Chancellor George Osborne should do more to encourage institutional investors to take a stake in buy to let property in the upcoming Budget, says the Council of Mortgage Lenders (CML).

The CML claims encouraging pension funds and corporate investors is a neglected policy that could provide the cash for more homes to rent.

The suggestion is part of a wide-ranging Budget review aimed at influencing the Chancellor to ease the mortgage market. The CML is the trade body for all the UK’s major bank and building society residential mortgage lenders.

The submission also criticises current housing policies:

Stamp duty holidays for first time buyers, which the CML claims these creates a boom and bust market around deadline dates

Paying housing benefits direct to claimants may damage landlord cash flows and lead to unnecessary mortgage arrears and repossessions

Making better use of housing stock as, the CML states, most of the homes available over the next 20 years have already been built

“Given the vulnerabilities and uncertainties, it is important to make sure that we have explored all avenues for how to strengthen and diversify funding structures,” the CML has told the Chancellor.

“We note with interest that the government continues to explore the obstacles to greater institutional investment in the supply of private rental property, but, strangely, the further scope for promoting domestic institutional investor interest in mortgage assets seems to be a neglected area of policy.”

The Budget report also points out that banks and building societies rely heavily on raising funds from wholesale markets which are challenged by the eurozone debt problems.

“Funding costs remain higher than a year ago, and the UK remains vulnerable to future eurozone developments. Given that current market conditions are somewhat fragile, it is very important that other government policies do not undermine housing market sentiment more generally,” says the CML.

“We believe that there are a few areas where policies are not as well aligned as they could be.”

Landlords should have more tax breaks to let them boost their buy to let businesses, a landlord group has urged Chancellor George Osborne.

Tax rules for landlords do not treat them the same as other businesses and are stifling efforts to invest in more properties for private renting, says the Residential Landlords Association.

Changing the tax rules in the Budget to let landlords operate as proper businesses rather than treating them as investors would make all the difference, says the RLA.

Three major changes would help, they told the Chancellor -

• Let landlord roll-over capital gains when selling a rental property to a first time buyer or when the cash is reinvested in buying another buy to let home

• Change self-invested pension plans (SiPPS) to include residential rental property with safeguards to avoid tax abuses

• Open claiming capital allowances to residential letting property

A report from tax expert Professor Michael Ball, of Reading University, commissioned by the RLA in 2011, disclosed the tax treatment of buy to lets as investments rather than as a business costs landlords around £1,000 in extra tax each year.

The RLA reckons this cash would be offset by landlords paying more tax on profits from larger buy to let businesses and would ease the cost of refurbishing homes to a higher standard for tenants.

Chairman Alan Ward said: “With rapidly increasing demand for rented accommodation and a supply shortage driving up rents, there is a real need for changes to the tax treatment of the sector to encourage it to invest. It is a nonsense that when landlords are running a business, that they should be hampered by a tax system that treats them as investors.

“Our proposals for change are cost neutral as they recognise the revenue that will flow from income to new and larger landlords and that every £1 invested in the sector provides a return to the economy of £3.50 through expenditure on building work and furniture.”

Cannabis is a growing problem for landlords as crime gangs change tactics to hide their stashes in buy to let homes to avoid police. 

Police forces all over the country have raided rental properties with sophisticated lights and watering equipment need for growing the drug.

Many of the cases are linked to Asian drugs gangs that are spreading the risk of detection by setting up farms in suburban rental properties rather than larger commercial concerns.

Typically, the properties house 200-300 plants tended by one or two illegal immigrants, usually from Vietnam.

In the most recent case, Wolverhampton Crown Court heard how a landlord let a home to illegal immigrant Mo Nguyen, 22, acted as a grower for the drugs gang.

Nguyen was jailed for two years after pleading guilty to producing cannabis. He faces deportation at the end of his prison term.

The farm was discovered when the landlord was called to the house to investigate a humming noise. Inside, he found 340 cannabis plants worth around £100,000 and growing equipment making the noise.

Nguyen claimed he was working off a £10,000 debt owed to the gang for bringing him to the UK.

Another Vietnamese illegal immigrant Vinh Cong Le, 18, was given 20 months detention by a judge at Peterborough Crown Court for producing cannabis worth £130,000 found by police who raided a four-bedroomed buy to let home in the city.

His lawyers are appealing his conviction on the grounds he was a victim of human trafficking.

They told judges at the Court of Appeal, London, that a drugs gang forced him to tend their crop to pay back costs of smuggling him in to the UK. They claim his conviction should be quashed as European Law forbids victims of trafficking from being charged with a criminal offence.

The UK Border Agency told the court no evidence showed he was a victim rather than a member of the gang.

This year the usual doom and gloom merchants Capital Economics and Jonathan Davis are still saying property prices will fall by 5% (CE) or up to -12% (JD). These two companies typically give ‘downbeat’ forecasts about the property market.

Other predictions suggest property prices will rise by up to 3% (Savills). The CEBR correctly predicted small falls in 2011 and then prices rising around 14% up to 2015. Although this sounds a lot, over a five year period, this means an average growth of just under 3% per annum, which means house prices potentially won’t keep up with current inflation levels of 4% or more. Hometrack predict house price falls of around 3% in 2012.

So, depending on whether we hit an economic recession in 2012 and how deep it is will determine whether prices show a little bit of growth or a small decline. If things get really rough with high unemployment levels, a sharp rise in repossessions and say a rise in interest rates, then it may be that the real doom and gloom forecasts of 5% or more falls could exist by the year end.

The following data and analysis helps us to understand what might happen over the next few months in the property market. However in view of the regional differences, it is essential to consult local property experts and not rely on national data which could give you a completely skewed view of the market.

For more information and analysis using For Sale Sign Analysis, Hometrack, National Association of Estate Agents and Royal Institution of Chartered Surveyors, please download the full release in PDF format.

What does the current market mean for Homeowners, Buyers, Sellers and Investors?

The current market suggests that for homeowners, nothing much will change this year unless you are in a tough area where property prices are falling 5% or more – such as Hartlepool, Blackpool, Carmarthenshire, Hull and North Lincolnshire. Owners of properties in these areas are more likely to find equity is being squeezed which could impact on their ability to re-mortgage their properties.

In other areas such as successful parts of London, the market is buoyant and homeowners can look forward to natural property price growth.

For buyers, in the main, the market will play into your hands as there appears to be more properties coming onto the market than there do buyers. However, the number of properties available for sale is still low, so although you could get a bargain, it may be tough to find the right property and when you do, with so many micro markets developing at the moment, you might end up having to compete to secure it.

For sellers, it’s all about understanding not just the local market but also the market for your individual property. Board counting is a useful way of doing this, just as For Sale Sign Analysis carries this out on a regional basis, so you can check how many similar properties to yours are for sale and how many are sold. If you are in a market where more than four properties out of ten are sold, it’s potentially a good time to sell, if it’s down around the one in ten, then you are likely to have to price keenly and have to wait a few months to secure a sale.

For investors, most areas across England and Wales should be quite attractive. Properties are sticking on the market and some sellers are likely to become desperate to move on this year, whether they are trading up or down. For those sellers that have the equity to be able to sell at a discount, investors can pick up a bargain. But, as stock levels are low, if you want to find a bargain, be prepared to do a lot of leg work looking at properties. You won’t be able to view a few properties and then make a cheeky offer. Finding a property where the deal stacks up could take you six months to a year and you are likely to have to look at over 100 properties to find a good investment.

Finally, all investors should be wary of companies offering ‘below market value’ properties, many of these are sold to novice investors who don’t know how to research prices properly and some have ended up buying a property which doesn’t necessarily have the discount they thought it did. Never buy a property without viewing it first!

For the full analysis please download the full release in PDF format.

For more information and property market commentary for consumers and one to one consumer property advice:-

Designs on Property Ltd (www.designsonproperty.co.uk) is run by Kate Faulkner, who spends half her time working as a consultant to the residential property industry, and the other half helping people carry out property projects. Kate is uniquely placed to help first time buyers, tenants, people trading up and trading down, renovators, self builders and would be property investors.

Kate’s new ‘Help me find a house’ service offers property hunters a 100+ page property pack which contains how tos, top ten tips, checklists and advice at every step of the way, including a one to one helpline via email or phone.

About Kate Faulkner
Kate carries out over 50 speaking engagements every year, highlighting property market issues to the industry and consumers. She has written six property books including four for Which? is a featured property expert on the 4Homes website, regularly presents market issues for BBC Radio Nottingham and has a column in the Nottingham Evening Post. She has appeared on BBC Radio 4′s You and Yours, BBC Radio 5 Live, ITV news and The Big Questions.

HMO landlords can borrow up to 80% loan-to-value on new broker-only deals from Kent Reliance.

Deals include two and three year fixed and discounted deals starting at 5.19% for HMOs, student landlords and limited companies.

Kent Reliance is one of just a handful of banks and building societies considering applications from landlords for HMOs.

Platform – the buy to let subsidiary of the Co-op Bank – has trimmed rates on two-year fixed rate buy-to-let mortgages by 0.20%.

Loans are available up to 75% loan to value on the standard range and 65% LTV for ‘premier’ products.

The deals include a free valuation and free legal fees for remortgages.

BM Solutions has also shaved 0.20% from all buy-to-let mortgages – including fixed and tracker loans.

The lender – part of the Lloyds Banking Group – also cut the cost of borrowing by up to 0.30% on selected landlord mortgages earlier this month.

BM Solutions has introduced some new fixed rate products at 75% loan to value, with a fee option of £995 or 0.50% of the amount borrowed.

BM Solutions Phil Rickards, said: “This is our second round of price reductions in as many weeks. By launching some new deals and reducing all rates in the current range, we’re shaking up competition in the buy-to-let market.”

The Mortgage Works (TMW) has released a free affordability app for iPhone and iPad after launching Android and Blackberry versions last November.

The app calculates how much TMW will lend after landlords enter the estimated purchase price rental income on a property in to their smartphone.

Paragon Mortgages revealed one in four applications handled by intermediaries are for buy to let mortgages – up from one in five a year ago, according to the lender’s latest research.

The survey discovered 40% of landlords are taking loans to buy more investment properties, while 30% are remortgaging for better mortgage deals.

Mortgage brokers increased their buy to let business by 4.5% in the final three months of 2011, said the lender.

Landlords and letting agents are readying for a new energy performance certificate regime across England and Wales from April 6.

The new rules apply to all properties – whether residential or commercial – and brings the rules for letting and selling in to line.

From April 6, a property owner or agent must ensure:

• An EPC is commissioned before marketing a property for sale or rent
• That evidence of commissioning an EPC is available on request to trading standards officers, who have a new power to demand this.
• To try to make sure the EPC is available within seven days of a property coming to market – or no later than 28 days from the marketing date.
• The front page of the EPC is available with any property marketing particulars – whether print, online or email documents.
• Give a full copy of the EPC to prospective buyers or tenants before they view a property.

Under the old rules agents would often keep the EPC until shortly before exchanging contracts – this is now a breach of the regulations.

Properties already on the market with an EPC do not need another certificate on April 6.

EPC design also changes with the new rules – complicated graphs on the front page are replaced with clearer details about energy costs and how to cut them.

Landlords or agents who do not comply with the new regulations could face fines up to £200 for renting or selling homes, or 12.5% of the rateable value with a minimum £500 and maximum £5,000 penalty for commercial property.

More information is online at Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment) Regulations 2011

Landlords and letting agents are readying for a new energy performance certificate regime across England and Wales from April 6.

The new rules apply to all properties – whether residential or commercial – and brings the rules for letting and selling in to line.

From April 6, a property owner or agent must ensure:

• An EPC is commissioned before marketing a property for sale or rent
• That evidence of commissioning an EPC is available on request to trading standards officers, who have a new power to demand this.
• To try to make sure the EPC is available within seven days of a property coming to market – or no later than 28 days from the marketing date.
• The front page of the EPC is available with any property marketing particulars – whether print, online or email documents.
• Give a full copy of the EPC to prospective buyers or tenants before they view a property.

Under the old rules agents would often keep the EPC until shortly before exchanging contracts – this is now a breach of the regulations.

Properties already on the market with an EPC do not need another certificate on April 6.

EPC design also changes with the new rules – complicated graphs on the front page are replaced with clearer details about energy costs and how to cut them.

Landlords or agents who do not comply with the new regulations could face fines up to £200 for renting or selling homes, or 12.5% of the rateable value with a minimum £500 and maximum £5,000 penalty for commercial property.

More information is online at Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment) Regulations 2011

HMO landlords are facing stricter licensing and enforcement as councils across the country take on extra powers to deal with poor housing.

Around 40 councils are preparing to tighten up controls – mainly against student landlords and other shared housing.

Oxford City Council has already instituted the first city wide HMO zone that requires all new shared homes with three to five tenants to register for a licence.

Nottingham City Council is imposing extra controls in some neighbourhoods from March 1, with a series of other councils in university cities are lining up to follow suit.

These include Newcastle, Manchester, and Southampton.

Under the rules, landlords letting new HMOs must apply for planning permission. The rule does not apply to current houses in multiple occupation, but new lets and properties that were once HMOs that switched to family homes or single lets that are marketed as shared houses again.

Landlords, students and letting agents in many cities have protested against the changes without success.

Councillor Jane Urquhart, Nottingham City Council’s portfolio holder for planning and transportation summed up the feelings of most councils.

“We have considered all the objections. We are proud of Nottingham’s status as a top university city and hope students are clear that this decision does not affect existing HMOs and will not suddenly reduce the housing stock available for them,” she said.

Meanwhile, Sunderland City Council has warned a group of ‘hardcore rogue landlords’ that they face prosecution for failing to sign up to a selective HMO licensing scheme.

The scheme covers the neighbourhood of Hendon, where out of 2,500 homes, 70 owned by 30 landlords remain unlicensed.

The council has agreed around 650 licences, with 470 licenses issued demanding property improvements.

Derek Welsh, housing and neighbourhood renewal manager, said: “The vast majority of landlords in Sunderland are good, reasonable landlords, but some don’t manage their homes or tenants well.

“We are now in the second stage of the legislation, taking prosecutions against people.”

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Editorial:

We continue to live in interesting times as the old Chinese proverb says, as more often than not the daily grind of bad news trumps the good, with stock prices bobbing up and down like a yoyo.

The Office for National Statistics (ONS) tells us that UK consumer price inflation fell in January, but house prices too continued their slide in the last quarter of 2011, according to figures from the Royal Institution of Chartered Surveyors (RICS).

More gloom as Credit rating agency Moody’s threatens Tuesday to downgrade Britain’s Triple A credit rating, which pushes the FTSE lower and, despite the Greek parliament’s agreement Monday on severe austerity measures, Greece continues to cast a shadow and much uncertainty over the Eurozone and the UK.

The economic effects of recent natural disasters are still being felt, with Lloyd’s of London estimating its costs from the severe flooding in Thailand in 2011 at £1.4bn adding to previous losses suffered in the Japanese tsunami.

Despite all this the Council of Mortgage Lenders (CML) latest figures show that properties being bought with buy-to-let mortgages increased by around 84,000 in 2011. During Q4 2011 a total of 34,800 buy-to-let mortgages (including 15,600 remortgages) were advanced – a total of almost £4billion. This adds modestly to the stock or rental property available to let, easing pressure on rents in some high demand areas.

At the height of the property boom in Q3 2007 quarterly mortgage lending was over 93,000 loans, worth £12.7billion, so the buy-to-let market is continuing at subdued levels, but there are clear signs it is continuing its recovery from a low point in 2009. CML figures indicate that buy-to-let accounts for nearly 13% of outstanding mortgages in the UK by value, and that buy-to-let lending now represents approximately 11% of total gross mortgage lending in Q4 2011.

Although mortgage areas in buy-to-let are generally lower than is the case with owner occupier mortgages, repossession rates are higher. This is due to the fact that the lenders exercise more forbearance with owners than they do with landlords, but they stress that a tenant’s rights are unchanged even if the landlord defaults.

CML claim that buy-to-let is performing an important role in the housing market, providing good quality accommodation, flexibility and mobility for those that need it, and does not crowd out first-time buyers.

For those interested in saving money on tax, Carl Bayley’s new TaxCafe 2012 book on Capital Allowances should prove very useful – see: www.taxcafe.co.uk/capitalallowances.html

Coming up soon the first in the 2012 season’s property shows – the Landlord & Letting Show – at its new venue – the Barbican, London, will be well worth a visit if you can make it on the 13th or 14th of March

Tom Entwistle, Editor – February 2012

e-mail your comments to: editor@landlordzone.co.uk

Tom Entwistle, February 2012

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Confidence in commercial property investment has continued to dip, following the gradual trend over most of last year, according to the latest data from consultants CBRE.

Average values dropped another 0.2% and returns were just 0.3% in January, says the report.

Wider economic concerns have dragged market sentiment down for several months in a row, despite a rally in December.

CBRE has declared a buyer’s market as even London offices fell back after almost three years of growth.

In 2010, the commercial market saw £33.4 billion of property change hands. Around 35% wen to overseas buyers, but offices, retail and industrial saw values fall by 0.2%. Industrial and offices delivered better returns of 0.3% thanks to a larger income component.

“The decline in London has caused a softening in overall office performance this month, as the counter buoyancy effect of a strong central London office market has stalled,” said Nick Parker, Senior Analyst of Economics & Forecasting at CBRE.

“December’s glut was predominantly thanks to overseas investors filling their boots with UK property, in a market where buyers currently hold the cards. Over the next 12 months we foresee international investors group remaining a key component of the UK property investment, as they have increasingly become over the past 10 years.”

Offices in Outer London/M25 and rest of the UK saw values fall by 0.4%. Neither  have experienced much of an upturn since June 2009, with Outer London M25 up 2.6% and the rest falling by 0.9% during this time.

A depressing underlying performance is masked by Central London office values that surged by 47.2%.

In the wider market, retail suffered a general weakening in January, with total returns of 0.2%, down from 0.4% in December, as values fell 0.2%.

Shopping centres performed the worst in January, with capital values falling 0.5%, delivering a neutral return.

Retail warehouses returned a flat performance, with total returns down to 0.4% from 0.7% in December. Rents were stable.High street shops saw a slight improvement in performance in January, but still saw values fall by 0.1% with total returns of 0.3%. Rents were down o.1% in January and 1.2% over the past year.