Despite resigning, Boris appoints new secretary of state for housing

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Landlords have a new secretary of state for housing to deal with after Boris Johnson appointed Greg Clarke, MP for Tunbridge Wells, to the role.

This followed the PM’s sacking of Michael Gove from the position late last night for ‘disloyalty’.

Many within the sector were disappointed to see Gove go after he brought a more considered and proactive attitude to the reform of the housing market – albeit his White Paper has not been popular with many landlords.

But the ministerial vacancies remain at the Department of Levelling Up, Housing and Communities (DLUHC), with posts still unfilled following the resignation of Andrew Stuart.

For a time, just Eddie Hughes, who has kept quiet during yesterday’s multiple resignations, was the only housing minister at the DLUHC.

Previous experience

Clarke has experience of housing policy having served at the department briefly during David Cameron’s government before becoming Secretary of State for Business, Energy and Industrial Strategy, a post he held until 2019.

How long he keeps the job is debatable – the PM has spent the past few hours appointing new ministers to replace those who have departed in recent days despite an expected official resignation announcement expected later today.
Reports indicate that Johnson is to become a caretaker PM until his party elects a new leader – but a new PM is unlikely to stick with his choice of ministers.

Hughes spent much of the past few days keeping his head down, except to give a speech at an affordable homes conference in London held by CapitalLetters, and chipping in a solitary but supportive tweet.

At the conference, during which he announced £14m in funding for the homeless housing organisation, no mention of the poisonous political backdrop was made.

View Full Article: Despite resigning, Boris appoints new secretary of state for housing

Online vs. Traditional Auctions: How do they work differently?

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Auctions have become one of the most popular ways to buy property quickly, thanks to the speed at which auction purchases can be completed and the opportunity to grab a property at a bargain price. Whether online or otherwise, property auctions can be useful for seller, buyers and estate agents alike. But how do online and traditional auctions differ?

How do traditional and online auctions work?

Properties for a traditional auction are typically advertised in newspapers, via estate agents and auctioneers, and online. They can range from standard residential homes to properties that have been repossessed or that are un-mortgageable. Auctions have become a popular way for investors to buy a property at a lower price, particularly with house prices soaring. The benefit of a traditional auction is that it’s a social event where buyers and sellers can communicate directly. 

The completion process is quick and easy, and buyers can enjoy the satisfaction of exchanging much faster – often on the day of the auction. UK finance brokers Finbri explain that “Bridging loans are used by those in the property development business who need to make large secured payments at short notice such as auction purchases.” For buyers who need a quick transaction, a traditional auction is very appealing. Bridging finance is often used to speed up the process, instantly taking a property purchase from months to days.

Online auctions follow similar principles to traditional auctions, but there’s far more flexibility involved. There’s no physical location to the auction taking place, so buyers can purchase a property from anywhere. The timeframe for an auction is also more flexible, with auctions taking place over days, weeks or months, giving buyers the chance to place their bids. Once a bid is accepted, sales are completed within 28 days, although it can take longer if it’s a conditional auction. However, there are no costs associated with a traditional auction, so it’s a less expensive option for sellers and just as convenient. 

What are the key differences?

One of the primary differences between online and traditional auctions is speed – once the gavel falls at a traditional auction, contracts are exchanged immediately and completion takes place 28 days later. Online auctions are closer in style to an eBay auction, where bidders bid online only, and the accepted buyer has 28 days to exchange and a further 28 days to complete. 

But security also plays a factor – many buyers choose auction properties because they’ve experienced a property purchase fall through or because time is of the essence. Property buying is a stressful process for anyone, and having a smoother, quicker and more secure process is beneficial for all parties. 

Once the bid has been accepted at a traditional auction, neither buyer nor seller can pull out, meaning the risk of the purchase falling through is removed entirely. However, with an online auction, there are still 28 days to exchange and so the buyer can still pull out since there’s no legal obligation to complete. 

When it comes to the price, sellers are naturally going to seek out the best possible price, while buyers are looking for a bargain. Both traditional and online auctions aim to satisfy the needs of the client, though since a traditional auction doesn’t require a fee from the buyer until the exchange has taken place whereas online auctions require a reservation fee since the exchange and completion process takes longer which is usually up to 4% of the purchase price and included in the stamp duty. 

Naturally, given the process of bidding, online auctions offer the possibility of buying a property from any location. But for some, that can be a downside – some people enjoy the atmosphere of the bidding room and the face-to-face contact that it offers. The choice between traditional and online auctions tends to fall to speed and convenience, but as we can see there are various factors that differentiate the two. 

Final thoughts

There are pros and cons to each option when it comes to buying a property at auction. While a traditional auction offers more security since the exchange takes place almost immediately, making it legally binding on the day, an online auction offers more flexibility and is a more convenient solution for individuals who are buying or selling property in a different location to where they live. However, both methods enable the seller to secure the best price for their property. 

View Full Article: Online vs. Traditional Auctions: How do they work differently?

What now for the Renters Reform White Paper?

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Instead of resigning along with 50 plus and counting other ministers, Gove was actually sacked as Secretary of State for the Department for Levelling Up, Housing & Communities.

The big question for landlords is where does this leave the progress of the Renters Reform White Paper?

View Full Article: What now for the Renters Reform White Paper?

Equity Release: How to Fund a Buy to Let Purchase

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In light of the ongoing cost of living crisis, the fastest rise in UK house prices since 2007 and concerns over an incoming recession, economic uncertainty is the current talk of the town. 

As such, investing in buy-to-let property through some of the more traditional means, like taking out a loan or mortgage, can be a lot more difficult than it was before. And, because of this, many prospective buyers are now looking for alternative ways to fund their property purchases. 

One such example comes through equity release – a means of taking cash out related to the value of the home – with a huge number of Google searches recently questioning whether buy-to-let purchases can be financed through this process. 

Well, we’re here to tell you that yes, they can. And here’s how you can do it.  

Equity Release on Residential Properties: A Quick Overview

If you are looking to release equity from a residential property to fund the purchase of a new buy-to-let property, the process should be relatively plain sailing – especially when using a specialist mortgage broker. 

However, as with any type of equity release scheme, there are a few set criteria you will need to meet in order to qualify. 

“To qualify for equity release, you will need to be over the age of 55 (or over 65 for a home reversion plan) and own your own home,” says Mortgage Broker and MD, Pete Mugleston from Online Mortgage Advisor. “Most equity release providers will cap the amount they will offer at somewhere between 20% and 50% of the property’s market value. Some go higher than this and others lower.” 

Once you meet these criteria, the money you choose to release from your property can then be used in any way you wish – from funding a dream holiday to financing your buy-to-let investment – without any further hoops to jump through. 

Equity Release on Buy-To-Let Properties: A Quick Overview

If you are looking to release equity on a buy-to-let property you own, while it is entirely possible to take out an equity release mortgage, the process tends to be a bit more difficult than on residential properties. 

This is because most equity release mortgage providers refuse applications where the capital to be released is from an existing buy-to-let property. In fact, only a small minority of providers will even consider applications for these types of properties. 

Therefore, it’s generally recommended to use an experienced broker when trying to source the best possible deal. In doing so, they will be able to identify the best course of action, offer professional advice and ensure that releasing equity is actually the right financial decision for your circumstances. 

What’s more, releasing equity on an existing buy-to-let property offers a much more attractive means of raising funds over simply selling the property. This is because selling typically incurs capital gains tax, which could have a huge impact on the amount of money you actually take from the sale. 

How Much Equity Can Be Released? 

The amount of equity you can release from your property will vary from landlord to landlord and will depend on a number of factors.

If, for example, you are looking to release equity from your main property of residence, taking out a lifetime mortgage (the most popular form of equity release) will typically allow you to borrow around 20% to 60% of the home’s overall value. 

On the other hand, if you’re releasing equity from a buy-to-let property, the loan to value percentage you can borrow will largely depend on your age; the maximum amount starts at 19% for 55 year olds and increases to a maximum of 44% at 80 years old. 

However, funds can be released from several buy-to-let properties at the same time. So, if you have a portfolio of buy-to-let properties already set up, you can release a larger amount of equity from these without affecting the rental income you are already bringing in. 

Summary

Whether you are looking to invest in your very first buy-to-let property, or are trying to expand on a pre-existing portfolio of buy-to-lets, taking out an equity release mortgage could help turn those dreams into a reality. 

However, as with any form of borrowing, releasing equity isn’t something you should take lightly. Therefore, it’s important to know as much as you can before agreeing to anything you’re unsure about. 

A professional mortgage broker will be able answer any questions you might have, helping you determine whether equity release is the best way to fund your first – or next – buy-to-let property purchase. 

View Full Article: Equity Release: How to Fund a Buy to Let Purchase

Housing ministers revolt! Gove and two deputies call for PM to resign

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Three key housing ministers including the Secretary of State working within the Department of Levelling Up, Housing and Communities have either resigned or called for Boris Johnson to go.

During a fast-moving day in politics which has seen over 20 MPs quit the government or withdraw their support for the Prime Minister, DLUHC boss Michael Gove called for Boris Johnson to step down while one of his ministers, Stuart James, resigned his post.

Another housing minister, Kemi Badenoch, was one of five ministers to call for Boris Johnson to consider his position, leaving just Eddie Hughes – who remained loyal on Twitter throughout the day – sticking to the official line.

The other four ministers who signed the letter but who work at other departments were Julia Lopez, Lee Rowley, Neil O’Brien and Alex Burghart.

Resignation letter

In his resignation letter James, which has only worked as a housing minister since February, said: “It is with sadness that I am resigning as Housing Minister.

“I pay tribute to all my ministerial colleagues, officials, and civil servants in the Department and the wider sector.

“I look forward to continuing to serve my constituents in Pudsey, Horsforth, and Aireborough.”

But his letter to the Prime Minister also admits that his loyalty to the party and Johnson had ‘overidden his judgement’ and that: “there comes a time when you have to look at your own personal integrity and that time is now”, he said.

The whole spectacle of the Johnson government imploding began last week when former housing minister Christopher Pincher resigned from his job as a government whip after admitting to ‘embarrassing himself’ after drinking too much at a party in London.

It later transpired that he had groped two junior Conservative MPs and activists and been reported by other MPs in attendance at the gathering.

View Full Article: Housing ministers revolt! Gove and two deputies call for PM to resign

Michael Gove sacked after joining his housing ministers in calls for Boris to resign

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Michael Gove, arguable the best housing secretary for some years, has been sacked from his job after joining a chorus of Tory cabinet ministers calling on the PM to resign.

During a fast-moving day in politics which has seen over 40 MPs quit the government or withdraw their support for the Prime Minister, DLUHC boss Michael Gove had called for Boris Johnson to step down while one of his ministers, Stuart James, resigned his post.

Another housing minister, Kemi Badenoch, was one of five ministers to call for Boris Johnson to consider his position, leaving just Eddie Hughes – who remained loyal on Twitter throughout the day – sticking to the official line.

The other four ministers who signed the letter but who work at other departments were Julia Lopez, Lee Rowley, Neil O’Brien and Alex Burghart.

Resignation letter

In his resignation letter James, which has only worked as a housing minister since February, said: “It is with sadness that I am resigning as Housing Minister.

“I pay tribute to all my ministerial colleagues, officials, and civil servants in the Department and the wider sector.

“I look forward to continuing to serve my constituents in Pudsey, Horsforth, and Aireborough.”

But his letter to the Prime Minister also admits that his loyalty to the party and Johnson had ‘overidden his judgement’ and that: “there comes a time when you have to look at your own personal integrity and that time is now”, he said.

The whole spectacle of the Johnson government imploding began last week when former housing minister Christopher Pincher resigned from his job as a government whip after admitting to ‘embarrassing himself’ after drinking too much at a party in London.

It later transpired that he had groped two junior Conservative MPs and activists and been reported by other MPs in attendance at the gathering.

View Full Article: Michael Gove sacked after joining his housing ministers in calls for Boris to resign

Too many MPs are landlords, says leading international anti-corruption group

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An anti-corruption group has questioned how MPs and peers can objectively sort out the housing crisis when 27% of them own a second home.

Transparency International UK’s research found that 177 MPs own at least 312 residential properties they don’t live in, compared to just 9% of the rest of the English population.

Assuming a minimum value of £100,000 each, these 312 properties are worth at least £31 million.

Almost 40% (212 MPs and 321 Lords) had a registered interest in property with 113 MPs holding a total of 261 properties generating ‘significant’ annual rental income of £10,000 or more.

These interests ranged from owning a flat and renting it out to holding shares in a property finance company.

Conservative Lords and MPs had the most declared property interests with 43%, compared with 42% of Liberal Democrat parliamentarians and 23% of Labour Lords and MPs.

Conflicts of interest

The report says current rules don’t go far enough to address potential conflicts of interests.

It recommends placing tighter controls on parliamentarians’ second jobs, greater transparency over financial disclosures, and providing better training to ensure MPs and peers comply with the rules.

Transparency International UK believes that given Parliament scrutinises and votes on measures relating to a range of related matters, including Stamp Duty, planning rules, cladding fire-risk remediation and rights for renters, it’s reasonable to conclude there might be tensions between some parliamentarians’ public duties and their private interests.

The findings also beg the question why MPs are so hostile to landlords when so many of them hold rental properties.

Chief executive Daniel Bruce (pictured) says: “Collecting such details of MPs’ and peers’ financial interests is extremely time-consuming and highlights the need for greater transparency.

“Despite calls from the Commons Standards Committee and others to make these records more digitally accessible, there has been little progress to date.” 

View Full Article: Too many MPs are landlords, says leading international anti-corruption group

The 6 most-asked landlord questions on tax and insurance

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Insurance and tax aren’t the most exciting topics, but they are two of the most important to understand. These are some of the top questions we get asked by landlords.

Do I need landlord insurance?

Yes, because insurers consider a tenanted property to be higher risk than an owner-occupied home. It’s important to be aware that if you only have standard home insurance for a property that you rent out, any claim is likely to be rejected, which could leave you significantly out of pocket.

What type of cover do I need?

Landlord insurance products are designed to cover a range of issues and be flexible so you can customise them to your specific type of let and tenant profile.

Most landlord policies include as standard:

• Buildings insurance
• Theft, fire and flood
• Accidental damage
• Property owner’s liability insurance to cover your costs if someone injures themselves in your property and seeks compensation

It’s worth considering adding the following if it’s not already included:

• Malicious damage that might be caused by your tenant or visitors
• Alternative accommodation costs if your tenants need to be temporarily re-homed following an insured event
• Contents insurance for furnished properties

• Rent protection insurance
• Home emergency cover

How much does landlord insurance cost?

The cost will vary, depending on the size and location of your property, the type of tenancy, optional extras you may have added, and your insurance history.

As a rough guide, to insure a 3-bed detached modern property that is let to working tenants, you can expect to pay between £500 and £700 a year / £42 to £58 a month for a landlord policy that includes liability insurance and loss of rent cover. For a modern 3-bed terrace, it would be between £300 and £500 a year / £25 to £42 a month.

Source: 3 bed det https://quote.simplybusiness.co.uk/q/landlord/new_business/quote_comparison/62c3f7be1cd69001ef4c28553

3 bed tce https://quote.simplybusiness.co.uk/q/landlord/new_business/quote_comparison/62c3f7be1cd69001ef4c2855

What taxes do landlords have to pay?

Tax is very personal to your own circumstances and isn’t just based on your property earnings, it’s applied across all your income and assets.

1. Additional purchase tax. If the purchase means you’ll own more than one property, you have to pay a higher rate of tax. In England, it’s an additional 3% on top of standard Stamp Duty – and whereas the first £125,000 is tax-free for standard single property purchases, the higher rate applies to the whole purchase price, if you pay in excess of £40,000. If you’re buying a property at £200,000, that’s £1,500 standard Stamp Duty (£75,000 x 2%) plus £6,000 higher rate tax (£200,000 x 3%).
2. Income Tax. Your rental income is added to any other income you have and the whole amount – less the personal tax-free allowance (£12,570 until 2026) and any permitted deductions such as agent’s fees, repairs and maintenance – is liable to income tax. So it’s worth checking whether your income from property will take you into a higher-rate tax band before you buy.
3. Capital Gains Tax. When you sell or pass on your rental property, any increase in the value since you bought it is liable to CGT – less your annual personal allowance (£12,300 for 2021/22 and 2022/23). If you’re a higher-rate tax payer, you’ll pay 28%. If you’re a basic-rate tax payer, the gain is added to your income, so be aware this may mean part of your income may be charged at the higher rate.

How do I find out what tax I need to pay?

The best way to make sure you pay the right amount of tax is to consult a property tax specialist. By getting properly tailored advice, you’ll be able to judge what you’ll need to pay and when, so you can plan ahead.

When are tax payments due?

For landlords paying income tax via self-assessment, the deadline for payments is 31^st January each year.

For the tax year 6^th April 2021 to 5^th April 2022, the deadlines for filing your return are:

• 31^st October 2022 for paper returns
• 31^st January 2023 for online returns

For more information on letting property, do get in touch with our experts at Leaders. Leaders is an introducer appointed representative of Bode Insurance Solutions who can provide you an instant landlord insurance quote.

View Full Article: The 6 most-asked landlord questions on tax and insurance

What’s the outlook for UK commercial property, post pandemic & Brexit?

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The pandemic has had a devastating impact on commercial property, with lockdowns, social distancing, working from home (WFH), all accelerating the move to online and home deliveries. The likes of Tesco, Ocado and the other big supermarket deliveries were the saviour of the public during the worst dark days of lockdown, and they boosted one of the few property sectors to gain directly from Covid warehousing.

Shops, restaurants and leisure businesses suffered the most, with the demise of the high street and its negative impact on commercial property accelerated and continuing apace. Reduced footfall in some towns and cities reduced some property rents and values by as much a 50%, and despite the easing of restrictions values will be slow to recover.

Hot on the heals of Brexit and the pandemic came the war in Ukraine, exacerbating an already dire economic outlook – energy and food price hikes with steadily increasing inflation now look to slow the economy even more, at lease for the foreseeable future.

A partial recovery

Before the war in Europe, and a couple of years on from the start of the pandemic, investors were again turning to the commercial property market. Towns and cities throughout the UK have come back to life, though a long way from pre-pandemic levels – thousands of workers are still working from home and the fuel crises will exacerbate this.

Working from home here to stay

Around 40% of UK working adults were said to be WFH at some time in their week and despite the efforts of employers (private and public) to encourage staff back to the office, the WFH lifestyle is likely to continue and to some degree will probably become permanent.

Labour shortages mean that employers are faced with an employees’ market, which means employers will be forced to adopt strategies to attract staff and talent. With employees attending the office for a few days a week, businesses will need to think about how they adapt their premises to provide their staff with best possible space to carry on their work – Covid safe, environmentally friendly and offering the best possible spaces for work collaboration.

Demand for more faculties

As the economy does go into recover mode, and right now that looks a little way off, all this has major implications for landlords. Companies will be competing for offices with the right employee facilities, even the likes of in-house gyms or café, in the larger buildings.

Businesses looking to increase the size of their workforce will be looking for suitable commercial premises which have the floorspace and faculties they will need for expansion – the modern offices will probably need more floor space per employee that pre-pandemic, so fewer staff in the office does not necessarily mean that companies will need smaller offices.

Investors in commercial property need to be mindful of these key elements: improving space and facilities in the light of Covid and meeting the latest and future environmental standards (MEES) – all domestic and commercial buildings available to buy or rent in the UK must currently have an Energy Performance Certificate and achieve a minimum EPC rating of E.

The Government’s plans were for as many homes and commercial buildings as possible to have an EPC rating of C by 2035, where practical, affordable and cost effective. However, more recent soundings from Government, and following COP 26, it is now being proposed that ratings should rise to C or above for all newly rented properties from the start of 2025. These changes if the come would be phased in, with existing tenancies given until 2028 to comply. It is also likely that once new regulations apply, the penalties for not having a valid EPC could rise from £5000 to £30,000.

Re-purposing and re-configuring

There will be opportunities for those landlords who adapt their premises to the changing nature of the demand for office, retail, leisure and residential space. Despite many businesses offering hybrid working, and the economic headwinds businesses face, it is said that 80% of businesses are planning to increase their workforce, and the number of people attending the office over the next 12 to 18 months. According to Savills, there will be a growing demand for prime office space, a key trend in the commercial property market.

According to the accounting consultancy, Deloitte, a necessary conjunct to hybrid working (part home, part office) will be an increasing use of technology, which allows safe remote working, and maintaining the highest security for company data. Buildings will need to be wired and equipped for collaboration tools and video conferencing facilities that can connect people nationally and around the world.

In some cases, tenants will expect landlords to provide this technology, and competition for tenants may compel them to do so. It will require planning and investment from commercial property investors with the possible implementation of smart technology in office spaces. This will allow businesses to seamlessly switch between online and in-office working as well as providing total building security.

Repurposing has become a buzz-word amount property agents and landlords. With many vacant buildings, particularly around UK high streets, banks, offices and department stores, investors are recognising the potential of converting commercial properties into more profitable uses.

There has been a growing trend of converting these premises into hotels, leisure and residential premises, and many high street buildings on a mixed uses basis.

These properties can be converted to include shops or restaurants at ground level, improving the flexibility, profitability and value of the original building. As such a trend is emerging with landlords turning disused office and retail space which might include gyms, bars or other types of commercial units.

Campus Development is the current term used to describe developments that contains a number of buildings with supporting ancillary uses, operated as a total integrated package with facilities including outdoor space, parking, access, building design, landscaping and design aesthetics. In areas with high footfall, this could prove highly lucrative.

Other trends afoot

The demand for storage space as gone through the roof: as businesses struggle with supply chain issues – just in time delivery has suffered greatly with pandemic shortages and now the war in Ukraine – a trend has emerged for vacant commercial space, offices and retail premises to be converted for storage facilities.

The pandemic changed the landscape of the distribution industry and accelerated the growth of the distribution hubs and warehousing. Covid had a big impacted on distributors’ technology investment plans and this trend continues as the economy enters a post-pandemic phase. With a new normal coalescing, customer demands could be permanently changed, so a technological transformation is the likely result. According to ONS statistics, online sales have been accounting for approaching 40% of sales in the pandemic years.

Retail & office goes local

The decline on the high street has not just arrived with Covid, it’s been a long-term trend. However, WFH and convenience (local) shopping has seen something of a revival, post pandemic. During lockdowns, suburban areas have enjoyed relative success at the expense of some of the big supermarkets, town and city high streets and large shopping centres. People favoured staying close to home, avoiding large crowds and using their smaller shops over larger supermarkets. They have also had more time and flexibility with the remote working trend, giving people more time to visit their local shops on a more regular basis.

Many local independent shops have have given exceptional service during Covid and many have managed to maintain their levels of footfall despite the difficulties. This trend looks likely to continue post-pandemic, in many locations.

The reconfiguration of some high streets in enlightened towns and cities, with pedestrianisation and ample free parking, has allowed cafes, restaurants and other leisure faculties to offer outdoor seating and to grow revenue, as well as increasing healthy footfall for other commercial uses.

As independent businesses grow, opportunities are arising for some smaller commercial landlords to pick up bargain properties with the potential for re-purposing conversions. In these towns and suburbs, where buoyancy is retuning, the demand for localised retail spaces is set to rise. With this revival come opportunities for commercial to residential and mixed use conversions on a smaller urban and high-street based scale.

The trends afoot in the commercial property markets both large and small show that commercial property investing, though down, is by no means out, and the future, as the economic cycle works through, looks decidedly more optimistic.

Further reading:

The post-pandemic outlook of the UK commercial property market

Commercial property: the post-pandemic landscape

View Full Article: What’s the outlook for UK commercial property, post pandemic & Brexit?

EPCs (bane of my life) and Energy Suppliers (also bane of my life)?

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We have a vacant flat with a very low EPC (G!), in which we want to install high heat retention storage heaters.

Good idea? No, not when British Gas is only making emergency engineer appointments and cannot give me a date for the installation of an Off-Peak Meter.

View Full Article: EPCs (bane of my life) and Energy Suppliers (also bane of my life)?