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UK buy to let landlords could face tougher lending conditions, it is suggested
There is concern that buy to let landlords in the UK will face tougher lending conditions on top of tax relief changes already scheduled for next year. One lender, the Nationwide Building Society is already cracking down on rental calculations and cutting back its maximum loan to value for landlords over worries about the tax relief changes next year.~ Nationwide's Mortgage Works, the mutual's buy to let arm, which provides one in seven loans to landlords, is increasing rental cover requirements from 125% to 145% and cutting its maximum LTV from 80% to 75% from 11 May 2016. According to Armistead Property more lenders may follow suit and while the changes facing buy to let landlords, on top of the recent extra stamp duty payable on additional homes, can be taken into account landlords need to plan ahead. Currently, landlords can claim tax relief on monthly interest repayments at the top level of tax they pay of up to 45%. However, the Chancellor’s new tax rules could mean that thousands of buy to let landlords will see their profits hit as the amount they can claim as relief will be set at the basic rate of tax which is currently 20%. Some current basic rate taxpayers will also be hit, because the change will push them into the higher rate tax bracket. It will be phased in over a four year period from April 2017. However, the firm believes that the tougher lending criteria and recent tax hikes, will not have a major impact on the property market as a whole. ‘This move by Nationwide could trigger other big lenders to follow suit. The banks seem to believe that the Chancellor’s tax crackdown on mortgage tax relief will could cause difficulties for landlords. Though the new tax rules are challenging for most landlords, rising asset values and rental income will go a long way to protect profits,’ said Peter Armistead. ‘Landlords have plenty of options available that will help offset the increased taxation. The first thing landlords should do is carry out a serious portfolio review and work out how the tax changes and tougher mortgage lending will affect them and what options there are to save, or make more money. For example, mortgaging to get a better deal, renovating some old stock as these costs will be tax deductible, selling some properties or increasing the rent,’ said Peter Armistead. ‘Landlords need to think outside the box and ask themselves questions like can I buy with cash or with far less leverage, should I incorporate, can I change a house into an HMO and increase the rental income, can I get planning on an existing property to increase its value or can I add an extension, or convert the cellar?’ he pointed out. ‘Although the government is trying to curb the buy to let market, property investment is robust in the long term. It is estimated that two million Britons are now private landlords… Continue reading
UK’s South East office market makes strong start to 2016
Office market in the South East of the UK has seen the strongest start to a year since 2008, according to new research. Overall take-up in the South East Office market increased by 30% in the first quarter of 2016, according to the latest M25 Offices report from Knight Frank. A total of 973,000 square feet of space was let or acquired during the quarter, 10% above the 10 year average. The high level of take-up ensured that overall supply remains historically low with availability across the South East markets 25% to 30% below the long term trend. The report says that following record investment volumes in 2015, the first quarter of this year has recorded £494 million of investment, which is consistent with the 10 year average. It points out that the £325 million acquisition of SEGRO’s 972,000 square foot office portfolio in Slough by AEW was significant representing, not only the largest transaction in the South East market for two years, but also further evidence of overseas purchasers becoming more active and widening their UK focus beyond Central London. With stock levels improving in the second quarter of 2016 Knight Frank predict an increase in transaction volumes from the middle of the year and expect investment volumes to be close to £2 billion by the end of the year. Emma Goodford, head of National Offices at Knight Frank, said that overall take-up in the first quarter has been encouraging, particularly set against increased market anxiety relating to the forthcoming referendum on the future of the UK in the European Union. ‘Although, some decision making will clearly be deferred until after the vote, we continue to see interest rise from diverse array of occupiers with active named demand topping 6.6 million square feet. With this in mind, we are predicting strong rental growth in key locations, particularly where new development is accompanied by infrastructure and amenity improvements,’ she explained. According to Tim Smither, head of National Offices Investment at Knight Frank, the weight of capital targeting opportunities in the South East remains robust. ‘Whilst some investors pause to await the outcome of the EU referendum, others are seeing opportunity. In particular, high yielding, asset management opportunities remain keenly sought after, supported by a strong rental growth outlook for the region,’ he said. Continue reading
Property prices in metro areas in the US continue their upward trend
An uptick in sales activity amidst meagre supply levels upheld the trend of unwavering property price gains in an overwhelming majority of metro areas in the United States during the first quarter of 2016. It means that the median existing single family home price increased in 87% of markets with 154 out of 178 metropolitan statistical areas showing gains based on closed sales in the first quarter of the year compared with the same quarter of 2015, according to the latest data from the National Association of Realtors. Some 24 areas or 13% recorded lower median prices from a year earlier but there were more rising markets in the first quarter compared to the fourth quarter of 2015, when price gains were recorded in 81% of metro areas. The data also shows that 28 metro areas or 16% experienced double digit increases in the first quarter of the year, a slight decrease from the 30 metro areas in the fourth quarter of 2015 while 51 metro areas or 28% experienced double digit increases in the first quarter of last year. Lawrence Yun, NAR chief economist, pointed out that home prices chugged along at a robust pace in most metro areas during the first three months of 2016. ‘The solid run of sustained job creation and attractive mortgage rates below 4% spurred steady demand for home purchases in many local markets,’ he said. ‘Unfortunately, sales were somewhat subdued by supply and demand imbalances and broadly rising prices above wage growth. As a result, the path to home ownership so far this year remains strenuous for a segment of prospective buyers in the most competitive areas,’ he added. The national median existing single family home price in the first quarter was $217,600, up 6.3% from the first quarter of 2015 and the median price during the fourth quarter of 2015 increased 6.7% from the fourth quarter of 2014. Total existing home sales, including single family and condos, rose 1.7% to a seasonally adjusted annual rate of 5.29 million in the first quarter from 5.2 million in the fourth quarter of 2015 and are 4.8% higher than the 5.05 million pace during the first quarter of 2015. ‘In spite of deficient supply levels, stock market volatility and the paltry economic growth seen so far this year, the housing market did show resilience and had its best first quarter of existing sales since 2007,’ Yun explained. ‘The demand for buying is there, but unless the stock of new and existing homes for sale increases significantly especially in several markets in the West, the housing market will struggle to reach its full potential,’ he pointed out. At the end of the first quarter, there were 1.98 million existing homes available for sale, which was below the 2.01 million homes for sale at the end of the first quarter in 2015. The average supply during the first quarter was 4.3 months, down from 4.6 months a year ago. ‘Current home owners… Continue reading
