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Many buy to let property investors not put off by UK tax changes
Most property investors in the UK are undeterred from buy to let despite 2016 tax changes and 56% are planning on purchasing within the next 12 months, new research shows. With changes in tax approaching some 40% plan to set up a limited company for their properties to counter the impact of tax changes, whilst 33% plan to raise rents, according to the latest client barometer survey from specialist lender Shawbrook. However, while the outlook for investors remains positive, new changes to tax relief and stamp duty have caused some investors to check their ambitions. Of the 44% who are not planning on purchasing a new buy to let property this year 37% said it was due to the 20% cap on tax relief for buy to let properties making the proposition unattractive and 16% said the 3% extra stamp duty levy on additional homes was putting them off. The latest figures also revealed that 49% of clients said they considered regulation to be the biggest challenge facing property investors over the next six months, a significant increase on last year’s barometer results, which found that regulation was something only 23% of investors considered to be the biggest challenge they faced. Despite these challenges 61% have a positive outlook for the upcoming 12 months, predicting either a large or small increase in property value. In total 43% of landlords saw an increase in tenant demand in 2015 and 61% saw an increase in their rental income. A further 44% are confident that their business will grow in 2016. ‘As a lender it is always great to see such positivity in the market, and as with our Broker Barometer conducted in late 2015, it seems that there is a lot of optimism amongst property professionals also,’ said Karen Bennett, the firm’s sales and marketing director of commercial mortgages. ‘Obviously the new changes will have an effect and may instil more caution across the market, however, Shawbrook is well placed to adapt to change, and we are expecting the market to remain buoyant,’ she added. Continue reading
Property lenders in UK ready for new European wide mortgage directive later this month
UK lenders are ahead of most of their European counterparts in implementing the mortgage credit directive (MCD), a process that is due to be formally completed on 21 March. With UK firms having been given the opportunity to adopt the revised rules up to six months early, many have chosen this option and are therefore already complying with the directive’s requirements. In practice, borrowers will notice few changes in the process of taking out a mortgage as we pass the MCD implementation date, according to the Council of Mortgage Lenders (CML) which does not expect the move to have any significant effects on the market or on the availability of mortgages. However, in a report, the CML says that over time, borrowers may notice changes in the disclosure documents presented to them by lenders when they are considering taking out a new mortgage. Other changes as a result of the directive include the creation of a new class of consumer buy to let borrowing, sometimes abbreviated to CBTL, as well as modifications affecting foreign currency loans and second charge lending. It points out that in many ways, implementation of the directive in other European countries will align them with standards already applying in the UK, where the mortgage industry has been operating for the last two years under a system of enhanced consumer protection following the mortgage market review (MMR). Nonetheless, the UK, like other EU countries, is required to implement the MCD, which is intended to set minimum regulatory requirements across Europe. An assessment from the European Mortgage Federation (EMF) of how different countries were working towards implementation the directive said that the MMR in the UK already went beyond the core provisions of the MCD. The EMF also estimated that many firms in the UK were six months ahead of most of their European counterparts on implementation. Firms in Belgium and Denmark had also made rapid progress, and had almost completed the process of adopting the directive by last autumn. At that stage, the EMF was predicting that a handful of European states, including Finland, Latvia, Portugal, Slovenia and Malta, might not meet the 21 March deadline. But all of those countries were expected to have adopted the directive within four to eight weeks thereafter. Government, regulators and firms in the UK have all supported the adoption of the MCD, even though consumer protection in this country has already been comprehensively re-appraised and reinforced through the MMR and the directive does little in practice to extend protection for UK borrowers. The process of implementing the MCD has been overseen by HM Treasury, although the rules will be supervised by the Financial Conduct Authority (FCA). The CML report also points out that the transition towards implementation of the MCD has been smoothed by the decision to give lenders a six month window, within which they have been able to adopt the directive’s measures to their own timetable. This means that firms have,… Continue reading
Property sales in Scotland up 4% in 2015, down from 11% the previous year
Residential sales in Scotland increased by 4% in 2015, well below the 11% recorded in the previous year, a new analysis report points out. Tougher mortgage lending conditions during the first half of 2015 impacted the recovery of Scotland’s housing market, according to the report from real estate services firm Savills. However, the market adjusted during the second half of 2015 due to a recovery in mortgage lending for house purchases across Scotland, which increased by 9% from 59,500 in 2014 to 64,800 in 2015. On a Local Authority level, East Renfrewshire witnessed the strongest annual growth in the number of transactions during 2015 at 13% which the report says was boosted by the good schools effect. Other star performers include Glasgow City, West Dunbartonshire and West Lothian, where annual transactional growth in 2015 was higher than Scotland as a whole. Considering 2015 as a whole, prime sales, transactions at £400,000 and above, outperformed the overall market, with an 8% annual increase and much of this activity took place prior to the introduction of LBTT which brought higher rates of taxation to the prime market. Furthermore, the number of transactions at £1 million and above reached its highest level since 2008. Prime markets in suburban and commuter areas across Scotland’s Central Belt performed strongly during 2015, with growth spreading out from core urban hotspots. ‘This upturn in demand is driving an improving development land market. Sentiment for development land in Scotland’s cities remains positive,’ said Faisal Choudhry, director of Savills Scottish Research. With strong annual growth in the Savills Residential Development Land Index, particularly for greenfield land around Edinburgh, Perth and Stirling. The overall Savills index for greenfield land in Scotland increased year on year by 9.6% during December 2015 compared with December 2014. Choudhry explained that the development market has been further supported by Government incentives, such as the Help to Buy Mortgage Guarantee and new build schemes, which made up 8% of all residential activity in Scotland between October 2013 and September 2015. The recently announced extension of Help to Buy (Scotland) scheme to 2019 is expected to further support Scotland’s new home sales. The overall Savills index for urban land in Scotland increased year on year by 20.4% during December 2015 compared with December 2014.The increase in values, particularly in Edinburgh and Glasgow, reflects a rise in demand from housebuilders and developers, due to an improved economy, stronger markets and increased viability, Choudhry pointed out. However, he also pointed out that the fall in sentiment within the Aberdeen development land market, due to the continued low oil price and uncertainty over the future of the industry, has impacted negatively on the overall Scottish development land index. Continue reading
