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Survey finds over half of buy let landlords unaware of mortgage changes
Over half of buy to let mortgage applicants in the UK are unaware of forthcoming changes to mortgage tax rules and other changes that could affect their application, a new survey has found. Indeed, it is accidental landlords, those who did not intentionally set out to rent out a property, are least likely to know about these regulatory changes, according to the research from landlord insurance provider Direct Line for Business. It found that 62% of applicants were unaware of either the changes to mortgage tax relief or the European Union’s Mortgage Credit Directive (MCD), both of which could impact their ability to secure a mortgage. This lack of awareness rises to 71% amongst accidental landlords. This comes as it is estimated that accidental landlords account for around 17% of new mortgage applications, with overall buy to let mortgage applications growing by 29% in the past year. The research also revealed that only 7% of mortgage advisers believe that the MCD will have a positive impact on approvals of buy to let mortgage applications, compared to 59% who expect it to have a negative impact. The EU’s MCD could see circumstances where landlord mortgage lending will be viewed as consumer lending and could be subject to more stringent lending criteria. Accidental landlords with one or two rental properties may not be able to pass the expected new affordability tests. Changes to the mortgage tax relief are set to be phased in from April 2017 with landlords no longer able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20% basic rate tax on this amount. Landlords are also set to be hit from April 2016 by stamp duty changes that mean anyone buying a second home or buy to let property will pay an extra 3% stamp duty. ‘The new EU legislation on mortgages coupled with the Government’s increase in buy to let taxation could significantly alter the buy to let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord,’ said Nick Breton, head of Direct Line for Business. ‘With house prices in the UK rising by 7% in the year leading to October 2015, and with the estimated average deposit standing at more than £61,000, it is imperative that landlords are able to maintain a suitable amount of property to house the population of young people saving up to buy their first property, or those seeking a temporary stay in a town or city,’ he added. The firm urges landlords to make the most of existing tax benefits. Any money spent on keeping a property in a good state of repair is tax deductible, as are all broker and arrangement fees. Landlords can also claim the whole cost of council tax or utility bills that a tenant would pay. It also says they should keep up to… Continue reading
Canary Wharf set to see strongest office rental growth in central London this year
Canary Wharf is set to have the strongest central London office rental growth in 2016 with an increase of 12.8%, followed by Shoreditch at 10% and Midtown at 9.6%, according to a new analysis. Affordability is the main driver for rents to increase, along with the development of Crossrail, integrating Canary Wharf with the rest of central London, and a general shortage of available offices across London, says the Knight Frank report. This will push tenants seeking high quality affordable offices eastwards, with Canary Wharf well placed to benefit. Expansion by Technology and Creative firms will contribute to the shift, as they are growing fast and increasingly seeking larger offices, it explains. It also says that Shoreditch’s increase in office rents will principally be driven by technology sector expansion. The more mature, established heavy weight tech firms have firmly established a London rival for California’s Silicon Valley in the area, which is set to continue to grow over the next 12 months. Indeed, the technology sector was the largest source of demand for office space in central London in 2015, for the fifth consecutive year, and rents in Shoreditch grew by nearly 24% in 2015, nearly double the 12% increase seen in the neighbouring City Core which is London’s traditional financial district. Moreover, at £65.00 per square foot, rents in Shoreditch have closed the gap on the City Core rents which stood at £70 per square foot at the end of the fourth quarter of 2015. In 2007, Shoreditch rents were £42.50 per square foot, about a third less than the City Core at £63.50 per square foot. Central London vacancy rate levels are at a 14 year low, the report also shows, the lowest since the first quarter of 2001, with the West End at 3.4%, the lowest since 1989. ‘The gap between rents in traditional core areas and other sub-markets has never been so small. Occupiers are making decisions based on quality of product and amenity, availability of scale, adjacency of workforce and not by postcode,’ said Dan Gaunt, head of City Leasing at Knight Frank. According to James Roberts, Knight Frank chief economist, what has surprised everyone is that Shoreditch office rents have got so close to those of the City Core. ‘Everyone assumed the tech firms could not afford rents that high,’ he said. ‘However, the more successful start-ups from five or six years ago have matured into larger, established companies with deeper pockets. They now need bigger, modern, high quality offices, and they can afford to pay to get what they want. It’s what happened in Silicon Valley but there the process took decades, in Shoreditch it has happened in a few years,’ he added. Continue reading
Calls for large scale build to rent projects to be exempt from new additional home tax
The property industry is urging the UK Government to protect large scale investment in residential property from a proposed higher rate of Stamp Duty for purchasing additional homes. The British Property Federation says in its response to the consultation on the new tax that is due to be introduced in April that unless they are protected the housing industry risks losing much needed investment in new housing. It warns that the higher rate of tax could cancel out the progress that the build to rent sector has made since 2011 with new data showing that there are now over 30,000 build to rent units with planning permission in the UK, a 47% increase since October, when the BPF calculated there to be 21,000 units with permission. The BPF has noted that since the turn of the year there have been significant build to rent investment announcements made by the sector, these include Grainger Plc pledging to invest £850 million in the private rented sector by 2020. Legal and General is working with Dutch pension fund PGGM to deliver a £600 million build to rent investment plan, Greystar Europe Holdings, one of the USA’s biggest housing investors, announcing the acquisition of a 26.5 acre site in Greenford, West London, on which it will develop the UK’s largest purpose built rented housing scheme and the Royal Bank of Scotland has pledged £1 billion in lending for the build to rent sector. The BPF is calling for the introduction of a simple portfolio test to exempt institutional investors with 15 or more units in their portfolio from the additional tax. ‘Since the start of the year, there has been investment in the build to rent sector on a scale that we have never seen before. Following the changes that were made to SDLT a few years ago, investment in the sector has really taken off, and it is great to see pension funds and other institutions now investing heavily in housing,’ said Melanie Leech, BPF chief executive. ‘There is cross-party support for new housing and a better quality rented sector, and we would expect Government to recognise the impact that the SDLT surcharge might have on investment in new homes, and the creation of a better quality rental product,’ she added. Without such an exemption there would be a significant negative impact on the sector, according to Andrew Stanford, UK residential fund manager at LaSalle Investment Management and chair of the BPF’s Build to Rent Committee. ‘LaSalle intends to provide good quality, built to rent homes across the country for customers on their journey to home ownership or for customers who want the flexibility and security of renting a home with a long term institutional landlord,’ he said. ‘We were encouraged by the proposed exemption for large scale investors from the additional 3% SDLT charges. If the exemption was not implemented it would have a significant negative impact on our ability to invest in… Continue reading
