Research conducted by the Council of Mortgage Lenders* on UK landlords has found that 49% of UK landlords own their property outright.
The survey of 2,500 landlords also found that 50% of rented properties in the UK are owned by buy-to-let landlords. Of the landlords questioned, 62% of them own a single property, while over half of buy-to-let landlords own more than one.
In fact, the average buy-to-let portfolio is 2.7 properties. This has, however, decreased since 2004, when similar research was conducted. In 2004, over 30% of buy-to-let landlords had 6 or more properties, while this number is now around 7%.
The study also highlights the prevalence of accidental landlords – often those who choose to let their property if they can’t sell for whatever reason, or those who inherit a property from a family member and use it as an additional source of income – which account for nearly a quarter of all landlords in the UK.
Most landlords in the survey own rental properties close to their own home, with a split between those who manage the property themselves and those who employ a managing agent, like Reliable Homes - see details of our Management service here.
The most recent report from Halifax* has found that the number of first-time buyers in the UK last year was the highest it’s been since 2007.
In 2016, the number of first-time buyers in the UK was 335,750. Although not quite as high as 359,900 in 2007, last year marks the third year in a row that this number has stood at over 300,000.
Last year’s figure was also 75% higher than the lowest point in 2009.
Martin Ellis, a housing economist at Halifax, said “record low mortgage rates, high employment levels and government schemes such as Help to Buy have helped first-time buyers.”
With the government's Help to buy scheme, first-time buyers can put down a deposit of as little as 5%, making buying a first home achievable for many more people.
Although, Halifax have found that in London first-time buyers put down, on average, a 25% deposit.
And that the average age of a first-time buyer in the UK is 30 – which is not far off the average age of 33 in London, as reported in this research into London's first-time buyers by mortgage broker Alexander Hall.
As part of Mr Hammond’s latest plans to help those “just about managing” in England, the banning of letting fees could save hundreds of pounds a year for up to 4.3 million households across the country.
The move will put England in line with Scotland, where lettings agency fees to tenants have already been banned. Hammond’s announcement did not apply to Wales or Northern Ireland.
But what does it mean for landlords? The move could encourage competition for landlords who will be forced to shop around for the cheapest agents, because it is speculated that the agents will instead pass the charge on to the landlords.
“We have seen these fees spiral, often to hundreds of pounds,” said Hammond.
“This is wrong. Landlords appoint letting agents and landlords should meet their fees.”
However, there is a feeling that extra costs faced by landlords could result in them charging higher rents to their tenants; sending tenants back to square one.
Alternatively, some letting agencies may choose to absorb part of the administrative costs themselves to remain competitive to both landlords and tenants.
Richard Lambert, Chief Executive of the National Landlords Association (NLA), said: “But adding to landlords’ costs on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents.”
Some landlord groups have suggested fees such as reference checks should not be passed on to landlords as they prevent dishonest applications. Instead, the NLA believes more transparency is necessary for charges, rather than a blanket ban on tenant fees.
David Cox, Managing Director of the Association of Residential Letting Agents, said: “A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market.
“It will be the fourth assault on the sector in just over a year, and do little to help cash-poor renters save enough to get on the housing ladder.”
But Shelter said that in Scotland, rental prices have not increased dramatically, citing that analysis of Office for National Statistics (ONS) figures showed private rents in Scotland have actually increased at a slower pace than those in England in recent years.
Barclays brings back the 100% mortgage giving new hope to first time buyers - but only for the wealthy..
- Cashless people earning £50,000 can get three-year fixed deal at 2.99%
- 100% mortgages vanished in 2008 after financial crisis took hold
- Barclays deal requires family to put 10% in account for three years
Zero per cent deposit mortgages have not been offered since the financial crisis. These risky home loans used to be widely sold by lenders, but were withdrawn after the collapse of Northern Rock in September 2007.
David Hollingworth, from mortgage broker London & Country, said the deal differs from the old 100 per cent mortgages because of the money parents have to lock away to provide security.
He added: 'This could appeal to parents who don't want to have to give their cash away to get their children on the property ladder.' News of the Barclays deal came as it emerged that the 'Bank of Mum and Dad' is the equivalent of the UK's tenth biggest mortgage lender, according to research.
Parents, grandparents and other relatives help finance one in four mortgages. This year alone, parents are predicted to lend their children £5billion.
Some 300,000 homebuyers will end up using cash from loved ones to get a mortgage, purchasing homes worth £77billion in total, the research from insurance giant Legal & General and consultants Cebr predicts.
The average contribution will be £17,500. Over three-quarters of 'Bank of Mum and Dad' purchases – or 256,400 properties – will be completed thanks to assistance from the buyer's parents.
A further 22,500 will be helped by grandparents, with 27,000 mortgages part-funded by other family members or friends. If all the lending power was combined it equate to the country's tenth biggest mortgage provider.
Nigel Wilson, of Legal & General, said: 'The Bank of Mum and Dad plays an increasingly vital role in helping young people take their early steps on the housing ladder.'
Soaring house prices, a crackdown on risky mortgage lending and years of meagre or non-existent pay rises have put the dream of home ownership beyond reach for many people.
Figures from the Office for National Statistics show a record 2.2million still renting in their thirties in 2014, compared to 1.24million in 2007 when the credit crunch began.
Being a landlord is not always plain sailing – on top of all the things on your to-do list, there are frequently changing regulations to comply with too. However, tempting it might be to slip checking Government websites to the bottom of your list, we always advise landlords to keep on top of all upcoming regulations, to avoid the unnecessary hassle of last-minute compliance arrangements.
Here we take a brief look at some of the important tax changes due to take effect from April 2016 and beyond:
Stamp Duty Land Tax (SDLT) increase:
- A 3% surcharge on SDLT for second homes and buy-to-let purchases was announced in the Autumn Statement
- The surcharge will be effective from 1st April 2016
- Second home/buy-to-let purchasers who exchanged contracts before 25th November 2015 are currently believed to not have to pay the higher SDLT rate even if completion takes place after 1st April 2016
- For purchases by a parent as co-owner with their offspring for mortgage purposes, a Treasury spokesperson advises that “if the parent already owns a residential property it is likely that the higher stamp duty charge will apply from 1st April 2016, but the details will depend on the outcome of the upcoming consultation”
Consultation closed on 1st February and the final details of the tax changes are expected in the Spring Budget announcement due 16th March.
Wear and tear allowance offset:
- The annual 10% wear and tear offset allowance for furnished properties will be scrapped from April 2016
- The cost of the new items can be claimed on a renewals basis as they are purchased
Buy-to-let mortgage tax relief:
- Buy-to-let mortgage tax relief will be limited to the 20% basic rate, as per the Summer Budget 2015 announcement
- The change will be phased in gradually over four years, starting from April 2017
Whilst this change may seem far away, our recommendation for landlords who are higher tax payers is to take a professional tax advice as soon as possible to ensure that the allowances to maintain your income are maximized. With mortgage interest rates currently being at a historic low, it might also be a good time to consider using any finance that you may have in order to reduce your mortgage interest charges.
For further information on income tax for landlords and the new stamp duty tax surcharge contact www.gov.uk.
BUY TO LET STAMP DUTY TRIGGERS PESSIMISM AMONGST LETTING AGENTS
•Two in five (40%) letting agents predict supply will decrease, a sharp rise from October
•Only 23% of letting agents report rent hikes for tenants – the lowest this year
Two in five letting agents are predicting supply will decrease over the next five years – the highest rate this year, according to the Association of Residential Letting Agents (ARLA) monthly Private Rental Sector (PRS) Report1.
David Cox, managing director, Association of Residential Letting Agents (ARLA), says: “This month’s findings are triggered the Chancellor’s announcements around buy-to-let (BTL) tax in his Autumn Statement. When the ‘rabbit’ was first pulled out of the hat, we said these changes would be ‘catastrophic’ for the rental sector and this has been echoed by letting agents across the country. The new stamp duty increases will make owning a BTL unprofitable for a lot of landlords, and certainly make new investors think twice about purchasing a BTL property.”
Cost of renting
Tenants experiencing rent increases continue to fall, with less than one quarter (23%) of letting agents reporting rent increases for tenants in November, down from 25% in October – and the lowest this year.
Supply and demand
Demand for rental properties increased marginally in November, alongside supply of available housing – likely a result of tenants preparing themselves to find new rental properties in the New Year. ARLA agents registered an average of 34 new tenants per branch this month, up from 33 in October.
Supply of rental accommodation also increased in November, rising by nine per cent, from an average of 173 properties managed per branch in October, to 189 this month. However, renters in the capital will still struggle to find a property, with only 121 properties managed per branch – 36 per cent less than the UK average.
David Cox continued: “It’s promising to see that the number of agents reporting rent increases is continuing to decline, and this should spread some Christmas cheer amongst renters renewing tenancies or looking for a new property to rent. However, just under a quarter of tenants are still unfortunately seeing hikes in their monthly rent payments. But if we continue to follow trends we’ve seen in previous months, we should see fewer tenants experiencing increases as we welcome in 2016.”
Autumn statement 2015: Buy-to-let landlords sacrificed again with 3pc stamp duty hike to 'help first time buyers'
The new 3pc surcharge was announced as Chancellor George Osborne outlined plans to help more people get on the housing ladder. Buy-to-let landlords have been hit by the second major tax hike in less than a year, as Chancellor George Osborne took action against the "growing crisis of home ownership" in Britain.
Property investors will be hit by a 3pc rise in stamp duty from 1 April 2016, and the surcharge will also apply to people buying second homes. It means the tax bill on a buy-to-let property costing £250,000 will jump from £2,500 to £8,800.
Unveiling the surprise levy in today's Autumn Statement, the Chancellor said private landlords making cash purchases are currently unaffected by tax changes announced earlier this year, which cut the amount of relief investors could claim on mortgage interest.
The additional stamp duty will not apply to caravans, mobile homes or houseboats. Mr Osborne said the property tax would raise almost £1bn by 2021, which will help fund the construction of new homes. Around £60m will go to communities in England where the impact of second homes is particularly acute, such as Cornwall.
New buy-to-let stamp duty: How much will you pay?
The government wants to build 400,000 new homes, to help ease the UK's chronic housing shortage. The Chancellor plans to relax some planning restrictions and to release public sector land with capacity for 160,000 homes.
The Association of Residential Letting Agents said the 3pc stamp duty rise was "catastrophic news" for tenants, who are likely to face higher rents as landlords look to recoup the charge.
“To make owning a BTL property financially viable, landlords will need to pass on the increased stamp-duty costs to tenants, who will in turn see less spent on maintaining their property and of course see increased rents," said David Cox, the group's managing director.
"The changes will also deter new landlords from entering the market, pushing the gap between dwindling supply of available property and growing demand even further apart, which will also - in turn - push up rental costs. The Capital, where demand is so strong and last year’s stamp duty changes hurt, rather than helped, will see tenants having the greatest burden to bear," he added.