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Councils may push for reform to empty property relief after policy

Since 2008, when empty property relief was first introduced, the use of short-term lease arrangements as a form of business rates mitigation has become commonplace. This typically involves tenants taking short-term leases on properties, often on very favourable terms, allowing the landlord or property agent to reduce their business rates liability by taking advantage of empty property relief when the lessee leaves. This can significantly reduce the landlord’s business rates liability across a property portfolio.

Of course, local authorities do not like this practice and seek out every opportunity to challenge these short-term occupations. Often, this involves pushing for evidence that the property is genuinely occupied and that there is a commercial benefit to the occupation. For example, the tenant could be running a business from the premises to make a profit.

In Principled Offsite Logistics vs Trafford Borough Council, the local authority argued that, by using the premises to simply store goods short term, the tenant was not getting any commercial benefit from its occupation and therefore it could not be regarded as a rateable occupation. The council argued therefore that the landlord should not be able to claim empty property relief when they leave.

The tenant openly described the arrangement as a rates mitigation scheme and explained that in exchange for storing goods, it was paying the landlord a peppercorn rent and also receiving a percentage of their savings when leveraging empty property relief. Trafford Borough Council had obtained magistrates’ court summonses seeking rates liability orders against Principled. However, Principled Offsite Logistics decided to challenge the council’s approach and it requested a judicial review.

The review has now concluded that, in the eyes of the law, rateable occupation does not have to be for commercial benefit as long as there is some benefit to the tenant. This outcome means the common objections raised by many local authorities against this type of rates mitigation scheme can be defeated and schemes can continue unheeded. This result will be welcome news for businesses, commercial landlords, property agents and corporate occupiers alike.

Yet the situation could change in the future. Local authorities have been up in arms for some time about what they consider a loophole in the law. The outcome of this case could encourage them to push for changes to legislation. Landlords and corporate occupiers need to be prepared for this.

Source: Property Week

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Haart Says Government Must Increase Buy To Let Support

The government needs to increase the support it extends to buy to let investors, according to Haart estate agents.

The government needs to begin supporting investors or it will see significant numbers of landlords exiting the buy to let market says Haart. This will lead to a sharp decline in rental property listings.

The call for further support comes amidst the government consultation for longer tenancies. Without greater incentives for buy to let landlords, many will not be prepared to offer longer tenancies. They will then leave the market. This will contribute towards the already-exiting supply and demand imbalance in the private rental sector that is beginning to push rental prices higher, adding more pressure on tenants.

Prospects for the sector without further incentives are looking worrying. The latest data from UK Finance found that gross mortgage lending rose by 7.6 per cent to £24.6 billion in July 2018 year on year. This was ahead of this month’s base rate rise.

However, activity in the buy to let sector did not grow. This is likely due to increasingly punitive tax measures levied by the government, such as reducing mortgage interest relief to the basic rate of income tax and adding a 3 per cent stamp duty surcharge to the purchase of additional homes.

12 per cent fewer landlords are purchasing properties in comparison to the same time last year.

CEO of Haart estate agents, Paul Smith, commented: ‘Mortgage lending jumped a huge 8 per cent on the year in July as existing homeowners sought to seal themselves into a lower rate ahead of the Bank of England’s interest rate hike. The buy to let sector is a fundamental part of the UK property market, and with fewer landlords, we are seeing rents rise. The government must stop penalising those who are willing to invest in the rental market and stop its needless crackdown on the sector.’

Source: Residential Landlord

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UK house price rise slips back to five-year low

British house prices grew by a weaker than expected 2.0 percent in August, mortgage lender Nationwide said, slipping back to a level last seen in June when prices rose at their slowest in five years.

The slowdown is the latest sign of how the housing market has slowed since the 2016 Brexit vote.

Economists taking part in a Reuters poll had expected prices to rise by a stronger 2.7 percent.

In monthly terms, prices fell by 0.5 percent in August from July. The Reuters poll had pointed to a 0.1 percent monthly increase.

Nationwide’s measure of house prices was showing increases of about 5 percent a year shortly before the 2016 referendum decision to leave the European Union. Britain’s overall economy has slowed since the vote.

Nationwide said it continued to expect house prices to rise by 1 percent in 2018.

A Reuters poll published earlier this week showed economists expect house prices to increase nationally by 2 percent this year and next.

Source: UK Reuters

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Thousands Of Buy To Let Property Investments Sold

Almost 4,000 buy to let properties per month are being sold by property investors as part of the first recorded fall in the number of rental properties in 18 years.

New official figures from the Ministry of Housing report found that around 3,800 buy to let homes are being sold by landlords each month. This is due to changes in mortgage interest tax relief, which continue to have a negative effect on the buy to let market.

Landlords’ profits have been negatively affected by a plethora of tax and regulatory changes over the last few years. These changes range from the removal of the ‘wear and tear’ allowance for rental properties and the implementation of the 3 per cent Stamp Duty surcharge.

Chief executive of letting agent trade body ARLA Propertymark, David Cox, said: ‘The barrage of legislative changes landlords have faced over the past few years has meant the buy to let market is becoming increasingly unattractive to investors. Landlords are either hiking rents for tenants or choosing to exit the market altogether to avoid facing the increased costs incurred.’

The vast numbers of landlords leaving the buy to let market has lead to a chronic shortage of properties available to rent in certain parts of the country. The disparity is felt particularly acutely in London where rental demand is high.

CEO of Shojin Property Partners, Jatin Ondhia, commented: ‘As a result of the government’s increase in stamp duty, it is now much more costly to acquire a buy to let property. A £250,000 investment property will incur stamp duty of £10,000 compared to £2,500 for an owner occupier. Many landlords have seen their profits eroded by the increased burden of taxation and regulation. They are also facing poor buy to let yields especially in London for example, where they are between just 2-3 per cent, while nationwide the average yields are between 6-8 per cent.’

Source: Residential Landlord

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Macron is prepared to throw May a Brexit lifeline and stop Britain crashing out without a deal

  • Emmanuel Macron reportedly wants the EU to be more generous in Brexit talks in order to avoid no deal.
  • The French President is set to call for more flexibility in certain areas at a summit of European leaders next month.
  • He is likely to focus on the area of security, where the UK is set to be excluded from a number of programmes. 
  • Both sides are still a long way from an agreement on the Northern Irish border.

LONDON — Emmanuel Macron has urged European leaders to throw Theresa May a lifeline and prevent the United Kingdom crashing out of the EU without a deal.

The French President believes no deal would do huge damage to the EU, according to The Times.

Because of this, Macron will reportedly use a summit of EU leaders in Austria next month to argue for an EU based on “concentric circles,” with EU nation states in the central ring, and the UK close by in the second ring.

“He [Macron] sees a no-deal scenario as something that would break links and poison relations at a time when Europe needs to be united beyond the EU,” diplomatic sources told The Times.

Macron is unlikely to soften his position on the indivisibility of the single market. Prime Minister May wants a “common rulebook” for goods after Brexit, which would effectively give the UK full single market access for goods.

However, he is more likely to urge European leaders to more generous on security. The EU has May’s red lines mean the UK must leave security initiatives including the Galileo sat-nav project and European Arrest Warrant.

EU and UK negotiators are still a far away from an agreement on the thorny issue of the Northern Irish backstop with just weeks to go until the October European Council summit where leaders want to finalise a Brexit deal.

Without an agreement on the backstop — the fallback option if trade talks fail to preserve the open Irish border — the UK will crash out without a withdrawal agreement, unleashing chaos and disruption across all areas of life.

In its first batch of no deal Brexit technical notices published last week, the UK government said that no deal would create an array of new border checks and threaten the pensions of millions of people, among other issues.

Chancellor Philip Hammond also said leaving the EU would make the UK £150 billion over 15 years.

Brexit talks are set to continue on a regular basis until the October council, with UK Brexit Secretary Dominic Raab scheduled to meet Michel Barnier, the EU’s chief negotiator, on Friday, followed by talks the following week.

Source: Business Insider UK

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Midlands Seeing Investment Property Market Growth

The East and West Midlands are seeing growth in buy to let investment property purchases.

New research from Paragon, which surveyed a total of 680 landlords, found that buy to let mortgages for property purchases have fallen by approximately 40 per cent overall since 2015.

However, landlords in the Midlands are challenging this trend. Strong economic growth in the region fueled by Birmingham’s successful regeneration and a plethora of universities have made the region particularly desirable for investment.

Further stimulation came from several financial service firms relocating their head office and operational functions outside of London to Birmingham. HSBC and Deutsche Bank recently made the move, while further activity is expected in the city ahead of the 2022 Commonwealth Games.

Tenant demand was also seen to be increasing in the region. 42 per cent of landlords in the East Midlands had seen a surge in demand, while 33 per cent of landlords in the West Midlands noted the same trend. These figures are particularly high when considered in comparison to the 24 per cent of all landlords who noted rising demand.

Rental in the region were also strong. Landlords in the East Midlands reported average yields of 6.7 per cent while those in the West Midlands saw yields of 6.2 per cent. In comparison, the research also discovered that landlords operating in Central London were least likely to be buying property. In fact, a net 16 per cent of those in the capital said that they had sold some property in the first quarter.

Managing director of mortgages at Paragon, John Heron, said: ‘These findings highlight a big regional difference in landlord experience and buying habits. Some Central London landlords appear to be scaling back a little while landlords in the Midlands continue to invest on the back of a positive outlook.’

Source: Residential Landlord
London property market
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The current state of the London property market

As we enter the second half of 2018, the London property market continues to struggle says Dave Beard, Lending Expert from specialist second charge mortgage broker Feasible.co.uk.

Once a bastion of high prices and sales activity, the London market has struggled through much of the year. In July 2018, it was reported that London prices have fallen by 0.5%. In some ways, this could be considered an improvement; the fall in June 2018 was 1.9%. However, the continual downward trend is undoubtedly concerning.

The discrepancy between boroughs

However, it is worth noting that the continual downward trend is not displayed throughout every borough. The most expensive borough, Kensington & Chelsea, reported a 4.1% rise in house prices in July. This was by far the biggest increase, with the next largest rise – 1.5% in Greenwich – falling far behind. Tower Hamlets and Camden also saw house prices rise, but not enough to offset a grim picture elsewhere in the capital. Hackney, for example, saw house prices drop by 3.3%, while Hammersmith & Fulham and Lambeth fared little better.

London compared to the rest of the UK

The statistics above are particularly of note, given that house prices across the UK have continued to – albeit modestly – rise to the tune of 3.34%. London, once the leading light of the UK housing market, now appears to be losing its status – and Bank of England policy maker Ian McCafferty has offered speculation as to why: Brexit.

The “exodus” of EU bankers

McCafferty told LBC listeners that he believes an “exodus” of EU bankers is taking place, and drew direct correlation between this and the ongoing uncertainty regarding the UK’s withdrawal from the EU. With EU negotiations not set to resume until October at the earliest – and political turmoil predicted as a result – then, if McCafferty is right, it looks likely that the London property market may take a while to stabilise yet.

Foxton’s loss reflects growing fears

Unfortunately, it appears the current stagnation of prices has claimed a victim, with well-known agency Foxtons reporting a loss in its recent financial data. The company had already issued four profit warnings recently, and its share value has fallen from 250p to just 45p in two years. In the first half of 2018, Foxton’s lost £2.5 million, with the problems in the London property market being identified as one of the major causes.

The rental market

However, there is some sign of life in the London property market: average rental rates have risen to a new record high of £1,615. This is a 3.3% rise from this time last year, and is the first time ever that London rental figures have broken the £1,600 barrier.

This surge was particularly welcomed, given that rents in the capital fell – for the first time in seven years – in June.

In conclusion

Unfortunately, the current state of the London property market is rather unhealthy. While the rental market returns to a gentle boom, London is falling behind the rest of the UK in terms of house prices. Foxton’s loss has demonstrated the very real consequences of the continued difficulties facing the London property market, they are likely to be just the first casualty.

Source: London Loves Business

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Mortgage lending drops to ‘disappointing level’ as buyer interest falls away

Nationwide this morning reported the biggest monthly drop in house prices since July 2012.

The lender said that the average house price is currently standing at £214,745 this month, down 0.5%  from £217,010 in July.

The fall brought annual house price inflation down to 2%, and Nationwide said it expects house prices to finish this year 1% up.

Meanwhile, mortgage lending fell to £3.2bn in July, the lowest figure for 15 months, according to the Bank of England.

Mortgage approvals for house purchase dipped to 65,000, while the number of approvals for remortgages fell 5.5% to 45,000.

Estate agent Jeremy Leaf said the figures were disappointing “in that they reflect a period when we would have expected a pick-up in the market over the spring buying season”.

John Eastgate, sales and marketing director at OneSavings Bank, said: “Buyer activity remains pretty depressed as the market comes to terms with economic uncertainty on top of existing obstacles of a lack of supply and increasing affordability challenges.”

Separately, NAEA Propertymark said that in July the number of properties available per estate agency branch rose for the third consecutive month, from an average in 33 in April, to 37 in May, to 39 in June, and to 41 last month.

Measured year on year, this is 17% up on July last year, when agent branches had an average of 35 properties.

While supply rose, demand shrank for a second month running, to 303 applicants per branch. However, the NAEA said this was entirely in line with seasonal trends.

Source: Property Industry Eye

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Property transactions hit four-year low, but are sales picking up?

Transactions in England and Wales are at their lowest level since the new graduated rates of Stamp Duty were introduced, but may be starting to improve, figures suggest.

Data from property investor London Central Portfolio (LCP), based on cumulative Land Registry sales registered in the 12 months to July, show residential property transactions fell 2% in that period to 876,628.

This is the lowest annual figure since the new graduated Stamp Duty system was introduced in 2014, LCP said.

Average prices in England and Wales are up 2.5% annually in the 12 months to July to £293,897, while new-builds are priced at a 21% premium at £343,175, according to the research.

The capital has seen a bigger drop in sales, down 8.3% over the 12 months to 3,831 in prime areas and 6.5% in Greater London to 88,189.

Average prices in prime central London (PCL) are up 12.5% annually to £1.96m, while Greater London saw a 2.2% increase to £293,897.

The data also shows that new-build prices in London have reached record highs, at £3.4m in PCL and £784,892 in Greater London.

Naomi Heaton, chief executive of LCP, said: “There are very few causes for optimism in the domestic property market, where real terms, inflation-adjusted house prices are no higher than they were in 2007.

“Affordability remains heavily constrained in a post-Mortgage Market Review world, where wage growth struggles to out-pace inflation.

“Artificial stimulation of the market through Help to Buy and first-time buyer incentives has supported the market but there is a general reticence amongst up- and down-sizers to commit at this point.

“The continued lack of a defined exit plan from the European Union, combined with economic uncertainty and a number of punitive tax changes targeting the buy-to-let sector, have caused the market to stagnate.”

However, official Land Registry data suggests transactions actually picked up last month.

Its latest Price Paid Data for July 2018 shows 89,454 residential sales lodged at the Land Registry last month.

This was up 12.2% on June and the third consecutive month that registrations have increased.

The figure is also up 1.7% annually.

There is a time lag between a property sale and its registration, but the Land Registry said 24,719 transactions took place in July of which 526 were of residential properties in England and Wales for £1m and over.

The most expensive residential sale was of a terrace property in the Royal Borough of Kensington and Chelsea, London for £18.5m, while the cheapest was a terrace property in Henllys, Cwmbran, for £6,120.

Source: Property Industry Eye

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Quarter of cities still below pre-crisis house prices

House prices in a quarter of the UK’s largest cities are still struggling to surpass pre-crisis levels, Hometrack figures have shown.

In its latest UK cities house price index released today (28 August), the property market analysts found prices in Belfast, Liverpool and Aberdeen were still lower than in July 2008.

Prices in Northern Ireland’s capital were 28 per cent lower than they were a decade ago, now at £129,629.

Compared with data from July 2008, Newcastle and Glasgow have seen weak growth – at 3 per cent and 1 per cent respectively.

In contrast, the average value of properties in Cambridge has increased by 70 per cent to £432,410 and London prices have grown by 65 per cent to an average of £483,792.

Meanwhile averages prices in Oxford have grown by 55 per cent to £411,900 and in Bristol they have grown by 53 per cent to £280,200.

Richard Donnell, insight director at Hometrack, said while 2008 was the year house prices fell at their fastest rate, they continued to fall for a further three to four years in weaker markets.

He said: “These past 10 years would have been difficult for many homeowners living in these cities, with low prices, weak growth making it difficult to move homes for work or to up-size to accommodate growing families.”

Mr Donnell said stronger performance in Cambridge, London, Bristol and Oxford have been driven by stronger economic growth, a broader base of demand for housing and limited availability of homes for sale.

He added: “However, these cities are now registering the weakest annual rate of growth as tax changes impacting investor and affordability pressures impact demand and the level of house price growth.”

Hometrack’s index reported UK house prices had risen by 4.2 per cent in the past year, mainly driven by growth in medium-sized cities such as Nottingham and Leicester.

In fact Nottingham saw the highest level of year-on-year increase to July 2018, with average house prices rising by 7.5 per cent to £152,000.

In the 12 months to July 2018 average house prices in London fell by 0.1 per cent while in Aberdeen they fell by 4 per cent.

Steve Seal, director of sales and marketing at Bluestone Mortgages, said figures from the past decade showed the vast regional differences in the UK housing market and suggested the only real solution was to increase the UK’s housing supply.

He recognised that in the meantime schemes like Help to Buy continued to provide much-needed support for first-time buyers hoping to step onto the property ladder.

Mr Seal said: “There is, however, another group of borrowers we need to consider; those with irregular incomes or a weak credit history, as these customers are often unable to obtain mainstream financial support.

“Real life is full of unforeseen bumps and a one-off event should not have a permanent bearing on someone’s ability to borrow – instead, lenders need to take the time to recognise the underlying circumstances and offer solutions accordingly.”

FT Adviser