Tax regulations designed to protect consumers should not apply to the buy to let sector according to The Council for Mortgage Lenders in the UK who are lobbying for tax breaks for landlords.
And given the fact thatÂ BTL sector activity seems set to rise, the Government should consider the introduction of tax breaks similar to those in Germany and France where rental losses can be offset against income. In some jurisdictions the rate of capital gains taxÂ declines over time which would be a huge incentive to many potential landlords of the future investing for their retirement.
The CMS is calling on the UK government to consider a range of changes to complement the actions taken by mortgage lenders in recent years thatÂ have allowed the market to grow. Lenders have ensure that a range of attractively priced loans have become available andÂ landlords are still able to borrow on an interest-only basis, although this should be weighed against stricter criteria in terms of yield.
The CML also has asked government to hold off from further regulation until it has reflected on the current situation in the market, in particular with regards to local landlord licensing which it is felt may deter new entrants to the BTL market.
An increase in the number of first-time house buyers appears to have slightly eased demand in the rental property market, which is turns seems to have checked the recent relentless rise in rental levels.
AsÂ the number of tenants drops, so a slowdown materialises with the average monthly rental payment in England remaining constant from May to June 2013. At Â£737 per month however, rents are still 2.6% higher than in the same month last year according to LCL, parent company of Reeds Rains.
As always of course where property is concerned, the survey found significant regional variation with half of UK regions surveyed seeing rents rise in June, topped by the East Midlands where rents rose 0.7% from May. Â The North-West and South-West also saw rental levels surging ahead at 0.5% growth.Â Compare this to the situation in Wales where average rents are down almost 2%.
The report found that overall the proportion of households in the private rented sector continues to grow and that this trend should continue for the foreseeable future. Affordability of a first time home purchase continues to be limited by low earnings and high deposit requirements plus other factors associated with compliance rules. Hence average rents are expected at least to rise in line with inflation in the coming years.
Levels of UK Home ownership are still falling whilst the numbers of people in the UK in rented accommodation is becoming correspondingly higher.
According to the latest English Housing Survey, 65% of the England’s 22 million households areÂ owner-occupied, 17% Â are socially housing whilst the remainding 17% are privately rented. And according to the survey there has actually been a drop in the overall number ofÂ owner-occupied properties since 2005. Over the same period, the number of privately rented properties has increased by more than 50% to 3.8 million.
Of particular interest is the amount of income for those in each housing category, and the proportion of that income that is spent on mortgage and rental costs. The average mortgage payment for owner-occupiers is Â£611 per month whilst social tenants paid Â£83 a week on rent. But the highest amount for accommodation is paid by private tenants who cough up an average monthly rental bill of more than Â£710.
Of interest for those that own and let their property to tenants is the situation with tenancy deposits. 70% of tenants had their deposits returned, 17% received part of their deposit back and 13% had no right to any of their money back. And one particularly interesting statistic for landlords. WhenÂ asked why tenancies had ended, more than 80% ended at the behest of the tenant, 10% ended by mutual agreement, and 9% of households were requested to leave by their landlord.
Housing charity Shelter have recently called for landlords to pay the costs of setting up tenancies through letting agents, instead of tenants. InÂ my opinion this isÂ totally unrealistic … and somewhat naive.
What do Shelter expect to happen once agents and landlords are faced with the full costs associated with a new tenancy? It doesn’t take a genius to work it out. One of two things will happen. Either their business will be put under massive financial strain which may lead to them going out of business completely, or else they will simply increase the rent to cover the charges.At the moment a range of associated costs are not charge to tenants, including checks and certificates associated with services such as gas and electric and other repairs. Tenants would be left wide open to ruthless agents who will seek to exploit administration charges, damage claims, etc. Administration fees are probably the most divisive aspect often causing major problems with fees varying widely across the UK.
Agents fees must be transparent from the start of the tenancy and tenants need to be aware of exactly how much is payable and at when. Although letting agents can be expensive, tenants can choose which letting agent to use, but they are unlikely to be a cheap option?