TSI
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
Majority of UK private rented sector tenants don’t want long leases, research shows
Almost 80% of tenants in the UK want a lease that is between six months and two years, with just one in five tenants wanting longer leases of two to five years, new research has found. Over half of tenants are hoping to move up the rental ladder and rent a nicer property when they can afford to, according to the study by online letting agent PropertyLetByUs. It also found that over 60% of tenants would like to redecorate their property and over half of tenants want to change the carpets and floorcoverings a further 23% want to install decking, 18% want to add a hot water tub and 13% want to create a patio. ‘Clearly tenants don’t want long leases. For many, longer than two years does not give them the freedom and flexibility they need. They may find a job, then move on to another one, start out living with friend and then want to move in with a partner,’ said Jane Morris, the agent’s managing director. ‘However, landlords like longer leases as they get charged fees each time their agent needs to find new tenants. Our research also shows that many tenants do aspire to owning their own home and a large proportion of them want to redecorate their rental accommodation,’ she explained. But she pointed out that this can cause a major headache for landlords, with many facing redecorated properties at the end of the lease, with no prior approval secured by the tenant. The latest Tenant Deposit Scheme report shows that redecoration is a major cause of dispute, taking 32% of the share. ‘We have seen properties with walls painted in bright colours, despite landlords specifying that the décor must be a neutral and standard lettings property colours, from off-whites and beige to magnolia. One tenant decided to decorate the whole house black and white. Another tenant chose a dark burgundy for all the walls, throughout the property,’ said Morris. ‘Even when a tenant repaints in the correct or authorised colour scheme, there are still problems. We have seen instances of bad paint application, patchy walls, paint spills on carpets, curtains, fixtures and fittings, all of which the tenants will be responsible for at the end of the tenancy,’ she added. The firm says that it is vital that landlords carry our mid-term property inspections and ensure the inventory and check-in stipulates the colour and quality of the decoration. If tenants do want to decorate, they should be given colour swatches to choose from and clear instructions on what can be painted and how. Continue reading
