reflecting the maturation of many of the younger householders who were part of the initial wave of house purchases. The difference between 2007 and 2014 is striking, the report says, pointing out that the prevalence of mortgagors is lower than in 2007 among every age group below 55, and the prevalence of mortgaged home ownership among age groups under 40 is lower than in 1977, before the Right to Buy was introduced. It indicates that the rise in the incidence of private rentals has been particularly marked among 21 to 25 year olds, increasing from less than 20%… Continue reading
Larger number of UK landlords now considering setting up limited companies
With buy to let landlords in the UK now facing paying more property tax and facing cuts to mortgage tax relief, increasing numbers are considering moving their property investments into limited company vehicles. Some 41% of 1,400 landlords taking part in a survey commissioned by Paragon Mortgages indicated that they are considering moving their portfolio into a limited company following the Chancellor’s decision to limit tax relief available to landlords last year. A further 5% have already established limited companies. For larger landlords with 20 or more properties, 14% are already operating as limited companies, while 63% are considering it. In terms of portfolio growth, 43% of landlords surveyed agreed that the stamp duty increase will affect their buy to let purchasing plans over the next couple of years. This figure rises to 63% for larger landlords with 20 or more properties. Despite uncertainty about what impact the changes to tax relief and stamp duty might have however, tenant demand amongst landlords is still perceived as being high. Demand for rented property in the fourth quarter of 2015 was strongest in the South West where 40% of landlords reported demand to be rising. Landlords in the North East experienced the weakest demand, with just 24% of landlords reporting increased demand. Reflecting this demand, average yields have also remained stable and averaged 5.6% across the country, unchanged on the previous quarter. The North West saw the highest yields, at 6.2%, while outer London had the lowest, at 5.1%. ‘Recent government interventions into the buy to let market are now beginning to impact landlord sentiment and plans. The fundamental drivers of the market however, tenant demand and yields, remain strong so there are competing dynamics at play,’ said John Heron, director of mortgages at Paragon. ‘It is interesting to see that concern about the impact of changes to stamp-duty and tax relief is greatest among larger landlords. This concern is likely to grow now that the government have confirmed that landlords with larger portfolios will have to pay the increased rate of stamp-duty on buy to let purchases,’ he added. Continue reading
First time buyers in the UK are failing to count the cost of home ownership
First time buyers in the UK are failing to count the true cost of purchasing a home with legal fees and insurance catching them off guard, new research suggests. Some 40.6% of new home owners don’t take unexpected fees into account and bank transfers, searches and mortgage set up costs were among the biggest shocks for one on four buyers. The research from Pegasus Personal Finance also found that 24.3% weren’t aware of land registry fees, 16.7% unaware of stamp duty and 14.7% not knowledgeable on solicitors’ fees while one in 10 admitted a lack of knowledge on interest rates. Some 13.5% of home owners, assumed to be those with variable rate mortgages, admitted they haven’t prepared for an increase in interest rates should they unexpectedly climb from a seven year low of 0.5%. The firm points out that excluding stamp duty, unforeseen fees could amount to a sizeable £1,850 according to recent data from the Money Advice Service. On top of this one in five did not account for an increase in utility bills as a result of moving to a larger property, while the same number were surprised to see their car insurance costs increase. And 24.6% underestimated removal charges while 13.9% viewed furniture and decor as a surprise expense. ‘The results of this study showed some real eye opening insights and surprisingly displayed a lack of thorough understanding when it comes to the cost of buying a property,’ said Jonathan Le Roux, director of Pegasus Personal Finance. ‘When buyers are working out their budget for a future home move, forgetting the significant costs associated with stamp duty, solicitors fees or similar can really put a spanner in the works at the last minute,’ he explained. ‘Our advice is to do your research and carefully list all the associated costs so you go into home ownership with your eyes wide open. It may be tedious but completing this homework is essential to everything going smoothly,’ he added. Continue reading
