Investment
UK private rented sector sees fewer serious arrears and landlords finances healthy
Tenants in the UK private rented sector are now less likely to suffer from a serious build-up of arrears with just 1.6% of tenancies in this position, the latest research shows. The number who had moved out of series rent arrears improved by 1.5% in the final quarter of 2015 compared to the previous quarter, according to the latest Tenant Arrears Tracker by estate agency chains Your Move and Reeds Rains. This reverses some of a deteriorating trend throughout the earlier parts of 2015. There were 82,900 households behind on more than two months’ rent, down from 84,200 in the third quarter of 2015. However, the latest quarterly improvement still represents a worsening on an annual basis. The number of tenants in serious rent arrears remains 19.5% higher than in the final quarter of 2014. But as a proportion of the entire market, the latest total still represents just 1.6% of tenancies across the UK private rented sector. This compares to a peak proportion of 2.9% of tenants in the first quarter of 2008. The absolute number of tenants in serious arrears is also mild on a historical basis, considerably below the record 116,600 such cases seen in the third quarter of 2012. According to Adrian Gill, director of estate agents Your Move and Reeds Rains, an individual tenant is still extremely unlikely to fall into serious rent arrears. ‘In fact the proportion of renters getting seriously behind on payments has dropped considerably over the longer term. But absolute numbers are now going the right way too. With fewer people at risk from more serious consequences of struggling to pay the rent, this is great news,’ he said. The tracker also shows that eviction rates have dropped in response to healthier tenant finances. In the final quarter of 2015 there were a total of 26,676 court orders issued for the eviction of tenants, on a seasonally adjusted basis. This is down marginally by 0.4% compared to the previous quarter when seasonally adjusted eviction orders stood at 26,775. On an annual basis, downward progress for evictions is more considerable, with 5.3% fewer evictions than 28,167 a year before in the fourth quarter of 2014. The latest figures for evictions represent 32% of the stock of tenants in severe arrears in the fourth quarter, meaning only around one in three such cases translate into evictions each quarter. Landlord finances are the healthiest on record, it also shows. Cases of landlords falling behind on their own financial commitments are diminishing. In the final three months of 2015 there were 5,500 examples of buy to let mortgage arrears, down by 3.5% from 5,700 in the previous quarter and a resumption of downward progress after the figure previously remained the same between the second and third quarter of 2015. On an annual basis, progress for landlords’ finances has been… Continue reading
Many buy to let property investors not put off by UK tax changes
Most property investors in the UK are undeterred from buy to let despite 2016 tax changes and 56% are planning on purchasing within the next 12 months, new research shows. With changes in tax approaching some 40% plan to set up a limited company for their properties to counter the impact of tax changes, whilst 33% plan to raise rents, according to the latest client barometer survey from specialist lender Shawbrook. However, while the outlook for investors remains positive, new changes to tax relief and stamp duty have caused some investors to check their ambitions. Of the 44% who are not planning on purchasing a new buy to let property this year 37% said it was due to the 20% cap on tax relief for buy to let properties making the proposition unattractive and 16% said the 3% extra stamp duty levy on additional homes was putting them off. The latest figures also revealed that 49% of clients said they considered regulation to be the biggest challenge facing property investors over the next six months, a significant increase on last year’s barometer results, which found that regulation was something only 23% of investors considered to be the biggest challenge they faced. Despite these challenges 61% have a positive outlook for the upcoming 12 months, predicting either a large or small increase in property value. In total 43% of landlords saw an increase in tenant demand in 2015 and 61% saw an increase in their rental income. A further 44% are confident that their business will grow in 2016. ‘As a lender it is always great to see such positivity in the market, and as with our Broker Barometer conducted in late 2015, it seems that there is a lot of optimism amongst property professionals also,’ said Karen Bennett, the firm’s sales and marketing director of commercial mortgages. ‘Obviously the new changes will have an effect and may instil more caution across the market, however, Shawbrook is well placed to adapt to change, and we are expecting the market to remain buoyant,’ she added. Continue reading
Property lenders in UK ready for new European wide mortgage directive later this month
UK lenders are ahead of most of their European counterparts in implementing the mortgage credit directive (MCD), a process that is due to be formally completed on 21 March. With UK firms having been given the opportunity to adopt the revised rules up to six months early, many have chosen this option and are therefore already complying with the directive’s requirements. In practice, borrowers will notice few changes in the process of taking out a mortgage as we pass the MCD implementation date, according to the Council of Mortgage Lenders (CML) which does not expect the move to have any significant effects on the market or on the availability of mortgages. However, in a report, the CML says that over time, borrowers may notice changes in the disclosure documents presented to them by lenders when they are considering taking out a new mortgage. Other changes as a result of the directive include the creation of a new class of consumer buy to let borrowing, sometimes abbreviated to CBTL, as well as modifications affecting foreign currency loans and second charge lending. It points out that in many ways, implementation of the directive in other European countries will align them with standards already applying in the UK, where the mortgage industry has been operating for the last two years under a system of enhanced consumer protection following the mortgage market review (MMR). Nonetheless, the UK, like other EU countries, is required to implement the MCD, which is intended to set minimum regulatory requirements across Europe. An assessment from the European Mortgage Federation (EMF) of how different countries were working towards implementation the directive said that the MMR in the UK already went beyond the core provisions of the MCD. The EMF also estimated that many firms in the UK were six months ahead of most of their European counterparts on implementation. Firms in Belgium and Denmark had also made rapid progress, and had almost completed the process of adopting the directive by last autumn. At that stage, the EMF was predicting that a handful of European states, including Finland, Latvia, Portugal, Slovenia and Malta, might not meet the 21 March deadline. But all of those countries were expected to have adopted the directive within four to eight weeks thereafter. Government, regulators and firms in the UK have all supported the adoption of the MCD, even though consumer protection in this country has already been comprehensively re-appraised and reinforced through the MMR and the directive does little in practice to extend protection for UK borrowers. The process of implementing the MCD has been overseen by HM Treasury, although the rules will be supervised by the Financial Conduct Authority (FCA). The CML report also points out that the transition towards implementation of the MCD has been smoothed by the decision to give lenders a six month window, within which they have been able to adopt the directive’s measures to their own timetable. This means that firms have,… Continue reading
