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NOV
11

The Property Update; November Newsletter

black and white housesThe Lewis Nedas Property Newsletter is back!

We took a break over the Summer and the early Autumn, to assess the ramifications of the Brexit vote and its effect on the Housing Market. It is still far too early to say what the true effects are, because there have been so many other variables to consider (the drop in the pound being one such major variable). It's accurate to say that the market is much quieter and price growth is much reduced.

The London prime markets, i.e. Zones 1 and 2, have however seen a marked reduction in prices, a record average drop of over £100,000!

Fewer people are able to buy property; in fact the number of under 35’s who are property owners has decreased by 1/3 since 2011, to 334,000 this year. The U.K is now outside Europe’s top 20 countries for house sales.

 

Buy to Let Market

It's plain that there are issues on the horizon for buy to let investors; they will see less tax relief and less mortgage availability the supply of housing is on a rising curve and rents are increasingly unaffordable.

Additionally those BTL landlords who used a supposed loophole, which appeared to allow landlords (before the increase in SDLT in April this year) to transfer properties into limited companies in an attempt to avoid the increase in tax, are likely to come to the attention of HMRC.

Such a device is likely to fall foul of HMRC and tax avoidance legislation, and could easily attract allegations of both tax and mortgage fraud. It is anticipated that HMRC would assume that such transfers to limited companies were artificial structures.

 

Residential Property

We have seen the usual contradictory reports about the market - the NAEA (National Association of Estate Agents) report that confidence in the housing market is back to pre- Brexit levels and an increase in demand in September 2016, though in the same month mortgage approvals were markedly reduced (by 15%) when compared with September 2015.

There was also a slight dip in the number of residential properties coming onto the market, again when compared with last year.

Sales of homes are now taking longer than in 2015, in fact they are taking an additional month longer and it can take 91 days to secure a sale.

John Lewis report that new build / newly converted properties in this country are now the smallest properties in Europe, and are on average 92% of the recommended size.

Property Partners latest research suggests that it would take the average Londoner on an average salary of £34,000 faces a period of 121 years before they could afford to save the average necessary deposit to buy a property in London, if they are unable to rely upon the bank of Mum and Dad.

The drastic fall in the value of the pound has attracted increased foreign interest in the London market, but the canny US/Chinese/Middle Eastern potential purchasers would appear to be hanging back to see if any further falls in the pounds value would benefit them more.

Certainly they would also seem to be casting their nets wider than the prime London zones 1 and 2.

Those areas likely to be affected (or benefited by) Crossrail and HS2 are also of increasing interest, in particular to shrewd Chinese investors.

Additionally we have noticed that foreign investors have computed that because of the increased SDLT, it makes more economic sense to buy a number of smaller flats in areas such as Colindale and Hendon, rather than pay the same amount of SDLT upon the sale of one larger property.

Our specialist property lawyers have also dealt with a large increase in clients seeking advice about potential compensation as a result of HS2 expansion - Our very own Richard Greenby (rgreenby@lewisnedas.co.uk) is the lawyer to contact in that issue.

This brings us neatly to the issue of the Third Heathrow Runway expansion, recently given the official go ahead by government.

According to reports this is likely to depreciate the value of properties in the area by 20%, some 783 homes are expected to be demolished. It is said, that government are prepared to pay a purchase price of 125% of the value of the property together with stamp duty and related fees, the likely cost of which is rumoured to be in the sum of £1.5bn.

It is also said to offer a potential boost to the construction industry to the tune of £18bn.

 

Commercial Property

Again this sector is experiencing some major changes, a great many investors have removed themselves from this market.

The 'gig' economy is also have a huge effect on the market, Young flexible companies do not wish to tie themselves up with lengthy commercial leases of 20 years, instead the average lease is now about 7 years and likely to reduce further.

Business centres that offer office facilities are increasingly in demand and are proving to be a lucrative investment.

 

Equity Release

This sector is still booming away and has increased by 1/3 over the last 12 months.

An interesting demographic change in the type of Equity Release applicants has revealed increasing demand not just those from the lower socio- economic demographic but also those who on paper would certainly appear to be wealthier (with properties worth £1 million plus) but who have reduced incomes.

 

If you require an advice / assistance with any of the above issues, please contact our specialist and highly skilled property lawyers on 020 7387 2032 or use our enquiry facility on www.lewisnedas.co.uk

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JUN
17

At Long Last, the Mortgage Market is Waking Up

Housing questionThe mortgage market has finally realised that people are living for longer and the majority of property owners are asset rich and cash poor, and likely to lose out at the older end of the market to Equity Release, which has seen a huge surge over recent years.

After the early horrors of the early Equity Release products, the current offerings are clear, comprehensive but expensive.

Smaller specialist mortgage lenders have been prepared after the last financial crisis to lend to older borrowers but now the mainstream lenders have entered that older borrower market.

The Nationwide are prepared to lender BTL investors up to the age of 105, and The Halifax will lend to residential borrowers up to the age of 85 years.

Young people now fully expect to have a mortgage during their working lives and into retirement and so the mortgage market had to react to this and dispense with their ageist policies of refusing to lend after 65 years of age.

What is the best choice - Mortgage (mortgage extension) or Equity Release?

Equity Release, as we have already said is undoubtedly more expensive but it prevents repossession of the property. The ER borrower remains in the property until death or removal to a Care Home.

There is also the 'no negative equity guarantee'; i.e. that a borrower cannot owe more than the value of the property.

The huge increase in negative equity is used by borrowers to: assist family to get onto the property market; pay for grandchildren’s university education; meet the cost of home adaptations so that the borrowers can remain in their homes or to pay off existing debts There also remains the issues of potential beneficiaries, many of whom are shocked to learn after probate that their parents have obtained Equity Release against the family home, often the main asset. It's best to ensure that all potential beneficiaries are made aware, in writing, of your ER intentions before you go ahead.

If on the other hand you have an income in retirement it would be cheaper to mortgage or extend a mortgage but there always remains the threat of repossession should you default.

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JUN
17

So Just How are Buy to Let Investors reacting to the Increase in Stamp Duty?

buy to let signMost assume that the increase, together with the reduction in tax relief, will be passed to the Landlord’s tenants.

Some investors are setting up corporate structures in which mortgage interest could still be set off against tax; we would advise consulting a specialist tax accountant if you are thinking of doing this.

Allsop, the auctioneers, are reporting that they witnessed the largest turnout to date at one of their more recent property auctions, though they noted that the bids on property  were lower than the past.

Overall, the increase in stamp duty does not appear to have deterred BTL investors.

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JAN
11

More Responsibilities for Buy-to-Let Landlords

The buy-to-let sector is facing a number of new obstacles this year.

Right to Rent 

As from 1 February 2016, a new additional ‘right to rent’ burden has been placed upon landlords; it will now be a legal obligation for landlords to ensure that a tenant (or lodger) has the right to live in the country before they grant the tenancy or licence to reside.

This means in real terms that landlords will have to check and copy all identity documents, e.g. passports, biometric residents’ permits, identity cards, and/or certificates of Naturalisation or British Citizenship. They must insist on seeing and copying original documentation, keeping it safe, and logging the date on which the checks were made. If a potential tenant does not have those documents, then the landlord must contact the Home Office using a particular online reporting facility, and must wait for up to two working days to know whether s/he can let the property to these potential tenants.

It should also be part of any agreement between the landlord and their managing agents that the agent is fully responsible for fully completing the ‘right to rent’ checks, and that they should be fully liable for any breach of the obligations and will pay any penalty due as a result of any breach.

Of course, it will be impossible for any lay individual to detect whether any of the documents shown are fake or not; at best, they can check dates and that the photographs resemble the potential tenant in front of them – they are not police officers after all! It is vital that the landlord or their agent uses their best endeavours.

There are, of course, penalties to be paid if the landlord or managing agent is found to be in breach of this duty; currently a maximum fine of £3,000, however, the impending Immigration Bill 2015/16 promises the threat of custodial sentences for landlords who fail to meet their obligations. Additionally, the bill will bring accelerated eviction systems, which will ensure that the illegal tenants will be evicted from the premises quickly.

New obligations re heating and energy 

Later this year, 31 December 2016 to be exact, landlords with more than one tenant and a communal heating system must do the following:

  1. All heating bills must be based on consumption of energy;
  2. Landlords must notify the National Measurement and Regulation Office (NMRO);
  3. They must install meters and temperature controls (except where the landlord can show that it is neither cost effective nor technically feasible);
  4. If that exemption can be proved that the landlord must install heat cost allocators, thermostats, radiator valves, and hot water meters, unless s/he can prove that another exemption under the relevant regulations applies.

It is advised that the landlord should insert a clause within the lease or rental agreement for the recovery of the costs of the billing and the installation of the equipment in the Services Charges.

Smoke Alarms

Since 1 October 2015, landlords in the private rental sector are obliged to:

  1. Place one smoke alarm on each floor of the rented premises;
  2. Fit a carbon monoxide alarm in any room with a solid fuel burning combustion appliance;
  3. The alarms must be in proper working order on the first day of a new tenancy. After this, it becomes the tenants’ responsibility to ensure that the alarms are tested regularly so that they are always in working order.

These obligations do not apply to HMOs (houses in multiple occupation), social housing, or live-in-landlord situations.

Penalties 

Breach of any of the above could result in a maximum fine of £5,000.

Contact Lewis Nedas Expert Buy-to-Let Property Lawyers

If you are a buy-to-let investor or landlord and need advice on any of the above, our property lawyers are able to assist. Call us on 0207 387 2032 or complete our online enquiry form here.

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