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A Tale of Two Cities – London Price Rises and Falls

Rightmove have released their latest house price index and it has some interesting figures for those looking to sell their home.

According to their findings, properties coming to market on Rightmove in London as a whole have seen a price rise of 1.1% in the month of July but this can be split into Inner London and Outer London.

Inner London which consists of Hackney, Tower Hamlets, Islington and nine other boroughs in the centre of London have seen asking prices rise 2.6% in July. If you head further afield to Outer London which consists of Newham, Waltham Forest, Haringey, Barking & Dagenham, Redbridge, Havering and thirteen other boroughs, there has actually been a drop in asking prices on -0.4% in July but that can be broken down further still.

Each borough is different and although outer London has seen a decline, if we delve into individual boroughs we have a clearer picture of the top performing areas. Topping the whole of London for price increases is Newham with a whopping rise of 8.5% in asking prices for the year followed by Hackney with a smaller but still impressive 5% increase.

Another interesting thing to note is the time a property takes to sell. In June 2016, the average time to sell a house in London was 45 days. Go forward to June this year and it is close to 13 days longer with the average being 58 days.

Therefore, when selling your home you will need a complete marketing strategy and a good agent to make you stand out of the crowd. Gone are the days where you can simply place the property on the market and have a rush of buyers come in. Picking an agent who will make the effort and execute a well worked out strategy is vital to avoid properties going stale in the market.

The full report including a breakdown by borough including average house prices can be seen by clicking here. As always, if you’re looking to buy, sell or just want a chat about property, please contact your local Homefinders branch.
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Rental Trends

Well, if you’re a landlord outside London, it’s good news according to Sam Mitchell of Rightmove. Rental prices in the UK have seen an average rise of 2.8% in quarter 2 (April-June) this year. London has not fared so well with a modest fall of -0.2%.

The annual picture doesn’t offer a much better outlook with rent decreasing in London by -3.2% over the past year as opposed to a 1.9% increase across the UK.

Unfortunately for the rest of the UK, London is usually a barometer for what is going to happen to prices in the not too distant future. Prices may be increasing now but a decline could be on the way.

The increase in the amount of available properties could be leading the decline in rental prices with the number of properties available to rent up 8% on last year in London. Tenants have more to chose from when looking for a place to call home. This increase in available property may still be due to the property glut from when landlords rushed to purchase properties ahead of the increase in stamp duty to 3% last year.

If you’re a London landlord, it’s important to take heed of the market. Of course, you always want to achieve the most rent possible for your investment but if you overprice your property and have it sitting empty for an extra month and then have to drop the price anyway to find a tenant, you are losing out on more money than you need to.

It’s also important in a declining rental market to set your property apart from the rest and it may well be time for you to spend a few pounds on your property in either redecoration or slightly bigger jobs such as a new bathroom or kitchen to keep it looking modern and a draw for tenants in an ever more competitive market.

Renewal negotiations and looking after your tenants are also more important in a declining market than before. It is often better to renew an existing tenancy with a small increase or no increase in rent and keep a good tenant as opposed to having a void.

Another service Homefinders can offer you if you want to take the risk out of letting is leasing. We can guarantee your rent for 3 years and payments will be made whether your property is tenanted or empty. The rent level will be set at today's rates, small maintenance jobs will be taken care of at no cost to yourself and on top of that, you do not have to license your property which costs around £800. It's win win.

Please contact your local Homefinders branch to find out more.
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Rogue Landlords Beware


It’s getting harder by the year to be a bad landlord and rightly so. From the day of Charles Dickens and the age of reform where landlords could get away with murder (quite literally) to today where increasing regulation helps weed out the worst of us.

The most recent tool against rogue landlords and agents is from the Housing and Planning Act 2016, in particular, rent repayment orders. As with most punitive action this hits landlords where it hurts; in the pocket. A landlord may be forced to repay up to a year’s worth of rent to tenants if they:

 Use violence to secure entry to the property
 Harass tenants
 Fail to comply with improvement notices or prohibition orders
 Have an unlicensed property or HMO
 Breach a banning order that prohibits them to rent properties for past infractions

The legislation took effect from April but is not all that is being done in London. With the age of social media, Mayor of London Sadiq Khan has started naming and shaming landlords who have broken the law.

A database is being built in conjunction with London boroughs and will be published on the Mayor’s website listing all the landlords and agents who have been successfully prosecuted for housing offences.

The London Borough of Newham is helping to develop the database and with borough wide licensing in force, have been one of the most proactive in targeting rogue landlords. Since 2013 they have prosecuted over 1,100 rogue landlords and agents and banned 28 from operating.

Of course, not all landlords who fall foul of the law do so intentionally. If you are unaware of your legal obligations which grow each year or just don’t have time to meet the demands of being a landlord, using a reputable agent is the best way forward for you.

If you have any questions or would like to find out more, please feel free to contact your local Homefinders’ branch.
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Equity Loans and Help to Buy ISAs – Making Property Affordable

Not everybody has the luxury of wealthy parents to help them buy their first home and with house prices usually going up faster than wages, the government has stepped in to help first time buyers and to a certain extent, house builders. There are currently two schemes available, equity loans and a help to buy ISAs.

For the equity loan, the government will lend you up to 20% of the property value (capped at £600,000 for the total purchase price) interest free for five years. All you need do is find a 5% deposit and arrange a mortgage for the remaining 75%. If you’re in London, they will lend you up to 40% of the property value.

If we do the maths on say a £200,000 property, you’d need 5% of this figure for a deposit which is £10,000, the government’s 20% loan would be £40,000 and you would need to get a £150,000 mortgage (you’d need to be earning over £33,000 assuming you can borrow 4.5 times your income) on the remaining 75%.

For London it would work out as £10,000 for your 5% deposit still, the 40% government loan would be £80,000 and you’d need a mortgage of only £110,000 for the remaining 75% (and an income of just over £24,000).

As helpful as this is, there are caveats:

o This is available for new build properties only for first time buyers and people moving homes but they can only own one property at a time (sorry landlords)

o The government’s stake is always 20% of the property, so if the value goes up 10% in value, your 20/40% loan from government would increase by £4,000 and £8,000 in the above examples. If it decreases in value, you’re quids in as so will your government loan!

o In year six, you start repaying 1.75% of the original loan as interest. This will increase every year in line with the Retail Price Index plus 1%.

o You do unfortunately have to pay the loan back after either 25 years or when you sell the property, whichever is the soonest

The help to buy ISA (Individual Savings Account) is where the government actually gives you free cash. It is for first time buyers only and for properties valued at £250,000 outside London and £450,000 inside London, new build or existing properties.

The way it works is that every £200 each person saves, the government tops it up by £50 to a maximum of £3,000 if you save £12,000 towards a deposit. The government top up becomes available at the point of purchasing a house and using a £200,000 house again as an example, you’d need to save £8,000, the government will add £2,000 and there you have a 5% deposit, none of which will need to be paid back to the government. You also receive tax free interest on your savings and it can be used in conjunction with the government equity loan.

Buying a house is one of the most expensive things people will ever do and as costs escalate, it was becoming out of reach for many. With one or both of these schemes, it has just got easier for those of us without the bank of Mum and Dad to help them on their way. If you’re looking to buy or have further questions, feel free to contact your local Homefinders branch and find out more.
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DALSTON MARKET NEWS

Dalston has shown its mettle in the last few years and remains a particularly buoyant and robust part of the UK property market. In the aftermath of the credit crunch, some parts of the UK saw prices fall by as much as 8% (2007 vs 2009), but here in E8, prices held steady and have risen consistently since 2000.
For that reason, we are confident that house prices in our area will see a strong growth up to the end of the decade. Since 2000, prices have increased by 21.6% per year, and if that pattern continues for the next three years, prices would end the decade at £780,750 which is 19.4% above the current level (they are currently £654,000). Even if we take a less bullish position, the outlook is still rather good. Since 2009, prices have increased by 16.3% per year, and if that pattern continued to the end of the decade, they would sit at £679,000 which is 3.8% above the current level. That means your home could be making £10,900 per year.
But there’s no reason not to be cheerful about the market, because of the fundamental factors underpinning it. For example, the demand profile is broad and not overly dependent on any one demographic. Transaction levels are not only high, but consistently so which is the best measure of the health of residential markets.

The last two years have seen a seismic shift in the underlying dynamics of the UK economy. While the long-term effects of Brexit on property prices remain to be seen, price levels in E8 remain robust. Since the start of 2015, flats have seen a rise of 29%. This compares with a fall of 4.1% for terraces.
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WHAT ARE THE MAIN TAX CONSIDERATIONS FOR LANDLORDS?

The Government has hit landlords hard over the past 12 months with changes to the tax they pay and can claim back. Here we outline the tax rules which landlords need to consider.

Stamp Duty Land Tax (SDLT)

From 1 April 2016 anyone purchasing an additional residential property (that is not their only or main residence) for £40,000 or more must pay an extra three per cent stamp duty above the current Stamp Duty Land Tax (SDLT) residential rates.

The current rates mean that you pay SDLT on increasing portions of the property price above £125,000 when you buy residential property. For instance, up to £125,000 the SDLT rate is zero. On the portion from £125,001 to £250,000 the SDLT rate that you will pay is 2%. The portion from £25,001 to £925,000 a SDLT rate of 5% is applicable. From £925,001 to £1.5 million the SDLT rate is 10% and the remaining amount i.e. the portion above £1.5 million the SDLT rate is 12%. Therefore for an additional buy-to-let property landlords will pay an extra 3% on top of these rates!

It’s worth noting that purchasers now have 36 months rather than 18 months between selling a main residence and replacing it with another without having to pay the higher rates‎.

Restriction of allowable costs

All landlords with residential property inside or outside the UK are allowed to claim relief for finance costs such as mortgage interest incurred on the property they let. Tax relief is available at 40% and 45% for landlords paying tax at the higher and additional tax rates. However, this tax relief will be restricted to the basic rate of income tax (20%) by April 2020 and is being phased in gradually by the Government from April 2017.

Changes to Wear and Tear Allowance

In April 2016 the Wear and Tear Allowance for fully furnished properties was replaced with a relief that enables all landlords of residential houses to deduct the costs they actually incur on replacing furnishings, appliances and kitchenware in the property. The relief given will be for the cost of a like-for-like, or nearest modern equivalent, plus any costs incurred in disposing of the old item, or less any proceeds received for, the asset being replaced.

Capital Gains Tax

Landlords are likely to have to pay Capital Gains Tax if they make a profit when they sell a property that’s not their home such as a buy-to-let investment. In the last 10 years there have been many changes to how Capital Gains Tax is charged. Currently the rate applicable to gains made on the sale of property is 28% and this amount is payable irrespective of whether a landlord intends to reinvest theses gains.

To understand these issues further get in touch with your accountant or an independent tax advisor.
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THE KEY TO TACKLING HOME IDENTITY FRAUD

Home identity scams are becoming more frequently reported in the mainstream media, with multiple prominent cases recently coming to light.

In a recent high profile property fraud case, Laylah De Cruz and her mother, Dianne Moorcroft, duped property professionals into a fraudulent application for a £1.2 million bridging loan on a vacant home in Kensington.

On 16 January, both were found guilty of conspiracy to commit fraud by Southwark Crown Court and are currently awaiting sentencing.

Dianne Moorcroft changed her name by deed poll and posed as the registered proprietor of the home. She convinced agents and solicitors that she was looking to sell up and move to Dubai. When the application was made to Land Registry, it was identified as possible fraud and the request was cancelled.

Although in this case the owners did not lose their property, the loan company had already advanced the money, which was withdrawn as cash in Dubai before it could be returned.

Since 2009, Land Registry have been cracking down on home identity fraud but it is important that resident remain vigilant and do what they can to protect their properties from fraud.

How to protect against fraud

Make sure property is registered with Land Registry
Ensure contact details are up-to-date with Land Registry
Any confidential documents should be shredded before being thrown away
Sensitive security or bank details should never be disclosed over the phone
Bank statements should be checked carefully for any suspicious transactions
The Land Registry offer a free Property Alert Service, notifying homeowners if the register of their property is changed. Restrictions can also be applied to title deeds where a sale or mortgage can only be processed if a conveyancer or solicitor certifies the application was made by the homeowner.

Property fraud should be reported to the Land Registry property fraud line on 0300 006 7030 or by e-mail on reportfraud@landregistry.go.uk.

Scam and rogue trader complaints should be reported to Trading Standards via Citizens Advice Consumer Service on 0345 4040 506.
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Rental Outcast for 2017

Rightmove has released its latest analysis of the 2016 rental market and what they expect in 2017 to look like.



In 2016, outside of London recorded rental increases of 3% with inner London seeing a 5.2% drop in asking prices and outer London seeing a more modest 2.5% decrease in asking prices. The decrease in London was due to more availability of stock as around 32% more properties came onto the market when landlords rushed to beat the stamp duty hikes that came into force in April.



The main winners for 2016 in rental increases were Swansea with an 11.4% annual increase in asking prices, Gillingham with 11.1% and Bath with 10.5%.



2017 predictions are akin to guessing how long a piece of string is as there are more factors than usual coming into play. With higher stamp duty on purchases, tax to be paid on mortgage interest, tighter mortgage lending rules and the Brexit factor, it is hard to say how rents will react. If there are less landlords leading to a diminishing amount of stock, there will be an upward pressure on rents.



Of course house building also plays a part. According to research think-tank Civitas, there are only enough homes being built to meet 80% of the predicted demand in England for housing of this Parliament with London only building 55% of homes that are estimated to be needed there. Bad news for children and parents stuck living together but good news for landlords!



In 2017 Rightmove forecasters are looking at a 4% growth in rents outside of London with London itself looking to remain flat for the year.



If their predictions are correct, in a flat or decreasing rental market, it is necessary for Landlords and agents to price their property realistically. Although it is important to achieve the maximum for your property, if it is overpriced and tenants are not taking it, a month or two void period will easily cover the increased rent you may have been asking for and then you’d have to drop the rent anyway; possibly by more if the market is decreasing.



If you have a property coming available for rent or are looking to purchase one, please feel free to contact one of our branches to find out what to expect from your investment in 2017 and how the local market is performing.
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Landlord Tax

“Tax doesn’t have to be taxing” was the strapline for an advertising campaign run by Her Majesty’s Revenues and Customs (HMRC) not so long ago. Unfortunately for many of us around this time of year it is taxing both financially and mentally. With around two weeks left to go until the 31st January deadline to file your tax, it’s important to get it right.


To help make life easier for you, HMRC has set up a webpage detailing what you need to know and do. Most importantly, it tells you what records you should be keeping, what expenses you can claim for and what you can’t. It also runs through how to file your taxes online.


Expenses you can deduct if you pay them yourself are usually:


- General maintenance and repairs to the property,

- Water rates, council tax, gas and electricity

- Insurance – landlords’ policies for buildings, contents and public liability

- Interest on a mortgage to buy the property (although this is changing next tax year)

- Costs of services, including the wages of gardeners and cleaners

- Letting agent fees and management fees

- Legal fees for lets of a year or less, or for renewing a lease for less than 50 years

- Accountant’s fees

- Rents (if you’re sub-letting), ground rents and service charges

- Direct costs such as phone calls, stationery and advertising for new tenants

- Vehicle running costs (only the proportion used for your rental business)


Records that you should keep as evidence are:


Electricity and gas bills, (unless you already get the cost of this back from the tenant), ground rent and service charges

The cost of maintenance and repairs (such as extensions but you may need this for any future capital gains calculation)

Any rent or ground rent that you have to pay

Fees you pay to a Letting/managing agent

Legal fees on renewing short leases (but not when they are first made)

Interest you may pay on a loan obtained for the purchase of the property (i.e. a mortgage) but not capital payments (this changes for individuals from 6 April 2017)

Other interest directly related to the business may be allowed

Cost of gas safety certificates or similar requirements

Building and contents insurance

Accountancy fees

Services like cleaning or gardening

From April 2016 the cost of replacing furniture

Other direct costs like phone calls, stationary and advertising

If you are lucky enough to be a Homefinders’ landlord, the majority of the above information will be held by us. If you’ve mislaid this information, we’re happy to provide it for you.

For more information on Landlord Tax and the full guide, visit

http://www.hmrc.gov.uk/courses/syob3/letting/HTML/letting_menu.html
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Blog By: Neil Spooner, Accountant

Budgets have been very hard on the buy to let landlord as explained in the following article

2015-16 removal of wear and tear allowance

For many years’ landlords who let property which was “fully furnished” have been able to claim an allowance each year equal to 10% of the rental income to reduce their tax liability.

A higher rate tax payer with rental income of £20,000 per year has been able to save £800 per year or 4% of the total rental income because of this.

This has always been a very generous allowance which for some landlords was the difference between having to pay tax or not. The allowance has been completely withdrawn from 6 April 2016 and in future landlords will only be able to claim for the cost of any replacement furniture or white goods.

Whilst the restriction in the amount of mortgage interest that can be claimed against rental income has been the focus of the financial press this change could have much more of an impact on the return achieved from the buy to let investment. This will lead to increased tax having to be paid on rental income.

2016 -2017 Mortgage interest tax relief phased out

As you will all be aware from next tax year (2017-18) mortgage interest on but to let properties will no longer be a deduction from “profit”. Instead you will receive a basic rate tax credit of 20% of the mortgage interest.

If you are a basic rate tax payer, ie your total income from all sources is below £43,000 then this will not change your actual tax liability, However if you are a higher rate tax payer this will have a considerable impact on your tax liability.

The government announced in the autumn statement that the rate at which you start paying 40% tax will increase to £50,000 so that will offer some hope to the smaller landlord that these rules may not apply.

Example

Current rules

Rental income £10,000

Mortgage interest £3,000

Profit £7,000

If you are a basic rate tax payer you would pay 20% x £7,000 = £1,400 in tax. If you are a higher rate tax payer you would pay £2,800 or 40% x £7,000.

Under the new rules if you are a higher rate tax payer you will actually pay £3,400 in tax.

This is calculated as follows

Profit on rental income £10,000

Tax at 40% £4,000 less basic rate relief on mortgage interest being 20% x £3,000 or £600 leaving tax to pay off £3,400.

If you earn over £150,000 and pay tax at 45% then the changes in rules are even more costly.

These rules are being phased in over the next 3 tax years but from 2020-21 these will be the tax liabilities landlords will be facing.
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