Our final LandlordZONE® Newsletter of the year is here, 12 of 12 for 2013.
Here’s wishing all our readers and supporters a Merry Christmas and a Happy and Prosperous New Year from the team at LandlordZONE®.
2013 has seen a lot of changes for us, with developments both internally and quite a lot in the UK Private Rented Sector (PRS). We spent the first 6 months of the year working hard on the development of a new website, launched in July 2014 and we’ve been involved in a government inquiry into the future of the PRS.
Feed-back about the new site has been very positive and, despite the major change to a completely new platform, traffic has not taken a dip but has actually improved steadily since the launch. As “first in field” and as we approach our 15th year of operation, we still hold the leading position of similar websites world-wide and in the UK in terms of traffic volumes – the site has received around 2.7m actual visits and 13.2m page views over the past year.
Alexa.com rank LandlordZONE® as the 1437th most visited website in the UK and 46,829 most visited website in the World as of December 2013. Quite impressive I think you will agree for a niche site, when you consider how many websites now exist, even in the UK alone.
As usual I’ve been busy attending and exhibiting at all the Landlord and Buy to Let Shows and the Property Investor Show up and down the country, giving seminars and writing articles for the Landlord & Buy to Let Magazine. In addition, once again I took part as a judge for the Landlord & Buy to Let Awards in Coventry in November – a very rewarding experience considering the quality of the entrants this year.
I would encourage all organisations involved with the UK Private Rented Sector to enter for these prestigious Landlord & Buy to Let Awards. As always, the secret of achieving a high ranking in these awards, if there is a secret, is spending time putting forward a really good written submission which highlights your achievements against a given set of criteria, and backed by good evidence.
2013 has resulted in surprisingly quick turnaround in the fortunes of Buy-to-Let. It is helped by the fact that property still offers one of the best returns on investment when compared to cash and pensions in a low interest rate environment. In addition there are now several Government initiatives which have obviously helped to boost the economy and the housing market, coming up to an election. But this begs the question, how sustainable is this and might we be entering “bubble” territory again?
Most of the signs appear good and Mark Carney, Bank of England Governor assures us they will not allow another “property bubble” to develop. With the UK economy, along with the US, growing at the fastest rate of all other Western economies, tapering off of the QE stimulus is going to be inevitable and will result in a steady rise in interest rates. This won’t happen overnight but anyone with a substantial amount of borrowing against property assets should be doing some “stress testing” now.
Get yourself on one of the many mortgage rate calculators on the Internet and work out what your re-payments will be in interest rate stages as these rates start to rise towards their long term averages of around 4.5 to 5%. Then, using a spread sheet cash-flow forecast, work out how you can meet those re-payments without excessive strain on your resources. Your forecast will show-up any shortfall early, giving you time to do something about it.
Given the successes of buy-to-let, it would be unfortunate then if something came along to spoil the party; but it’s probably inevitable there are those who feel that landlords are getting an easy ride to wealth, at the expense of non-property owners, notwithstanding landlords are risking their own capital to provide much needed accommodation. People will still complaint that “something should be done about it” because looking in from the outside it all looks so easy.
There is resentment in some quarters about the tax concessions that landlords receive, including mortgage interest relief and “business” expenses, the 10% depreciation allowance etc. But all of these critics, politicians and commentators alike have probably never run a rental business in their lives, and have no idea what’s involved in dealing with voids and bad tenants, or how slim returns can be at times. See Michael Ball’s Report below.
Headlines like these don’t help: “Property millionaires are being created at the rate of 254 a day as booming house prices push up the value of luxury homes” and of course there’s the constant threat that another property bubble is on the way.
Most of these wealthy landlords are in London and the South-East and this situation is by no mean universal across the country – there are some very deprived areas where prices and rents have hardly moved or have even declined over the year. Britain has 393,127 home owners with properties worth more than £1 million – with 61% of all millionaire home owners with homes in and around the capital.
As with all markets when they reach such high levels and enter “bubble” territory, risks increase, so anyone contemplating purchases in these hot spots needs to be wary.
Also, the landlord’s standing in society’s eyes is not helped when rouge landlords operating “below the radar” are often, mainly through lack of effort or resources on the part of local authorities, allowed to get away with “murder”. As always there are calls for more and more regulation, but the reality is there are plenty, more than enough laws already in force to effectively deal with bad landlords, they just need to be actively enforced.
Landlords and property investors need incentives to put their capital at risk and they need certainty of outcome. Given the importance of the PRS to the national economy and society, Governments present and future should bear this in mind; in any case UK property taxation still compares unfavourably with some regimes in other countries, particularly the US with generous depreciation allowances on property.
Having said that, HM Customs and Excise (HMRC) claim that there could be up to 1.5 million residential property landlords who are not declaring any or all their rental income. This is a very foolish practice as it’s so easy to get caught out. If you are caught out HMRC will go through your affairs with a fine tooth comb and you will forever be flagged up as “not to be trusted” in all your tax matters.
If you are in this position you should think seriously about the consequences. HMRC has recently started a campaign and has set-up a “Property Tax Task Force” to weed out these evaders. In the meantime they are encouraging people to take the opportunity to bring their affairs up-to-date if needs be, before they are caught out – significantly higher penalties will be charged later.
Anyone interested in minimising their tax payments, and doing investment and inheritance tax planning etc., should consider a subscription to the excellent publication, in my opinion, www.propertytaxinsider.co.uk They produce a monthly publication which covers UK Personal, Business and Property Taxation designed to build month by month into a detailed tax guide and reference file.
Adding to this theme of a backlash against landlord investors, indications of possible future policy emanating from the party conferences show that the Opposition would be much more prepared to interfere with market forces and impose price caps and much more aggressive regulation.
Banks, Energy Companies, and Building Firms, along with big corporations in general, would be in the firing line, and it is now clear that so would housing, and the PRS in particular.
There has been much talk of Rent Control (RC) from some quarters, and even though it’s unlikely to come to full blown RC there are certainly moves in that direction already which will not only be detrimental to landlords, in my view it will be detrimental to the whole housing market. More and more cash strapped councils are imposing compulsory selective licencing; a national register of all private landlords is a possibility, as are longer-term (5-year) tenancies.
Whether they would go the whole hog and take us back to the Rent Act days is debatable, and truly unthinkable, but any talk of price capping and rent control will make suppliers in any market jittery about putting more money at risk. See this analysis Rent Control
Further to this, the Residential Landlords’ Association (RLA) commissioned a report, which is well worth a read, by Michael Ball, Professor of Urban and Property Economics at Henley Business School, University of Reading entitled: “Investing in private renting Landlord returns, taxation and the future of the private rented sector”. See: http://longertermtenancies.com
Some student landlords could come under more pressure with the steady increase in the provision of high end and new student accommodation by big corporate investors, taking advantages of tax concessions from Government.
The Unite Group PLC is the largest provider of student accommodation in the UK offering some 42,000 rooms in 23 locations and has ambitious plans to provide many more. Student landlords need to be aware of this change in the landscape and adjust their strategies accordingly.
The June 2013 ruling in the Superstrike Ltd vs. Marino Rodrigues has left landlords and letting agents uncertain about the legal position they are in regarding the tenant’s deposits they have taken. Six months on we still await clarification of the position from Government (DCLG) or any further new cases which will decide the matter once and for all.
As it stands, the case involved specific circumstances (a pre April 2007 tenancy) and in theory the ruling affected those tenancies only, but it still leaves uncertainty as to whether the same logic will be applied to post-2007 tenancies. Hopefully, common sense will prevail in the end but in the meantime landlords and agents should play safe; confirm with the deposit agencies that the deposits have been “re-protected” and re-serve the statutory deposit notice each time a tenancy becomes periodic, or is renewed.
Legislation currently going through Parliament in the form of an Immigration Bill will likely introduce an obligation on landlords and agents to do immigration status checks when renting out property, and possibly on an on-going tenancy basis. This is obviously another task to be carried out and an added expense, but in reality I don’t see how these obviously necessary checks are to be done other than by landlords and agents. These checks will be built into the credit checking and referencing process by www.tenantVERIFY.co.uk in the near future.
Measures announced in the Autumn Statement by George Osborne were largely welcomed by landlords. In particular, good news for commercial landlords and their retail tenants were the measures to be introduced affecting reliefs on Business Rates. Largely blamed for the current demise of the high street, previous steep rises in business rates and the planned increases next year were crippling many small businesses.
Following on from the devolution in Scotland and Wales, housing legislation continues to diverge from Westminster, with both regions, most recently Wales, with its Housing Bill, introducing their own housing legislation. Landlords with properties in these locations will increasingly need to refer to a wider range of regulation, much of which will be more onerous on landlords than before.
Finally, to finish on a very positive note for the year end, we have being running a very successful advertising campaign throughout December for 12 leading suppliers to the rental market. From furniture supplies to condensation control, insurance to tax advice and management software to student accommodation these suppliers are all respected leaders in the fields, see press article here.
Tom Entwistle, December 2013