What do the falling house prices mean for landlords?

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May has brought more bad news for some landlords with the Nationwide Building Society reporting a 3.4% drop in house prices in the year to May ’23 and interest rates that are expected to rise to 5.5.% later this year.

Landlords with a long-term outlook, high yield properties, and/or either no mortgage or fixed price mortgages, may be tempted to ignore any loss in equity as a normal market fluctuation.

Landlords with large amounts of disposable cash might be looking forward to buying better quality property at lower prices.

However ,any landlord with minimal profit or those planning to sell before the abolishment of Section 21 should consider selling now before equity drops and business costs rise.

The dilemmas that landlords who want to sell all or some of their buy-to-let properties, before prices drop further, face are:

• Waiting for tenants to leave usually takes too long and can involve property being empty for months while sales complete.
• To try to overcome the waiting part (but not the ‘empty property with no income’ part) of this problem, there have been huge rises in landlords issuing Section 21 (S21) notices but if tenants refuse to leave after a S21 notice has been served (as many more are doing due to their own cost-of-living crises), landlords often face more costs (including solicitor and bailiff fees), huge amounts of stress to gain possession through the courts and the threat that tenants might stop paying rent as a result of the process.
• If tenants can argue an S21 notice was not issued correctly or in accordance with their rights and their landlord’s legal obligations, the process may need to be repeated multiple times until a court instruct the tenants to vacate. If they do not vacate within the timeframe given by the court, landlords will need to go back to court and get a court appointed bailiff to recover possession.
• If, as expected, there is a flood of landlords serving S21s when the abolishment date is confirmed, the problem is only to get worse.

So what are landlords doing to avoid empty property, long delays and/or legal costs if they want to sell buy-to-let property without waiting to sell with vacant possession or without long periods of running empty property while a sale is completing?

While some will attempt to sell property with tenants in situ, most high street style estate agents will not get involved in collecting tenancy information and sales normally take longer. Choosing this option, landlords face higher legal fees and more risk a sale will collapse from ‘complications’ or falling property prices causing buyers to want to renegotiate.

Multiply the problems by the number of properties landlords want to sell and it is understandable why many landlords are under huge financial and mental stresses.

The Landlord Sales Agency specialise in helping landlords to BUY or SELL buy-to-let property. They:

• Sell to owner occupiers and investors to ensure seller get the best price possible
• Sell with reliable tenants in place to landlords looking for a readymade business with proven success
• Ensure all required certificates are legislation is current and in place
• Manage the process to provide vacant possession, if necessary
• Arrange practical, financial and external help for tenants to overcome problems they face as a result of the sale and moving out is in everyone’s best interest
• Have a database of 30,000+ of private buyers and investors
• Sell single properties and property portfolios
• Secure offers early in the process to avoid gazumping and wasted costs

They have also developed coordinated work practices with independent services providers in financial, construction and legal industries so clients can incorporate additional expertise in the process to benefit from: 

• Proper planning and tax-efficient company structuring to minimise annual tax bills and Capital Gains tax rate from 28% to 18% when selling property
• Structural/building problems solved

With experts predicting the Golden Age of rapid property price growth is over, there has never been a better time for landlords to enjoy the equity they have built up through capital gains and no better company to make sure they get to keep as much of their profits as possible.

Join the 200+ landlords who have chosen Landlord Sales Agency today to sell their buy-to-let properties faster and with less disruption to business than most (if not all) other options.

Contact Landlord Sales Agency today to find out why they are the best in the business.

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View Full Article: What do the falling house prices mean for landlords?

LATEST: London borough gives green light to big new HMO licencing scheme

admin    Uncategorized     agents

Redbridge Council in North London has given the go-ahead for a new borough-wide additional HMO licensing scheme.

The scheme extends licensing to all HMOs with three or more tenants forming two or more households after the authority’s consultation discovered significant issues such as poor housing conditions, ineffective management, crime, and anti-social behaviour persisting within the borough’s HMOs. 

Redbridge is also hoping to extend its current selective licensing scheme which covers 12 wards. The scheme, which runs until 30^th September – in Aldborough, Chadwell, Church End, Cranbrook, Fairlop, Goodmayes, Loxford, Mayfield, Newbury, Roding, Seven Kings, Snaresbrook – could also include parts or all of Barkingside, Fairlop, Hainault, Wanstead Park and Wanstead Village if it gets approval.

A consultation finished on 31^st January and the council hopes that any replacement scheme will be in place by 1st November although it has yet to feed back on the results.

Penalties

It reports that since January 2021 it has issued 38 civil penalty fines to rogue landlords for health and safety hazard offences associated with a range of issues relating to disrepair, inadequate fire protection, overcrowding, and poorly managed waste arrangements, to landlords operating without a licence which put tenants at risk.

This has resulted in estimated fines totalling more than £170,000, the council reports.

Councillor Vanisha Solanki (pictured), cabinet member for housing and homelessness, says: “The licensing of properties plays a major role in helping to improve the quality of homes in the private rental sector. Most of our landlords are following the rules, but for those that aren’t, we encourage you to come forward and license your property to avoid receiving a potential fine.”

View Full Article: LATEST: London borough gives green light to big new HMO licencing scheme

NEW: ‘Landlords who make sex for rent demands should be banned for life’

admin    Uncategorized     agents

Estate agents have called for landlords who advertise sex for rent to be banned from the PRS for life.

In its response to the government’s consultation into the practice, industry body Propertymark insists these landlords should be kicked out as well as dealt with under the Sexual Offences Act, through criminal proceedings, in order to eliminate the “abhorrent” practice.

Propertymark suggests giving local authorities enough resources to ensure standards are high across the board in the PRS, as well as making sure there is a referral route for them to report suspected cases to the police and relevant authorities.

It also wants the government to tackle online platforms that are used to advertise these arrangements and to give them the same requirements to meet as online property platforms.

It adds that the police and other authorities should share information with letting agents and landlords on spotting the signs and how to report it.

sex for rent

Propertymark believes that the small number of landlords who engage in sex for rent are likely to engage in other criminal acts such as prostitution, human trafficking, and drugs.

They are also extremely unlikely to provide the high standards expected of landlords within the PRS such as complying with legislation and health and safety requirements.

It adds that criminals are likely to pick on those most marginalised and vulnerable in society including sex workers, the low waged and people from overseas or at high risk of homelessness.

The government consultation ends on 30th June.

Read more about the prosecution of 'sex for rent' landlords.

View Full Article: NEW: ‘Landlords who make sex for rent demands should be banned for life’

COMMENT: Why are property values going down for the first time in ten years?

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The Halifax revealed today that house prices have fallen on an annual basis for the first time since December 2012, by 1%.

This means the average house value has declined by £132 which may not sound a lot but represents a seismic change after years of ultra-low interest rates prompted continuous waves of price rises for landlords.

This news will trouble some buy to let investors who are relying on their portfolios to rise in value as part of their investment or retirement plans, particularly if they have just started out.

The wider question is whether the housing market faces big problems overall or whether today’s ‘price correction’, as economists like to call it, is a blip.

Here’s what different experts have told us.

The industry leader – Nathan Emerson, Propertymark

“House prices are holding steady, and we are in a sturdy market.

“Propertymark data has found a 70% increase in properties available for sale compared to April 2022, showing confidence from sellers, and giving buyers more choice and room for negotiation.”

The estate agent – Matt Thompson, Chestertons

“Strong buyer demand [in London] has and will continue to contribute to the majority of the capital’s properties holding their value and, in some particularly sought-after neighbourhoods, allow sellers to be insistent on their asking price without allowing room for negotiation.”

Specialist lender – Gareth Lewis, MT Finance

“These numbers are unsurprising, given the fall in transactions. They also reflect that those who are willing to buy are less bullish when it comes to committing to higher house prices because everything is costing more, so they are going to chip away at the price,” he says.

“Mortgage borrowers overall, other than perhaps some first-time buyers, can still afford a mortgage but just have to be prepared to put their hand in their pocket a bit more.

“This is all part of a re-education process; money isn’t free, and you are going to have to pay more for it in future. The housing market will inevitably be quieter as a result.”

The portal boss – Jason Tebb, OnTheMarket.com

“The high cost of living, recent disappointing inflation news and the likelihood of further rate rises will impact what buyers are willing to pay for their next home,” he says.

“This news should be taken, however, in the context of the unprecedented post pandemic house price growth, fuelled by a lack of supply and pent up demand – property prices are still, on average, £25,000 above the level of 2 years ago.”

The estate agent – Jeremy Leaf, former RICS Residential Chairman

“Halifax, like the Nationwide figures, exclude cash sales and reflect activity from a few months ago.

“But they confirm recent trends that tentative market recovery is being threatened by the prospect of more interest rate rises and stubbornly high inflation. 

“And the survey shows prices are still considerably above where they were two years ago so cash and equity-rich buyers in particular are recognising the opportunities.”

View Full Article: COMMENT: Why are property values going down for the first time in ten years?

First annual fall in house prices for 11 years

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The average house price saw no change (0.0%) in May, following a drop of 0.4% in April, Halifax reports.

Its latest house price index does, however, show that the annual rate of house price growth saw a decline of -1%

View Full Article: First annual fall in house prices for 11 years

Soaring energy costs prompt dangerous meter tampering requests

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A shocking survey reveals that 43% of electricians and gas engineers have been asked by clients – including tenants – to illegally tamper with their electricity or gas meters to reduce their energy bills.

The findings from Direct Line business insurance highlight that as energy prices continue to rise

View Full Article: Soaring energy costs prompt dangerous meter tampering requests

Concerns over loan defaults as office and retail tenants fail to renew leases

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Persistent home working is affecting office occupancy rates and is leading commercial tenants to fail to renew their office leases.

Ghost city streets have emerged post pandemic as occupancy rates hit a new low. In the UK it has been reported that these office space rates could now be as low as 36 per cent in some locations compared with an average level of above 80 per cent pre pandemic.

The Ifo Institute for Economic Research, a Munich-based research institution, one of Germany’s largest economic think-tanks, reports that on any given day, 12.3 per cent of workplaces remain unused because staff working from home.

In the US some lenders expect to take losses on real estate loans following warnings that the commercial property asset class is the sector to experience a crisis after the recent turmoil in the US regional banking industry.

Quantitative Easing

Since the start of the global financial crisis in 2008, central banks around the world continued to roll out quantitative easing (QE) measures which has resulted in dramatic expansions of their balance sheets.

The Covid pandemic further accelerated this trend as an essential monetary policy tool. The pandemic emergency purchases programmes aimed at softening the economic shocks led to government purchases of unlimited amounts of treasury and mortgage-backed securities.

Interest rates were cut to near zero pushing up asset prices to unprecedented levels, but as bank and central government unwind QE, raise taxes and attempt to contain high inflation levels by raising interest rates, all this is increasingly putting pressure on commercial borrowers and lenders.

Leases not renewed?

The problem for commercial property landlords is that vacancy rates are increasing as leases expire and fail to be renewed. There are many businesses operating with a considerable amount of spare capacity, office and retail space. Many commercial landlords and will either not be renewing their leases or will renew taking less space.

The persistent trend for office workers to work from home means that many businesses with spare office space will not be renewing their leases because their employees continue to work from home. Studies show that the trend has only partly been reversed since the pandemic, and experts are predicting that working from home will remain a feature of future office life.

A similar issue is facing many commercial retail stores in UK high streets. Many shops are facing dramatic declines in values brought on by a lack of tenant demand which is brought about by the rising trend for online shopping.

All this is making banks nervous. Landlords may be looking to restructure loans as their income streams dry up, when tenants fail to renew, and new tenants are hard to come by. In the worst case for bank lenders, landlords will simply fold leaving the lenders shouldering large losses.

In the US the commercial property market has already reached a point where some banks have been offering to sell off commercial property their loans at a big discount, even when their landlord borrowers are currently keeping up with their repayments – the banks are anticipating problems ahead and want to reduce their exposure to commercial property debt.

CoStar, a commercial property research company, thinks that a commercial real estate loan issue is looming, warning that commercial real estate could be the next crisis point in the US following the recent regional banking crisis there.

Oversupply

An oversupply of commercial buildings in some locations will inevitably lead to certain amount of re-purposing. Converted commercial buildings to residential and other uses is a trend that’s been ongoing for some time, and there are tax and planning incentives to do this.

It needs considerable new investment to implement conversions to be successful, and even when the buildings continue in office or retail use, they may need a considerable amount of refurbishment to meet the new energy efficiency standards, particularly with older buildings.

Some down town areas are struggling because of a lack of footfall, a lack of people traffic when workers are working from. This makes it all the more important that some buildings in these locations are converted to residential use to increase this all important foot traffic.

View Full Article: Concerns over loan defaults as office and retail tenants fail to renew leases

BREAKING: Welsh Government is ‘looking at rent control options’

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The Welsh Government has launched a consultation on ‘fair rents and adequate housing’ within which housing minister Julie James (main picture) reveals she is considering rent controls.

The consultation asks for the views of those within the private rented sector on a wide range of subjects linked to affordability, supply and demand and what constitutes ‘fair rent’.

But it is the section on rent controls that will alarm many landlords, who had thought the Welsh government had rejected rent controls following a debate in the Senedd during October 2022.

Now, James says: “I am committed to using all the levers we have to ensure we maintain a viable private rented sector here in Wales, offering high quality and choice of accommodation, where landlords have confidence to invest in making improvements and tenants have greater certainty that longer term costs of moving into or staying in a rental property will be affordable,” says James.

Rent control options

The consultation explores four potential rent control measures including a ceiling or freeze; limiting annual rent rises to pre-agreed percentages and only allowing rent rises when a tenant moves out and the property is advertised afresh.

Welsh landlords could also face rent restrictions based on limits to yield using a formula, and a ‘costs plus’ model.

But all this is up for debate and the NRLA is urging landlords with properties in Wales to get involved in the consultation, which follows an earlier Green Paper.

Ben Beadle (pictured), Chief Executive of the National Residential Landlords Association, says: “Let’s be clear, rent controls would serve only to decimate the sector further and would be a disaster for tenants, when so many are already struggling to find a place to rent.

“The Minister herself diagnosed the issues when she rightly rejected calls for a rent freeze before Christmas.

“The same reasons apply now. We all want to see more homes available to rent but adopting the tried and failed ideology of rent controls is not the way to do it.

“The best way is to introduce pro-growth measures to increase housing supply that will reduce costs for renters.

“Now is the time for landlords to get involved and for the Welsh Government listen carefully to the views of those providing much needed homes.”

To submit your views, visit the consultation website.

View Full Article: BREAKING: Welsh Government is ‘looking at rent control options’

Airbnb to give rental income data to HMRC, short lets landlords warned

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Airbnb is to share data with the taxman on its hosts’ earnings going as far back as the 2017-18 financial year, a new warning on its website reveals.

The information will help HMRC identify those making money from letting their properties without declaring it, who then face criminal prosecution and tough penalties of up to 30% of the tax owed.

The Treasury has previously said that more than half of people using ‘sharing sites’ did not think they had to pay tax on this income.

However, anyone renting properties on Airbnb can only make up to £1,000 a year before tax, which is protected by the ‘trading allowance’ while any profits above this threshold must be declared.

Taxpayers who have not disclosed their income are being encouraged to do so via HMRC’s longstanding Let Property Campaign, which would reduce the penalty.

Tax investigation

Richard Morley, a partner at accountancy firm HW Fisher, told The Telegraph that if HMRC obtains evidence that tax has been unpaid in a previous year, the tax authority can open an investigation to obtain information going back up to 20 years under so-called ‘discovery laws’.

An HMRC spokesman says: “This is routine activity – each year we send out thousands of reminder letters on various areas of tax. We believe our customers want to pay the right amount of tax and by working with online rental platforms, as well as issuing these reminders, we’re taking steps to help make it as easy as possible for people to get their tax right.”

Holiday home owners will be forced to obtain planning permission to let their properties under government plans expected to come into force later this year. The government is also holding a further consultation on a new registration scheme for short-term lets.

Read the LandlordZONE Forum discussion on the subject.

Read the Airbnb warning in full.

View Full Article: Airbnb to give rental income data to HMRC, short lets landlords warned

BLOG: Ministers MUST reconsider periodic tenancy plans for students

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Last year saw worrying housing shortages in a number of university cities in the UK. In Leeds we were turning away larger than usual numbers of students at the back end of the summer as there were simply no rooms available.

Even before the proposed changes under the Renters Reform Bill, accommodation portal StuRents predicted that there would be a national shortfall of 450,000 student bedspaces by 2025.

Currently, most students sign a fixed 12-month contract for a full academic year and move in over the summer.

Students like the security of a fixed agreement, as do landlords; it’s hard to re-fill a large student house half-way through the year with professionals or families.

In addition, Article 4 planning restrictions in many cities could prevent a landlord re-letting to students in the future if voids are backfilled with families or couples, as this could be seen as a change of use class.

Students secure accommodation well in advance of the next academic year as both tenants and landlords have a pre-determined end date when properties will become available again.

By prohibiting fixed tenancies, student tenants would only need to give a month’s notice and could vacate at any point during the year.

This indefinite leave to remain means there is no guarantee that the property will become vacant for the following year, making it impossible for landlords (and prospective new tenants) to enter into a new tenancy agreement for the next academic year.

Massive demand

Leeds has about 37,000 students living in the city and there’s a massive demand for housing as the universities, especially the University of Leeds, continue to grow.

In Leeds, shared student HMOs still provide the bulk of supply, despite Article 4 regulations curbing further expansion. This essentially means that bar the planning department having a complete change of heart, there’s no likelihood of student HMO housing numbers increasing.

The current drafting of the Bill gives an exemption for Purpose Built Accommodation (PBSA) but not for the typical student house-shares.

There is nothing wrong with PBSA – some of the accommodation is excellent – but it’s expensive and dilutes the student life-experience of proper communal living if it accommodates students for the full duration of a university education.

The number of PBSA bedspaces are growing, but not by enough to match demand. Many of the new blocks are also targeted at international students, and while we’ve seen student HMO rents in Leeds increase by around 15% in the last 12 months, PBSA rents in Leeds are on average still £100 a week more expensive than HMOs. For many students there’s a real affordability issue.

Real issues

With supply and demand very delicately poised, Leeds is a city where – should student landlords exit if fixed tenancies are abolished – there are likely to be real issues for students in finding houses. There just isn’t the capacity to pick up the slack if landlords leave.

University applications are down by around 2% for 2023 (compared to the post-Covid spike), but that is unlikely to provide enough breathing space.

The student landlords in Leeds we have spoken to are certainly twitchy, but I think most are waiting to see if amendments are made before they decide what to do.

In Scotland, Section 21 has already been scrapped and large numbers of landlords have left the student market. In cities like Edinburgh, students are couch-surfing, commuting from other cities, or simply cancelling courses.

Alongside landlord and university groups (including the University of Leeds) we have been lobbying for all student tenancies to be exempt, not just PBSA. It’s not too late to avert a crisis, and there are noises coming out of Westminster that this is at least being considered. Fingers crossed that common sense prevails.

• Sugarhouse Properties has partnered with Leeds RAG – the Leeds University Union’s official fundraising society, to sponsor and participate in this year’s RAG week culminating in a charity abseil down the side of the university’s historic Michael Sadler Building. To donate or learn more about Leeds RAG and the charities it supports, go to https://engage.luu.org.uk/groups/VBD/leeds-rag

Richard Napier (main picture) is director of Sugarhouse Properties, a student and professional independent letting agency in Leeds.

View Full Article: BLOG: Ministers MUST reconsider periodic tenancy plans for students