Showing posts with label stamp duty. Show all posts
Showing posts with label stamp duty. Show all posts

Thursday, 22 June 2023

Rents up 10% in a year


Rents have increased by 10% on average in the past 12 months across the UK. Interestingly, the greatest increase (+13.6%) has been in Scotland…where government-imposed rent controls are in place! 

Who could have possibly anticipated that all of the government's meddling would negatively impact those it was supposed to help (i.e. tenants).

Maybe said Government should read my newsletter!....


In December 2015, when the stamp duty surcharge to landlords was announced, I wrote:

“The tax changes announced in the Summer budget and now the additional 3% stamp duty to new buy-to-let properties will reduce investment in rental properties. There is already a shortage of rental properties on the market and the new legislation will further limit the options available to tenants, which will ultimately increase rents.”


In April 2017, when ‘section 24’ tax changes first took effect, I wrote:

"The impact of all this is likely to translate into some landlords selling up, alongside fewer people entering the market. The resulting drop in the supply of rental properties, coupled with landlords needing to earn more to make the venture worthwhile, suggests rents are likely to increase."


A couple of months later in June 2017, when a ban on fees to tenants was announced, I wrote:

"I believe the letting fees ban will lead to rents rising; meaning any short-term savings for tenants will be more than offset by the monthly increase in rent. Perversely this will penalise those tenants wanting to create a long-term home the most, which is something I thought the government was in favour of?"


In February 2019, when the previously announced tax changes started to bite harder, I wrote:

"Some landlords are already exiting the market as they’ve calculated it just isn’t worth it for them anymore. Whilst that may create some opportunities for people looking to buy, it will mean a further reduction in the number of properties available to rent and, as a consequence, an increase in rents for those that remain."


In June 2019, when ‘the other stuff’ bolted on to the Tenant Fees Act was better understood, I wrote:

“Security deposits will be capped at five-week’s rent (for rents up to £50,000pa). Whereas tenants with credit issues, who are self-employed (with income that’s hard to prove) or with pets used to be welcomed simply by asking for an increased security deposit, now this is not an option. Instead, many will be rejected outright and will thus find renting a home even more difficult than it already is. They may alternatively be asked to pay an enhanced rent (which is allowable under the guidance of the Act).”

as well as:

“Unfortunately, I believe these changes will lead landlords to be pickier than ever as to who is allowed in their properties, as well as being less flexible (and perhaps less helpful) than they were before the Act came into force.”


The renters reform bill has now started to take shape; so, do I think it will ultimately prove to be good news for tenants? In a word…no.

The problem with all of the government’s meddling and the theory that ‘good landlords should not be worried about the changes’, is that the good landlords (and letting agents) are the ones burdened by trying to do things right. This can become an onerous task, to which many decide the easiest solution is simply to exit the market. Meanwhile, the rogue landlords will continue to ignore or sidestep the rules like they always have. I believe this will ultimately lead to a drop in the supply of rental homes, which will lead to a rise in rents, alongside a decrease in the quality of the operators who remain in the industry. 









Thursday, 8 June 2023

How does stamp duty work?

I made one of my former landlords a five-figure sum this week, just by knowing a little about stamp duty. With that in mind, I thought I’d provide an overview of how stamp duty is calculated and, perhaps more interestingly, how you might be able to claim some of it back!

You usually pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price when you buy a residential property:
Some exemptions and reliefs apply; most notably for first-time buyers, whereby the first £425,000 is subject to no stamp duty (assuming the purchase price is below £625,000).

Unfortunately for many since April 2016 though, if buying a new property means you’ll own more than one property (anywhere in the world) and you have not sold your current main residence, then you must pay a further 3% of the purchase price as additional SDLT. Most commonly this will apply to those buying a second home or a buy-to-let property, but others can get caught out by the surcharge too. In short, if you have not sold your main residence on the day you complete your new purchase, you’ll have to pay the extra 3%.
This is clearly a great financial advantage to first-time buyers, but a deterrent to those wanting to invest in buy-to-let property. This is just one of the reasons why landlords sold 35,000 more properties than they bought in 2022, for which the supply/demand imbalance is being seen through rapidly rising rents.

Crucially for some though, it is possible to reclaim the 3% SDLT surcharge in certain circumstances. The most common (but still not widely known) is if you sell your former main residence within three years of having paid the additional SDLT.

So, when I saw the previous home of a former landlord of mine pop up for sale just two and a half years after they had moved, I gave them a quick call for a catch-up and mentioned the substantial refund due to them…which they had no idea about! I knew when they had purchased their new property and duly moved in that they had kept their old home (initially so a family member could live in it). This would have meant paying the 3% surcharge on their new property purchase as it meant they then owned more than one property and were not selling their former main residence. Having sold their old home within three years of this though, they can now claim back the additional 3% SDLT they had previously paid.

Many see stamp duty as an archaic and unjust tax grab that should either be reformed or scrapped altogether. It raises approximately £10 billion for the Treasury every year though, so a fair chunk of change would need to be found elsewhere to balance the books. With such large sums at stake though, it definitely pays to have a little knowledge on such matters.


If you are looking for an agent that is well established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP



Chichester rental valuation

Thursday, 23 June 2022

Shortage of homes to rent leads to tenant bidding wars

This was the title of a recent BBC News article, which seems to have come as a surprise to many. Rents have increased by 10.6% on average in the past 12 months across the UK. Who could have possibly anticipated that all of the government's meddling would negatively impact those it was supposed to help (i.e. tenants).

Maybe they should read my newsletter!....


In December 2015, when the stamp duty surcharge to landlords was announced, I wrote:

“The tax changes announced in the Summer budget and now the additional 3% stamp duty to new buy-to-let properties will reduce investment in rental properties. There is already a shortage of rental properties on the market and the new legislation will further limit the options available to tenants, which will ultimately increase rents.”


In April 2017, when ‘section 24’ tax changes first took effect, I wrote:

"The impact of all this is likely to translate into some landlords selling up, alongside fewer people entering the market. The resulting drop in the supply of rental properties, coupled with landlords needing to earn more to make the venture worthwhile, suggests rents are likely to increase."


A couple of months later in June 2017, when a ban on fees to tenants was announced, I wrote:

"I believe the letting fees ban will lead to rents rising; meaning any short-term savings for tenants will be more than offset by the monthly increase in rent. Perversely this will penalise those tenants wanting to create a long-term home the most, which is something I thought the government was in favour of?"


In February 2019, when the previously announced tax changes started to bite harder, I wrote:

"Some landlords are already exiting the market as they’ve calculated it just isn’t worth it for them anymore. Whilst that may create some opportunities for people looking to buy, it will mean a further reduction in the number of properties available to rent and, as a consequence, an increase in rents for those that remain."


In June 2019, when ‘the other stuff’ bolted on to the Tenant Fees Act was better understood, I wrote:

“Security deposits will be capped at five-week’s rent (for rents up to £50,000pa). Whereas tenants with credit issues, who are self-employed (with income that’s hard to prove) or with pets used to be welcomed simply by asking for an increased security deposit, now this is not an option. Instead, many will be rejected outright and will thus find renting a home even more difficult than it already is. They may alternatively be asked to pay an enhanced rent (which is allowable under the guidance of the Act).”

as well as:

“Unfortunately, I believe these changes will lead landlords to be pickier than ever as to who is allowed in their properties, as well as being less flexible (and perhaps less helpful) than they were before the Act came into force.”


The renters reform bill has now started to take shape; so, do I think it will ultimately prove to be good news for tenants? In a word…no.

The problem with all of the government’s meddling and the theory that ‘good landlords should not be worried about the changes’, is that the good landlords (and letting agents) are the ones burdened by trying to do things right. This can become an onerous task, to which many decide the easiest solution is simply to exit the market. Meanwhile, the rogue landlords will continue to ignore or sidestep the rules like they always have. I believe this will ultimately lead to a drop in the supply of rental homes, which will lead to a rise in rents, alongside a decrease in the quality of the operators who remain in the industry. 


This article was featured in...









Thursday, 7 January 2021

What’s in store for Chichester’s landlords in 2021?

Whilst attention was largely focused on tackling the coronavirus pandemic in 2020, new laws were still implemented that affected the lettings industry. Indeed, the pandemic seems to have provided the excuse to fast-forward into law a few matters that were previously only ‘on the horizon’ and, as such, 2021 looks set to be another busy year for landlords.

Letting agents must have Client Money Protection - confirmed
The deadline for this mandatory requirement has been pushed back twice in the past few years, but a firm date of 1st April 2021 now exists. From that date, all letting agents must have Client Money Protection, which covers the misappropriation of their landlords’ and tenants’ money. So, check your letting agent has it in place!



Electrical safety checks - confirmed

Since 1st July 2020, an Electrical Installation Condition Report (EICR) must have been carried out (and a copy provided to the tenants) when starting a new tenancy. From 1st April 2021, EICR’s will become mandatory for all tenancies.

 

Changes to stamp duty - confirmed
In July 2020 the stamp duty exemption rate was increased from £125,000 to £500,000. Although landlords are still subject to the 3% additional property surcharge, it has meant big savings have been on offer on property purchases (of upto £15,000). This is set to end on 31st March, although it’s quite possible that this period will be extended. What is confirmed though is that, from 1st April, all non-UK residents will be liable for an additional 2% stamp duty surcharge.

 

Changes to Section 21 - highly likely
Emergency legislation in light of Covid-19 currently means landlords must provide tenants with six months’ notice (compared to the normal two months). This is set to end on the 31st March, but it’s likely that political pressure will see this period extended. Worryingly for landlords, this ‘temporary’ measure could set the way for the full abandonment of the current ‘no fault’ Section 21 notice system. This has been lobbied for by pro-tenant groups and discussed for years, and would result in all evictions needing to go through the courts (which are already stretched beyond capacity…).


Increase in tax - highly likely

Nothing has been confirmed in this regard, but Rishi Sunak did say that tax increases in 2021 were “inescapable” after the vast sums of money spent dealing with the coronavirus pandemic. One likely candidate is Capital Gains Tax, whereby the rates are increased to match those of the income tax bands (for which many landlords are now in higher brackets, due to the full ramifications of the ‘Section 24’ mortgage interest relief changes being felt).


Changes to Right to Rent - likely

Since February 2016, landlords in England have had to check their prospective tenants’ immigration status to ensure they had the right to live in the UK. Brexit has brought in a new points-based system, but landlords have been told to continue with the existing checks until 30th June. Guidance for what to do after then is due to be released in the Spring.

 

No more ‘no pets allowed’ - likely

A bill has been put forward that would allow tenants to have a pet without requiring their landlord’s approval. Whilst I am typically pet-friendly as a letting agent / landlord, some people and types of property simply aren’t suited to having a certain type, or number, of pets. Many landlords also simply do not like being dictated to, as further control about their property gets taken away from them.




Further impact from coronavirus & Brexit - who knows!!

Whilst no one knows what the future holds, we can at least prepare ourselves for what might happen. Those who are able to adapt to the frequently changing world of lettings should be well-placed to cater for the growing number of tenants, at a time when the number of landlords and available properties is decreasing.



This article was featured in...




Thursday, 11 May 2017

Which month is busiest for the estate agents in Chichester?


I was chatting with a landlord in Chichester last week who had decided to sell their rental property but was struggling to do so. He was therefore considering re-letting the property rather than holding out for a seller who might not come along, having waited several months already. I told him if he really wanted to sell, it might be best to remain patient a little while longer as April-May is typically a busy time amongst estate agents in regards to selling property.

When I got back to my office this got me thinking…which month is the busiest for the estate agents in Chichester? I thought if I looked up the number of property sales in Chichester in each month of last year, I might be able to find an answer.

Here’s the month-by-month total for 2016:

January - 166
February - 171
March - 274
April - 82
May - 107
June - 132
July - 139
August - 135
September - 154
October - 168
November - 142
December - 155

So March saw far more property sales in Chichester than in any other month in 2016. BUT this is something of a red herring, as 2016 was quite unique due to the government’s meddling. A 3% stamp duty levy that came in on 1st April 2016 for landlords and second home owners, meant there was a huge increase in the number of transactions getting pushed through in March (and January & February) to avoid this additional cost.

Because of this, I thought it best to go back another year to 2015 (a year that wasn’t distorted by government policy), where I found the following number of property sales in Chichester for each month of the year:

January - 124
February - 144
March - 174
April - 139
May - 169
June - 246
July - 245
August - 213
September - 192
October - 204
November - 188
December - 206
We can see that the number of sales were far more evenly spread throughout 2015 than in 2016. The comparison between the two years also highlights what a drastic affect the stamp duty changes have had on Chichester’s property market, as every month after they came into force has seen fewer properties sold in Chichester than in the same month the year before.

Back to my original question though, about which month is busiest in Chichester’s property market, and it would seem the peak in property sales in 2015 occurred in June and July, where 246 and 245 properties were sold in Chichester respectively. 

Bear in mind though that these figures (from Land Registry) are when a property sale is completed, rather than when it is first agreed between buyer and seller. With the legal process taking at least a couple of months, we can conclude that the majority of sales are indeed agreed in April and May.


Clive Janes, CRJ Lettings.


www.crjlettings.co.uk

_________________________________


If you are looking for an agent that is well-established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:


c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP

__________________________________


Thursday, 31 March 2016

What's going to happen tomorrow?

tomorrow



Maybe it was all an April Fools’ prank from George Osborne, but assuming that isn’t the case; why might the 1st April 2016 go down as a particularly unhappy day for many?

I am of course talking about the additional 3% stamp duty charge for second homes and buy-to-let purchases, which comes in to effect from tomorrow.

It was only in the Spring Budget a couple of weeks ago that some of the previously unanswered questions were addressed, but still the new rules drag many into paying the additional charge that you might not expect. Some parents helping their children on to the ladder as well as those with second homes anywhere in the world will be penalised whenever they move home.

As for landlords, they will have to pay the taxman an additional £5,520 if buying the average priced (£184,000) buy-to-let property. Meanwhile, here in Chichester, there will be an additional £10,132 stamp duty to pay on top of the £6,887 already due, based on an average property purchase price tag of £337,736 locally.

The question remains as to whether we will see prices drop by 3% to absorb this tax increase or whether owner-occupiers will take up the reigns whilst investors simply have to take it on the chin?

Some say that in a years’ time it will simply be the norm and that in the scheme of things, a 3% one-off charge will pale into insignificance over the long-term (it’s taken just four months for prices to increase 3% in Chichester).

I however question whether there is enough demand from owner-occupiers in Chichester who have the (minimum) 10% deposit (£33,774 average in Chichester) to replace these investors. This, at a time when we have seen the proportion of private renting in Chichester increase from 8.5% of households to 12.8% in a decade (which is still below the national average). 

The real sting in the tail that I fear many will face tomorrow due to this legislation will be the sudden collapse in their property sale or onward purchase. Having spoken to local estate agents and solicitors, there are many sales agreed with the caveat that it either completes by the 1st April or the buyer will pull out.

There could be a lot of vendors unwittingly affected by this, either directly or indirectly by a transaction elsewhere in the chain that could scupper proceedings. I think there will be a spike in properties coming back on the market, which could yet offer a glimmer of hope to those looking to buy.


If, on the other hand, you have just completed on a buy-to-let purchase before tomorrows ‘deadline’ and are now looking for tenants or someone to manage the property for you, please get in touch to see if I can help.


chichester observer property headline

(This article was featured in the Chichester Observer's property section 

on 31st March 2016).

Clive Janes, CRJ Lettings.  

www.crjlettings.co.uk


___________________________________

If you are looking for an agent that is well-established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

Follow The Buy-To-Let Property Investment Market in Chichester

Chichester Property Market LinkedIn Page for Clive Janes

CRJ Letting Agents Chichester Facebook Page

CRJ Letting Agents Chichester Twitter Page

Chichester Investment Property Management Specialist CRJ Letting Agents Website




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Thursday, 3 December 2015

Rush to beat the buy-to-let stamp duty hike

stamp duty


The big news last week was the Autumn statement piling the misery on to landlords. From April 2016 any property purchase for the purpose of buy-to-let will be subject to an additional 3% stamp duty charge.

With the average UK buy-to-let purchase of £184,000, that will mean a £5,520 increase in stamp duty. Here in Chichester, the average property purchase price is £348,741, meaning stamp duty is currently £9,237. From April 2016 this will increase to £16,699 for buy-to-let purchases.

Frankly, I’m getting a little tired of the landlord bashing from George Osborne and the wider public. Yes, there are some landlords who overcrowd their properties that aren’t fit for habitation, but this is rare. Most landlords abide by the 400+ pieces of legislation to provide safe and proper homes to those who aren’t in a position to buy.

The tax changes announced in the Summer budget and now the additional 3% stamp duty to new buy-to-let properties will reduce investment in rental properties. There is already a shortage of rental properties on the market and the new legislation will further limit the options available to tenants, which will ultimately increase rents.

People say the homes won’t just disappear if landlords don’t buy them but instead will be bought by an owner occupier. The problem with this is that many don’t have the (minimum) 10% deposit (£34,874 average in Chichester) nor the money left over for all the other fees to be able to buy.

There is also a growing number who choose to rent rather than buy. They do this for both financial reasons but also the flexibility it offers in not having to tie themselves to a particular property (without enduring the added time and expense of selling). 

As UK housing has returned an average 7% compound annual growth rate over the last thirty years, investment bank UBS doesn't think the attractive investment case will diminish with the additional one-off 3% stamp duty charge. It can also be partially offset against the capital gains tax when you come to sell the property too.

In the long-term, I agree that buy-to-let is still a strong investment if implemented correctly. The consistent lack of new properties being built in the country and continued strong demand from tenants means the 3% penalty charge will pale into insignificance in the long-term.

In the short term there could be a rush for those who were considering buying a buy-to-let to do so before the additional 3% fee comes into force in April 2016.

If you’re considering investing in a buy-to-let I’d advise you to start putting those plans into action. If you’d like some free advice and assistance in beating the buy-to-let stamp duty hike, please get in touch.


chichester observer property headline

(This article was featured in the Chichester Observer's property section 

on 3rd December 2015).

Clive Janes, CRJ Lettings.  

www.crjlettings.co.uk


___________________________________

If you are looking for an agent that is well-established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

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