Stamp duty holiday failed to create landlord buying spree says leading property firm

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The stamp duty holiday failed to create a buy-to-let spending spree despite landlord stamp duty bills falling by more than a third, says Hamptons.

Investors bought 12% of homes sold in Great Britain during the 15-month tax break, up from an average of 11% during the 12 months before the holiday, but far from the 17% recorded in Q4 2015 – the run up to the introduction of the 3% stamp duty surcharge on 1st April 2016.

Investors made 215,000 purchases between July 2020 and September 2021, up from 164,300 during the same period in 2018/19, however, this was 11% fewer than the 242,000 made before the 3% surcharge came in.

Hamptons Monthly Letting Index reports that the holiday meant the average investor paid less in stamp duty than at any time since April 2016, but their average bill remained twice the level it was before the surcharge was introduced, which partly explained why there hasn’t been as much of an increase in investor purchases this time around.

Significantly smaller savings

Hamptons reports that 83% of investor purchases were under £250,000, meaning their savings from the holiday were significantly smaller than those enjoyed by home movers. Investors have been less sensitive to the change in the nil-rate stamp duty threshold since they tend to buy cheaper properties.

In September, rents across Great Britain rose 8% year-on-year, meaning that the average rent now stands at £1,109 pcm. Aneisha Beveridge, Hamptons head of research, says that while rental growth rates typically peak over the summer months, this year they have continued to rise into the autumn. 

She adds: “This means average monthly rents have passed £1,100 for the first time nationally, led by big increases on larger homes. While we are expecting this growth to moderate in the final few months of the year, it is likely 2021 will mark some of the fastest rates of rental growth in a generation.”

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Stamp duty surcharge stagnates increase of investor purchases despite tax break says Hamptons

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The stamp duty holiday failed to create a buy-to-let spending spree despite landlord stamp duty bills falling by more than a third, says Hamptons.

Investors bought 12% of homes sold in Great Britain during the 15-month tax break, up from an average of 11% during the 12 months before the holiday, but far from the 17% recorded in Q4 2015 – the run up to the introduction of the 3% stamp duty surcharge on 1st April 2016. Investors made 215,000 purchases between July 2020 and September 2021, up from 164,300 during the same period in 2018/19, however, this was 11% fewer than the 242,000 made before the 3% surcharge came in.

Hamptons Monthly Letting Index reports that the holiday meant the average investor paid less in stamp duty than at any time since April 2016, but their average bill remained twice the level it was before the surcharge was introduced, which partly explained why there hasn’t been as much of an increase in investor purchases this time around.

Significantly smaller savings

Hamptons reports that 83% of investor purchases were under £250,000, meaning their savings from the holiday were significantly smaller than those enjoyed by home movers. Investors have been less sensitive to the change in the nil-rate stamp duty threshold since they tend to buy cheaper properties.

In September, rents across Great Britain rose 8% year-on-year, meaning that the average rent now stands at £1,109 pcm. Aneisha Beveridge, Hamptons head of research, says that while rental growth rates typically peak over the summer months, this year they have continued to rise into the autumn. She adds: “This means average monthly rents have passed £1,100 for the first time nationally, led by big increases on larger homes. While we are expecting this growth to moderate in the final few months of the year, it is likely 2021 will mark some of the fastest rates of rental growth in a generation.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Stamp duty surcharge stagnates increase of investor purchases despite tax break says Hamptons | LandlordZONE.

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Scotland could face chronic rental shortage this winter says landlords association

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Hostile anti-landlord rhetoric has caused scores of landlords to quit the sector, leading to fears that Scotland faces a chronic rental property shortage this winter.

The Scottish Association of Landlords (SAL) says in just the last two months its members have reported falls of 80% or more in the number of properties available to let, while landlords have been selling up because of their fear of planned rent controls and a total ban on evictions.

Students’ groups have recently complained about the dire lack of properties to rent, which SAL attributes to an unintended consequence of the Private Residential Tenancy introduced in 2017, meaning that landlords are no longer able to offer fixed-term leases which match term times – leading to a reduced number of student homes. 

Nowhere to live

Chief executive John Blackwood says some landlords and letting agents report that they have no properties at all left to let, despite enquiries from hundreds of people looking for a home. “At the same time, we are seeing huge jumps in the cost of buying a house, and with limited supply and increased demand in the PRS, many people will be left with nowhere to live, inevitably putting massive pressure on emergency housing supply as well,” says Blackwood.

“We are just beginning to see some of the consequences of the hostile anti-landlord rhetoric from the Scottish government. The Minister for Tenants’ Rights must stop portraying the entire private rented sector as ‘exploitative’ and understand the essential role private landlords play in Scotland’s housing sector.”

SAL is calling for an open discussion about the correct size of the country’s PRS and for a massive increase in social housing, which would lead to a corresponding re-balancing of its size.

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Lender says letting out as licenced HMO breaches terms and conditions?

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I am a residential landlord of a small portfolio of buy-to-let properties in London. I purchased my most recent property in March 2018, and took out a 5-year fixed-rate mortgage with a lender to enable me to do so. I rent it out to 4 tenants

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Receiving a property gift – What to do next and how to do it?

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Hi, My parents will be gifting a property to me in the not too distant future, and I just wanted to gather some advice regarding best practices moving forward with the aim of growing a buy-to-let portfolio.

I am 26 years old and understand somewhat the benefits of doing this within a corporation however was wondering if it was possible to receive the gift directly into the company and if so what are the benefits of doing this?

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Smart company set up and maintenance costs?

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Hi Property118, I am interested in setting up a Smart property company structure with a holding company and SPVs (Single Purpose Vehicles) as subsidiaries and want to understand the set-up and annual maintenance costs involved, please.

Many Thanks

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Winter drawers on

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“Winter drawers on!” was the risqué chorus amongst the women on the shop-floor where I served my engineering apprenticeship, every year, as the weather started getting colder!

And that reminded me that it’s time all landlords were making sure their boilers are going to withstand the onset of winter –

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SAL reporting drops of 80% plus in PRS homes available

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The Scottish Association of Landlords (SAL) has warned of a shortage of properties available to rent over the winter, increasing pressure on emergency housing provided by councils. SAL members are reporting drops of 80% or more in the number of properties available to let

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LATEST: Airbnb licensing in Scotland revised after landlords voice concerns

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The Scottish government has revised its planned licensing scheme for short term lets after concerns were raised by the sector during a consultation earlier this year.

In February, it passed legislation designed to make it easier for local authorities to manage the short term lets market, allowing councils to establish control zones where any property operating as a short term let for more than 28 days a year would need planning consent.

It also announced plans to introduce a mandatory licensing scheme.

Social Justice Secretary Shona Robison has now outlined changes ahead of laying the licensing legislation in the Scottish Parliament next month.

These include the removal of overprovision powers, a simplification of the way that neighbours are notified about licence applications, reducing public liability insurance requirements, and removing personal names from the public register.

Revised guidance will be developed with stakeholders, with an emphasis on a risk-based, intelligence-led approach to property inspections as well as keeping costs and fees under control, says Robison.

“Following our recent consultation and engagement with stakeholders, we are making some pragmatic and significant changes to improve the proposed legislation. We are therefore addressing issues raised by stakeholders whilst still allowing licensing authorities to ensure short-term lets are safe and address issues faced by neighbours.”

Onerous bureaucracy

She adds: “This means local authorities can respond to the needs and concerns of local communities and neighbours to short-term lets without imposing onerous bureaucracy on responsible tourism businesses.”

Shomik Panda, director general of the Short Term Accommodation Association, says it welcomes the decision.

He adds: “We believe that the changes that the Scottish government has announced today are a positive step in the right direction, although we will continue to push for further improvements for our members, including a grandfathering provision and auto-renewals of licences. We look forward to continued engagement in Scotland, to build the best set of regulations that we can for all.”

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Will empty retail and office space lead to the next economic crisis?

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Commercial real estate is in trouble, there is no doubt about that. What shops are letting are attracting rents of as low as 50 per cent of what they were pre pandemic. Office space is being reduced and some companies are failing to renew leases as homeworking looks like becoming a permanent feature of office life.

Property crises in the past have often led to a banking crises, and alarm bells are ringing in those hallowed banking halls. The question is, have the recent signs of economic recovery in the sector been overestimated by the central banks and the financial watchdogs? Have they underestimated the threat posed by an industry that’s in danger of breaching debt covenants and with asset prices collapsing right, left and centre?

With a rather opaque market like commercial property it is impossible to assess at this stage the full extent of the damage caused by the switch to home delivery and home working. Property values are slow to reflect the new situation until leases run their course and properties come onto the open market. But surveyors are already significantly marking down rents for new lets.

One useful guide to real estate values in the commercial sectors is the price of shares in quoted real estate investment trusts and Reits. These have been substantially hit, severely affecting the value of peoples’ pensions and other investments.

Banker concerns

The Bank for International Settlements, which is the central bankers’ bank, estimates that in the UK, US, Europe and Japan the pandemic has has wiped away Reits’ cumulative valuation gains over the last five years. By comparison, the general quoted stocks on the main markets (FTSEs and S&P500) had regained all their losses within 18months.

Property deals are falling out of bed, property companies are trying to raise new money in the corporate bond markets and are tapping their unused bank facilities. Industry experts openly admit that many commercial properties in the US and UK are now worth less than the debt that was used to buy them, and delinquencies similar to the levels experienced in the 2008 financial crisis, particularly in the US, are beginning to escalate.

The longer the pandemic goes on with travel, hotels, retailers and office work severely affected the more the financiers worry that the resulting widespread value downgrades, defaults and eventual foreclosures could spill over into the general economy.

Major UK retailers like Marks and Spencer, which announced 7,000 job cuts in August, are busy closing loss making stores. In the US and UK many household retailing names such as Brooks Brothers and Debenhams have also fallen into bankruptcy, hastened by the growth of Amazon and other online suppliers.

There are lots of large corporate entities across the world currently looking at the impact home working, or partial homeworking, will have on their future needs for office space. A massive rationalisation programme is underway by many corporates aiming to make offices safe work spaces while reducing overall space requirements.

Government support

Requests for public support for the commercial property sector fall largely on deaf ears in Government, no doubt because hand-outs to big business are pretty unpopular with the general public. One industry expert at Colliers International, speaking about the Government’s accelerated Towns Fund says:

“The current Government funding will barely provide enough for a new bus stop for those 101 towns that are selected to receive between £500k-£1million to spend on projects in their areas. The figure needed is more like £96million per town. If the Government has such a vested interest in regeneration and transport, it needs to look at the wider picture and all financial instruments available to local councils.”

A major problem is no one yet knows how long the crisis in the commercial real estate sector will last. Business travel could take 12 months or more to pick up again, leaving hotels in limbo, though many are now housing asylum seekers. Office leases are sheltering landlords from the full effects of the downturn — offices tend to have long leases — and there’s much uncertainty around high streets, with some looking decidedly healthy while others totally forlorn.

So, what of the opportunities?

In this economic climate the need to change and adapt commercial space one way or another – repurposing as the industry terminology would have it, in other words adapting or re-using space – is likely to be a long-term saviour of the industry. It’s about adding value to what could otherwise be obsolete properties, certainly properties with little or no occupier demand.

This is not a new concept by any means: developers have been spotting opportunities to re-purpose existing buildings for ever, but an important caveat here is that the full effects of the pandemic, the way the cards will fall as things return to normal, it still difficult to predict.

With the wider economy and Brexit in the mix, it’s hard for anyone to see what’s going to be in demand in a give locality and some properties won’t suite alternative uses. However, where there are opportunities for adapting buildings, the conversion can be used to incorporate advances in technology and green environmental considerations.

Relaxed planning rules on conversions

Relaxation of the planning rules mean that from the 1st of August this year developers are allowed to convert a wide range of business premises into residential apartments and flats.

Office to residential conversions are already allowed under permitted development rights (PDR), but as from 1st August these rights were extended to include Covid hit vacant shops, restaurants and gyms.

There are of course some safeguards. To be eligible for these conversion rights, developer’s proposals must meet specific limitations and conditions set in the legislation. In some cases a prior approval application is required and even where a scheme meets all the PDR criteria developers can ensure that a scheme is lawful by applying to the planning authority for a lawful development certificate (LDC). In all cases initial consultations with local planners is essential.

However, a recent study by insurers Zurich UK warns that some of these conversations could lead to poor quality housing if the quality is not properly controlled. Office and industrial conversions can be tricky when trying to meet recognised residential space requirements, and they may be vulnerable to overheating in summer.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Will empty retail and office space lead to the next economic crisis? | LandlordZONE.

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