Rental Portfolios Increase in Q1

Landlords average portfolio size increased from 12.7 properties to 13.2 properties during Q1, research by Paragon Mortgages has revealed.

Landlords who took part in the specialist lender’s quarterly Private Rented Trends Survey also found that 43% of landlords expect demand to grow in the 12 months.

Private investor landlords are also optimistic about demand levels with 48% saying that they expect demand to grow or boom, compared with 41% of professional landlords.

John Heron, director of Mortgages, said: “Tenant demand has remained high for a number of years and this is unlikely to change in the foreseeable future.

“Private rented sector housing is the only growing housing tenure in the UK and increasing pressure is being put on the sector.

“As professional landlords remain constrained by limited equity and access to funding, private investor landlords will drive growth in the sector, growth that is desperately needed to meet the ever increasing demand from tenants.”

Paragon also found that 13% of those surveyed are expecting to buy a further rental property in the second quarter.

Of those looking to buy almost half (41%) are planning to buy terraced houses, 30% are looking to buy semi-detached houses and a further 30% are looking to buy flats and maisonettes.

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House Prices Set to Soar

Millions of British homeowners were given a timely boost last night as it was forecast average house prices are set to rocket by £45,000 over the next five years.

As the UK economy stutters back into life the outlook looks bright for those owning or aspiring to own their own home with yearly increases of £9,000.

And in a double boost, mortgage rates have hit record lows as the high street feels the effects of action to breathe life into a previously stagnating housing market.

The positive picture comes in a top-level report by the respected Centre for Economics and Business Research. Experts said the average UK home would be worth £267,000 by 2018 - up from today’s £222,000.

The boom equates to a £25-a-day - or £750-a-month - increase in value and proves action is working to drag the housing market out of the doldrums.

The news quickly follows Chancellor George Osborne’s budget “to get Britain moving again”, which contained a raft of measures to help people get a foot on the property ladder.

Last night economist and report author Daniel Solomon said: “By 2018, we expect the typical UK home will cost £267,000 – over 20% more than this year.

“Gradual wage and population increases will be the fundamental drivers of this medium-term trend.

“We expect the Chancellor’s new Help to Buy scheme will push up house prices before it raises housing supply.

“We predict the scheme’s effects will be quite modest, but it could support the construction of roughly 5,000 new homes in 2015. This supply boost could provide a welcome route on to the housing ladder for a small number of aspiring homeowners.”

News of a resurgence in Britain’s housing market comes after the Council of Mortgage Lenders reported home loans had got off to their best start since 2008, when the market was at its pre-crisis peak.

Buyers can now pick up some of the lowest rates in history, with one building society offering a two-year fixed rate at a staggering 1.74 per cent.

Lacklustre wage growth, recapitalisation by domestic banks and the deepening Eurozone crisis are expected to subdue house price growth this year.

But next year, the CEBR expects house prices to be 2.3 per cent higher than they were in 2007.

Experts said the predicted strengthening economy will lead to rising wages, while population growth is projected to outpace housing supply increases.

It is these two crucial factors that will lead to accelerating house price growth. By 2018, the CEBR forecasts a typical UK home will cost £267,000, as house prices rise by 4.6 per cent over that year.

Incredibly, in five year’s time UK house prices will be 20.4 per cent higher than they currently are.

Last nightindependent financial expert Stephen Bacic urged Britain’s army of first-time buyers to take the plunge and invest in bricks and mortar.

He said: “There is a lot of pent-up demand out there but credit is getting easier to obtain.

“I don’t believe there is ever a bad time to buy a house - people have absolutely nothing to gain by waiting to get on the property ladder. Now is as a good a time as ever.

“What is the alternative? I can’t believe anyone would be happy paying rent to a landlord until the day they die.

“People have to realise that at the end of their mortgage term they will own a house, people certainly don’t want to be using their meagre pension paying for a roof over their head.”

In his fourth budget as Chancellor Mr Osborne was roundly praised for unveiling a £130billion package to bankroll mortgages aimed at helping aspiring homeowners get their first home.

His pioneering Help to Buy scheme is targeted at stimulating supply growth as house builders respond to higher prices.

The scheme was designed to allow those who could only muster a modest five per cent deposit to buy a newly-built house worth up to £600,000 with loans from the taxpayer worth up to 20 per cent of the value of the property.

The loans will be available from January to everyone, with no salary restrictions, and are interest-free for the first five years.

In year six, borrowers will have to pay a 1.75 per cent annual fee, which will rise by one per cent above RPI inflation every year after that.

The Halifax and other major high street mortgage lenders believe the buoyant swell in house prices shows the Government’s Funding for Lending Scheme has been a success.

As house builders are encouraged to build thousands of new properties to help start a new housing boom, the CEBR said the market would soon start to jolt into action.

In 2015, they expect house builders will respond to higher prices, meaning Mr Osborne’s Help to Buy scheme could lead to an additional 4,800 homes being constructed.

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Mayor: Private Landlords must be Licensed

The voluntary accreditation of private landlords does not work and a mandatory licensing system is needed, the Mayor of Newham has said.

Newham Council became the first local authority in the country to introduce mandatory licensing of all private properties on January 1.

Around 15,000 landlords have signed up to the council's scheme so far, submitting around 28,500 applications for properties, representing a compliance of nearly 75 percent.

The council has now begun enforcement action against non-compliant landlords, who face fines of up to £20,000.

Speaking before a Commons select committee last week, Mayor Sir Robin Wales explained that a voluntary initiative the council ran before the mandatory system had a take-up rate of less than five percent.

Sir Robin said: "We want to work with good landlords, they have nothing to fear. It's the bad ones, the criminal landlords, that we're after.

"We will never accept private sector tenants being directly exploited by landlords who force them to live in dangerous and unacceptable conditions. One bad house can drag down a whole street.

"All the evidence - and we have tried it extensively - is voluntary accreditation simply doesn't work."

The council has said that it consulted extensively with residents, stakeholders, private sector tenants, landlords and lettings agencies over its mandatory scheme. Seventy-four percent of residents and 76 percent of private tenants supported it.

The move came after the borough announced the creation of a task force to combat 'beds in sheds' - illegal outbuildings built at the bottom of gardens which often house tenants living in appalling squalor. In just seven wards, Newham's enforcement team has investigated over 600 cases with over 500 'beds in sheds' now closed.

The scheme is backed by housing charity Shelter and other councils are now considering following Newham's lead.

Kay Boycott, director of communications, policy and campaigns at Shelter, said: "With a chronic shortage of social housing and more and more people being priced out of the housing market, renting is fast becoming the only option for thousands more Londoners. Our advice service for tenants in Newham sees people every day who are suffering at the hands of rogue landlords who are ignoring their responsibilities and wreaking havoc on tenants' lives.

"We urge other local councils to follow Newham's lead in sending a clear signal that enforcing the law against rogue landlords is a priority."

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Devon tenant Brian Kiddell Sells Landlord's Home Online for £90,000

A tenant who sold his landlord's property on the internet for £90,000, has been jailed.

Brian Kiddell, 75, of Topsham Road, Exeter, posed as the owner of the Newton Abbot property.

The owner of the Devon house only found out when he drove past the For Sale sign after the deal had been completed.

At Exeter Crown Court Kiddell admitted nine charges of fraud, theft, and the dishonest use of a dead man's passport. He was jailed for six years.

The court heard that Kiddell rented the house in Prince Rupert Way, Heathfield, Newton Abbot in the name of Paul Stevenson, who had died in 2004, but whose passport he had obtained.

He posed as owner David Ayton, to put the house up for sale.

Mr Gareth Evans, prosecuting, said: "Kiddell had been renting the house for four months when the owner happened, purely by chance, to be driving past and noticed there was a For Sale sign outside the address.

"He contacted his own letting agent and the estate agent and found that it was being sold."

By the time he raised the alarm, Kiddell had completed the sale and made off with the money.

The court also heard that Kiddell tried to access a bank account under a false name to transfer £18,000 after saying the account holder had died and presenting a fake death certificate.

He claimed to be the dead man's brother but the bank blocked the transfer when the real customer was found alive.

Kiddell carried out several other frauds but was caught after applying for a £25,000 loan in the name of Anthony Russell at Barclay's Bank in Launceston, Cornwall.

When Kiddell, posing as Mr Russell, turned up for an appointment he was arrested by plain clothes police.

Mr Stephen Mejzner, defending, said Kiddell was forced to take part in the frauds by an organised crime gang to whom he owed money.

He was sentenced on Wednesday.

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Landlords Could Claim More Than £10k Tax Back

Landlords with a portfolio of buy-to-let properties could be missing out on claiming thousands of 

pounds of cash back from the taxman.

Legislation dating back more than 130 years allows property owners to claim back capital allowances worth tens of thousands of pounds against various fixtures and fittings in commercial properties.

Beverley Loggia, sales director at Bracknell-based Inventive Tax Strategies, said many qualifying UK landlords can claim capital allowances, including those with student lets, professional shares, and more traditional HMO lets.

As many as nine in 10 properties being used for commercial purposes in the UK are eligible for capital allowance tax relief that has never been used.

The allowance is a form of relief available against any capital expenditure made buying, renovating or making adjustments to a commercial property.

There are also some circumstances where the reliefs can be applied to Buy-to-let properties as well. To qualify, residential properties should be shared flats or houses with two or more bedrooms, worth £100,000 or more and owned by UK taxpayers (individuals, UK trusts and UK companies) paying income tax at a rate of 40%.

In some circumstances that can mean there are tens of thousands of pounds worth of rebates available to the property owner, because this tax relief can be backdated to the year the property was purchased.

Loggia said: “The process with ITS is genuinely straightforward. We carry out a free initial capital allowances assessment after giving them some basic property and income details, and if this is promising and you wish to proceed, we appoint a surveyor to carry out a specialist plant and machinery survey to provide an unbiased valuation of the qualifying assets within the property.

“In addition, a due diligence process is undertaken to ensure previous owners have not already claimed in order to confirm your entitlement to claim.

“We are confident that we can save tax on your property assets, hence our initial no-cost review to ascertain the potential extent of the tax savings available. Once determined we will agree a fee structure that suits you, normally between 3% and 7% of the capital allowances amount identified.

“Finally, a claim report for submission to HMRC is compiled and sent to you and your accountant. The report is of a format commonly accepted by HMRC, highlighting the applied legislation, confirmation of ownership, entitlement to claim and the amount.”

Matthew Anderson, director at bridging lender Fincorp, said: “At Fincorp we have a good working relationship with Inventive Tax Strategies, who have been helping landlords reclaim income or corporation taxes previously paid and reduce their future tax liabilities for years. In their opinion it is possible to reach as much as 8% of the property purchase price for residential properties or up to 15-20% on commercial properties.”

Anderson added: “One of the main reasons so many properties haven’t taken advantage of the tax relief is because of the complexity of the claim process - your typical accountant won’t necessarily know that relief is even available, much less how to go about claiming it.”

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House Prices in Biggest Jump for Three Years, says Hometrack

House prices are being kept up by lack of stock – but affordability appears to be driving new buyers away.

The latest Hometrack report, out this morning, says house prices rose by 0.3% this month, but stock volumes and the level of sales agreed were down. Also down was the rate of rise in new applicant numbers.

The house price rise was the highest monthly growth for three years, says Hometrack.

London house prices rose the most (0.7%) this month. But prices were down in just one region, the North-East.

In London, prices rose in 60% of postcodes. Across the rest of England and Wales, there have been price rises in one fifth of postcodes.

Supply continues to be a headache for many agents. It has grown by 13% over the last two months, but by just 3.5% over the last six. Demand has risen by 19% in the last two months, but the rate of increase fell this month, and is lower than this time last year.

Time on the market stands at just 4.9 weeks in London, the lowest since October 2007. That compares with 11.8 weeks in the Midlands and North.

Richard Donnell, Hometrack’s housing analyst, says market sentiment is improving, and said it should continue to do so thanks to Budget initiatives and Funding for Lending.

However, he cautioned: “While scarcity of homes, and support for lending and new housing, will act as a support to pricing levels, the problems of affordability and deposit levels still remain serious impediments to a full-blown housing market recovery.”

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£4.5bn Housing Package Announced in Budget

Communities Secretary Eric Pickles welcomed a new multi-billion pound housing package that will help aspiring homebuyers move up the housing ladder and build thousands of new homes.

As part of yesterday’s Budget, the Chancellor revealed £3.5 billion of funding to help homebuyers secure affordable mortgages and new measures that will enable more social tenants to purchase their home through Right to Buy.

The Chancellor also pledged over £1 billion of extra funding to build thousands of new homes for affordable and private rent.

Welcoming the Budget, Communities Secretary Eric Pickles said: “The multi-billion pound package for housing recognises its vital importance to the economy. But this support is not just an economic calculation – it’s about values.

“These measures mean whoever you are – whether a prospective first time buyer, an existing homeowner or a social tenant – if you work hard and want to take responsibility for your future, we will support your aspiration to move up the property ladder.

“At the same time our funding for thousands of new affordable and private rented homes will get spades in the ground, workers on site, and deliver a vital boost to the British economy.”

Housing Minister Mark Prisk said: “The Budget places housing front and centre in the Government’s plans for economic growth, with measures aimed at getting Britain building, helping aspiring homeowners, and supporting our growing market for privately rented homes.

“The clear message from the multi-billion pound package of measures is clear: that wherever you are in the housing market, whether renting council housing or privately, whether a first-time buyer or looking to move up the property ladder, there is help available for you.”

Mortgages
At the heart of the package is the new £3.5 billion Help to Buy: Equity Loan scheme, which by 2016 will help up to 74,000 homebuyers take their next step on the housing ladder with just a 5% deposit.

It will expand and replace the highly successful FirstBuy model, which is currently aimed at first time buyers purchasing new build properties.

Under the new scheme existing homeowners will also be eligible to receive a 20% equity loan that will help them buy a new build property, with prospective buyers receiving support to purchase properties from a participating housebuilder with a value of up to a £600,000.

By extending support to existing homeowners, the scheme will remove a bottleneck in the market where people want to move, but may be struggling to raise a large enough deposit to purchase their next property.

At the same time a separate option, called Help to Buy: Mortgage Guarantee, will enable lenders to use Government-backed guarantees to offer £130 billion worth of mortgages with smaller deposits, as little as 5%, on new and existing properties.

Where properties are bought under this option, the Government will provide security for the loan, so if the house is then sold for less than the outstanding mortgage total the lender will be able to recover its loss.

Help to Buy will build on the popularity and success of the FirstBuy and NewBuy schemes, which housebuilders have praised for driving sales and boosting the supply of new homes.
Aspiring homeowners have already been voting with their feet: by September 2012 nearly 11,000 reservations and 7,000 sales had been completed through FirstBuy, and the latest figures show 3,700 reservations have been made through NewBuy, the successful industry-led scheme that will continue to work alongside Help to Buy.

Right to Buy
Ministers are determined to ensure that aspiring social tenants also have the opportunity to purchase their home through Right to Buy, and will take further steps to remove barriers so that more tenants can get a foothold on the property ladder.

After years of restricted discounts and dwindling sales, the Government reinvigorated the Right to Buy last April, by radically increasing the potential discounts to £75,000 – almost quadruple the previous discount in some areas.

The Government intends to further boost the scheme by:

• raising the discount cap to £100,000 in London, from Monday 25 March, to recognise higher prices;
• lowering the eligibility criteria, so that tenants can apply to buy their homes after 3 instead of 5 years; and
• looking at ways to simplify the application process for tenants.

Since the higher discounts were introduced in April, 3,500 council-owned properties have been sold to tenants – a third more than in the whole of the previous year, and the highest number of sales since 2007.

The new measures will build on the surge in the numbers of homeowners taking up the Right to Buy, and open the door to home ownership for thousands more social tenants.

Private rented homes
Efforts to help homebuyers will be matched by extra funding to build thousands of new homes for private rent, increasing choice across the housing market.

Funding for the Government’s flagship Build to Rent Fund will be dramatically increased to £1 billion to support the construction of new homes specifically for private rent.

Build to Rent provides recoverable finance that supports the delivery of private rented homes until they are built, let out and managed. This funding model gives housebuilders – more traditionally used to building homes for sale – the confidence to branch out into building homes for private rent, and provides the platform for large-scale institutional investment in this sector.

Since the launch of the fund in December 2012, the £200 million scheme has been heavily oversubscribed, demonstrating the huge untapped potential of investment in the private rented sector. The extra funding will help meet this surge of interest and deliver thousands of extra homes.

Affordable housing
Ministers will also double funding for the Affordable Homes Guarantees Programme to £450 million. Up to 30,000 affordable homes will now be delivered through the expanded programme, with all new homes started on site by the end of March 2015.

Private registered providers in England will be able to bid for a share of the larger funding pot using guidance published last month. The extra funding will complement the Affordable Homes Programme, which is set to deliver 170,000 new homes by 2015 – with almost 63,000 of these already completed.

Ministers revealed that a social rent policy for the next ten years will be announced in the Spending Review this June, which will give certainty to the affordable housing sector until 2025.

They also confirmed that social landlords will be able to charge high-income tenants – those earning above £60,000 – a fair level of rent for the privilege of living in taxpayer-subsidised housing.

The move could see tens of thousands of high-earning social tenants paying market rents to continue living in their social homes, and the additional income generated could then be used by landlords to increase spending on affordable housing.

Ministers believe the changes are necessary to address the problem of precious social housing resources being occupied by tenants who could comfortably afford to live elsewhere.
Making better use of existing buildings

The Budget also included planning proposals to secure the long-term future of high streets, by making better use of empty buildings and bringing people back to live in town centres, increasing footfall and supporting shops.

Other measures will enable rural communities to grow by ensuring better use is made of their existing buildings. By reducing planning burdens, redundant and empty barns and other farm buildings that are no longer viable for other farming or commercial uses could be converted to homes. This will help increase rural housing for local people and promote regeneration of redundant and empty buildings.

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'My House Became a £400,000 Cannabis Farm'

A Birmingham landlord has told how he rented out a family home – only to later discover it had been turned into a £400,000 cannabis farm.

Gary Bond, 53, had let the property on Addison Road, Kings Heath, to what he believed was a Polish couple six weeks ago.

But after they failed to pay their rent he entered the house and discovered it was filled with 400 cannabis plants, each potentially worth £1,000.

West Midlands Police kept the property under surveillance overnight but the mystery tenants did not return.

Police Sergeant Tom O’Keeffe, said: “Around 400 cannabis plants were found inside the property along with heating and lighting equipment; the factory spread over several rooms.

“The force’s cannabis disposal team were alerted to dismantle the set-up once the power company had made the property safe and issued a safety certificate.’’

Yet garage manager Gary and wife Rebecca, 42, from Solihull, were also unhappy with the state police had left the property in.

“I was told that the cannabis team would visit the house, hire a skip and sort it all out,’’ he said

‘‘But instead, they smashed light bulbs in the back garden, cut the cannabis plants off pot-high leaving the pots behind. Fertiliser, smashed plugs and extractor vents were spread around the house.

“The house belongs to my uncle Terrence Bond, 75, and we use the money collected from rent to pay for his nursing home fees.

“I just want the house let again and in it’s current condition it doesn’t seem likely any time soon.’’

Rebecca added: “It was cleaner when the cannabis farm was still up!

‘‘The cannabis gardener was a tidy person as there was washing up done, toiletries in the bathroom and he even had a dustpan and brush.’’

But Sgt O’Keeffe said: ‘‘Cannabis farms need large amounts of fertilizer and irrigation whilst the heat and lighting tends to come from electricity bypassed from mains supply; they are routinely the dirtiest, most dangerous scenes police attend.

“It’s almost impossible to dismantle a cannabis factory on this scale without creating some mess.”

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Falling Rents Slow Down in February

The average rent in England and Wales slipped by 0.1 per cent from January to £731 per month, although annual growth actually accelerated to 3.3 per cent.

Despite the monthly drop at a national level, rents grew on a monthly basis in half the regions. The strongest monthly rental inflation was a 1.8% rise in Wales, followed by the North East where rents were 0.9% higher than in January. London’s rents also returned to growth – rising by 0.5%. The fastest falls were in the North West, at 1.3%, followed by a 1.1% drop in the East of England and a monthly fall of 0.7% in the South West.

Only one region saw rents fall on an annual basis; the average rent in the South West is now 1.2% less than a year ago. Rents in London showed by far the fastest annual growth, rising by 6.2% – or £64.

The South East saw the next biggest year‐on‐year rise, of 3.3%, while in Wales rents were 2.9% higher than last February.

David Newnes, director of LSL Property Services, owners of estate agents Reeds Rains and Your Move, comments: “The rental market hasn’t yet burst into life, but we’re seeing more vitality than last year’s timid February market, when tenant demand was impacted by the rush to buy homes before the stamp duty deadline. 

However, this February has also seen a more vibrant sales market reduce the strain on the private rented sector during its sluggish off‐peak season. While a modest increase in supply has had an effect too, in the longer‐term, the supply of rental homes will have to increase considerably to prevent monthly rent rises when the rental market re‐enters its traditional peak season.”

The total annual return on a rental property rose to 6.2% in February. This represents an average return of £10,144 with rental income of £7,622 and a capital gain of £2,522. The average yield on a rental property was 5.3% in February, compared to 5.2% in the same month last year.

If rental property prices maintain the same trend as the last three months, the average investor in England and Wales could expect to make a total annual return of 12.5% per property over the next 12 months – equivalent to £20,880 per property.

David Newnes comments: “The strengthening of the house sales market has had a positive impact on rented property values. Now, alongside faster annual growth in rents, the expected total return looks even more attractive for landlords. Most importantly, low mortgage rates have widened the gap between monthly payments and rental income even further. In the wake of the base rate decision last week, and after recent speculation that Bank rates could even go negative, mortgage rate rises seem unlikely in the near future. For landlords, the mortgage market looks set to continue providing a platform for profitable investment, especially those with more equity to put down.”

The total amount of rent late or unpaid recovered to levels not seen since November. Total arrears in February were £248m, down from £269m in January. This equates to 7.4% of all rent across England and Wales, compared to 8.1% of all rent in January.

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Majority of UK Renters Unaffected by Rent Rises in 2012

Nearly three quarters of UK landlords have frozen or cut their rents in the last year, according to research from Shelter today.

A survey of 4,300 renters reveals 26 per cent were affected by rising rents over the past 12 months while 74 per cent were unaffected.

British Property Federation director Ian Fletcher says: “These figures suggest that for most tenants, private sector rents are not rising at all, and official statistics show that nationally they are not exceeding inflation.

“Shelter’s stable rental contract has some good intentions, but it isn't clear what impact it would have – for example, Shelter should clarify if it is calling for rents to be index-linked to RPI or to CPI. Even the difference between these two figures is very important because the consequences could leave millions of tenants or landlords financially worse off.”

Shelter is using the data as the basis of an argument in favour of a stable rental contract, meaning that rents would rise in line with inflation on an annual basis.

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