Landlord news to Thursday 22nd August, 2019

Get the low-down on holiday let hot spots, find out the latest proposal for the governments rogue landlord database, Javid says stamp duty will not pass to seller and more...;
Smiling mum, children and their dog

Holiday let hot-spots

The attraction of holiday lets appears to be gaining in momentum, featuring in both the national UK press as well as in landlord industry news.

Latest figures from holiday rental company, HomeAway, highlight the top UK locations, from its database of over 92,000 properties. The results may surprise you.

The city of Norwich in Norfolk, 40 minutes inland from the East Anglian coastline, boasting strong retail and cultural facilities, restaurants and nightlife, and in reach of the Norfolk Broads and other glorious countryside is among the top 10 in the country.

In the city centre, average property prices are currently sitting at £223,300, which at this price-point would secure a two-bedroom apartment, or small terrace house.

According to HomeAway data, large multiple-bedroomed properties are much sought after for group getaways, whether that is for families or stag and hen celebrations.

Investors at this end of the market, who are looking in the city centre, would be looking at a seven-figure sum for a 6-bed property.

However, broadening the search west of Norwich and out to the coast, prices for 6 or more bedroomed properties are upwards of £450,000, with a 7-bed link detached barn conversion located in a popular village on the Broads currently on the market for offers in excess of £575,000.

Also featuring in the top 10 is Kingsbridge in Devon, a cobbled-street market town on the banks of the estuary that is also home to popular resort town of Salcombe.

Kingsbridge has a much higher average property price than Norwich, but is a cheaper alternative to Salcombe, at £386,500 – 50% less in fact.

Tenby, on the south-east coastline of Wales, is also within the top 10 for UK holiday let locations. This ‘Little Fortress of Fish’ (the meaning behind its Welsh name, Dinbych-y-Pysgod) will give you a strong idea of what to expect from the tourism on offer.

If a mackerel sea fishing trip is not quite your speed, then the medieval history, the holy Caldey Island, coastal walks and beaches, not forgetting the RNLI station made famous on Channel 4’s Grand Designs, are plentiful opportunities for tourist tenants.

The property investment opportunities vary from around £240,000 for a two-bed apartment overlooking the sea, to a £2.5 million 11-bedroomed seafront property with its own boat slipway and 26 acres of land.

Lending in this area of the private rental sector is expanding.

Some organisations remain tentative of the Air BnB dynamic, although there is still a choice of lenders; far more favour traditional holiday rentals – both individually owned or bought through a limited company/SPV (Special Purpose Vehicle) structure.

The maximum loan to value for holiday lets is commonly 75%, so you will need a 25% deposit, which may affect the type of property you invest in.

Some lenders may look for applicants to have a minimum personal income of £25,000 – this isn’t always the case though - and first time landlords and/or first time buyers, have a very narrow line of opportunity, but it is achievable with, at the time of writing, a surprisingly preferential rate.

The decision to invest in any property is not one to be taken lightly. Financial and tax advice are prudent steps to take.

But, with the ongoing uncertainty of Brexit driving up staycation holidays, the differing tax structure for holiday lets and what can be very favourable yields, a holiday let may well give investors food for thought.

To let signs outside

Rogue’s database feels like empty gesture

It has been 16 months since the government launched its rogue landlord database. A year on and 4 entries had been made to this much-hailed tool to help clean up the private rental sector.

At today’s date, the number is still lacklustre, at just 12 entries.

Figures from the Ministry of Housing, Communities and Local Government confirm that one local authority has added three names to the records, the remaining nine entries are single submissions from individual authorities.

The process of recording a landlord on the database is, rightly, a thorough one. But, is it proving unwieldy for local authorities to implement?

A statement from the Ministry of Housing clarifies the steps that occur before an entry is made:

“It takes time to secure convictions or civil penalty notices for offences that may be recorded on the database.

“The offence must have been committed after 6 April 2018, the landlord or agent must have been prosecuted and convicted, and the appeals process must be complete.

“The local authority can then apply to the first-tier tribunal for a banning order and a hearing must be scheduled. When a banning order has been imposed, the local authority must record it on the database.”

There is currently a consultation underway to debate whether to include more offences on the database records. The current list can be found on the government website here.

The proposed list of additional offences is outlined here.

It includes 25 new offences, which encompass a range of issues, from failing to provide a free Energy Performance Certificate to causing or permitting overcrowding.

It might be argued though, that widening the net of reportable offences may not be the answer to enforcing better practices and eliminating the minority of bad landlords from the equation.

Certainly the available capacity for local authorities to take action, has been a question mark hanging over the plans from the beginning.

Houses of Parliament at dusk

Javid says stamp duty will not shift to seller

Speaking out via Twitter, in reference to his recent interview with The Times, Sajid Javid has denied he ever said he would shift the cost of stamp duty to the person selling a property.

The day after the interview was published, the Chancellor of the Exchequer took to Twitter, with the following statement on stamp duty:

“More speculation about stamp duty this morning. To be clear, I never said to @thetimes [The Times newspaper] I was planning to put it on sellers, and I wouldn’t support that. I know from @mhclg [the Ministry of housing, communities and local government] that we need bold measures on housing - but this isn’t one of them.”

Whilst Mr Javid has indicated that stamp duty may be open to change, in support of first time buyers, he is giving away none of the specifics. In the Times interview Mr Javid indicated that autumn will provide the unveiling of his plans, as he encouraged readers to “wait and see for the Budget”.

Will the Autumn Budget be pre or post Brexit?

In 2018, Phillip Hammond delivered the Budget on Monday 29th October. This October, there is the even more pressing matter of Brexit to attend to. But, the new chancellor had no clarification to share as to when his 2019 Autumn budget will go ahead.

One positive to take from his comments to at the weekend is that he has titled himself “a low-tax guy. I want to see simpler taxes.”

UK landlords will be strongly hoping for an improvement in their tax prospects, from Mr Javid.

Happy people

Freedom of movement deliberation, fuels ARLA outrage

A question mark has been placed, by the government, over the existing EU freedom of movement rules, if a No Deal Brexit goes ahead.

Theresa May’s plans seemed likely to involve the phasing out of the rules on freedom of movement, but it seems the government has been dropped this course of action, without EU consultation.

It now appears the government is in favour of halting all freedom of movement at the end of October 2019.

This change in the rules would affect all EU citizens arriving in the UK from 1st November 2019.

David Cox, chief executive of The Association of Residential Letting Agents expressed outrage at this change in stance:

“As recently as April, government committed to continuing with current arrangements around Right to Rent for EU citizens. Planned transition is vital in order to allow practical Brexit arrangements for housing and it is essential that sufficient time is allowed for moving to any new system.

"To move the goalposts at this stage will cause unnecessary distress and uncertainty to all those affected. Tenants, landlords and agents must not be left in limbo, arrangements must be clear and transparent for all parties.”

Pound coins and bank notes

PRS exceeds GDP of 130 countries worldwide

Recent research has found that there are over 5.2 million private tenants in the UK, contributing just under £52 billion to the UK economy, a figure that could be set to rise.

A calculation of the value of the industry was made, by multiplying the average annual cost of rent in the Private Rental Sector (PRS) with the number of tenants in each county, to reach a figure of £51.9 billion.

According to PropTech firm Bunk, this amount exceeds the gross domestic product of 130 countries and a number of FTSE-100 companies.

This includes Myanmar in Asia, with a GDP of £51.8 billion and Luxembourg in Europe with a GDP of £48.1 billion and on the FTSE-100 the likes of Vodafone, Lloyds, National Grid and Barclays.

With the ongoing failure to build homes at a rate necessary to cope with demand, this has the potential for positive news for landlords, but not for the tenant population. Tom Woollard, co-founder of Bunk had this to say:

"While the most recent UK GDP figures released last week show a slight decline in growth, in contrast, the private rental market continues to see a consistent increase almost across the board.

"With rents increasing and an acute shortage of properties being built for sale and to rent, we will surely see this upward trend climb further in the future - great for landlords, not as good for beleaguered tenants."

Dark house on the hill

Labour’s 5-point plan to tackle rogue landlords

Jeremy Corbyn has promoted, on Twitter, a video giving advice to tenants on tackling rogue landlords.

His message is one of galvanising community action to affect change by following these steps:

  1. Build relationships with neighbours
  2. Share your stories with to identify common problems
  3. Understand your rights through contact with Citizens Advice or a legal professional
  4. Find Labour Party Community Organisers
  5. Escalate your actions to affect change

His voice joins others in politics highlighting the issue and trying to tackle the problem.

Any help to improve the operation and conduct of an industry is only to be welcomed.

However, with so much publicity focussed on the negative elements in the industry, UK landlords may be justified in questioning where the balance lies.

The flip side of the coin are the many landlords who suffer significant financial losses at the hands of tenants who damage property, leave rent unpaid, operate illegal businesses from property, cause anti-social behaviour, and more.

There do not appear to be similar voices from any party seeking to solve those issues. Nor is it always the tenant as David, taking on Goliath.

Many political voices from key parties appear keen to only pour scorn on an industry that is, in the majority, providing thousands of rooves over the heads of the UK population.

Woman holding house keys

New landlords focus on the North East

Property portal Zoopla has released figures that demonstrate a flurry of interest from new landlords in the market town of Stockton-on-Tees.

Their data shows that there has been a year-on-year increase of 75% in enquiries provided to the regions letting agent clients, over the last 12 months.

Anecdotal evidence from local estate agent Pattinsons, suggests that in the past, property investors were more likely to renovate and sell-on property. However, current trends infer that the introduction of the 3% stamp duty surcharge has led to a change.

Yields in the area average at 5.8% for a two-bedroom house, which is 1.5% higher than average yields for London and the South East and an improvement on the 4.9% national average.

The other factor likely to be contributing to the growth in popularity of rentals in the area, is an average house price of £160,700.

An experienced landlord would need a deposit of £24,105 (15%) to buy a property at that price. New landlords would require a 20% deposit, or £32,140.

However, currently on the market is a recently refurbished 3-bedroom terrace house at £90,000, meaning a deposit to secure it could be from £13,500 - £18,000 depending on landlord experience. In three years since its last sale (at the current asking price) the property is looking at a capital appreciation of £35,000.

Elizabeth Williams, branch valuer at estate agent Pattisons made the following observation on activity in the local area:

“We have seen a significant uptick in buy-to-let investors looking to purchase in Stockton-on-Tees, so much so that we deal with enquiries of this nature on at least a daily basis. Previously, these investors bought properties and flipped them for a profit, but now there is a 3% levy on stamp duty land tax on second homes and yields are stronger here, so letting these properties is a much more attractive prospect.

“These investors are predominately looking to purchase three-bedroom terrace houses. This is likely due to landlords wanting to attract families rather than young professionals as tenants, as the former typically prefer longer term contracts which offer a more stable income to the investor.”

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.