Tag Archives: real estate
Home owners in London more confident about house price increases than rest of UK
Households across the UK believe that the value of their home increased this month with people in London more so than the rest of the country, says the latest house price sentiment index. Households in all of the 11 regions covered by the index reported that prices rose in February, led by households in London at 68.1 and the East of England at 62.3. Households in Scotland reported the most modest rate of growth at 51.7 followed by the North East at 53. The data from the Knight Frank/Markit index also shows that households expect house prices to rise over the next 12 months, with the strongest growth expected by households in the South East. However, the rate of growth expected over the next year eased compared to January and while 23.2% of the 1,500 households surveyed said that the value of their home had risen some 4.1% said that prices had fallen. This resulted in a HPSI reading of 59.6, the 35th month in a row that the reading has been above 50. Any figure over 50 indicates that prices are rising, and the higher the figure, the stronger the increase. Any figure below 50 indicates that prices are falling. Indeed, February’s reading was the highest recorded by the index since October 2014, indicating that households perceive that the value of their home rose at its strongest rate since then. However, February’s reading remains well below the peak of 63.2 reached in May 2014, reflecting the easing in average UK house price growth seen since then. The future House Price Sentiment Index (HPSI), which measures what households think will happen to the value of their property over the next year, fell in February to 69.8, from 70.5 in January. While still indicating that households across the UK expect the value of their home to rise over the next 12 months, the future HPSI remains below its peak of 75.1 reached in May 2014. There remains a clear north-south divide in terms of the outlook for house prices, with households in Southern England more confident about future growth over the coming 12 months. Indeed, households in the South East were the most confident that prices will rise at 78.7, followed by Londoners at 77.8 and those in the South West at 74.1. In Scotland, the North East and Wales expectations for future price growth remain positive, but are more subdued at 62, 60.6 and 62.5 respectively and the data also show that those who own their home outright are the most confident that prices will rise over the next year at 75.4, followed by mortgage borrowers at 75.2. ‘The HPSI indicates that house prices are set to continue to tick up modestly in the coming months. The market is being underpinned by the solid economic recovery and ultra-low interest rates which now look as if they will stay put for some time to come,’ said Gráinne Gilmore, head of UK residential research at… Continue reading
High proportion of UK landlords considering ways to combat tax change
Some 40% of landlords in the UK are either seriously considering forming a limited company in order to limit their exposure to changes that will restrict mortgage interest or will be looking into the option in the coming months, according to new research. However, the research from the National Landlords Association (NLA) found that so far only 1% had actually incorporated, which the NLA says can be explained by the high cost of transferring property held personally into a company. The findings also show that 31% have no intention of moving their portfolio to a limited company and that 29% are still unsure about whether they will incorporate or not. Mortgage interest relief for individual residential landlords, which will be restricted to the basic rate of income tax of 20% by 2021, will begin to be phased back from April 2017. The changes will mean that landlords will no longer be able to deduct the cost of mortgage interest before declaring their taxable profit, and will instead receive a tax credit of 20% of their mortgage interest costs. The NLA has labelled the changes the Turnover Tax, because landlords’ tax will be calculated on rental income they earn, rather than their profits, forcing many basic rate payers into a higher bracket and leaving higher and additional rate payers with considerably bigger tax bills. Landlords structured as companies will be exempt from the changes, instead paying corporation tax, currently 20%, on their profits alone. ‘Transferring personally held property to a limited company isn’t a straightforward process, so it’s not surprising that so few have taken this action so far. Landlords need to do their research but many will realise that incorporating simply doesn’t stack up financially; doing so will incur capital gains and potential stamp duty charges, which means the process may be prohibitively expensive,’ said Richard Lambert, NLA chief executive officer. According to Richard Price, executive director of the UK Association of Letting Agents (UKALA), if landlords follow through with these intentions then it’s likely that more and more will take a hands on approach to managing their portfolios in the future, which would mean less business to go around for agents, and certainly less of a need for full service offerings. ‘The changes to taxation are forcing landlords to re-evaluate their businesses and their place in the market, so our advice for agents is to begin talking to your clients about their intentions over the next few years, and consider how you’ll meet their changing needs in a way that is distinct from your rivals,’ he pointed out. Continue reading
Residential rents in England and Wales up 3.6% year on year
Rents in England and Wales increased by 3.6% year on year in January with the East Midlands and the East of England lead rental growth, up 5.9% and 5.8%. This means that rents re growing quicker in these two regions in London and landlords overall have seen total annual returns reach 12% or £21,988 in absolute terms since November 2014. The data from the buy to let index from Your Move and Reeds Rains also shows that the average rent is now £790 per month and the proportion of late rent fell in January to 8.2% compared to 9.3% in December 2015. In London rents rose by 5.7% on an annual basis, marginally slower than 6.3% recorded in December. At the other end of the spectrum rents are lower than a year ago in the South East and North East regions, both seeing a 1% annual fall. Meanwhile the slowest annual rent rises are in Wales, up just 0.6% since January 2015. Six out of 10 regions have witnessed monthly falls in rents, in line with the overall month on month trend across England and Wales. This is led by London, with rents in the capital 0.7% lower than in December. Taking into account both rental income and capital growth, the average landlord in England and Wales has seen total returns of 12% over the 12 months to January, up from 11.2% in the 12 months to December, a 14 month record since total returns stood at 12.3% in the year to November 2014. In absolute terms this means that the average landlord in England and Wales has seen a return of £21,988 over the last 12 months, before any deductions such as property maintenance and mortgage payments. Of this, the average capital gain contributed £13,594 while rental income made up £8,394 over the 12 months to January. Rental yields have so far proved resilient in the face of price rises, the report also shows. The gross yield on a typical rental property in England and Wales, before taking into account factors such as void periods, is steady at 4.9% in January, the same as in December 2015. On an annual basis, this is fractionally lower than the 5% gross yield seen a year ago in January 2015. ‘Buy to let returns are building and property prices are picking up as the housing shortage across the UK intensifies. Landlords’ balance sheets are looking healthier than at any point since 2014, and property investors are looking at an excellent rate of return from their portfolios,’ said Adrian Gill, director of estate agents Reeds Rains and Your Move. ‘With house prices rising rapidly into the New Year, this acceleration will be a welcome addition to the wealth of landlords on paper, while solid rental yields are underpinning total returns pushing well into the double digits,’ he added. He believes that the current fuss over the… Continue reading
