Central London asking prices 5-10% too high

Belfast rents rising in 2010

Bridge to let

HMRC consults on furnished holiday lettings

London property value outlook is positive

Councils are causing growing tension with landlords

Central London asking prices 5-10% too high

The latest Knight Frank Prime Central London Index for July 2010 shows that prime London property prices fell in July by 0.5% which is the first monthly price decline since March 2009.

Despite this prices are 23.4% higher than they were at their lowest point on the index in March 2009.

Liam Bailey, Knight Frank’s head of residential research, said: “The slowdown in the London market has been anticipated for several months, the bounce in pricing on the back of low interest rates and weak Sterling had driven prices close to peak levels, and in some cases above these levels.

“The market experienced a severe lack of houses for sale during late 2009 and early 2010, which helped to push prices higher. Since May demand has fallen back by 8% – anecdotally price rises have begun to encourage potential buyers to think about renting again – and supply has also risen (by 7%) as vendors look to take advantage of higher prices.

“A key indicator of the health of the market is the ratio of asking-to-achieved prices, which hit 97% in May and which is now 95%. Most agents across the capital believe that asking prices are between 5% and 10% higher than where the actual market is at the current time.

“This month’s price fall is only one piece of evidence, but allied to the decline in asking-to-achieved prices we believe that our forecast for around 5% price growth in central London for the whole of 2010 will be borne out, which suggests that prices will fall by around 3.2% during the final five months of the year.”

Belfast rents rising in 2010

Average monthly residential rents in the Greater Belfast area rose to £564pcm in Q2 2010, up from £544pcm in Q1 which represents a quarterly increase of 3.7%.

This more positive recent trend follows two previous quarters with a downward trend and an annual drop of 6.6% in achieved rents compared to Q2 2009 when average rents were £604pcm.

Dan Cookson from Citylets said: “Agents are finding it increasingly difficult to find good quality property to rent as so many tenants are extending their tenancies rather than moving on to the property owning ladder.”

Citylets say that the quarterly upturn is also encouraging when considering the volume of new rental property that has come on to the market in the last two years as a result of the dramatic downturn in the sales market.

The most current house price data for Northern Ireland from the Department of Communities and Local Government (DCLG) for May 2010 reports an average mix adjusted price of £168,484 which is down 34.9% from the peak seen in Aug 2007.

Time to let (TTL) - another key indicator of demand has also improved and currently stands at 48 days in Belfast which is 9 days less than in 2009. This is significantly better than TTL figures of 73 days seen in Q1 2009.

Landlords are also seeing that the proportion of properties taking longer than 4 weeks to let has now come down from 72% in Q2 2009 to 60% in Q2 2010.

Bridge to let

TBMC, the buy-to-let and commercial mortgage specialist, have announced a semi-exclusive bridge-to-let scheme with the commercial lender Tiuta, which is only available via a limited number of distributors.

It comprises a six month bridging loan up to 75% of the open market value at 1.65% per month whilst works are carried out, followed by a two-year 6.99% fixed buy-to-let mortgage.

Andy Young, chief executive officer at TBMC the buy-to-let specialist, said: "We are pleased to offer this niche product which will be useful for professional landlords looking to purchase bargain properties in need of some refurbishment. For the right investor, this product enables portfolio development and leaves little capital tied up at the end of the term."

Guy Garrard, head of business development at Tiuta, said: "In today's lending market, many landlords are experiencing difficulty arranging buy-to-let finance for properties that need upgrading before letting them out.

"They have access to bridging finance for refurbishment but no guaranteed exit route. Tiuta's bridge-to-let scheme caters specifically for this type of property investment, giving landlords the security of a buy-to-let mortgage after completion of the works."

HMRC consults on furnished holiday lettings

The Government has just published a consultation document on proposals to ensure that the tax rules for Furnished Holiday Lettings (FHLs) meet EU legal requirements in a fiscally responsible way. The proposed changes, which will take effect from 1 April 2011 for companies or from 6 April 2011 for individuals, seem encouraging for those that run a self-catering holiday home on a full time business, and should appeal to those who are considering entering the holiday lettings industry.

The three main changes being proposed by the Treasury are:
• To raise the eligibility criteria; to qualify for FHL tax breaks owners must let a property for an annual minimum of 15 weeks (raised from the current 10 weeks)
• Owners must also advertise the property for an annual minimum of 30 weeks (instead of 20)
• To restrict the use of loss relief from FHLs. If the proposed changes are made, holiday home trading losses will only be able to be offset against future profits from the same business. Under the existing rules, owners can offset trading losses from a holiday home against any other sources of income.

Ross Elder, managing director of Holiday Lettings™, said: “At first sight the future certainly looks more prosperous for those in the holiday lettings marketplace. Although many holiday home owners will have concerns about the proposed changes to loss relief usage it is important to acknowledge the positive implications of the consultation.

“The previous Government’s proposals to completely remove all FHL tax treatments would have had a terrible impact on the industry, and been exceptionally unjust in its treatment of professional holiday home landlords.

“By keeping the furnished holiday letting tax treatments in the main unchanged but tightening the eligibility criteria, the proposals will continue to protect the professional holiday home landlord whilst increasing the incentives for part time landlords to make their properties available for more of the year. I’m actually quite optimistic that this could be good for the exchequer, good for industry investment and good for the holidaying public. Common sense appears to have prevailed.”

London property value outlook is positive

Nine out of 10 buy-to-let landlords in the capital believe the value of their property will increase over the course of the next year or hold steady for the remainder of 2010.

According to property portfolio management service the Young Group, this represents a 10% increase in confidence levels among residential landlords over corresponding figures for the second quarter of the year.

The feel good factor is restricted to the capital, with 30% of buy-to-let landlords outside of London saying that they believe prices are likely to fall from their current levels over the next 12 months or, at the very best, remain static.

However, the company points out that even these figures show clear signs of improvement, as only 49% were anticipating property price increases at the beginning of this year.

The latest report also suggests that the UK's buy-to-let investors continue to take a long-term approach to the market, with 95% of those landlords surveyed stating that they plan to remain in the sector and will hold on to their properties for at least the next 12 months. Just over half of all landlords (55%) anticipate retaining their property for the next decade.

Councils are causing growing tension with landlords

A growing number of LHA (Local Housing Allowance) tenants are falling into arrears through no fault of their own, according to tenant referencing specialists FCC Paragon. With a cap on housing benefit payments due to come into effect from April 2011, and a growing fear that rental arrears situations will worsen as a result, FCC Paragon offer advice to landlords on how best to take action.

With high tenant demand and a low supply of properties now coming to the lettings market, Kerry-Anne Dowdell, Credit Management Manager for FCC Paragon believes councils are not doing enough to assist private landlords and their LHA qualifying tenants.

Dowdell said: “Due to how local housing allowance is paid, many LHA tenants can find themselves two to four weeks in rent arrears. Whilst landlords blame tenants, quite often tenants have submitted the relevant paperwork but it is the council who are holding up the process due to protocol.

“The problem we are encountering is that local councils encourage tenants to stay put until a bailiff or possession date comes through, which creates growing tension between tenant and landlord, and as a result we are having to intervene much more in order to resolve issues for our clients.

“Our advice to landlords is to contact your local council as soon as your tenant is in arrears so that the investigation process can get underway.” However, councils will not talk to a landlord about a claim unless the claimant has given written permission, so if a tenant believes the council are holding up the process, landlords need to seek permission from the tenant so that they can then intervene.”

According to Dowdell, most tenants do not want to be in this situation but they are left with little choice, as they have suddenly found themselves in a position where they have to rely on funded support which is beyond their control.

Dowdell concluded: “We have found that building a relationship with both tenant and landlord to offer timely mediation can often be enough to resolve an issue most efficiently and our services have been well received by both landlords and tenants alike.”

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