Buy-to-let news to Friday, April 6th, 2018
New guide launched for Northern Ireland landlords
TDS Northern Ireland has for the first time published a range of online guides, aimed at assisting buy to let investors in the region.
The launch of these publications, End of Tenancy Guide, Deposit Deductions Template and accompanying Guide, will help to ensure landlords in Northern Ireland remain aware of and compliant with their obligations, so as not to break tenancy agreements.
The guides provide useful information for landlords and agents, specific to the marketplace in the province, on deposit regulation and also how to raise rental standards.
Eamonn Hunt, Operations Manager at TDS Northern Ireland, said: “As the only tenancy deposit protection scheme based in Northern Ireland, we’re in the unique position of being fully immersed in the sector.
“We know what landlords, agents and tenants across Northern Ireland want from us and regularly review practices and systems to improve our service. By publishing these guides, we are meeting the demand for specific guidance and templates from the Northern Ireland private rented sector.”
Tenant security deposits to be capped at five weeks?
A national newspaper claims that the Government is set to limit tenant security deposits at a maximum of five weeks, rather than six, as had previously been suggested.
The Sun newspaper alleges that it has seen a leaked report on the Draft Tenant Fees Bill, in which the Housing, Communities and Local Government Select Committee has recommended the reduction from six weeks to five.
According to the newspaper, the committee is also set to recommend moves to tighten the eviction process and stop landlords ‘chucking tenants out of their houses’ with no explanation. The leaked report calls for Trading Standards to be handed powers to take action against landlords who evict tenants in ‘revenge’.
The proposals also suggest that landlords and agencies will not be permitted to increase rents as a means of compensating for lost revenue as a result of the proposed letting agent fees ban, with ministers to look into what constitutes “reasonable fees”.
The Residential Landlords Association (RLA) reacted with criticism of the proposals alleged by the newspaper, suggesting that the five-week cap on deposits “will play into the hands of rent cheats”.
RLA chairman Alan Ward said:
“Policy makers need to address the problem of tenants who fail to pay their rent with as much energy as tackling rogue landlords.
“Proposals to lower the cap on deposits paid by tenants will play into the hands of the minority of tenants who cheat those providing housing for them out of the rent they are legitimately owed.
“What is needed is not new law but councils better enforcing the large array of powers they already have to root out bad landlords and tenants.”
The Tenant Fees Bill is anticipated to come into force in the spring of 2019.
Mortgage tax relief changes to hit landlords
April sees the end of the tax year and the first real indicator of the impact of the loss of mortgage interest tax relief for buy to let landlords.
The 2015 Budget introduced new rules that meant landlords would only be able to offset reducing proportions of mortgage interest relief, when filing their tax returns, with the first reduction covering the 2017-18 tax year.
The amount of this type of relief that landlords can claim, will reduce annually, until it is replaced in the tax year 2020-21 by a 20% tax credit.
What does this mean for landlords?
The financial reality of the reduction of mortgage interest relief will start to be felt in the latest tax returns.
Prior to 2017, landlords were permitted to deduct all of their mortgage interest payments as an allowable expense, when filing their tax returns. This meant that tax was payable only on their profits, rather than their overall turnover and many benefitted from this system, as they owned interest-only mortgages.
However, the changes mean that tax returns for the 2017-18 tax year, which must be filed by January 31st, 2019, will only be able to claim 75% of the mortgage interest paid, with a 20% credit applied for the 25% they cannot claim back.
In the 2018-19 tax year, landlords may claim 50% of their mortgage interest tax relief, with the 20% tax credit replacing the other 50%.
For 2019-20, landlords can claim 25% of the mortgage interest tax relief, with the 20% tax credit applied to the other 75%.
Then in 2020-21, landlords will no longer be able to claim any of their mortgage interest tax relief, instead they will simply receive a 20% tax credit.
The changes mean some landlords may now find they have to declare substantially more income on their tax returns – leading to the risk that some could find themselves pushed into a higher rate tax bracket.
Landlords unsure of their tax position should speak to a qualified tax professional.
England set for letting agent shake-up
The conduct of letting and managing agents in England is set to be more closely scrutinised, following Government proposals to create an independent regulator and a new code of practice.
The plans, from the Minstry of Housing, Communities and Local Government, aim to provide tenants with greater protection from rogue landlords, while leaseholders are also set to benefit, with greater rights to challenge unfair fees and charges.
In order to eradicate questionable practices such as unexpected costs and poor property maintenance and repairs, Housing Minister Heather Wheeler said that a mandatory code of practice will be introduced.
Landlords will also benefit from the proposed changes, with reassurance that the agent they are dealing with is professionally qualified.
As part of the process, letting and managing agents will have to obtain a nationally recognised qualification in order to carry out their business, with each organisation needing at least one individual who is qualified to a higher level.
Furthermore, the Government intends to bring in a new independent regulator, with powers to crack down on agents who break rules. Those who do so, will find themselves banned from trading and could even face criminal sanctions for severe breaches of the new code.
“Most property agents take a thorough and professional approach when carrying out their business, but sadly some do not. By introducing new standards for the sector, we will clamp down on the small minority of agents who abuse the system so we can better protect tenants and leaseholders who find themselves at the end of a raw deal.”
At present the proposals for the new code of conduct are being fully considered by a working group which includes letting, managing and estate agents, tenants and regulation experts.
According to Wheeler, the final proposals should be announced early in 2019.
Average cost of MEES £1,400 for affected landlords
New rules regarding Minimum Energy Efficiency Standards (MEES), came into effect from April 1st. But it is estimated that a further £400 million in expenditure is required, to bring the whole of the PRS up to the minimum EPC rating.
Data from mortgage lender Together, suggests that up to 300,000 rental properties remain below the new minimum EPC rating of E – meaning that those properties cannot be rented out under new or renewed tenancy agreements until the necessary improvements have been carried out, to make them conform.
Together’s research suggests that in order to bring these properties up to acceptable energy performance levels, will require typical expenditure of £1,400 per property, on actions such as loft and cavity wall insulation, a new boiler or double glazing.
When totalled, this amounts to £400 million that landlords will need to spend to ensure these properties are rentable in the future.
Furthermore, the MEES rules will extend to covering all rental properties in April 2020, irrespective of the tenancy status.
“At a time when their profits are being seriously squeezed following a swathe of new tax and regulatory changes impacting the buy to let sector, landlords are feeling increasing pressure on their cash flow this year and can ill afford the potentially huge fines that could come their way if they miss the upcoming EPC improvements deadline” commented Marc Goldberg, commercial chief executive at Together.
“While the vast majority of landlords understand that enhancing the energy efficiency of their properties will boost rental yields over the long term, unfortunately many don’t have the available cash to hand to fund the urgent home improvements that are needed” he added.
With landlord renovation expenses under scrutiny, the Residential Landlords Association (RLA) has backed proposals that property improvement costs aimed at meeting MEES rules, should be tax deductible.
At present, landlords have been urged to register if they cannot afford the costs of necessary home improvements, while suggesting a £2,500 cap on what landlords should have to pay to bring their rental properties up to an EPC rating of at least E.
According to the RLA, expenditure on ‘repairs’ to rented homes are tax deductible, while ‘improvements’ are not.
The organisation argues that 61% of landlords would feel incentivised to carry out the energy efficiency of their properties with tax relief available on their outlay.
RLA policy director David Smith stated:
“Whilst considerable improvements have been made over the last decade, private rented homes currently falling below the new energy standards are some of the hardest to treat properties of the country’s entire housing stock.
“Given the importance the Government attaches to improving the energy efficiency of rented homes there is a strong case for giving work to upgrade this the same tax treatment as for repairs.”
Tory peer urges Government to rethink landlord taxation policy
A Conservative Party peer has slammed his party’s approach to the buy to let industry in recent years, calling for a substantial rethink that includes tax incentives for landlords.
Lord Flight, a former Conservative Shadow Chief Secretary to the Treasury, who also has personal experience as a landlord, suggested that current policy towards landlords is adding further problems for the troubled housing sector.
His comments follow previous criticism of the way the Conservative Government has approached buy to let legislation.
A Tory change in stance
Writing on the Conservative Home website, Lord Flight suggested that the Tory Party stance on private landlords, has changed vastly in the thirty years, since Nigel Lawson extended the Business Expansion Scheme to companies specialising in letting residential property. The aim of the scheme was to stimulate growth in the private rented sector.
He stated: “This came from a government which also, rightly, put supporting home ownership at the heart of its philosophy of a property owning democracy. Taken together, the two approaches teach us a valuable lesson that the rental and home owner markets are not in competition with one another. The biggest domestic issue of our times is the high cost of housing in the UK both pricing the younger generation out of home ownership and driving up rental costs.
“Yet, since 2015, the private rental market has faced an onslaught of tax hikes, restricting mortgage interest relief to the basic rate of income tax, putting a premium stamp duty levy on the purchase of new homes to rent; not extending the 20 per cent rate of capital gains tax to residential property and taxing a landlord’s turnover rather than profit, unlike any other business sector."
On blaming the housing crisis on landlords
“It is, however, a nonsense to blame private landlords for the housing crisis – rather the large increase in private rented properties over the last decade has alleviated the shortage of residential accommodation.”
In his article, Lord Flight suggested there was no evidence that buy to let landlord investment had prevented people from taking their first step on the home ownership ladder.
“A report by the London School of Economics has argued that the very limited research that does exist into competition between investors and owner-occupiers has found that “nationwide only a minority of sales to landlords involved bids from both types of buyer. Mostly these are two segregated markets.”
69% of landlords deciding not to invest is “worrying”
Lord Flight also quoted data from the Residential Landlords Association as “worrying” - which indicated that 69 per cent of landlords had decided not to invest in more rental properties, as a result of the introduction of the stamp duty levy on second homes.
A call for tax changes
He then outlined his own ideas for buy to let could be reinvigorated by Conservative Party policy – with tax changes at the heart of his proposals:
“Instead of treating the private rented sector as part of the problem, the Government should recognise the important part it must play in solving the housing crisis. This means, at the very least, dropping the stamp duty levy where landlords invest in property adding to the net supply of housing. Otherwise we are effectively taxing the growth in the supply of housing.
“We should also look seriously at tax incentives for landlords prepared to offer longer-term tenancies. It is somewhat illogical for the tax system, as it currently does, to make it more attractive for a landlord to switch properties to short term holiday lets than to continue providing homes for long term rental.
“Ministers could also consider providing landlords with Capital Gains Tax relief where they sell a property to a sitting tenant to become a home owner.”
Report reveals Barking as London’s best place for rental yields
A new report has highlighted Barking as the best place in London for rental yields.
Estate agents Portico created a rental yield Tube Map, which identified the top eight areas in the Capital, for rental yields.
Barking came out on top with average yields of 6.2%. The area has good Tube links to Central London and good motorway access, while the average property price of £254,943, reflects a 26% increase since 2015.
East London provided the top two places in the data, with East Ham coming second, with average yields of 5.8%.
Once again, good transport links were deemed an important factor in making this area popular with renters, while the closure of Upton Park, former home of West Ham United, has resulted in a number of new property developments getting underway.
The average property price in East Ham is £383,469, a figure which has grown 4% in the past year.
Portico’s top 5 London regions for rental yield
|3rd||St. James' Park||5.6%|
To view the full list of top performing rental yield areas in London, please click on the following link:
Below are the top 3 buy to let mortgage deals, by lowest initial rate, for fixed, tracker and variable products.
This table updates twice daily with the latest deals from a diverse range of specialist and high street lenders. Call our team to discuss any deal or click through for the full range.
|Rate||Product||Monthly cost||LTV||Lender fee||APR|
|1.39% then 5.00% Fixed for 26 months||Fixed for 26 months||£115||60%||£2,178||4.70%||Enquire|
|1.50% then 5.19% Variable for 24 months||Variable for 24 months||£125||75%||£295||4.78%||Enquire|
|1.49% then 5.00% Tracker for 24 months||Tracker for 24 months||£124||60%||£2,178||4.76%||Enquire|
|1.73% then 4.99% Fixed for 26 months||Fixed for 26 months||£144||70%||£2,239||4.75%||Enquire|
|1.50% then 5.19% Variable for 24 months||Variable for 24 months||£125||75%||£295||4.78%||Enquire|
|1.89% then 5.00% Tracker for 24 months||Tracker for 24 months||£157||70%||£2,178||4.82%||Enquire|
|2.94% then 4.99% Fixed for 24 months||Fixed for 24 months||£245||80%||£1,825||4.94%||Enquire|
|2.89% then 5.19% Variable for 24 months||Variable for 24 months||£240||80%||£295||4.98%||Enquire|
|3.90% then 5.50% Tracker for 24 months||Tracker for 24 months||£325||80%||£500||5.43%||Enquire|
|4.59% then 6.58% Fixed for 24 months||Fixed for 24 months||£382||85%||£3,110||6.73%||Enquire|
|4.64% then 6.58% Variable for 24 months||Variable for 24 months||£386||85%||£3,110||6.74%||Enquire|
Important: Lender fee is calculated based on a loan amount of £100,000.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE.
*Some lenders offer mortgages with no fees; however, our broker fee of up to £1,198 for Buy to Let first mortgages and up to £2,198 for Buy to Let secured loans will apply.
This table includes both Purchase and Remortgage rates. Speak to our advisors for a personalised recommendation.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.