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2014 UK Property Prices To Increase Further

2014 UK Property Prices To Increase Further

UK Property Prices Extend Best Run Since 2007

There was some good news for property investors looking for capital appreciation this week as it was reported that UK property prices have continued to rise, increasing for the 14th consecutive month in March 2014, the longest run of price growth for nearly 7 years.

Residential property values across the UK increased by an average of 0.6% in March, with the South West and East Anglia regions recording the largest property price increases of 0.8%, according to data supplied by Hometrack Ltd.

Yorkshire & Humberside and the North West regions registered the smallest gains, with property values increasing by just 0.2% in March 2014.

Even independent surveyors are forecasting property prices to increase by a further 6% this year and are including this information on property condition reports for prospective purchasers.

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Capital Gains Tax For International Property InvestorsUK To Tax International Property Investors

The Chancellor, George Osborne’s has taken a step towards levelling the playing field for UK property investors after deciding to introduce Capital Gains Tax (CGT) for international property investors, a move that has attracted a mixed response from property professionals.

While UK property investors have broadly welcomed the new tax for international property investors, some industry professionals have slammed the Chancellors decision to introduce it, with some pundits speculating that it could drive foreign investors away, increase housing supply and push property prices down.

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According to the report, 13% of chartered surveyors reported rent rises rather than falls in the three months to April 2012. This growth was largely driven by increasing demand as a net balance of 15% more respondents reported rises in prospective tenants, with houses in greater demand than flats.

Rental values in the UK have now grown consistently since 2009 as the problem of unaffordable mortgage finance and large deposits required by lenders remain a barrier to home ownership, with many potential buyers forced to turn to the rental market.

Significantly, supply of property to the market continues to grow, albeit at a slower pace, with 7% more surveyors reporting increases rather than decreases in landlords looking to let their properties.

Unsurprisingly, with rental values steadily increasing, landlords’ gross yields also continued to grow during the early part of the year, although the pace of growth has begun to slow. This was the case in every part of the UK with the exception of London where tenant demand also saw a slight downturn.

Looking ahead, surveyors remain positive that the market will remain buoyant over the next three months, with 13% more predicting rents will rise rather than fall.

Across the UK, all areas expect rents to continue to increase with the exception of Scotland where expectations entered negative territory for the first time since October 2009.

Peter Bolton King, RICS Global Residential Director, says, “The rental market is still fairly buoyant and this looks likely to continue, given the challenges facing the sales market. Indeed, mortgage finance may become even harder to access particularly for first-time buyers if the euro crisis continues to deepen. This points to tenant demand continuing to outpace supply. As a result, rents will remain on an upward trajectory, adding to the pressure on many households whose incomes are already being squeezed.”

Landlords Should Be Aware Of Their Responsibilities and Legal Obligations

Landlords Should Be Aware Of Their Responsibilities and Legal Obligations

A large number of private residential properties are being rented out to tenants because the owners have moved out but found it difficult to sell the property on.

In fact, according to the Association of Residential Letting Agents (ARLA), many people are choosing to rent out homes they cannot sell.

This has led to an influx of reluctant or “accidental” landlords to the Private Rented Sector, who just want to have enough income coming in from the property to be able to afford the mortgage payments.

These reluctant landlords have little or no knowledge or understanding of the PRS, the legislation or regulations governing safety and often don’t know how to get the best out of the asset they have.

Ignorance is no defence in the eyes of the law and landlords who do not comply with the 70+ pieces of legislation currently in force in the UK can face large fines and even imprisonment. Even reluctant landlords have duties, responsibilities and obligations and the law demands that these are not ignored.

Legal 4 Landlords offers reluctant landlords the following advice:

All Landlords need to protect their property investment and along with regular maintenance should always take out comprehensive landlord insurance for the good of both the property and the tenants living in it.

The Gas Safety Regulations 1998 requires landlords to have all gas appliances checked annually by a Gas Safe registered engineer and attain an annual CP12 certificate. Failure to comply will lead to a heavy fine.
• Gas safety compliance is vital and a lack of a valid safety certificate could mean the property is left empty for a prolonged period of time, rather than occupied by paying tenants.

Smoke alarms also need to be fitted to ensure the safety of tenants and should be installed on every floor and tested regularly.
• Contact your local fire service to enquire if they are involved in any fire safety incentive schemes and it may not cost anything – some well resourced fire services do fit smoke alarms for free in properties occupied by tenants claiming certain types of benefit.

Protection against thieves is paramount to preserving a no claims bonus on landlord insurance.
• Locks ought to be fitted on every door, with door chains for extra security. Padlocks are also recommended for sheds, garages and gates.
• Double glazing and burglar alarms also add to the safety of a property

To get the best out of short-term lettings landlords should always thoroughly tenant reference all would be tenants on application.
• Landlords need to ensure that the tenant are who they claim to be, have a sound financial history, no undisclosed criminal convictions, are employed at where they state they are employed and are solvent enough to be able to afford the rent and associated bills that come with a home.

Making sure the rent comes in on time every month is a real concern for many landlords and could cause them financial stress paying the mortgage on the rental property if rental payments are either late or not forthcoming.
• Many landlords are now using Rent Guarantee insurance to ensure their rental cashflow remains uninterrupted, insurance cover is subject to terms and conditions.

Get educated and learn how to be a better landlord
• Find out what other successful landlords in your area are doing and copy them.
• Attend local landlord groups or property networking events and learn from like minded people who can help with problems or share knowledge that could take a reluctant landlord and turn them into professionals who profit from property whilst providing quality homes for tenants.

The Royal Institution of Chartered Surveyors (RICS), has reported that Private Rented Sector (PRS), property rental prices have continued to increase across the UK but at a much slower rate than has previously been observed over the last 2 years.

RICS says the rental property market may be beginning to level out, with an increasing number of prospective tenants unwilling to pay out for increasing private sector rents.

With PRS rental growth beginning to slow in many areas of the UK and a recent upturn in prospective property buyers, RICS says an increased number of landlords are looking to sell their rental properties when they reach the end of lengthy tenancy agreements rather than face expensive refurbishment costs.

RICS members that also handle residential property lettings have stated that they expect very slow growth in PRS rental values.

Michael Newey, RICS spokesperson, said: “With many potential first-time buyers having been forced into rented accommodation due to problems with obtaining affordable mortgage finance, rental prices have grown quickly across much of the UK in recent times. However, it seems that tenants may be becoming less willing to meet increasing rental values. While still growing, demand from potential tenants is also beginning to slow. With a recent upturn in buyers entering the sales market prior to the expiry of the Stamp Duty holiday in March, it seems that those who are in a position to get a foot on the property ladder may have chosen now to do so.”

Families who are looking to move into larger properties are finding themselves stuck in first-time buyer flats because they cannot sell their homes or get a mortgage.

A survey by LloydsTSB found that “second steppers”, those who have a first home to sell and who want to move up the ladder, are increasingly stuck in unsuitable accommodation.

The report reveals that home affordability for Second Steppers has become much less favourable and declining house prices have led to many homeowners being in negative equity.

Second Steppers are homeowners looking to sell their first home and move up the property ladder.

Many potential Second Steppers in today’s market would have bought close to the peak of the UK property market and are now finding it increasingly difficult to get off the “first rung”.

Many bought at the peak of the market in 2007, and may have negative equity to cope with as well as a lack of buyers and difficulty meeting moving costs.

The figures show the majority of property vendors in this situation have been stuck on the property ladder for over 12 months.
Some will have had children in the intervening time and feel that they are stuck in unsuitable accommodation.

22% now believe that it is harder to move up the housing ladder than to get on it in the first place.

According to Lloyds TSB’s report,
• 61% of second steppers have wanted to climb up the ladder in the past 12 months but have been unable to do so as they face an increasing number of challenges.
• 22% believe it is now harder to move up the ladder than get on it in the first place.
• 43% also feel it will be as equally difficult.

Stephen Noakes, mortgage director of Lloyds TSB said: “First-time sellers are now faced with some very tough challenges when trying to make their next move on the property ladder and many are finding it more difficult than getting on the ladder in the first place. It is vital that this group of home movers receive more support and attention as they play an intrinsic role in getting the housing market moving again.”

A recent study by HSBC also found that as many as 360,000 home owners are unable to move up the property ladder thanks to a combination of sliding house prices and more restrictive lending rules.

Those who bought properties in 2007 before the housing crash do not now have sufficient equity in their homes to trade up to larger properties, according to new research by HSBC.

Although most are not yet in negative equity, they do not hold enough of their home’s value to cover the required 10% deposit on a new property and pay associated moving costs, such as stamp duty, agent fees and legal expenses.

The problem has been exacerbated because the price of many first time properties has fallen faster than the rest of the housing market.

Demand from first time buyers has waned since lenders pulled out of the 100% mortgage market.

Mortgage lenders now require buyers to put down at least a 10% deposit, and even then these borrowers will be charged a higher mortgage interest rate than those borrowing 75% of a property’s value.

Peter Dockar, the head of mortgages at HSBC, said: “Those who have bought their first home can no longer rely on rising house prices to provide them with the deposit they need for their second.”

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