Some 21% of landlords are looking for opportunities

SRB customers receive further protection from the FSA

London businesses to pay 2% levy to help fund crossrail scheme

Residential land values increase for third consecutive quarter

The NLA states tenancy deposit protection legislation is working

According to a report by Paragon Mortgages, the average size of a landlord’s portfolio increased by +4.2% to £1.43m in Q4 2009, the first increase since the same quarter of 2008, as 21% of landlords look to increase their portfolio in 2010, with an overall increase of +2.1% expected.

Nigel Terrington, Paragon Group’s chief executive, said: “Landlords enjoyed a strong end to the year and enter 2010 with a solid platform on which to build. Last year was one of stability after the volatile events of 2008 – arrears declined, tenant demand grew and rental incomes strengthened.

“Landlords also reported growth in the value of their property portfolios, whilst the level of tenant arrears fell. Confidence in property investment can be seen in the number of landlords looking to expand their portfolios this year. PRS Trends shows that one in ten landlords is planning to purchase in the first quarter of 2010, but unfortunately investors continue to be hampered by a lack of available buy-to-let mortgage finance.”

A quarter of landlords said that tenant demand continued to grow due to a slow housing market whilst only 13% said it had declined, despite a continuation in positive net migration and ever increasing student numbers creating strong demand.

Tenant demand is also expected to further increase during 2010 with 36% of landlords stating that they expect it to end the year higher than the current level, with just 7% predicting that demand will go down.

Lack of mortgage finance is causing a serious issue for residential investors with 68% of landlords having difficulty securing finance in Q4 2009 compared to the previous three months.

Terrington said: “Those who tried to secure mortgage finance in the final quarter of the year, nearly seven out of 10 said it was more difficult than in the third quarter. Without a significant increase in product availability and an easing in lending criteria, we cannot see this situation improving in the first quarter of 2010.”

However, one in ten landlords plan to purchase property in the first quarter of 2010, with 65% looking to buy a terraced property, 25% are after semi-detached houses, 20% want flats and just 10% are looking for detached houses.

SRB customers receive further protection from the FSA

The Financial Services Authority (FSA) has released details for its new rules and regulations which will mean a stronger framework for protection to consumers in the sale and rent back (SRB) market.

The FSA is tackling the SRB market in a two staged approach having initially implemented an interim regime in July 2009 for 12 months to deal with those consumers whose problems needed to be acted upon quickly, whilst the full regime which has now been announced, will come in to full force on 30 June 2010.

Ed Harley, the FSA’s head of mortgage policy, said: "For some people in financial difficulty, staying in their home remains very important. Selling their home and renting it back in this way can be right for them. But we are aware of some firms exploiting vulnerable consumers at a difficult time. So, it is right that we introduce these further protections, and we will take swift action where they are not met."

The FSA has banned exploitative advertising and high-pressure sales techniques while prohibiting the use of emotive terms like ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’ in promotional literature. It has also:

• Introduced a 14 day cooling-off period to give consumers more time to make decisions on SRB    
• Banned cold calling and prohibited firms from dropping promotional leaflets through letter boxes
• Confirmed rules to ensure consumers have a security of tenure for a minimum of five years
• Introduced an affordability and appropriateness check across all sales to check that the sale and rent back deal is right for the consumer and put in place measures to ensure all risks are clearly signposted to the customer, via FSA literature and during the sales process.

The FSA is proactively monitoring the SRB market for unauthorised activity, and will take action if necessary, as all firms active in the sale and rent back market must be authorised otherwise they face potential fines or imprisonment.

London businesses to pay 2% levy to help fund crossrail scheme

In order to meet the £16bn cost of the Crossrail project, London businesses will have to pay a 2% rate levy from April 2010, according to London Mayor Boris Johnson.

However he has revealed that around 80% of small and medium businesses will be exempt from the 2p in the pound supplement as only those companies with commercial premises with a rate-able value of more than £55,000 would be liable to help shoulder the cost, with the Mayor hoping to raise £4.1bn for the project.

Johnson said: "I understand that in these difficult times the additional business rate will be a greater burden to our smaller businesses.

“Our final proposals now set the right balance by exempting a further 4,000 of those firms that initially faced a disproportionate burden to those larger organisations in the centre, the West End and the financial districts that will benefit significantly from Crossrail and should therefore pay the greatest share of the construction costs."

Almost 70% of the cost will be borne by those businesses located in central boroughs - which will be served by Crossrail stations - with outer London boroughs contributing the least. Those liable will have to pay the business rate supplement for up to 31 years.

Residential land values increase for third consecutive quarter

According to Knight Frank, UK residential development land values rose for the third consecutive quarter in Q4 2009, with urban land values rising by +2.1% and Greenfield land up +4%.

Urban land values are still -51% down on their peak level which was reached in Q4 2007 but have risen +6.1% since their low point of Q1 2009, whilst Greenfield land is -39% below its peak but up by +8% from the low in Q1.

Liam Bailey, Knight Frank’s head of residential research, said: “The strong price performance delivered by development land in Q4 reflects the recovery we saw in the wider residential market during 2009. With UK house prices, development economics have improved and developers and house-builders have been looking to raise new-build starts.

“Starts rose over 2009 and by Q4 were running at 25% above the level achieved in the same period a year earlier. However, while the development sector has become more active, the supply of land in the market is still painfully thin.

“We estimate that demand for land rose by +20% in Q4 compared to Q3 - a significant amount of this new demand is from the house-builders who are back in the market.

The revival in the market has been shown the way by the London market, in particular the ‘super-prime’ areas such as Kensington & Chelsea and Westminster, where land values have gone up by +7% in Q4 2009.

The NLA states tenancy deposit protection legislation is working

According to the National Landlords Association (NLA), the tenancy deposit protection legislation is working despite some concerns about price increases.

The Board of the Dispute Service approved a change in the method of charging subscriptions for TDS scheme, with subscriptions to be determined on a fairer basis in order to take account of the dramatic rise in disputes being sent for resolution.

David Salusbury, NLA’s chairman, said: “The NLA believes we need to be careful not to let the current discussions about TDS price increases detract from the principle purpose of tenancy deposit protection: offering legal protection for tenants where, in the small number of cases, landlords wrongly withhold all or part of their deposit.

“I have written to the TDS seeking clarification about the likely impact of their price increases on landlords and the NLA will communicate their response in due course. It is quite clear that landlords should not be expected to foot the bill of these price increases and we will be monitoring the situation carefully. For the NLA the interests of landlords must be safeguarded.”

The minimum annual subscription to the TDS has increased from £585 to £750 as a result of the changes. The fee is for letting agents and not landlords.

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