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Think tank predicts imminent rush to buy rental and second homes

Estate agents have been told that 50,000 purchasers of buy-to-let or second home properties could attempt to rush deals through before next April.

The Institute for Fiscal Studies is predicting a rush, after last week’s announcement of Stamp Duty surcharges.

However, the opposite school of thought is growing that buyers of rental properties and second homes will hold off – believing it would be stupid to buy now when prices are likely to drop back sharply next April.

While the IFS is predicting a short-term rush, it said the 3% rise was unjustified and in the long term will depress the property market.

It also warned that landlords will pass the extra cost on to tenants in the form of higher rents.

Stuart Adams, a senior research economist at the IFS, said: “Properties will be worth less because potential landlords and potential home owners won’t be willing to pay as much for them.

“If property developers don’t feel they’re going to get as much for them, then there’s less incentive to develop it.

“Thinking about the longer-term effect, at the margin the policy is likely to raise owner-occupation rates.

“It will make rental properties and second homes more expensive and therefore discourage the purchase of properties for that purpose.

“It may well also reduce house prices and might also increase rents if it feeds through.”


Written by: ROSALIND RENSHAW | NOVEMBER 30, 2015

Stamp Duty shock was attempt to bury bad news on immigration, claim

Property firm Martin & Co has acted to try and soothe industry fears after last week’s Budget Statement.

Martin & Co’s highly successful franchise business is predicated on private landlords.

Last Wednesday, George Osborne announced that buy-to-let purchasers would pay an extra 3% Stamp Duty Land Tax.

However, the Chancellor also said that the surcharges would not affect larger rental firms, such as institutional investors in the built-to-rent market.

ARLA – representing letting agencies whose typical client is a private landlord – described it as a catastrophe.

However Ian Wilson, chief executive of the Property Franchise Group, trading name of the more familiar Martin & Co, said this reaction was “overblown”.

He also suggested that the headline-grabbing change to buy-to-let Stamp Duty had helped bury bad news on immigration.

Wilson said: “While admittedly an unwelcome move for letting agents, we believe current thoughts as to the severity have been greatly exaggerated.”

Wilson said that the Chancellor’s intervention was a surprise.

He said: “It comes at a time when the buy-to-let market is working extremely efficiently, and we believe this move has been announced for political rather than economic reasons.

“Lending in this market is at record post-credit crisis levels, with over 1,000 buy-to-let mortgage products available, and about 20% of the population is now housed in the private rental market.

“The day after the Chancellor’s announcement, it was revealed that the Government had once again missed its target to reduce net migration into the UK, and the latest figures were at a new high with 336,000 people added to the UK population over the year.”

Wilson said that all drivers for further growth in buy-to-let remain in place, including high net migration and affordability.

He said he believed that total returns from buy-to-let will continue to outpace other investments, including traditional pensions, “and have the psychological and emotional advantage of being an easily understood, tangible asset”.

However, he also said that buy-to-let purchasers will factor raised Stamp Duty into the prices they are willing to pay, and “this will have a dampening effect on appreciating house prices in some sections of the market”.

Wilson said: “One may argue as a consequence, that buy-to-let purchasers could be out-bid purchasers for owner occupation (e.g. first time buyers).

“However, we believe buy-to-let purchasers will continue to be better placed to bid/complete on these properties given that they typically have more cash to inject and less restrictive buy-to-let mortgage conditions, meaning that there is greater certainty of the sale completing.”

Wilson, whose franchising firm now offers sales as well as lettings, said that the increased Stamp Duty was the “lesser of evils”.

He said: “Given the Government’s new-found desire to promote home ownership, we believe that higher transaction costs are significantly less severe than other potential regulatory levers, such as restrictions on buy-to-let lending or rent controls.

“In the short term, we would actually expect some benefit to the buy-to-let market, as we would expect prospective investors to bring forward purchases to before the April 2016 deadline for these changes.

“There is also the interesting possibility of tax engineering by creating corporate vehicles such as Real Estate Investment Trusts to own larger numbers of properties and escape both the extra Stamp Duty and the taper reductions in mortgage interest relief.”

Investors lose faith after Osborne cracks down on buy-to-let

Shares in companies with exposure to buy-to-let had a rocky day yesterday after the Budget Statement.

Martin & Co, founded as a lettings business although it now also handles sales, saw shares fall more than 10%.

However, competitor Belvoir – with a very similar business model – saw its shares rise very slightly.

Foxtons’s shares fell yesterday morning but then recovered to show a small gain.

Countrywide shares, which dropped over 2% following the announcement of a hike in Stamp Duty Land Tax for buy-to-let purchasers, finished yesterday less than 1% off.

Aldermore, a lender involved in the buy-to-let market, saw its shares fall 3.5% following the Autumn Statement.

Buy-to-let specialist lender Paragon also saw its shares drop yesterday, falling back by 3.5%.

Written by: ROSALIND RENSHAW | NOVEMBER 27, 2015

Budget bombshell: Will landlords be able to find loopholes?

Could there be tax loopholes that could catch the Government blindsided?

And will sellers of second homes and buy-to-lets distort the market by trying to beat next April’s tax deadlines?

Both scenarios have been raised following this week’s Autumn Statement.

On Wednesday, Chancellor George Osborne announced a 3% rise in Stamp Duty Land Tax for buy-to-let and second-home purchasers.

Large corporate entities owning at least 15 properties will be exempt from the higher charges.

There is to be a consultation on the policy detail.

However, according to accountant George Bull of RSM, it is “clear” that the Government wants to see landlords with only one or two properties leaving the sector “to be replaced by larger landlords, funds and corporate bodies potentially backed by overseas money”.

James Greenwood of Stacks suggests that landlords could join together to form larger companies.

He said: “We’ve yet to see some of the detail, and as it’s revealed affected parties will start to find loopholes.

“Landlords with small portfolios may club together to form a corporation holding of more than 15 properties, thereby exempting themselves from the rules.”

Greenwood also warned: “Osborne has administered another blow to an already fragile housing market.

“As we already know, it’s impossible to isolate a specific part of the market without affecting the rest.

“Break a big toe, and it becomes almost impossible to walk.”

He added: “Far from raking in receipts from the last round of Stamp Duty increases at the upper end of the market, the Government has simply witnessed a sector shutting down.

“The same will happen to the bottom of the market which is significantly driven by second homes and buy-to-lets.

“If the market is cold at both ends, the middle can’t warm up.

“Will there be a rush to buy prior to April?

“I doubt it. Competitive bidding will simply add a percentage to the price, cancelling any benefit to avoiding the extra 3%.

“And we are likely to see prices of the kind of property suitable for second homes and buy-to-lets dropping in price after the changes come into effect.

“The rental market will also suffer with less property available, and prices rising.”

He went on: “Chains will certainly become weaker.

“Downsizers regularly buy before they sell, and this tactic will now be too costly to be appealing.

“Older buyers with non-property owning offspring may use their kids as a temporary haven for their additional property.

“But whatever strategies buyers use, and loopholes some are able to exploit, this move will lead to at least a year of very poor transaction levels in all sectors of the market.”

Alan Ward, chairman of the Residential Landlords Association, has dubbed Budget day this week as Black Wednesday.

Ward said: “Politically, Osborne seems to have declared open season on independent landlords – formerly the bedrock of Thatcherism, self-reliant entrepreneurial voters who were not going to be dependent on the State.”

Meanwhile, respected industry figure Nicholas Leeming warned of distortion to the market.

Leeming, who is chairman of Jackson-Stops & Staff, said: “Landlords provide a valuable service in providing homes for those without the capital to buy, and the Chancellor should do all he can to encourage private investment in the rental sector to provide a substantial and diverse range of rental properties.

“This is another increase in transactional costs for property and this will inevitably lead to market distortion nearer the introduction date.

“Vendors should make the most of the opportunity before the April deadline.”


Written by: ROSALIND RENSHAW | NOVEMBER 27, 2015

Calls mount for ministers to make Client Money Protection mandatory for agents

Pressure is mounting on the Government to make Client Money Protection a mandatory requirement for all letting agents.

It is widely considered to be one of the single biggest – and simplest – reforms that the private rented sector needs.

SAFEagent has repeated its call for compulsory CMP, asking the Government to include a proposed amendment tabled by ARLA boss David Cox.

The amendment would add to the Housing and Planning Bill, currently going through Parliament.

The SAFEagent campaign, launched in 2011, has over 3,000 offices signed up, working to raise consumer awareness among landlords and tenants of the need to ensure they use agents who have CMP.

John Midgley, SAFEagent chair, said: “We welcome the positive action the Government is taking to deal with rogue landlords and agents. Mandatory membership of a redress scheme for all agents was a step in the right direction but consumers get no recompense through those schemes if an agent misappropriates their money.

“Only by introducing a mandatory requirement for all agents to be included under a CMP scheme can the consumer be afforded that protection.

“It is great that the industry is now pulling together to protect consumers – something that the SAFEagent steering group has advocated since the start of its campaign.

“We hope to build on this goodwill for other consumer protection initiatives which we are planning.”

Midgley has written to housing minister Brandon Lewis expressing his views.


Written by: ROSALIND RENSHAW | NOVEMBER 25, 2015

High street estate agents accused of losing interest in property after two weeks

An online agent has accused high street firms of losing interest in a property if does not receive offers within two weeks.

The claim is certain to be totally refuted by hard-working high street agents.

HouseSimple has made the claim after polling over 2,000 vendors who sold a property in the past 12 months to ask what they thought of the service they received from the estate agent who sold their property.

Half felt the estate agent’s commitment to sell their property dropped off considerably after the initial couple of weeks of marketing, and by the second week they felt they were already having to chase the estate agent for updates.

Despite that, half rated their agent at least 8 out of 10 for service.

And while online agents make much of not having to have high street premises, the poll shows that over three-quarters of vendors visit branches.

Sellers were also asked about the price their agent put their property on the market.

It is not uncommon for high street estate agents to promise an unrealistic sale price to get sellers signed up, only for the agent to quickly recommend a price drop once the property is marketed.

Just over half (51%) of the sellers polled revealed that their estate agent suggested they drop the asking price soon after marketing their property.

More than a fifth (21%) of those polled also claimed that at least half the people who came round to see their property were time wasters with no intention of ever making an offer.

That figure rose considerably in London and Wales with four out of ten sellers convinced that 50% or more were time wasters.

More than a quarter of sellers polled (27%) said that their estate agent only secured one offer for their property.

However, 49% rated their agent highly for service, giving the firm at least 8 out of 10.

Just over four in ten (42%) said they did not think the agent was worth their fee, and 28% said they did not think the agent tried hard enough to sell their property.

When sellers were asked if they had ever visited their agent’s branch, more than three-quarters said they had, with 23% saying they had not.

HouseSimple offers two packages, one of £9 a week plus a success fee of £495, and the other £395, which sellers can pay on completion of sale or at the end of 12 months.


Written by: ROSALIND RENSHAW | NOVEMBER 25, 2015

“The service has been exceptional!”

It makes it all worthwhile when we receive feedback like this;

“The service has been exceptional from Roy and his team. Prompt feedback from viewings to very swift solutions to tenant issues. A first class service to both Landlord and Tenant. The personal touch that some other Agents do not have.Thank you.”

Its all about going the extra mile! Well done to all the team!

House prices will rise another 10% next year, says Hometrack

House price inflation in UK cities is running at 9.4% annually and set to grow another 10% next year.

The forecast comes from Hometrack, which says that Glasgow, Manchester and Liverpool are currently recording their highest rates of annual house price growth since 2007 at 8.3%, 7% and 5.1% respectively.

However, their performance is nothing like London’s.

In Glasgow and Manchester, house prices have been recovering only in the last three years; in Liverpool, house prices went on falling until early 2012 and are still 13% below peak.

By contrast, in London house prices are up 70% since 2009.

The Hometrack city index monitors house prices in 20 cities, and found the highest rate of annual growth in Oxford at 12.8%, followed by Cambridge at 10.7%.

It found only one city, Aberdeeen, where house prices have tailed off over the last year, by 0.8%.

In another housing market report out today, agents Your Move and Reeds Rains said rents dipped in October to stand at £806 per month across England and Wales.

That is down from September’s all-time high of £816.

Despite the monthly fall, annual rent inflation is now 4.7%.

A third report, on house building, said that 135,050 homes have been built over the last year, up 17% compared with the previous 12 months.


Written by: ROSALIND RENSHAW | NOVEMBER 20, 2015