Buy-to-let news to Friday, December 29th, 2017

Traditional stone brick house

Buy-to-let sales rose 11% in November

There was a boost for buy-to-let business in November as sales rose 10.8%, or £334.1 million, in November, new data has revealed.

Total mortgage sales in the UK were up 4.1% (£637.4 million) during November, while year-on-year sales increased 3.0% (£470.1 million), the report from Equifax Touchstone indicated.

Wales showed the biggest growth at 9.9%, with the South East next best at 8.0% and the Midlands (7.5%).

Just two regions recorded a fall in sales, the North West (2.3%) and London (2.6%).

John Driscoll, Director at Equifax Touchstone, commented:

“Mortgage sales in the UK have once again remained strong. Buy-to-let figures in particular have continued to gain momentum, enjoying positive growth for a fourth consecutive month, a trend we expect will continue given increasing difficulty in getting on the housing ladder and the subsequent increase in demand for rental properties.

“As we approach the end of the year, the outlook for the market remains unclear. The full impact of the recent rate hike on sales is yet to be fully felt and even the abolition of stamp duty for first time buyers announced in November’s budget was not received as wholly positive; some within the industry believe house prices may actually rise as a result, which could negatively affect mortgage sales.”

Andrew Turner, chief executive at Commercial Trust Limited, said:

“These statistics are a really positive affirmation of buy-to-let’s attraction at the end of what has been a challenging year for landlords.

“Despite having a multitude of changes to buy-to-let thrown at them, landlords have remained resilient and have continued to see good returns.

“Without doubt, the buy-to-let industry has become more complex and it is perhaps more challenging to manage a portfolio and maintain a profit than before, but specialist mortgage brokers are there to assist landlords with any concerns.

“A fourth successive month of growth implies that landlord confidence is returning, now that the dust is settling in buy to let. I expect sales to take another leap up in January.”

Rental price inflation slowing down

Rental price inflation slowsRental price inflation remained sluggish in November, as the general rate of inflation continued to outpace it.

Average rents across the UK have increased by 0.7% year on year, from £898 in November 2016 to £904 this year. This is despite the fact that rents reduced in real terms for most of 2017.

At present, UK inflation stands at 3.1% and has outpaced rental price inflation consistently since December 2016.

The figures suggest that whilst rents have increased, landlords have put prices up with a degree of realism, as affordability has become a growing issue for many tenants.

It should also be noted that within the data, there are clear regional variations, with areas such as Northern Ireland, the East Midlands, South West and North East all seeing annual rental price inflation of over 3%.

The average was brought down, however, by regions such as Greater London, the East of England and South East, where negative figures were reported.

HomeLet’s chief executive, Martin Totty, said:

“So far this year we have seen very modest rental price inflation; rents are now higher than a year ago in most parts of the country, but there has been no return to the more rapid increases we last saw during the first half of 2016.

“HomeLet’s monthly data continues to support a picture of modest increases in rents over 2017 and, in most instances, a reduction in real terms against the backdrop of underlying higher inflation.”

Landlords could benefit from new EPC measuring software

New software could improve EPC ratingsUp to 80,000 privately rented homes could now have a re-categorised EPC rating following the launch of new RdSAP (Reduced data Standard Assessment Procedures) software, the Residential Landlords Association (RLA) has suggested.

Consequently, it is believed that some landlords will no longer need to spend money on improvements to bring their properties up to the new minimum Energy Performance Certificate rating of E, by April 2018, although they will need to check the status of each property to be certain.

The new Minimum Energy Efficiency Standards will prohibit landlords from setting up new tenancies or renewing existing ones if the property in question fails to establish an EPC rating of E. The changes will affect all rental properties and tenancy agreements by April 2020.

However, for six years the RLA has voiced concerns that the software used in EPC calculations was flawed. That has all changed now, with the introduction of new software and the RLA estimates that approximately 80,000 properties – nearly a quarter of the 330,000 homes in the private rental sector that currently fail to meet the new minimum standard, could now be re-categorised, with an unspecified number now deemed as compliant.

According to the RLA, the homes seeing the biggest improvement in ratings will be those with ‘Non-traditional’ solid walls, which typically comprise of 330mm (13”) thick stone, mixed earth or brick and stone.
Properties with traditional 228mm (9”) solid brick walls are also expected to see significant improvements to their ratings, while those homes with filled cavity walled premises are likely to see a reduced EPC rating, but it is very unlikely that many could go down into Band F.

In response to the new software, the RLA has recommended that landlords owning homes with solid walls, which are currently rated in Band F, should consider a new EPC reassessment, as any improvements they have already made could result in a better EPC rating now.

Furthermore, the organisation recommends that properties in Band G with solid walls and an impending EPC renewal, where energy efficiency work has been carried out, may also look to undertake a new EPC as they could now be compliant.

Richard Jones, RLA company secretary said:

“This change comes after six years of campaigning by the RLA for a proper scientific appraisal of the insulation properties of walls.

“This led to the Building Research Establishment undertaking research that demonstrated that sold walls in particular provide better insulation for homes than was shown in the EPC rating.

“We are delighted the new software is now in use, however time is getting short and we would advise anyone who wants to get a new EPC carried out to do so as quickly as possible.

“It is also worth being mindful of the fact that the minimum requirements may change in the future and to consider including further energy efficiency improvements if you are carrying out renovation works.”

HMRC planning tax clampdown on HMO landlords

HMRC clampdown on HMOs and expatsBuy to let landlords looking to establish houses of multiple occupation (HMO) could have to register with HMRC before they can apply for any relevant licence, it has been revealed in a new consultation document.

The initiative would affect expat landlords who earn money from UK lettings but do not pay UK tax on this, but will also target UK landlords not paying the correct tax.

HMRC launched its consultation, open until March 2nd, 2018, with a declaration that there is a continuing need to tackle tax avoidance, with England alone containing 510,000 HMOs, of which 64,000 require a licence.

With the Department of Communities and Local Government intending to force more landlords to register for an HMO licence, it is estimated that a further 160,000 of this type of property could fall under greater tax consideration.

The HMRC document states:

“The proposals included in this consultation would integrate tax registration checks into some of these existing approvals to encourage more customers to engage with the tax system at the right time.

“These proposals would support a key aim of our strategy: to crack down on the hidden economy by preventing people from entering it in the first place. They would promote tax registration, helping customers to better understand their obligations to register for tax and the simple steps they need to take to declare their income to HMRC.

“The Government values the private rented sector and wants to see a strong, healthy and vibrant market, which meets housing needs in a professional way. This includes ensuring that landlords are reporting and paying the tax they owe.

“Applying conditionality to HMO licences could support existing HMRC compliance activity by helping and encouraging more landlords to ensure they are compliant with tax laws before renting out properties. Similarly, there may be potential for tax registration checks to be incorporated into selective licensing schemes where appropriate and proportionate.”

Government to get tough on rogue landlords and HMOs

Government crackdown on HMOs and rogue landlordsThe Department for Communities and Local Government (DCLG) has revealed its intention to eradicate rogue landlord practices such as overcrowding, with a series of new measures.

The plans, which could impact up to 160,000 UK properties, will see the introduction of new rules which will set the legal size requirements of bedrooms within houses of multiple occupation (HMO), whilst also making it a legal requirement to register some properties with local councils.

Under a new licensing system, rooms used for sleeping by a single adult will have to be at least 6.51 square metres in size, while bedrooms occupied by two adults will have to measure at least 10.22 square metres. Bedrooms occupied by children aged 10 or younger, must be at least 4.64 square metres in size.

Further measures will mean that landlords looking to rent out properties occupied by at least five people from two or more separate households, will be obligated to obtain a license by their local council.

The Government also announced plans from next April, to vet who can become a landlord, with people convicted of certain criminal offences being banned from letting properties.

Among the offences that will apply are: stalking, harassment, blackmail, theft, burglary and handling stolen goods, with those guilty having their details added to a new database of ‘serious and prolific offenders’.

Announcing the plans, Housing Minister Alok Sharma stated:

“Every tenant has a right to a safe, secure and decent home. But far too many are being exploited by unscrupulous landlords who profit from providing overcrowded, squalid and sometimes dangerous homes.

“Enough is enough and so I’m putting these rogue landlords on notice - shape up or ship out of the rental business.

“Through a raft of new powers we are giving councils the further tools they need to crack down these rogue landlords and kick them out of the business for good.”

Rate roundup

Rates round-upBelow 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

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