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Wednesday 18 December 2019

Section 21 Accelerated Repossession will be scrapped

The new government's Queen's Speech included the scrapping of Section 21 Notices which give Oxford landlords access to a mandatory and accelerated process for achieving vacant possession through the courts.

Instead Oxford landlords will be forced to rely on the longer-winded Section 8 Notice which includes greater discretion for the courts, albeit with some mandatory criteria defined.  This author worries that without reform of the courts and the creation of a dedicated Housing Court, the already congested courts will not be able to cope, causing landlords greater losses and much longer periods before they can regain possession of their property.

The Section 8 process is well-established and broadly fit for purpose provided that landlords can secure early court dates.  Costs of Section 8 are typically higher, and landlords have to represent themselves or hire a solicitor, which further increases their costs.

Unfortunately Section 21 Notices which have come to referred to as 'no fault evictions' has been abused by a few rogue landlords, and those few bad apples have ensured that the vast majority of landlords who have used the process correctly now have to pay the price.  The worst hot spots for abuse of Section 21 are Manchester, St Helens, Liverpool, Birkenhead, The London boroughs of Croydon and Central London, followed by Stratford, Bromley, Clerkenwell and Shoreditch make up the top 10.

Friday 13 December 2019

Boris this is what Oxford Landlords would like for Christmas

Oxford landlords have been selling more of their properties than investing in new properties, despite Oxford being identified as THE top UK City for buy to rent investment returns.  With demand from Oxford tenants continuing to rise year on year, and supply of good quality private rented homes failing to keep up with demand, it seems certain that rental yields will outstrip inflation over the coming 3 years.  So why are landlords divesting?

It is the cumulative impact of legislative changes enacted by the government - a stamp duty surcharge, taxing new buy to let investments, the reduction of tax relief on mortgage interest and most recently, the tenant fee ban which has made agency more expensive.

However, whilst these changes have undermined investment returns, most landlords are still making strong returns overall.  But, Oxford's landlords are being made to feel the 'bad guys' by a political and media narrative that casts them as the bad guys and their tenants as an exploited minority.  The truth across Oxford is that the vast majority of landlords provide good quality and value reliable tenants.

The new government needs to stop interfering with the private rented market, and needs to take some specific actions to re-invigorate landlord investment if they are to avoid worsening an already serious local housing crisis.  So what do Oxford landlords want for Christmas from Boris?

Stamp duty reform
The government should repeal the stamp duty surcharge on buy to let purchases, to remove this barrier to new investment in private rented properties.

Reform not scrap Section 21 Notices
The proposed changes that will remove the Section 21 Notice forcing landlords to rely on Section 8 notices is short-sighted and punishes all landlords for the failings of a tiny minority of rogue landlords.  Instead the accelerated prepossession should be retained, but better enforced with clarification to offer tenants better protection from non-fault eviction.

House building blitz
Oxford has suffered over the last decade from a dearth of new affordable housing being built to offer a true alternative to renting for some tenants.  This is now THE biggest challenge facing local government and Parliament, without new affordable housing stock coming on stream, house ownership will remain a pipe-dream for many of the City's residents.  Until then, the city will remain reliant of a robust and vibrant private rented sector.

The jury is out on whether the election result will be positive for Oxford's landlords or merely the least-bad outcome.  But all are united in hoping that government will take time to properly consider the big picture and listen carefully to the industry experts so as to avoid negative consequences that have resulted from interference in 2019.

Thursday 12 December 2019

Oxford Landlord Rents to Rise


The Royal Institution of Chartered Surveyors (RICS) reports a fall in the stock of rental properties in the UK, and says this has now been a trend over the last three years. 

29 per cent of contributors report a fall in landlord instructions in November.  Over the same period, tenant demand remained steady at the national level. RICS expects rents to rise over the coming quarter. 

Letting agents consulted by the RICS have indicated a forecast of rent rises equivalent to two per cent over the coming 12 months. 

Over the longer five-year horizon, rental growth projections stand at more than three per cent per annum - this is outstripping sale prices which are seen rising by around 2.5 per cent annually.

This trend of sustained high demand from tenants and reducing supply resulting from landlords reacting to hostile government policy in the areas of tax relief, stamp duty and the ban on fee charged to tenants.  If, this anti-landlord focus continues, this author predicts a perfect-storm for people who rely on the private rented sector.

These pressures are particularly acute in Oxford, where high house prices mean that 28% of the population depends on good quality rented homes.  The tragedy is that as rents rise above inflation and above house prices, the investment returns should be attracting new landlords to invest, but to date this has not reversed the landlord exodus.

Our next government needs to think very hard before they intervene further in this fragile market, as they risk creating a rental housing crisis to sit alongside the housebuilding crisis, which is already an acute pressure in Oxford’s housing market.

Wednesday 11 December 2019

Oxford best city for buy-to-let investment


Aldermore the bank has published a report looking at the best Cities in the UK for buy to let investors and Oxford is confirmed the best city for landlords in the UK.

The city emerged top of the 25 analysed in the bank’s Buy to Let City Tracker.  Manchester, Edinburgh, London and Norwich respectively joined Oxford to make up the top 5

Oxford’s advantage for private landlords was that it has one of the largest private sector rental markets in the UK, with 28 per cent of all residents renting privately.

Average property prices have grown at 4.8 per cent a year over the past decade, the city’s average monthly rent for a room was £596, and it has low levels of void when compared to other Cities.

Five measures of buy-to-let investment desirability were assessed: Average total rent;  Best short-term returns through rental yield; Long-term return through house price growth over the past decade: Lowest number of vacancies as a proportion of total housing stock; and, the percentage of the City’s population renting.

Derby, Sheffield, Bradford, Newcastle and Wolverhampton were the lowest ranked Cities in the report.

The Aldermore report confirms feedback that I have given to Oxford landlords over the last few years, that their long-term investment returns are strong particularly after 5 years of property ownership.  Whilst property values have rather stagnated over the last several years in Oxford, the long-term returns remain robust and compare favourably with alternative investments.

However, with planning approvals and new build supply failing to improve, it seems likely that the proportion of Oxford residents renting will only rise further.  This seems certain to put upward pressure on rents, improving landlord returns, but not helping first time buyers to move into their first home.  With Government policy dissuading landlords from buying new properties, I believe Oxford is heading for supply constraint for good quality private rented properties.  Landlords with available funds would be well-advised to invest further to benefit from this supply constraint.

Monday 2 December 2019

Known new legislation in 2020 for Oxford's landlords

With 10 days to go until the General Election all eyes are on which party will form the next Government, it is easy to lose sight of the new legislation what is already due to become law in 2020.  The top 4 known changes that Oxford landlords need to focus on for 2020 are:


1) Minimum energy efficiency standards (MEES)

The minimum energy efficiency standards (MEES) came into effect in April 2018, stated that new tenancy agreements and renewals (other than some HMOs such as bedsits) must have an energy performance certificate (EPC) rating of E or above.

By April 1, 2020, however, the regulations will be extended to also cover existing tenancies. This means that, under the new legislation, properties with an energy performance certificate (EPC) rating of F or G will be classed as unrentable from that date on.

It is worth noting that there are already whispers that these standards could rise again in another couple of years, at which point ‘D’ will be the minimum EPC rating, so it’s worth getting your properties up to scratch now to prevent even more work later.

2) Electrical installation checks

Last January, the Ministry of Housing, Communities and Local Government (MHCLG) announced that mandatory five-year electrical installation checks on private rented housing in England would be introduced over a transitional period of two years. The implementation date has not yet been clarified so, it is still unconfirmed as to exactly when this will begin.  This author believes that it is likely that the legislation will be introduced  in 2020.

3) New tax relief rules

In 2015, the government made property rentals a much less viable option for many when they announced that Mortgage Interest Rate Relief was to be phased out.

From April 2020, Oxford's landlords will receive a 20% tax credit on their interest payments; not great news for those in the higher tax bracket – which could catch more landlords as they now have to declare the rental income that they previously used for interest payments.

Many landlords are now setting up limited companies when buying new rental properties in order to avoid the higher individual rates.

4) Changes to Private Residence Relief


From April 2020, changes to Private Residence Relief will result in Oxford landlords losing nine months’ worth of Capital Gains tax relief when they come to sell.

Currently landlords can claim Private Residence Relief for all the time they lived in their property before letting it to tenants, plus an extra 18 months after moving out, which will be reduced next April to the time they lived in their property plus just nine months post-moving out.

Landlords who rent out a property that was once their main home will lose the £40,000 worth of lettings relief they currently enjoy scrapped rom April onwards. Landlords who share an occupancy with their tenants will still be able to claim. And, the deadline for payment of  Capital Gains Tax  will be reduced to within 30 days of the completion of the sale.

It seems almost certain also that during 2020 Section 21 Notices that allow landlords to access an accelerated process to regain vacant possession of their properties will be abolished.  Whilst Section 8 Notices will still be available to landlords, there is widespread concern about the long-winded process to get a confirmed court date, and the fact that many Section 8 criteria allow for court discretion.

Whichever party wins the 2019 General Election, the private rental sector will continue to experience reform.  Cynics would claim that is merely a reflection of the parties trying to ingratiate themselves with the millions of tenants who rely on private rented accommodation.  However, I regard that as over-simplistic.  Some reform that seeks to professionalise the sector and improve the quality of accommodation is to be welcomed.  Where Government intervention is less welcome is in factors that seek to artificially impact the functioning of the market, and which appear to seek to punish residential landlords.  Such measures risk undermining the supply of good quality private rented homes at the very time when peak demand is being reached.

If Oxford's landlords are forced to sell their properties due to unviable financial returns, then rents will rise further as the supply of good quality rented homes reduces.