brexit uk property market

#Brexit Impact on UK Property Market

In light of the LEAVE decision from the EU referendum there may be effects on the UK property market.

The headlines:

The immediate impact has been market uncertainty, the FTSE has dropped approx. 10% since the decision was announced and major house builders like Taylor Wimpey, Permission, Barratts, and Berkley Homes have all lost between a third and half their value.

Further the sterling has dropped against the dollar from 1.50 to 1.30 and that is still falling.

Interest Rates

The EuroZone base rate is already negative and some experts are expecting the Bank of England to drop the UK base rate to zero to boost the economy and this may be further pushed in order to keep inflation low in the light of the currency falls which will impact the cost of imports.

The Bank of England will want to encourage investment in the economy therefore rates will remain low.

Supply

There has been an increase in construction activity over the past 24 months, buoyed by relaxation of some planning laws and extension of permitted development rights.

Although the market impact on large house builders, they will still want to complete projects, even if new project starts are delayed.

Demand

There are many factors that influence demand and attractiveness for housing in the UK that are not EU related, such as depth of skills, education, lifestyle and language. Further to this, supply is always below demand with an increase in the number of households and smaller family units. The affordable end of the market will continue to have the highest demand.

High end property, in particular may see an increase in demand as Dollar based Middle east and Asian investors will now consider the short term buying opportunities within the property market and look to acquire residential property priced above £1million. The currency correction more than compensates for the changes in stamp duty which had previously discouraged high value property transactions.

House Prices

House prices will depend on regional factors and differences. Some regions may see a correction some may stagnate; however it is too early to speculate specifics.

Rental Market

Rental market is linked to employment as well as affordability and ability of renters to become home owners. The rental market especially in London and the South East is also heavily influenced by migrant workers and students, depending on how working rights and students will be impacted will determine long term effects.

Lending

The measures in the budget in April already discourage buy to let purchases, therefore banks currently have more than the usual surplus to lend, this is reflective in the record low rates on the market.

Lenders may tighten criteria especially on rental expectation but overall lending should not be adversely effected in the short run.

Investment

Investment especially in buy to let has slowed since the introduction of measures in the budget, however with lower interest rates expected, as well as the drop in sterling, investing in the UK is now cheaper, together with the low savings rates in banks, property investment is by far the better investment.

Conclusion

Overall Article 50 will only be exercised after a new leader is elected and then after 24 months will Britain actually leave, therefore uncertainty may remain till then end of 2018, however not much else will change.

The UK Property market will remain resilient and still a strong place to invest.

How the Budget 2016 affects property investors

With the Stamp Duty surcharge coming into effect today, we look back at the key points from the Budget 2016 affecting the UK property market.

  • The planned stamp duty surcharge on purchases of additional property, to include those who buy more than 15 properties. Previously if you owned more than 15 properties you were exempt from the surcharge.
  • An 3% surcharge will be applied to residential stamp duty rates on all purchases of property not intended as the buyer’s main residence, from today, 1st April 2016.
    stampduty
  • The threshold at which people pay 40% tax will rise from £42,385 to £45,000 in April 2017 and personal allowance up to £11,500.
  • 0.5% rise in insurance premium tax.
  • Commercial stamp duty
    0% rate on purchases up to £150,000,
    2% on next £100,000 and
    5% top rate above £250,000.
    New 2% rate for high-value leases with net present value above £5m

Other issues to consider from previous budgets

  • Withdrawal of interest relief

Under current rules, taxable profits are reduced by interest on money borrowed for the purposes of the letting business.  Phased in over a four year period starting with the 2017/18 tax year, UK taxpayers will no longer be able to deduct interest in calculating taxable rental profits.  Instead, landlords will obtain a reduction in tax equal to basic rate tax on any interest borrowed.

The changes will be introduced gradually, so that the amount of interest which is deducted from rental profits is 75% from 6 April 2017, 50% from 6 April 2018, 25% from 6 April 2019 and 100% from 2020/21.

On the same dates, a reduction in tax will be given for the interest which has been disallowed.  The tax reducer is the basic rate tax (currently 20%) multiplied by the disallowed interest.  In practice the tax reducer will be 20% of 25% of interest for 2017/18, 20% of 50% of interest for 2018/19, 20% of 75% of interest for 2019/20 and 20% of the whole interest from 2020/21.

By 2020/21, a landlord who is a higher rate taxpayer will effectively only receive basic rate tax relief on mortgage interest payments.

Conclusion

Overall the positives for the Budget 2016 are a few; higher income tax thresholds and allowances and lower corporation tax.

The negatives are greater with the surcharges on Stamp Duty, higher insurance, and removal of interest relief.

The impact of new investors is much higher with the increases upfront Stamp Duty expense, and for those who are heavily mortgaged on their buy to let investments.

However it will take some time to effect rents and house prices, these may balance some of the additional costs for buy to let and property investors.

With interest rates still so low, property investment still out weighs leaving your money in the bank.

 

Sources:

LRS Forum

Coman & Co

Stamp Duty rise won’t kill property investment

On the 1st of April 2016, the “Landlord Tax” or stamp duty surcharge comes into affect of a 3% surcharge for anyone buying a second home or an investment or buy to let property.

However what will be the impact for the property investor? Will it reduce prices or first time buyers? Will the extra cost be passed on to renters? Will the UK property market crash?

Today the ONS released statistics that property prices are rising 6.7% year on year in 2015, and that is 9.4% in the UK. So in effect and extra 3% is the same as if you delay the purchase of your property in London by 4 months, or alternatively you will cover the cost by the increase in prices within 4 months.

Stamp duty increaseWell this is not exactly the case as usually a buy to let investor puts in about 25% deposit, and stamp duty is not covered by the mortgage value, so really the buyer needs that much extra cash available.

In this case an investor may try to pass on the additional cost to the renter. This will be a completely possible strategy and the property market will allow it. However will this make up the difference. For example a residential property yielding 6%, there for a 3% stamp duty surcharge would mean 6 months rent. If the Landlord increases rents by say 10% then it will take 5 years to recover the surcharge.

But, and its a big but, with the FTSE being volatile and the interest rates not likely to rise anywhere near enough to compete with property, an investors best place to invest is still property.

In conclusion the stamp duty surcharge will not really put investors off, it will just increase rents and increase the tax revenue.  

Stamp duty

Do you want to avoid the stamp duty surcharge?

Look into other options for property investment. Contact us we have a number of opportunities where you can invest in property development deals, with profit shares or fixed incomes. Contact info@propvestment.com

 

Sources:

BBC Article

 

Office to residential conversionx

Office to Residential Conversion made permanent

The Prime Minister announced today that the Permitted Development Rights that enabled office to residential conversion without full planning permission is set to be made permanent. The scheme with initially ran from 2013 to May 2016 will be extended indefinitely.

In other boosts for house building today, the PM is also announcing that a temporary rule introduced in May 2013 allowing people to convert disused offices into homes without applying for planning permission will be made a permanent change – after almost 4,000 conversions were given the go ahead between April 2014 to June this year.

This is great news for potential buyers of homes as well as property developers and all professionals connected to the industry. It will mean an flood of new development sites to the market and an increase in available housing stock. This should start to be realised within 12 to 18 months, the usual length of time required to convert a building.

Office blocks are usually in inner city location or near transport links making them ideal locations for residential units. Perfect for young buyers who rely on these links. Furthermore converted building are typically cheaper than new builds and many often come with a character that new builds just do not.

We at PropVestment are actively looking for office sites to convert into residential units, please email nirav@propvestment.com.

Office to residential conversionx

London Property

Is the London property market slowing?

Property Investor LondonWednesday 3rd December was the last McHugh & Co auction of 2014. Focusing on residential property in London this auction gives a good indication of the state of the London property market.

PropVestment attended the auction on the instruction of client’s interested in some of the lots on offer. Here is how it went:

Key observations:

  • Only 50% of the lots sold
  • Development lots sold the best, 5 of the 8 sold, at an average of £1.865m which was on average 55% above the guide price.
  • Houses did not sell well, only 3 of 9 selling, at an average of £499k, on average 17% above guide price. For the ones that did not sell, reserves were not met at an average of 3% above guide price.
  • Flats sold fairly well, 6 out of 10, at an average of 34% over guide price.
  • Lots in Zone 1 & 2 sold well and above guide, however many outside central areas did not sell.
  • Lots sold by councils, or trusts sold well, where as private sellers seemed to keep high reserves.

London property analysis

Developers were hungry for prime development lots in good locations, where there is confidence that final products will sell and where there is potential to achieve higher values. However locations away from prime residence or commercial zones did not fair so well. Some lots were offered by London Borough of Camden, the ones on normal residential streets sold well, but ones in proximity to estates and tower blocks did not. Council are cashing in.

Flats sold well, these are properties that are more affordable and hence there is greater demand.

Luxury houses suffered, where sellers are anticipating very high prices. The irony is that with the Stamp Duty announcement in the Autumn Statment these properties will be less desirable and therefore sellers will not achieve the prices they want.

Another factor that may contribute to slower sales is the up coming holiday season, with many auction lots requiring 4 week completions it is not desirable or possible to complete. Auction purchases require greater legal scrutiny and finance is still difficult.

For advise, appraisals or general consultancy on London property feel free to get in touch: info@PropVestment.com

London Property

 Note: PropVestment only attended the first 30 lots on offer, data is from first hand observation, although we aim to provide accurate information this information is not verified with McHugh and Co.

#AutumnStatement : UK Property Market

Property Highlights

  • Capital Gains Tax loophole closed

From April 2015, overseas investors will face a capital gains tax bill on any profits they make from UK property. It is only fair to make overseas investors pay capital gains tax (28%) on the profit they make when they sell their UK properties. That is what British second homeowners are required to do, so why not foreign investors too.

  • £1bn made available for property development loans

£1 billion of loan money is to be made available to councils wanting to fund new housing developments in Manchester, Leeds and elsewhere (expected to create 250,000 homes). House building is up by 29% on last year. It is a figure warmly welcomed by construction firms such as Persimmon, Barratt and Taylor Wimpey, though many large financial firms such as L&G insist house building should be a much higher and more urgent priority.

For Help to Buy, Virgin and Aldermore will be offering mortgages too.

  • Aim to keep interest rates low

The aim of many tight regulations in banking and financial industries is to encourage responsible lending and so it is possible to maintain low interest rates. This is vital to the general economy and must be fought against rising house prices. So house prices will need to be kept under control.

 What does this mean for a property investor?

Autumn Statement UK Property Capital Gains TaxFirstly if you are a foreign investor then much of the benefit you got have been diminished. However if you are not, this is great news. It will mean that foreign investors may start to put there money else where. This means there will be less competition from “Cash Oversea’s buyers” when you are after a property. Prices should also correct accordingly. Overall a good policy for UK property buyers and also the increased tax revenue will help the public too.

Funding for house building and developments will increase housing supply and keep construction jobs strong. However will this only benefit the house builders who sell at inflated prices? Possibly. The impact on the normal UK property investor will be minimal.

Low interest rates are welcome for investors, however it depends if new finance is available. Overall it will at least mean that investors’ current mortgage payments stay low.

Overall a good Autumn Statement for the UK Property investor.

 

 

Buy to Let mortgages

UK Property Market Update – Winter 2013

The UK property bubble is building

  • The average family home is up £5,583 and London properties have increased by more than £7,000.UK property prices went up by £7,430 in October
  • Average sale price in London is now £404,199
  • Help to Buy scheme is inflating prices
  • Rents increase 11% to £785pm, 41% of the average UK wage.

UK rents

UK property Sale prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average UK Property Prices In London, where the average sale price is higher than ever, 14 people compete for every property.

Mortgage applications rose by 6% in October, and almost double 2012 numbers. It comes as the Council of Mortgage Lenders said last week the number of homes sold this year will be more than one million for the first time since the financial crisis began in 2007.

The government Help to Buy scheme is pushing prices up.

Out of the 5,375 sold so far, the highest number of Help to Buy sales have been in Leeds, Wiltshire, Milton Keynes and Reading.

The average price of a UK property bought under the Help to Buy scheme was £194,167, with an average equity loan of £38,703.

UK property transactions

Critics warned the UK-wide second phase of the scheme, which began last month and is not restricted to new-builds, would cause a housing bubble.

It guarantees 15 % of the value of the home loan.

After almost coming off the market, Buy to Let mortgages are also being approved strongly. Landlords and investors are buying up and completing deals to keep up with the increasing rent demand and to cash in on the rental increases. This is a very encouraging sign for property investment.

However as the final graphic shows there is still not enough supply in the market, especially in London where there are almost 3 offers for every sale.

PropVestment’s thoughts

Offers and Sales

Yes the UK property market is picking up and in fact picking up a little too fast. But this is mainly due to the Help to Buy scheme which is resulting in unrealistic implications on price and the market. The only ones to benefit are the banks and house builders. First time buyers, buying under the scheme face higher interest rates compared to traditional mortgage products.   
The market right now is too competitive and sellers can take advantage. We do however have concerns that many first time buyers under Help to Buy will suffer from negative equity in years to come once the Government pulls the plug on the scheme and prices fall back to their realistic, natural and sustainable level.

Buy to Let mortgages

Source: Daily Mail

UK Student Housing has better returns than residential & commercial

Student Housing: Is it a good investment?

This week Savills published their student housing report. Here are some key findings from that report and some of personal experience and observations from working with our clients.

“Student housing continues to perform well as an asset class with higher yields than both residential and commercial property” – Savills

In the past the student market has been steered clear by investors due to the reputation of how students treat your property. However in recent years and the massive influx of students, the shortage in student housing has created a market where the returns are far higher and secure than residential and commercial property.

According to HESA between 1999 and 2012 the number of full-time students in higher education grew by 540,000, an increase of 46%.

With university halls of residence just about able to cope with the increasing numbers of first year students and private sector student accommodation operators racing to scale up, most students ended up in the private rented sector.

Average student housing rents by rightmove

Many landlords ceased the opportunity, some to accommodate for their own children and their friends. The use and availability of Buy to Let mortgages made it even easier.

Where to invest in Student Housing?

According to Savills, Bath, Brighton, Bristol, Cambridge, Cardiff, Edinburgh, London, Oxford and St Andrews are at the top of the list for investors.

Where to invest in student housing

 PropVestment’s clients have shown interests in south coast universities like Southampton and Portsmouth. In the past favourites have included Manchester and Nottingham and of course London, with investments south of the river.

 Demand for Student Housing & increase in Fees?

It was thought that student numbers would fall after the fees jumped to a maximum of £9,000 from 2012. But this only applied to domestic students.
In 2013 demand from within fell by 2.7%, However, demand from outside of Europe has continued to grow during this period, particularly from the Far East, which has seen average annual growth of 8.5% over the last 6 years.

The overall 0.4% fall in domestic student numbers between 2010-11 and 2011-12 was counterbalanced by a 1.7% increase in international students keeping student numbers
fairly stable.

Is London still the place to invest?

London Student Housing Market

London has 300,000 full-time students, and 110,000 part-time students. It is the student
accommodation market is both the largest and most active in the country.

With private sector rents forecast to continue growing, affordability for domestic students,
who make up 75% of the student body, will continue to be stretched and drive demand
into surrounding more affordable markets.

Therefore there is much opportunity in Zone 1 and Zone 2 areas of London. However in London there are many other factors that also effect the market.

PropVestment Top Tips

Invest and convert larger properties into HMOs to house multiple students. The returns are higher for the landlord, and the greater space can provide more affordable alternatives for students rather than renting a studio on Oxford Street.

UK Property Lending now available

Mortgage approvals help property market activity

After a few years of stagnation in the UK property market due to lack of lending  it seems there is some light finally.

UK Property Mortgage LendingOn Thursday 20th June the Guardian reported:

Mortgage lending jumped 21% in May, the sharpest rise since October 2008, suggesting Britain’s housing market once again has a spring in its step.

The Council of Mortgage Lender’s gross lending figures, which reveal the value of loans advanced without taking into account repayments, showed £14.7bn of mortgages were taken out during May, up from £12.2bn in April. The figure was also 17% higher than the £12.6bn seen in May 2012, aided by government schemes to boost lending.

Does this mean the Funding for Lending and Help to Buy schemes are working?

PropVestment’s client have had experiences that surprisingly agree, however there seems to be discrepancies across lenders.

One client of ours had a mortgage approved in principle by Santander. He had good credit, was buying below value and was putting in 30% of the money himself too. After two months waiting for Santander to send a surveyor over to value the property, a job most of us could do using Land Registry and Zoopla data, Santander say they have had a re-think and do not need a surveyors report. Santander pulled the plug.

Fortunately this deal was not part of a chain, and the seller was understanding. However due to poor business practises Santander could cost the industry dearly.

Our client returned to us, we put him in touch with our favoured mortgage broker, who went to the Halifax. Halifax approved, surveyed and letter of offer within 7 days.

We were surprised at the speed of response of Halifax. Previously we have not had such good experiences with the government owned banks since the credit crunch. LloydsTSB part of the HBOS group has usually been responsive with Natwest and the RBS group being the worst. Our client’s experience and a few others we have heard with Santander now put them firmly on the unfavoured list.

Money talks in this industry, if lending is available without unnecessary hassle, any bank will gain a strong reputation and foothold in the market.

We welcome your thoughts on the topic of lending in the property market and inparticular perspectives from other parts of the country. Email info@PropVestment.com

If you are having trouble getting finance for your property, we have a great range of mortgage advisers that can assist you.

 

#Budget2013 : Help to buy – impact on UK property market

Will the “Help to Buy” scheme help home buyers?

Budget 2013 Help to BuyThe Chancellor, George Osbourne has announced the budget for 2013 and beyond. Overall the budget covers all aspects or work and life in the UK, however we are concerned with property.

The head line for property has been the “Help to Buy” scheme.

There are 2 options, one for new buyers and new homes only and one for all property and buyers.

The below options breakdown are provided by Zoopla blog on the budget

Option 1: Help to buy – Equity Loan

-Is it applicable to any property?
No, just new build only

-Deposit required?
Yes, minimum of 5% deposit

-Do I have to be a first time buyer?
No, this scheme is available to all, not just first time buyers

-How does it work?
The Government will lend you up to 20% of the value of your property through an equity loan, which can be repaid at any time or on the sale of your home…so you will only need to secure up to a 75% mortgage from a bank or building society. It is interest-free for 5 years

-When does it start?
The scheme is available from 1 April 2013. It will run for 3 years and provide £3.5billion of additional investment

Option 2 – Help to buy – Mortgage Guarantee

-Is it applicable to any property?
New build and existing homes

-Will I need a deposit?
Yes, you’ll need a minimum of 5%

-Is it only open to First Time Buyers?
No, it is also open to existing homeowners

-How does it work?
You’ll need to secure a mortgage for your purchase. The Government guarantee should help encourage lenders to offer better access to low-deposit mortgages

-When does it start?
Available from January 2014, this scheme will run for 3 years

-Is there a maximum purchase price?
Maximum value £600,000

 Other points from the Budget 2013:

  • Budget 2013 help to buy21 % corporate tax rate – potentially beneficial to buy rental properties into a company rather than private names
  • Encourage to convert unused commercial space into residential

London Mayor, Boris Johnson has also secured £750 million for new build housing in the capital. This will boost affordable housing for middle income Londoners.

Official details can be found here: HM Treasury – pages 38 & 71

PropVestment’s thoughts

Overall we believe that the budget is progressive for the UK Property market, however it could have done more. However it seems that Help to Buy is more universal and will help more of the population. It is now for us to see how it filters through in reality. Many other schemes like NewBuy and FirstBuy have been less successful

 

Contact PropVestment today for a chat, we advise on all property investment queries. Lets make money from property