PRS reveals new advisory panel and seeks new ‘member’ experts too

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The Property Redress Scheme (PRS), which has over 17,000 property agency branches and property professionals covered, has revealed its new advisory panel after recently inviting applications for the new panel, which have now been filled.

PRS says the new approach is to promote an ‘authentic outlook and attitude’ across all areas of the property sector and to ensure that the PRS takes a balanced and knowledgeable view in its vision and in all of its policy decisions. The advisory panel now has experts representing a wide variety of areas:

• Landlord – Soek Yee Ashley Wong
• Tenant, buyer, seller – Robert Brown
• Lettings – Lynne Moss
• Sales/auction – Richard Powell
• Sourcing – Rupert Collingwood
• RLM & surveying – Andrew Chater
• Inventories – Daniel Evans
• Guaranteed Rent – Mandy Chandler
• Agent compliance – Jenny Markham
• Trading Standards – Grant Reardon
• Student/build to rent – David Campbell
• Holiday Lets – Vanessa Warwick
• General Legal – Robin Stewart

The PRS deals with approximately 2,000 complaints from tenants, landlords, property buyers and sellers each year and in 2021 awarded nearly £500,000 in compensation to those who had complaints upheld.

To strengthen its governance and accountability, the PRS is also launching a new ‘member panel’, bringing forward a new, open and transparent forum to benefit both members and the scheme.

Applications are open to all members of the PRS and particularly applications from members with experience of:

• Estate agency
• Inventory providers
• Lettings and property management
• Landlords (private/company)
• Property sourcing
• Rent to rent providers
• Residential leasehold management
• Other property professionals

PRS members can apply to join the member panel here.

Sean Hooker, Head of Redress at the PRS, says: “We’re approaching our second decade of redress and have industry-leading expertise as a result. 

“We recognise the expertise of our members too and that’s why we want them to help us with their feedback, guidance, advice and support. The member panel gives them that opportunity as well as enabling them to engage with other Panel members to share knowledge and raise standards”.  

Tim Frome, Managing Director of HF Resolution, the HFIS entity that owns the PRS, adds: “Our new member panel is a key part of our strategy for improving our offering to ensure we are not acting in isolation from the sector we represent. We want to know more about how redress works for our members – and how we can make it better still in the future.”

View Full Article: PRS reveals new advisory panel and seeks new ‘member’ experts too

The Recession Proof Strategy

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With inflation at over 10%, soaring energy costs and rising interest rates, we are likely to go further into recession and money will become tight for many people. It is very important to recognise that the property investing strategies you have previously used may not be the most appropriate strategies in the changing market conditions.

View Full Article: The Recession Proof Strategy

Property management firm boss disqualified for 12 years over dodgy Covid loans

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The boss of three property management companies that received Covid bounce-back loans totalling £135,000 has been disqualified as a director for 12 years.

The Insolvency Service says Michael Gaughan from Glasgow took out the loans even though none of the three companies he set up were eligible to receive them.

Covid bounce-back loan rules required companies to be trading on March 1st, 2020 but Gaughan’s three firms, which were established in February 2020 , did not start doing business until April 2020.

The 40-year-old then transferred the Covid cash into a single business bank account and used the funds to buy property worth nearly £160,000 in August 2020. He then sold the property in March 2021 for just over £140,000, and on the same day transferred £100,000 of the proceeds to his personal account.

Following this, in October 2021, the three companies were liquidated, triggering an investigation by The Insolvency Service, and he has now been disqualified, although the Government body has not revealed if any of the funds have been returned.

Gaughan’s director disqualification undertakings prevent him from directly, or indirectly, becoming involved in the promotion, formation or management of a company, without the permission of the court.

Adversely affected

Steven McGinty, Investigation Manager at The Insolvency Service says “Bounce Back Loans were made available for trading companies adversely affected by the pandemic. Brendan Gaughan should have known his companies weren’t entitled to the loans yet he took them anyway and used the funds for personal gain.

“We will not hesitate to take action against directors who have abused Covid-19 financial support like this.”

In December the National Audit Office criticised the way that this kind of bounce-back loan was administered, saying that counter-fraud measures were introduced ‘too slowly’. It also revealed that the Government’s own data suggested 11% were fraudulent worth £4.9 billion were fraudulent.

View Full Article: Property management firm boss disqualified for 12 years over dodgy Covid loans

Interest rate hikes sees nine out of 10 landlords increasing rents

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Rising interest rates have seen nine in 10 landlords either increasing rents or are about to, research reveals.

The findings from SME and landlord insurance provider, Superscript, questioned 600 UK residential landlords and found that 50% of respondents have already increased rents following interest rate rises earlier in the year.

View Full Article: Interest rate hikes sees nine out of 10 landlords increasing rents

Do you need to evict a tenant?

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If you need to evict a tenant, it can be a very stressful experience. There is a process to follow, otherwise even what seems to be a cut-and-dry case can take months and even a year or longer if not handled correctly.

View Full Article: Do you need to evict a tenant?

Lawyers publish HMO guide to help landlords fight ‘capricious’ councils

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A new book aims to help landlords and housing professionals decipher the complex and constantly evolving laws around HMOs.

Authors, property lawyer David Smith and his colleague Neli Borisova at JMW Solicitors, look at part two of the Housing Act 2004 – that environmental health officers use to regulate the sector – as well as the 2016 Housing and Planning Act, analysing key tribunal cases, and how they interpret and develop the law.

Houses of Multiple Occupation and Selective Licensing explains how the law’s effect on landlords depends on the way it is interpreted by these courts, particularly when Upper Tribunal rulings on issues such as Rent Repayment Orders aren’t binding on each other.

He believes the legal system was not entirely well thought out and has led to many landlords failing to properly understand their obligations.

“It created a structure which owed more to the views of desk-bound civil servants than to the often messy reality of residential properties,” he writes.

“Some local authorities have unfortunately failed to understand the legislation at all and have acted in ways which the legislation simply does not permit or have behaved in an illogical and capricious manner.”

Professional sharers

Smith tells LandlordZONE that HMOs have started to move away from just being poor quality, budget accommodation to encompassing more premium properties complete with features and services such as broadband, which attracts professional sharers.

He adds: “It will be interesting to see how things shape up once the property portal takes effect – which is a form of landlord registration – and if it takes the impetus away from councils’ licensing schemes.”

The book will be available from 31st October, through Amazon or direct via publisher Routledge.

View Full Article: Lawyers publish HMO guide to help landlords fight ‘capricious’ councils

House prices soared 14% in the last 12 months, how far will they fall?

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With inflation now into double figures, with all the financial shenanigans over the mini budget, the 10 year risk free bond yield at around 5 percent, it’s sending mortgages rates above 6 per cent, so how low will house prices go?

It seems inevitable prices will fall, but by how much? UK house price growth has seen an unbroken steady rise over many years, with the ONS recording a month by month increase since May 2012.

The steady growth has underwritten the success of buy-to-let investing, even though income yields have generally come down, this comforting capital growth has ensured a solid total return.

Neither Brexit nor the pandemic managed to derail this comfort zone for the average buy-to-let investor who saw the sector, a safe secure asset class, ideal for providing their pension nest egg. But all good things financial have a habit of coming to an end, and this time it took Kwasi Kwarteng’s mini-budget to finish off the rises, though things had been heading in that direction in any case.

Of course this was inevitable. Inflation had been rising steadily, accelerated by Putin’s invasion of Ukraine, a steady fall in the stock markets, and the value of the pound collapsing, especially against the US dollar. Much of UK imports are priced in the USDs, so oil, and a good deal of food and consumer durables become much more expensive to import. The country is so much poorer that it was just two years ago, so the question is, how far will UK property prices fall and for how long?

Housing shortages

Generally house prices are well supported by a shortage of housing and particularly in the private rented sector, so the slow down and fall may be tempered by that, but most property experts are predicting a price drop of between 5 and 15 per cent.

What the experts think

Knight Frank have come out with a forecast of a double-digit downturn, the property agent is predicting that house prices will fall by around 10 per cent over the next two years.

Although 2022 will see prices to have risen by 6 per cent, the agency thinks they will fall 5 per cent in 2023 and another 5 per cent in 2024 – a two year decline triggered by the spike in mortgage interest rates.

Senior personal finance analyst at interactive investor, Myron Jobson, has been quoted as saying:

“There is a clear and obvious lag between the latest official data on house prices and what is happening in the property market at present.

“More up-to-date house price indices paint a picture of a housing market that is running out steam, with rising mortgage rates and the escalating cost-of-living crisis cooling demand for homes.”

And head of UK residential research at Knight Frank, Tom Bill, has said:

“It’s a fairly safe bet that UK house prices have now peaked.

“The impact of rising mortgage rates will begin to hit demand and spending power in coming months, which we believe will lead to a fall of 10% over the next two years for UK prices.

“We may see mortgage rates fall to some extent if financial markets become more reassured by the government’s economic plan but the events of the last fortnight have been a reminder that the era of ultra-low rates is coming to an end.”

Credit Suisse and Capital Economics agree: both are forecasting a fall of between 10 per cent and 15 per cent, though property agents’ multi-franchise operator Belvoir (BLV), has said that although the combination of rising interest rates and the rising cost of living will put pressure on personal budgets, current mortgage levels were not high enough to reduce prices at all.

But, “If interest rates continue to rise, it is likely that asking prices may fall by between 5 and 10 per cent next year,” a Belvoir spokesperson told Investors’ Chronicle. “If, however, interest rates on fixed-term mortgages remain at their current levels, it is likely that prices will remain static and may even increase by 2 to 3 per cent.”

Meanwhile enquires by the Investors Chronicle found Savills (SVS) saying there will be “downward pressure” on house prices but wouldn’t be drawn to a figure until after the Bank of England’s (BoE) rates meeting on 3 November, and likewise property agents CBRE would not commit to a figure, though it “expect[s] the UK residential market to slow in 2023”.

Property agents JLL predict that house prices will drop over the course of next year and that it will come out with a number “in a week or two”. It thought that transactions are likely to drop 30 per cent in the short term. “The basket of properties that does transact will include a higher proportion of motivated sellers interacting with opportunistic buyers,” said JLL’s head of residential and living research, Nick Whitten.

Risk of recession

Interest rates coupled rising inflation, and sky high energy prices are the drivers of this decline leading to the risk of a recession are. Home buyers and home movers as well as potential new buy-to-let investors will find it increasingly difficult to finance new purchases.

Conversely, whereas most homebuyers and many buy-to-let investors use mortgages to buy homes, the decline could be a major buying opportunity for cash buyers, given the buoyancy of demand for rentals.

Experts are predicting that the Bank of England will continue to raise interest rates in a bid to kill off persistent inflation, where the bank base rate could increase from its present 2.25 per cent to as high as 6 per cent next year.

Consumer price index (CPI) inflation has now reached 10.1% for the 12 months to September 2022, the highest level for 40 years. It will take time to tame the beast with higher interest rates, and in the meantime one group of workers after another will strive to maintain their standard of living at the expense of the rest, fighting for a share of an ever decreasing pie.

View Full Article: House prices soared 14% in the last 12 months, how far will they fall?

Some Private Landlords Will Pay More Income Tax Than They Make In Profit

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Is it any wonder that so many landlords are selling some of their properties to pay down debt at the same time as restructuring the ownership of their rental property businesses?

At the foot of this article, I have shared a fantastic video interview where two Letting Agents from Christopher Shaw Residential Lettings interview Alex Norian

View Full Article: Some Private Landlords Will Pay More Income Tax Than They Make In Profit

Prominent landlord tells BBC how his mortgage payments now outstrip rental income

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A prominent landlord in the North East has told the BBC’s Newsnight programme that unless variable mortgage rates reduce he will have to start ‘handing the keys back’ to the ten or so properties within his portfolio.

Talking to reporter Sam Gruet (pictured), landlord Colin Campbell (main image), who is also chairman of the South Tyneside Landlords Association, said his income from rent was now outstripped by his rising mortgage payments.

“My market is the people who are on Housing Benefit or Universal Credit and I’m usually paid their rent direct by the Government,” he said.

“But now the interest rates is so high that the rent coming in from the Government, which here is £475 a month per tenant, is less than I’m having to pay the building society for the next two years.

“So if I’m ‘Joe average’ landlord in a very short time I’ll have to hand the keys back.”

Campbell went on to say that given his experience, the private rented sector is set to shrink significantly and that, consequently, unless local and national governments start building council houses in greater numbers, “the place is going to be full of desperate people in guest houses and hotels because there will be nowhere for them to live,” he said.

The 75-year-old landlord, who in the past has also criticised selective licensing in Tyneside, appeared alongside a local letting agent who recounted examples of tenants competing more and more for a shrinking number of properties, and a student tenant priced out of Newcastle city centre.

Watch the interviews in full.

View Full Article: Prominent landlord tells BBC how his mortgage payments now outstrip rental income

Mortgage rate rises major threat to London landlord profitability, says Moody’s

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More than a third of landlords (38%) with fixed-rate mortgages due to end between now and the end of 2024 will end up with loss-making properties if rates rise four percentage points higher than their current deals.

According to credit ratings agency Moody’s, as interest rates rise, these investors face taking a big hit because their interest coverage ratios (ICR) – the ratio of the gross rental income to mortgage payments – will fall below 110%. Two-thirds of landlords on fixed-rate mortgages will come to the end of their deals in the next two years.

Half of the nation’s worst-performing investment properties are in the capital where landlords would have to raise rents by 37% to keep them solvent.

Loss-making

More than a fifth (22%) of the buy-to-let properties at risk of becoming loss-making are in the Southeast where landlords will need to hike rents by 28% to make their properties mortgageable and profitable, while across the rest of the UK, rents would need to be raised by 24%.

Moody’s analyst Alexis Rivet (pictured) told The Telegraph that London will be home to the largest share of landlords falling below the 110% ICR benchmark because rental growth in the capital has lagged behind the rest of the country during the pandemic. Rents on newly-let properties in London are soaring at a record rate, but the measure that matters for landlords is the average rent across all rental properties. 

“Those landlords whose ICR falls below 110% have three options,” says Rivet. “They can increase the rent, they can reduce the amount they can borrow, or they can sell the property.”

However, many would struggle to make such sizeable rent increases during the cost-of-living crisis while tenants are being hit by energy price rises and a record drop in real earnings.

View Full Article: Mortgage rate rises major threat to London landlord profitability, says Moody’s