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What’s in your property ‘Scary Box?’

Like any other business set up, property investors have to start somewhere and – if it’s something you haven’t done before, then it’s probably in your ‘scary box’. You see, your subconscious is quite smart – it tries to protect you from uncomfortable experiences and, believe me, anything new will be uncomfortable at first, no […]

Systemise your business to scale up

What is systemisation? This is the process of designing standard operating procedures to ensure the consistency and efficiency of your organisation (yawn!). It doesn’t sound very sexy, does it? But don’t let the dullness of words turn you off; allow me to flick your switch and welcome you into the wonderful world of systemisation!  Without […]

Mortgage approvals double in one month

Mortgage approvals doubled between June and July, bringing the figure just 10% below February’s pre-lockdown numbers.

Latest figures from the Bank of England, show lenders gave the go-ahead for around 66,300 mortgages in July – compared to 39,900 the previous month. The figure for mortgage approvals in February this year was 73,700. By May it had dropped to a mere 9,300 – a record low since 1993 when the BoE first began collating the figures.

Unlike approvals, re-mortgage figure hasn’t jumped

The number of households re-mortgaging was similar month on month, at 36,000. This is almost a third lower than pre-lockdown.

Financially, gross mortgage lending was £17.4bn for July, compared to £16.3bn in June. That’s still short of February’s pre-lockdown levels of £23.7bn.

Figures for August even higher, say analysts

Property analysts believe August’s figures for mortgage approvals will be even higher, thanks to the Stamp Duty holiday which will cut an average of £4,500 from Stamp Duty bills. Those in the industry also point to furloughing of banking and other finance lending’ staff is resulting in a slowdown in the time taken for approvals to come through. Many believe the figures for August and September will reach February’s numbers very soon.

North London estate agent and former Royal Institution of Chartered Surveyors residential chairman Jeremy Leaf commented that the number of mortgage approvals did not reflect the stronger upsurge that the majority of surveyors noted across most property types and price ranges from the beginning of August.

Other analysts, however, are concerned about the effect the end of furloughing will have on the economy as a whole and the property market specifically.

Warning of lenders tightening their purse strings

Sam Harhat, Head of Finance at Andrews Property Group said lenders were becoming ever more stringent about lending, especially for high loan-to-value mortgages (those favoured by first-time buyers). This, he believed, would have a pretty deadening effect on the number of mortgage approvals for August.

He added: “The demand for property is exceptionally strong, a result of pent-up demand, the low cost of borrowing and the stamp duty holiday, while the availability of mortgage finance has been contracting by the day.”

Bigger houses selling one third faster than last year

It’s been clear over the past couple of months that rural retreats and suburbs are more popular than city centre living. But, property portal Zoopla claim they have also seen a 30% rise in the sale of four-and-five-bedroom homes since the easing of lockdown. That’s because people moving out of expensive city locations can afford bigger homes in quieter spots.

The website is also anticipating house prices to be 2 to 3% higher at the end of the year than they were at the beginning, thanks to “government support for the labour market and economy.”

Borrowing up in July – to above average levels

Meanwhile, Brits borrowed more money than they paid off in July – for the first time since April this year. At an additional £1.2bn it was slightly higher than the monthly average of £1.1bn for the past year and a half.

Prime Property Sales Double Year-on-Year

Sales of properties worth more than £500,000 are selling twice as well as they did last year.

Research by Frank Knight, based on property portal Rightmove’s figures showed sales of more expensive properties were twice the volume in July and August 2020 than for the same period in 2019. And they were particularly buoyant in the second week in August where they were 61% higher than in the previous year.

And more surprising still is the fact that none of these properties are eligible for Chancellor Rishi Sunak’s Stamp Duty holiday. Introduced last month and set to last until March 31 the rushed-through legislation means there is no Stamp Duty on property valued at up to £500m in England and Northern Ireland. A similar scheme applies in Scotland and Wales where there is no land tax on properties worth up to £250,000 – half the rate of England and Northern Ireland.

Sales volume increase biggest in £1m+ properties

Further research by the upmarket estate agency showed that sales of properties valued between £750,000 and £1m was 119% greater than the second week in August 2019. And, the number of Stamp Duty-qualifying properties which sold (ie up to £500,000) was 53% higher than the previous year

The big increase in sales of luxury properties comes at the same time as the UK government declared last week that the country was officially in recession. But analysts say the best-selling properties were those in the highest brackets of the market – a sector which wasn’t affected during the 2008 recession either.

August best month for property sales in a decade

Meanwhile, Frank Knight wasn’t the only company to declare a huge increase in property transactions compared to 2019. According to a Rightmove report, August 2020 was the best month for sales in more than a decade, with the total online value of those sales hitting more than £37 billion on their portal – an increase of 60% year-on-year. The number of properties coming to market was also far higher at 44% more than in 2019.

Rightmove’s figures continue to show the ‘city exodus’ is in full swing, with homeowners still intent on moving to smaller villages and the countryside in lieu of future coronavirus lockdowns. This resulted in 69% more London properties coming to market in July and August than in the same months in 2019.

Seaside properties faring well price-wise

Rightmove spokesman Miles Shipman also pointed out that properties in the commuter belt were no longer considered ‘premium’, thanks to more people planning on working from home in future. This is also evident in the rocketing prices of property in the seaside idylls of Devon and Cornwall.

House prices overall have risen

Figures from a survey by the Nationwide Building Society earlier this month show that house prices overall – regardless of geographical location or sector – were 1.7% higher in July this year than the previous one. This is despite a UK economic slump of 20.4 per cent during April, May and June.

Whether both the high number of sales and increased house prices continue for much longer remains to be seen – especially in light of the government’s furlough scheme ending in October.

Will England follow Scotland and extend Eviction Ban?

Will they – or won’t they? Thousands of landlords in England are waiting with bated breath to see if the government will indeed end the tenant eviction ban later this week on August 23.

The reason for the nervousness on behalf of buy to let landlords and other property owners is because the Scottish Government is voting this week on whether to extend the ban – to March 2020. The proposal is likely to go through.

Westminster has already done a U-turn on its exam results policy, following the Scottish decision to accept teacher’s results last week. Now those in the property market are wondering if they’ll go down the same road with the eviction ban.

Welsh Government to pay tenants’ rent

The Welsh Government has already extended the ban. But this is in a way that landlords won’t miss out on rent; the government will pay it on behalf of tenants who can’t afford it. The Scottish Government, however, haven’t come up with similar proposals, leaving landlords confused north of the border. Many are panicking that they will be forced to pay the rent on behalf of their tenants.

Homelessness charity Shelter claimed victory for the eviction ban extension in Scotland. Now Generation Rent are campaigning on behalf of English tenants.

London mayor Sadiq Khan has already asked the government to increase benefit levels to ensure these will cover rents. He also wants judges to have the power to ‘throw out’ eviction cases caused by Covid-19.

Around 180,000 Londoners in PRS in arrears

His remarks come on the back of research by YouGov which reckoned nearly 180,000 of London’s 2.2 million adults in private rented accommodation are behind with their rent. Another 374,000 worry it’ll happen to them soon too. Shelter say more than 170,000 people have already been threatened with eviction.

The National Residential Landlords Association are calling for a tenant loan scheme to help pay off rent arrears which have accumulated during the coronavirus.

Westminster making amendments for eviction cases

During the pandemic Housing Secretary Robert Jenrick promised to keep a roof over the head of tenants who couldn’t pay their rent due to coronavirus. The ban was originally for three months and then extended a further two months. Now the Westminster Government says it is amending court procedures to ensure ‘cases are dealt with fairly.’

Some of the measures include landlords having to tell the court how their tenants were affected financially by the coronavirus pandemic. If an eviction hearing doesn’t have this information then the judge can suspend proceedings.

At the same time, temporary court buildings (referred to as Nightingale Courts’) are being set up to deal with the current backlog of court cases to allow evictions and other cases to be dealt with in a reasonable time scale.

A spokesman for the Ministry of Housing, Communities and Local Government said: “The Government support package during the pandemic had helped prevent people getting into financial hardship or rent arrears.” 

There was no mention of whether this would be extended past Sunday.

Halifax record highest house price values on record

House prices last month were 3.8 per cent higher than the same time last year – despite the stagnation to the property market caused by coronavirus.

Halifax’s House Price Index recorded the value of the average home at £241,604. It was the highest price on record for the Index, which began life in January 1983.

Other figures show a total of 63,250 homes were purchased in June. That figure is 31.7 per cent higher than when lockdown was lifted in May. It is also 1.7 per cent higher than in June when the average house price was listed as £237,834.  

Property website Zoom recorded a loss of 124,000 house sales during lockdown. That’s equivalent to around £27bn.

Stamp Duty holiday buoying demand

Pent-up demand is responsible for both months’ high figures. However, it was the Stamp Duty Holiday that really pushed July’s sales. It came into force on July 8 and means thousands of pounds in savings for buyers of homes valued at up to £500,000 in England and Northern Ireland.

Buyers in both Scotland and Wales don’t pay any similar land and stamp duty tax up to £250,000. The scheme in all countries is due to end in March next year. So popular is the scheme that some in the property industry and urging the government to extend the barrier to property worth more than £500,000.

Halifax Managing Director Russell Galley also pointed to the ongoing lack of supply in housing as another contributing factor of higher property prices.

Property analysts say they are pleased to see the market recover after the slump. But they warn that the end of the furlough scheme in the Autumn could lead to a huge number of job losses and an economic crisis. This would, in turn, markedly affect the housing market.

Meanwhile current householders struggling to pay their mortgage will be entitled to continue to defer payments for up to six months from the end of October.

The eviction ban for tenants who can’t pay rent has already been extended and is due to end later this month on Aug 23.

Property markets continue through temporary Lockdowns

What happens to a local property market when a city, town or region is told to go into lockdown?

In Aberdeen this week First Minister, Nicola Sturgeon, re-introduced lockdown for a period of seven days. But viewings will already have been booked for that period and transactions taking place.

The Scottish Government hasn’t put a hold on the property market functioning, but it has insisted that estate agents and others in the industry follow ‘best practice’ in terms of coronavirus guidelines. England, Wales and North Ireland will follow similar procedures.

This means estate agencies don’t have to close the local branch and they can still go ahead with viewing (provided it is socially-distanced with only one person per household and that everyone attending wears a mask). They stress that in the first place though viewings should be via video or online. Physical viewings are only appropriate for buyers or tenants who seem very likely to purchase or rent.

Landlords to benefit from proposed leasehold reforms

Thousands of landlords could be set to benefit from the government’s plans to change leasehold regulations.

Boris Johnson and his cabinet are reviewing the recent Law Commission’s reports which recommend, amongst other issues, cutting the cost of buying back additional years on a lease. This is referred to as Leasehold enfranchisement.

It will affect landlords of apartments and some New Builds – which are more likely to be buy to lets. In fact, the government has calculated that there are currently around 4.7 million leasehold properties that will be affected.

The Law Commission – an independent body – looked at three main areas of the leasehold system in England and Wales. These were leasehold enfranchisement,right to manage and commonhold.

They want to stop the recent practice of developers selling on freeholds to property investment companies – rather than offering it to the leaseholder first. In many cases this has resulted in the freeholder charging the leaseholder extortionate service charges and land rents.

England and Wales using antiquated system

Other proposed reforms include abolishing the leasehold system completely. So antiquated is the system – it dates back to 1066 – that England and Wales are currently the only two countries in the western world who still operate leaseholds.

Landlords with buy to lets north of the border already have Outright Ownership of their property. Scotland abolished leaseholds in 2004 – a fact that makes changes to the other parts of the Union all the more likely.

Right to Manage to cut service charges

The Right to Manage issue, if it goes through, will mean that landlords can choose who they want to service their property. This is possible at the moment but leaseholders have to pay the freeholder’s legal costs in order to achieve this. In future, this wouldn’t be the case.

Commonhold may be compulsory

Under the Commonhold system apartment owners or house owners in a development can vote to manage their own block – despite not owning the freehold. All they would need to enact this is the go-ahead from half the owners. Other proposed changes include making all new apartments and housing complexes Commonhold in future.

Landlords to file quarterly in 2023

Landlords and other property investors will have to file tax returns under the Government’s new digital system in 2023.

The start date was announced recently and means that you’ll have to send quarterly updates of your accounts to HMRC and sign an annual ‘declaration.’ Sending reports can be as simple as pressing a button – but only if you already have a Making Tax Digital (MTD) account.

In order to sign up you will have to find software which is compatible with the government’s system. Right now, there are a number of software programmes which can do this and it’s likely that others are currently in development. If your property company is a partnership then you’ll have to find software that allows you to record the other individuals details too.

Exemptions ‘few and far between’

There are exemptions to the rules. If you earn less than £10,000, for instance, then you don’t have to open an MTB account. As far as landlords are concerned very few will quality, other than those who rent a room in their home and are eligible for a £7,500 exemption. You’ll also be exempt if you can’t get online due to your location, a disability or if your religion forbids you using a computer.

Penalties for non-compliance and late payment

Just like the old system there are deadlines and fines for late payment. Although – unlike the old system – late filing results in points which can be accumulated and then reset (like points on a driving licence). The first point is accrued after 15 days missed deadline. A penalty is issued after a certain amount of points have been reached.

Late payment penalties kick in after 15 days and double after 30 days. Interest is charged from the due date.  In the meantime, it’s believed the government will allow a year-long ‘grace’ period until users become familiar with the new system.

Those paying VAT at more than £87,000 pa are already using the system. Next year it will be the remaining VAT payers. The self-employed are being asked to file the same time as landlords and companies.

The government say they’re bringing in the new system to make errors in tax payment less likely. They have estimated the Exchequer lost around £8.5 billion for the tax year 2018 to 2019. It also means landlords, companies and the self-employed will have a better idea of how their business is going throughout the year – rather than waiting until they file annually.

Meet Ellie McKay

Ellie McKay is a property investor, developer, business woman and public speaker. She knows all about the pitfalls of property from personal experience, and it’s only through developing a strong mindset that she has been able to get where she is today, with her husband Mark alongside her. After a rocky start (which would probably […]
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