Residential Property Review

August 2019

A new era of renting – Build to Rent

A relatively new category in the rental market, Build to Rent, saw total investment of £2.6bn in 2018, an 11% increase from 2017 and it looks likely that this sector will continue to grow quickly.

Whilst home ownership remains an aspiration for many, figures show the private rented sector remains strong, growing from 3.7 million in 2009 to 5.4 million today, with many home-hunters choosing to rent long-term, often due to affordability and flexibility.

In contrast to many private landlords, Build to Rent providers often manage the whole building and seek to offer high levels of service and property management, as well as aiming to build a community.

The attractions of Build to Rent properties may include flexible tenancies with no fees or deposit, a monthly charge which includes all bills, facilities such as spas and gyms, on-site maintenance and community spaces.

Buyers’ market likely in second half of 2019

Recent research from Rightmove indicates that buyers may be able to obtain good deals in the remainder of 2019, with lower prices combined with high stock levels.

The research also shows that market fundamentals such as low interest rates and record employment levels remain strong. Additionally, mortgage availability remains good, as indicated by figures from UK Finance, showing the number of mortgage approvals from the main high-street lenders in May was up by 9.1% year-on-year.

Miles Shipside, Rightmove’s property expert said: “Those who have postponed their purchase should note that estate agency branches have more sellers on their books than at any time for the last four years, so there should be more choice of properties to buy. It could be a good opportunity to negotiate a relative bargain in the second half of the year, if they can set aside the continuing Brexit distractions.

He added: “With activity and prices often weaker in the second half of the year, it will be those sellers who are bold enough to price aggressively who will attract buyers with the confidence to act rather than hesitate. It would appear to be sellers in the upper end of the market who need to be boldest on pricing, as data shows that the middle and lower sectors are holding up better.

Brexit-related uncertainty remains in residential market

In its August Inflation Report, the Bank of England has reported that the housing market remains weak, but there are some signs of stabilisation.

The latest NMG survey, which is a biannual household survey commissioned by the Bank and covers over 6,000 households, revealed an expectation that house prices will decline a little over the next 12 months. The survey also revealed that around 20% of households who expect to move home in the next two years, reported having delayed their move due to Brexit-related uncertainty.

Nick Leeming, Chairman of Jackson-Stops said “The data makes it clear that continued uncertainty as we creep ever closer to leaving the EU without a deal has caused hesitancy in some areas of the property markets. Yet, once a firm decision has been made on when the UK will leave the EU and people decide to get on with their lives, we should expect to see a modest uplift in property prices in the new year.”

IS A 40-YEAR MORTGAGE A LIFELINE OR A LIFE SENTENCE?

Most people who choose a 40-year mortgage do so because they want a low monthly repayment. If you were to take a typical 25-year mortgage, your repayment would be higher. By stretching out the loan, monthly payments decrease.

WHAT YOU NEED TO CONSIDER

While lower monthly payments may be attractive and can represent your best chance of getting onto the housing ladder, there are downsides you should be aware of. Taking out a 40-year mortgage means you’ll pay more in interest, and you’ll find that you build equity, the amount of the property that you in effect own, more slowly.

Even if you don’t actually keep a 40-year mortgage for 40 years, the loan is designed with a 40-year timeframe in mind, so you could find that the interest rate is higher than it would be for a more traditional mortgage term. The chances are you’ll be making repayments in your retirement years, so that’s something you’ll need to consider. It makes sense to check that you can make overpayments if you can afford them and consider swapping to a shorter-term loan when your circumstances allow.

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Residential Property Market Review

July 2019

Our monthly residential market review is intended to provide background to recent developments in property markets, as well as to give an indication of how some key issues could impact in the future.

Average earnings of £54,000 required to buy a home in the city

Property website, Zoopla has released data to show that first-time buyers now need an average income of £54,000 to purchase a typical property in a UK city. This average income figure has risen by 9% since 2016, largely due to higher property prices.

In the 20 cities that account for more than one-third of the UK’s housing stock, Zoopla found that Liverpool had the lowest gross household income required for first-time buyers, at £26,000. In addition to being named the most affordable city for first-time buyers, Liverpool was also the city with the highest house price growth, at 5% over the 12 months to May.

In contrast, an average household income of £84,000 is needed in London and whilst this may appear unattainably high, it is actually £3,250 less than the amount required in 2016 and the lowest figure for four years.

Outside the capital, Oxford and Cambridge require the highest typical household incomes at £69,000 and £72,000 respectively. However, these were down on £71,000 and £76,000 respectively three years ago.

Edinburgh’s prime property market sees slowing price growth

Recent data from Knight Frank shows that annual price growth in Edinburgh was down from 7.6% at the end of Q1 2019, to 4.3% in June. The data also shows a drop of 10% in price growth from the end of 2018.

Edward Douglas-Home, Partner at Knight Frank commented: “A moderation in property values is a sign that, having appeared relatively unaffected by the political uncertainty which has been impacting other prime regional markets since 2016, both buyers and sellers in the city are becoming more cautious“.

Whilst country house prices across Scotland fell in value by 0.1% in Q2 2019, the demand for family houses outside of the city centre has remained robust, especially in traditionally popular areas such as Morningside, Murrayfield and Newington.

The data also indicates that some vendors are in no rush to sell, with new listings across the whole market in Edinburgh being 15% lower in Q2 2019, compared to the same period in 2018.

Improving sentiment as new instructions hold steady

Supporting the emergence of a more stable trend across the residential market, a recent survey by Royal Institution of Chartered Surveyors (RICS) shows respondents reported (in net balance terms) a very modest rise in buyer demand and new instructions holding steady throughout June.

Last month, new buyer enquiries were up 10%, which is the first time since November 2016 where survey contributors reported an increase in appetite from potential purchasers. A further sign of stable market activity, according to Savills, is a continued rise in the number of mortgage approvals and increase in Loan to Value (LTV) ratios, with the national average LTV for first-time buyers now standing at 78%.

SHORTAGE OF SUITABLE HOMES SCUPPERS DOWNSIZING PLANS

Moving Home

Once their offspring have left home, parents can often find the family house is too big for their needs and expensive to maintain. That’s why, as retirement approaches, many people think about downsizing, and moving to a smaller, easier-to-manage home that’s cheaper to run.

However, it seems that suitable properties might not be that easy to find due to a shortage of retirement homes. The think tank Demos2 has estimated that the UK has a shortfall of around 22,800 new retirement properties, homes that are needed just to meet current demand. With an ageing population, this figure is likely to rise steeply over the coming years.

HOUSING SUPPLY PROBLEMS

If older people can’t find suitable smaller properties to move into, then their larger family homes aren’t freed up to meet the demand from younger families looking for the extra space they need to grow. A shortage of smaller properties, in particular bungalows, means that prices continue to remain high.

MEETING DEMAND

The research shows that around three million people aged over 60 would be interested in purchasing retirement properties. At present, many new housing developments are concentrated on providing 3, 4 and 5-bedroom homes, and in some parts of the country there are double the number of 4-bedroom properties on the market compared to two-bed homes.

Research from around the UK3 shows that in Cambridge and Rugby there were three four-bed homes available for every two-bed property. However, in St Helens, Hull and Sunderland two-bed properties outnumbered four-beds.

LOOK BEFORE YOU LEAP

There’s a lot to think about when you’re considering downsizing. If you’re looking to raise cash by making your move, you need to do your sums carefully to ensure that it would be worthwhile after taking into consideration all the various costs involved.

2Demos, 2017 
3Responsible Life, 2019

Get Me My Mortgage Lends A Hand With Broker Partnership

Go to Mortgage Broker

Finance expert, Get Me My Mortgage, has named My Mortgage Experts as its go-to mortgage broker.

A home run for mortgage specialists

As the way we live and work moves at breakneck speed, more and more people in the UK are self-employed or running their own business – which can make securing a mortgage a tricky proposition.  UK based, Get Me My Mortgage, specialises in securing mortgage deals for those whose circumstances don’t fit neatly into the standard requirements.  From the self-employed to those with less than perfect credit, Get Me My Mortgage is the first stop to getting on the first step of the property ladder.

A unique and innovative service, Get Me My Mortgage has the ability to search over 20,000 loans in order to match customers with the perfect broker for them and their circumstances – kind of like Tinder for mortgage hunters.  Once we’ve completed our matchmaking magic, the broker will take over all negotiations, including applying for the loan and liaison with solicitors and estate agents; taking the strain out of the complex and time-consuming process.  For those looking to seal the deal and get on the move quickly, Get Me My Mortgage even offers a fast track service – ensuring that customers don’t miss the boat on that perfect property. 

The dream team

Get Me My Mortgage is delighted to be affiliated with My Mortgage Experts; bringing together decades of experience and outstanding service.  Based in Northampton, My Mortgage Experts is the region’s go-to specialist for buying, remortgaging and conveyancing.  On the relationship with Get Me My Mortgage, Managing Director, Sam Hubbard, says, “At My Mortgage Experts, we subscribe to the Treating Customers Fairly initiative and, we’re delighted to be able to work with Get Me My Mortgage who share our business philosophy and ethos when it comes to getting our customers the best deal possible.”

For more information on Get Me My Mortgage, visit: https://www.getmemymortgage.co.uk/

For more information on My Mortgage Experts, visit: https://www.mymortgageexperts.co.uk/

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

IN THE NEWS…

FIVE-YEAR FIX GROWS IN POPULARITY

According to mortgage lenders and brokers, five-year fixed rate mortgage deals are now outselling two-year options. With some UK homeowners concerned about the outlook for the economy, more are choosing to lock into lower interest rates, especially as the difference between interest rates charged on five and two-year deals has narrowed in the past two years.

EQUITY RELEASE BREAKS RECORDS IN Q1

Equity Release Council4 figures show that the market has experienced its busiest start to any year on record. Q1 2019 saw £936m of property wealth unlocked by 20,397 customers, including 10,854 who took out new plans. Client numbers in Q1 2019 increased 10% year on year, while the total equity released increased by 8% and the number of new plans agreed rose by 6%.

IMPROVING MORTGAGE AFFORDABILITY

In some parts of the country, mortgage affordability has been rising at its fastest rate since 2011, helped by annual wage growth at 3.4%, and subdued house price growth. This is particularly good news for first-time buyers, as many mortgage rates remain competitive.

4ERC, Apr 2019

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

SHOULD YOU REMORTGAGE?

Whilst everyone’s circumstances are different, remortgaging could make sense if you can get a better deal than the one you are currently on. You may, for instance, be able to find a deal that will mean you pay less interest, or one that gives you more flexibility, for example the facility to make overpayments so that you repay your mortgage quicker.

Given the hundreds of different mortgages available, getting professional advice will not only help you get the best deal for your circumstances, it will save you time and stress too. Get in touch.

New Capital Gains Tax rules on the sale of residential property

28 June 2019

Jennie Brown – Tax Specialist


Selling Residential Property? Soon you will only have 30 days to pay your Capital Gains Tax!

The government have decided they want to receive the tax on residential property sales much sooner, and so the rules have been changed.

From April 2020, UK residents who dispose of UK residential property will need to pay Capital Gains Tax (CGT) and submit CGT returns, within 30 days of completion of the sale.

For example, if the sale completes on 1 July 2020, the CGT will be due by 30 July 2020.

Currently taxpayers have either 10 or 22 months to pay CGT, so this is a big change and there will be penalties and interest charged for failure to comply with these rules.

Due to HM Revenue & Customs (HMRC) plans to ensure the change in rules are communicated to the public, it will be much harder for those who miss the deadline, to successfully appeal against any penalties. It is therefore crucial you seek tax support to ensure you comply with the new rules. Ellacotts can take the stress away and undertake the CGT tax return work for you.

The new rules apply to individuals, trustees and personal representatives. There are some exemptions in place with regards to certain sales, for example the sale of your main residence.

What should you do?

Landlords have faced so many changes over recent years; the restriction to the mortgage interest relief, additional Stamp Duty Land Tax and the new regime for non-UK residents means that the new payment regime is yet another cash-flow blow!

If you own property and you haven’t yet had tax advice to understand how the maze of change will impact you and understand the planning options that are available, then Ellacotts would be happy to help. Our tax team specialise in property taxation for landlords and are well placed to advise. Contact Jennie Brown on 01295 250401 or email jbrown@ellacotts.co.uk.

BUSINESS REVIEW – June 2019

Spotlight on issues affecting business

REFORMS PROMISE FIRMS GREATER PROTECTION

A consultation has been launched on government proposals to enhance the role of Companies House, increase the transparency of UK corporate entities and help combat economic crime.

The proposed new measures are part of a substantial package of reforms to Companies House, designed to tackle misuse of its register. A clear aim of the reforms is to increase the transparency of company ownership and management, while providing business owners with greater protection from fraud.

Specific proposals include: a robust identity check for company directors and people with significant control; a cap on the number of directorships individuals can hold; enhanced systems to protect personal information held on the register; and the establishment of effective links between records held by Companies House and other government bodies.

Companies House Chief Executive Louise Smyth commented: “This package of reforms represents a significant milestone for Companies House as they will enable us to play a greater part in tackling economic crime, protecting directors from identity theft and fraud, and improving the accuracy of the register.

One group that the government is particularly keen to hear from is company directors and officers of other corporate entities. The consultation period closes on 5 August 2019.

MARKETING LOW PRIORITY FOR MANY SMALL FIRMS

A new survey has revealed that almost six out of ten small businesses spend less than five hours per week on marketing, with stress being a major contributing factor restricting the amount of time business owners devote to marketing.

The report suggests the complexity of today’s small business environment is making marketing much more difficult. Indeed, with a bewildering range of marketing options available to businesses, it can be a stressful environment for owners who lack the resources to take advantage of these opportunities.

Conducted by OutboundEngine, the research found that a lack of finances (29%), time (22%) and marketing know-how (14%) were the factors most commonly cited by business owners as major hurdles in delivering an effective marketing strategy. While 58% of businesses spend under five hours per week on marketing according to the survey, 22% spend five to ten hours, and only 4% spend more than 20 hours each week.

However, the survey did highlight a clear correlation between spending more time on marketing and achieving business growth: more than 79% of respondents, who spent five to ten hours per week on marketing, experienced growth in 2018, compared to just 52% of those who spent less than five hours.

EMPLOYEES RANK HAPPINESS ABOVE PAY

A recent survey has revealed that over half of all UK employees are more concerned about being happy at work than the level of their salary.

The ‘Happiness Poll’ conducted by Wrike, surveyed 4,000 employees across the UK, France, Germany and the US, questioning respondents on issues relating to culture, pay and collaboration. It sought to identify what makes people happy at work and how that impacts on their productivity.

In the UK specifically, the findings suggest that levels of happiness are generally relatively high, although it was found that ‘doing meaningful work’ and feeling connected to a purpose was the most critical factor in terms of employee happiness, ranking even higher than pay. In addition, more than half of all UK respondents said they had taken a pay cut in order to accept a job that made them happier.

The research also corroborated other studies that have found a strong link between happiness and productivity, with this particular survey suggesting that 91% of happy employees felt they were ‘very productive’ at work. These findings therefore stress the need for employers to create a happy working environment if their workforce is to be truly productive.

CRUNCH TIME FOR LATE PAYMENTS REFORM

The Federation of Small Businesses (FSB) has urged Theresa May to use her final days in office to push through the late payments reforms package unveiled in the 2019 Spring Statement.

Chancellor Philip Hammond announced the package of measures designed to crack down on the scourge of late payments when delivering his Spring Statement on 13 March. The proposals will make the audit committee of every large business responsible for its payment practices; require listed companies to report their payment performance in their annual report; and strengthen the Prompt Payment Code.

And FSB National Chairman Mike Cherry is now calling on the Prime Minister to ensure her Government delivers on the promises made to the small business community, and to do so in June. Mr Cherry commented:

As Theresa May’s time in office draws to a close, we are now at crunch time for the promised late payments package we have worked hard with the government to secure. We are fast running out of time for the outgoing administration to secure this as their lasting and transformational small business legacy. We cannot afford to have these crucial reforms lost at the last fence, as attention turns to the leadership contest, a new administration and the upcoming Brexit deadline.

HIGHER MINIMUM WAGE DEEMED AFFORDABLE

In its ninth annual report on low pay, think tank, the Resolution Foundation, has declared the National Minimum Wage ‘a 20-year policy success story’ and suggested the UK can afford ‘an even higher minimum wage’.

Following rate increases on 1 April 2019, the National Living Wage (NLW) for employees over the age of 25 rose to £8.21 per hour and for those aged 21 to 24 the rate increased to £7.70 per hour. The National Minimum Wage increased to £6.15 per hour for 18 to 20-year olds and to £4.35 per hour for employees aged 16 or 17. For apprentices, the minimum rate stands at £3.90 per hour.

The report highlights that since the introduction in 2016 of the higher NLW for over-25s, the percentage of employees in low pay (defined as those who are paid less than two-thirds of median hourly pay) has declined from 20.7% in 2015 to 17.1% in 2018. While this is clearly good news for employees, the think tank warns that the minimum wage is now approaching a crossroads and policy makers must decide ‘how fast to boost wages for the lowest earners while managing the inevitable risks to employment.’

RESIDENTIAL PROPERTY REVIEW MAY 2019

Our monthly residential market review provides background to recent developments in property markets, as well as to give an indication of how some key issues could impact in the future.

Calls for a compulsory ‘snagging retention’ on new builds

A recent survey by New Home Review has revealed that more than nine out of 10 new-build homes in the UK have defects and almost 40% of new builds fail to meet their original deadline.

Following on from this, the HomeOwners Alliance have launched a campaign aimed at clamping down on developers of new-build homes who leave buyers with an unacceptable list of ‘snags’ and defects, ranging from poor finishes and ineffective insulation, to dangerous structural and electrical problems.

The Homeowners Alliance campaign proposes introducing a snagging retention of at least 2.5%, whereby new-build homebuyers retain a percentage of the cost of their house, until all faults are fixed, only handing this over six months after moving into their new home.

Currently, snagging retentions are common practice for commercial clients but are not generally available to individual new home buyers.

Brexit delay sees an increase in property listings

According to the latest property supply index, there was a surge in owners listing their properties in the days after Brexit was delayed again, with listings up 0.8% in April, month on month.

Analysis by online estate agent, Housesimple, revealed that almost half (49%) of major UK towns and cities saw a rise in new properties coming onto the market in April compared to March.

The overall picture in London showed new listings down by 1.4% in April compared to March, but four in 10 boroughs actually saw supply levels rise, with the biggest rise occurring in Kensington and Chelsea, with listings up by 17.3%.

Regionally, the biggest month on month rise was in Stevenage at 69.4%, followed by a rise of 43.8% in Salford, while Chichester saw a rise of 33.8%.

Sam Mitchell, Housesimple Chief Executive Officer said: “This latest six month delay provides a wider window of opportunity for homeowners to market while interest rates remain competitive and attractive to buyers“.

Increase in average rents in the UK

Data from Landbay Rental Index shows the average rent paid for a property in the UK is now £1,218 per month, up by 0.96% in the 12 months to April 2019.

Excluding London, the average rent in the rest of the UK was £773 per month, with Scotland recording the highest annual growth at 1.78%; Edinburgh being Scotland’s rental hotspot with an annual increase of 5.44%.

John Goodall, CEO of Landbay said: “Landlords can rest assured that there is decent rental growth to be found across the UK, particularly if they look north of London“.

Stamp Duty receipts fall

Tax receipts from Stamp Duty on property sales fell by £1bn over the last tax year, to a total of £11.9bn according to latest figures from HMRC.

However, Capital Gains Tax, which is payable when buy-to-let homes are sold, rose to £9.2bn, up from £7.8bn a year earlier.

The decline in Stamp Duty has been blamed on a decline in buy-to-let purchases and a slowdown in the higher end of the property market, in addition to the majority of first-time buyers having been removed from the tax.