Uk
Major changes announced for Scottish rental sector and rural housing
The private rented sector in Scotland is facing change with improved security for tenants and rights and safeguards for landlords, it has been announced. The Scottish government said that a new Private Tenancies Bill will be introduced to provide more predictable rents and curb excessive rent rises with local rent controls for areas where prices are deemed too high. A new Rural Housing Fund will be created to help create more affordable homes in the countryside and more details on the current Help to Buy scheme for first time buyers will follow. The Scottish Private Rented Tenancy will replace the current Assured system. It will remove the ‘no-fault’ ground for repossession, meaning a landlord can no longer ask a tenant to leave simply because the fixed term has ended. It will also provide comprehensive and robust grounds for repossession that will allow landlords to regain possession in specified circumstances. The aim is to provide more predictable rents and protection for tenants against excessive rent increases, including the ability to introduce local rent controls for rent pressure areas and overall to create a more streamlined, clearer to understand tenancy system that is fit for the modern private rented sector. The First Minister, Nicola Sturgeon also revealed that the Scottish Government’s target to provide 30,000 affordable homes by the end of this parliament is set to be exceeded. By the end of March 2015, a total of 26,972 affordable homes, some 90% of the target, had been delivered. Another £195 million will be made available over next three years to extend the Help to Buy (Scotland) scheme which help at least 6,500 households and there will also be a review of the planning system with a particular emphasis on delivering more homes by delivering a quicker more accessible and efficient process. The Rural Housing Fund aims to help people who wish to stay and live in rural communities where there is often a lack of affordable homes. It will be available from 2016 for a period of three years. Graeme Brown, director of Shelter Scotland, described the PRS bill as a very positive step that is good news for tenants, landlords and letting agents alike. ‘We look forward to seeing the bill in more detail, the timescales for implementing these changes and how they will work in practice,’ he said. ‘The private rented sector is now home to 330,000 households across Scotland, including around 85,000 families with children. The changes included in the bill will begin the process of reforming the private rented sector and making it more modern, stable, flexible, predictable and fairer for everyone that calls it home,’ he added. Harriet Protheroe-Davis from the Living Rent Campaign, welcomed the move on rent controls. ‘It is important that the model of rent controls fully addresses the problems in rented housing, and we will continue to campaign to ensure that it does, but today’s announcement shows that the Scottish Government has listened to the thousands of people… Continue reading
UK mortgage approvals highest since beginning of 2014
Approvals for mortgages in the UK increased in July to their highest level since February 2014, according to the latest figures published by the Bank of England. The data shows that there were 68,764 mortgages approved in July, up 16.4% from last November’s 17 month low of 59,100. Experts said that it shows that the housing market is heating up again and point out that mortgage approvals have risen in five of the past seven months at a time when house prices are also rising. Net mortgage lending, which lags approvals, also increased, up by £2.709 billion in July, the biggest increase since July 2008. Charles Haresnape, chairman of the Intermediary Mortgage Lenders Association (IMLA), pointed out that it is also the highest number of approvals since the introduction of the Mortgage Market Review (MMR) last year which cooled the market. ‘With 7% more approvals compared with the six month average, it is a clear indication that health is returning to a market that has been under significantly pressure to perform while adjusting to new working practices,’ he explained. However, he also pointed out that the European Mortgage Credit Directive (MCD) rules begin to come into effect this month and there is likely to be an extra element of uncertainty and instability ahead for the market. ‘With more regulation on the way and a potential rise in the cost of borrowing on the cards, the six month window to implement the MCD rules will be a challenge for all concerned,’ he warned. ‘On the positive side, rising approvals suggest consumer appetite is strong and lenders will also be striving to meet their end of year targets, which should support some competitive deals. We must hope that the impacts of change do not weigh down too heavily on what otherwise looks like a strengthening market recovery,’ he added. Howard Archer, chief economist at IHS Global Insight, said it was possible July’s performance was lifted by some house buyers looking to lock in a low mortgage interest rate before they start rising. ‘While we currently expect the Bank of England to first hike interest rates in February 2016, there is now a very real prospect that they could act before the end of 2015. However, the Bank of England is stressing that interest rates will only rise gradually and to a limited extent,’ he explained. Continue reading
Houses with multiple tenants are a better option for buy to let investment, it is claimed
Houses in Multiple Occupation (HMOs) are the most stable and profitable form of buy to let investment in the UK, protecting landlords against higher costs caused by an interest rate rise, a new analysis report suggests. HMOs, generally rented to young professionals and key workers, are intrinsically geared towards maximising rental income by letting each room on an individual basis, according to the report from Platinum Property Partners (PPP). Research for PPP has shown that compared to capital gains, rental income for all types of BTL is by far the most dependable and stable source of return on investment. The firm says that HMOs landlords are therefore best positioned to absorb the higher mortgage costs caused by an interest rate rise, an event which the Bank of England has indicated will take place in early 2016. It explains that the profits of a standard buy to let investment can be wiped out by a 3% rise in interest rates, assuming mortgage rates increase by the same amount, as gross rental income is not sufficient to cope with higher mortgage interest repayments. Even although HMO landlords pay for all household bills, the fact that the property generates a much higher gross rental income means that these costs are easily absorbed. The analysis suggests that the maximisation of income from a given size of property by creating extra rooms and renting them to multiple tenants means HMOs can generate rental income that is up to four times higher than the rents achieved in a standard buy to property. Previous analysis carried out by PPP has shown that rental income is a far more stable and dependable source of return than capital gains, dispelling the myth that the success of any buy to let investment is mostly about rising house prices. From 2010 to 2012, investors operating in both the standard BTL and professional HMO market were sustaining capital losses. It was only in 2013 and 2014 that capital gains began to recover but in contrast, rental income consistently increased throughout the same period for both asset classes, albeit at a much higher rate for HMOs, the report says. It also points out that the best way that landlords can ensure their investment can cope with an interest rate rise, and any other unexpected costs, is by planning ahead and having a good understanding of the financial performance of their portfolio. Research carried out by PPP in 2014 showed that a severe lack of research and poor planning is preventing many buy to let investors from maximising their income. A quarter of buy to let investors sought no advice and carried out no research before making their property purchases and a staggering 93% had no five year plan for their investment. Separate research by PPP shows that landlords are also prone to miscalculating their returns. Some… Continue reading
