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How Landlords Are Affected By 2015 Pre-Election Budget

How Landlords Are Affected By 2015 Pre-Election Budget

How Landlords Are Affected By 2015 Pre-Election Budget

During the pre-election budget last week, Chancellor of the Exchequer, George Osborne MP announced some significant changes that could have a detrimental impact on landlords the UK’s private rental sector (PRS) and residential property owners.

Below are the highlights of the pre-election budget that are of relevance to landlords and property owners:

  • £13 Billion (GBP) sale announced of the mortgages of UKAR – Northern Rock and Bradford and Bingley (Mortgage Express) to reduce national debt which followed the bailing out of the banks.
  • Introduction of 20 new housing zones.
  • The economy of the North grew faster than the South during 2014.
  • The UK has the highest rate of employment in its history!
    Employment is growing fastest in the North West, Yorkshire having the biggest employment.
  • Living standards are higher in 2015 than 2010.
  • Inflation forecast downgraded to 0.2%.
  • Low interest rates to be “locked in”.
  • Original target of debt reduction set in 2010 budget has been met.
  • 13 years of rising national debt has now been stopped.
  • UK achieved the largest and most sustained debt reduction of any major economy according to the IMF.
  • Government borrowing is falling.
  • The wealthy are making the biggest contributions to reduce debt.
  • End of austerity in 2019.
  • The annual tax return is to be abolished. New digital tax accounts to be created.
  • The personal tax free allowance has been raised to £10,600 (GBP) and will be raised to £11,000 (GBP) in 2017.
  • The higher rate tax threshold will rise to £43,300 (GBP) by 2018.
  • Class 2 national insurance contributions abolished for self-employed.
  • Stronger measures against tax avoidance and tax evasion.
  • Review of avoidance of inheritance tax through deeds of variation.
  • New penalties for tax evasion and those professionals who assist them.
  • Crime down 20%.

There was some good news contained in the 2015 pre-election budget too:

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Funding Boost For Government Build-To-Rent Plans

Funding Boost For Government Build-To-Rent Plans

Finance Secured To Build Thousands Of
Affordable Properties For Rental Purposes

Government housing minister Kris Hopkins has welcomed a deal that will release £500 Million (GBP) of additional funding to build new affordable residential properties in the UK.

The new investment finance has been secured through an agreement with the European Investment Bank (EIB), that will help deliver up to 4,300 new and affordable homes to rent in areas of the UK.

The funding is set to form part of the £3.5 Billion (GBP) Affordable Housing Guarantees programme, which enables housing associations to use Government guarantees to secure private investment at more competitive rates than they would otherwise be able to secure.

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Property Asking Prices Collapse In NovemberProperty Prices Rise At Fastest Rate For 6 Years…Or do they?

The asking price of property is supposed to be rising at the fastest rate for over 6 years, according to Rightmove, however, asking prices actually dropped by 2.4% during October, all but wiping out September’s 2.8% gain. This is the third dip in property prices in 2013.

UK property owners have raised the asking price for their properties by 4% compared to this time last year, marking the biggest annual rise in residential property prices since the financial crisis and property crash hit in 2007.

The average asking price that UK vendors want for residential property now averages around £246,237 (GBP), according to Rightmove, compared to £252,418 (GBP) in October.

It is worth pointing out that residential property asking prices usually fall by approximately 3% in November ahead of the festive season traditional slowdown.

So with residential property asking prices falling by just 2.4% in November suggests that the recent upturn in housing market activity will cushion the predictable seasonal drop.

Rightmove say that buyers still have a wide choice of property types to choose from as the UK property market is holding up relatively well for first-time buyers, as the number of flats and terraced properties on the market has declined more slowly than the number of detached and semi-detached properties this month.

Property prices in the East Midlands were 7.4% higher than they were in 2012, averaging £168,873 (GBP), outpacing property price rises in London.

The average asking price for a residential property in London is over three times greater than property values currently are in the East Midlands and asking prices in London have risen by 6.9% year-on-year, to reach a typical average value of £517,276 (GBP).

In fact residential property asking prices have increased across most UK regions apart from in the North, where residential property prices have dipped by 0.5% annually to average just £141,426 (GBP).

Property prices in Wales dropped by the smallest amount, down by 0.4% to reach a typical average of £165,110 (GBP), while desperate property vendors in London have dropped residential property asking prices by as much as 5% since October.

Rightmove said that traffic to its website has increased 30% in the last 12 months, a sure sign of growing demand from would-be property buyers. The property portal also said that the stock of unsold residential properties has fallen from an average of 71 per estate agency branch one year ago to 67.

Rightmove Director, Miles Shipside, said: “Estate agents expect a more buoyant 2014 as they pick up early signs of an increase in buyer interest and demand, so this side of Christmas could be the time for eager property buyers to hunt out keen property vendors and strike a deal. However, agents’ challenges differ wildly depending on local market conditions. While some are really concerned about future sales because of a lack of fresh vendors, others report vendors getting too brave too early on their asking price aspirations in less active parts of the country, potentially stifling a property market recovery before it has got going.”

The infographic below shows the increase and decreases in residential property asking prices in November 2013 compared to October.

Property Asking Prices Collapse In November

Property Asking Prices Collapse In November

Source: Rightmove.co.uk

Property In The North Is Cheaper

Property In The North Is Cheaper

North of England Leading The Way
For Renting Property

Renting property is more affordable in Northern regions of the UK as property prices in some areas stretch beyond of the reach of the average earnings of first-time and next-time buyers.

Chichester is the least affordable place to buy or rent property in the UK, whereas Hull and Belfast are the most affordable.

Middlesbrough, Dudley and Wolverhampton have the most affordable rental markets in the UK with 99% of properties within an average working couple’s budget.

The North-South divide is still prevalent in the UK property market with the most affordable properties located in the North of the country, where first-time and next-time buyers in full-time employment have the largest pool of properties within budget to choose from

Rental prices in East Anglia and the South East of England are among the highest in the UK according to analysts as these areas outperform the rest of the country, due to high tenant demand.

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Good news for landlords

Good news for landlords

There is a lot of Good News For Landlords Around As PRS rents Increase, Tenancies Last Longer And Demand Remains Strong

Good news for landlords as monthly PRS rents have increased by 1.1% year on year to average £845 (GBP) per calendar month (pcm). Scotland has witnessed the greatest rental price increase at 6.7% compared with the first quarter of 2013.

There has also been an increase in the number of older private rented sector tenants according to the latest quarterly index published by Countrywide lettings agency, who noted a 6% annual growth in the number of tenants over the age of 50 renting property in the UK private rented sector (PRS). The lettings agency also report that there has been a 7% annual decline in the number of tenants aged under 25 in the second quarter of 2013.

Buy-To-Let yields are strengthening across the UK, with the average yields being recorded in 3 regions:

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UK Residential Property Prices Are Still Increasing

UK Residential Property Prices Are Still Increasing

UK residential property prices increased by between 0.3% and 0.6% in June depending on which house price index is viewed

Figures released by Nationwide and Halifax have some disparity; however, both report that residential property prices are increasing. 

Nationwide report that UK residential property is valued 1.9% higher than a year ago with the typical UK home worth £168,941 (GBP). 

Halifax report that UK residential property is 3.7% higher than in the same three months of 2012.

The data from Nationwide shows that the southern regions of England, especially London, continued to record stronger rates of property price growth and London also tops the table of property price growth in the second quarter index.

Overall the price of a typical residential property is up 1.4% compared with the same quarter in 2012.

10 of the 13 UK regions saw annual property price rises in the second quarter of 2013, however, Northern Ireland is still the worst performing region with property prices down 2.1% in the second quarter of the year.

London property prices increased by 5.2% compared with the second quarter of last year and the city has seen the greatest recovery in property prices of any region with prices now 5% above their 2007 peak at £318,214 (GBP).

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North - South Divide Widens Again

North – South Divide Widens Again

A new study by the Office for National Statistics (ONS) has revealed that 20% of middle aged workers are property millionaires – on paper!

In the South East of England almost 30% of people in their 40s and 50s living in private residential properties can calculate their wealth to seven figures, when including savings, investments, the value of their homes and pension pots.

However, the study also revealed a sharp divide between North and South of England as well as between generations.

It claims that five times more children are growing up in households in the bottom top wealth bracket, North East, South East, wealth category as there are in the top wealth bracket.

While almost 60% of middle aged people in the South East have built up an impressive half a million pounds in savings, pension and property wealth, in the North East, 20% of the same age group have little or no assets that they can rely on.

The ONS study shows how wealth builds up through people’s working lives but begins to fall once they retire and begin using up their accumulated assets, in many cases on elderly care.

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Rental Yields Drop As UK Residential Property Prices Rise

Rental Yields Drop As UK Residential Property Prices Rise

Property Price Increases Wipe Out Landlord Rental Yields

Residential property prices are rising so fast that they are outstripping rental price increases and some private sector landlords’ rental yields are suffering.

Landlord rental yields in the UK private rented sector (PRS) have fallen almost everywhere in the UK, and any rise in the rental prices are being outpaced by rising residential property prices.

Countrywide have said that in May 2013, rental yields declined everywhere in the UK except in the East of England (up 0.2% to 6.2%) and Scotland (up 0.1% to 5.8)

Rental yields in the South-West and the Midlands remained the same at 5.7% and 6.5% respectively. The greatest rental yields in the UK PRS are being achieved by landlords who own rental properties in Wales (6.6%), the Midlands (6.5%) and the North (6.4%).

Average monthly rents on two- and three-bedroom properties in the UK private rented sector increased up by 0.5% and 0.3% in May to £770 (GBP)and £884 (GBP) respectively, but rental prices for one-bed properties fell by 0.6% to £674 (GBP) and rents on four-bed properties were also down by 2.1% to £1,363 (GBP).

Wales had the greatest increase in average monthly rental prices, up 4.9% on April 2013, followed by Scotland (up 2.2%), the North (up 1%) and South-West (up 0.5%).

Despite some regional increases, the average monthly rental price in England, Scotland and Wales fell by 0.2% in May 2013, but rents are still 0.8% higher when viewed year-on-year.

The Midlands has seen the greatest decrease in average monthly rents, down 1.4% month-on-month, followed by the South-East and central London, both down 1.3%. Scotland has the lowest average monthly rent at £617 (GBP) per calendar month (pcm) and central London the highest at £2,340 (GBP) pcm.

Countrywide have taken their data from over 5,000 rental properties in the UK.

Nick Dunning, Commercial director at Countrywide said: “Despite the decrease in yields in May, rental yields remain strong and are providing attractive returns for buy-to-let property investors compared to other types of investment.”

Smaller Buy-To-Let Properties Provide The Best Rental Yields

Smaller Buy-To-Let Properties Provide The Best Rental Yields

Smaller Buy-To-Let Properties Provide

 The Best Rental Yields

A one-bedroomed rental property in Wales may not sound like the most glamourous of property investments but it could deliver the best rental returns for landlords according to a new in-depth buy-to-let report by the UK’s largest lettings agency Countrywide.

A survey of more than 50,000 Private rented sector property owners has revealed Buy-to-let landlords are getting excellent rental yields in Wales, the North of England and the Midlands from 1 and 2 bedroom rental properties.

Landlords in many parts of Wales are achieving an average 6.7% rental yield (rent measured as a percentage of the property price), beating the North of England and the Midlands, which both average a 6.5% rental yield.

These figures are substantially higher than the average 4.6% rental yield observed in parts of Central London, regarded as the red hot heart of the UK’s property market.

One and two-bedroom rental properties have seen the greatest increase in average monthly rental prices in April 2013, with a 1.4% and 1.3% month-on-month increase to £679 (GBP) and £766 (GBP), respectively.

The detailed report into buy-to-let rental returns was conducted by Countrywide, who found that average monthly rental prices in England, Scotland and Wales have continued to increase for six consecutive months to reach an average of £842 (GBP) in April 2013.

But rent increases remain below the increased cost of living, with an annual average increase of just 0.8% measured against Consumer Price Index inflation of 2.8%.

However, average monthly rents have fallen within Central London, the South East, Wales and parts of Greater London.

The biggest rental price drop of 6.3% was seen in Central London, where average monthly PRS rental prices average £2,371 (GBP), more than double the £1,106 (GBP) recorded in parts of Greater London.

Rental returns by location

 

Rental returns by location - Source: Countrywide

Rental returns by location – Source: Countrywide

 

Nick Dunning, from Countrywide, said: “With renting for longer now the norm for many people as they save for a deposit to buy their first home, we are seeing more young families looking to rent cheaper accommodation, hence the increase in demand for smaller rental properties. While prime Central London has seen the greatest fall at 6.3%, this is simply reflecting the fact that in April stock levels in prime Central London were very high compared to last year which benefited from the Olympics. As a result this April, tenants tended to view multiple properties putting in lower offers, which some landlords accepted. However, as demand picks up into the summer, and supply and demand becomes more balanced, the same property could easily rent for more in August than in April.”

Returns by property type

 

Rental returns by property type - Source: Countrywide

Rental returns by property type – Source: Countrywide

 

Source: Countrywide

UK Buy-to-Let Needs New Landlords

UK Buy-to-Let Needs New Landlords

The demand for rental property in the UK is such that many experts are predicting that as many as 1 in 5 households will be living in rental property as tenants by 2016.

In order for this estimate to be accurate there will need to be an additional 1.1 Million more rental properties made available in the UK private rented sector.

Experienced property investors are expanding their rental property portfolios and the demand for rental property is so strong that many new property investors are being encouraged purchase property for longer term rental yields and become landlords.

UK PRS landlords are reported to control as many as 4.8 Million PRS rental properties throughout the UK, up from the reported 2.5 Million in 2002.

PRS rental properties in London account for 27% of all residential properties while social renting now accounts for just 24%.

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