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Friday 29 May 2015

SAFE AGENT Awareness Week 1st to 5th June 2015

Next week is ‘SAFEagent Awareness Week’ and at Belvoir we are celebrating this as we were one of the founding members of SAFEagent, when it launched in 2011.

The SAFEagent scheme allows firms who are regulated by bodies such as NALS and ARLA to show to both landlords and tenants that they are part of a Client Money Protection Scheme.

Landlords and tenants need to ensure their funds are protected by dealing with a SAFEagent, this will ensure the agent meets the following criteria:

·        To have professional indemnity insurance
·        To have a defined accounting standards relating to clients’ money
·        To have a customer complaints procedure
·        To have membership of an ombudsman scheme

Irrespective of which agent you choose to manage and let your property please do insist that they are a SAFEagent. We here too many accounts of rent being paid over late by agents or funds not being paid at all! A SAFEagent will ensure your funds are safe.

Is your letting agent complying with the law?

It is now a statutory duty for letting agents to fully publicise the fees they charge to landlords and tenants.

Under the Consumer Rights Act 2015, agents must prominently display a list of their fees at each of their offices as well as on their website.
Guidance for the new requirements has been issued by the Department for Communities and Local Government with input from the Advertising Standards Authority.

The guidelines state that: “All fees, charges or penalties (however expressed) which are payable to the agent by a landlord or tenant in respect of letting agency work and property management work carried out by the agent in connection with an assured tenancy. This includes fees, charges or penalties in connection with an assured tenancy of a property or a property that is, has been or is proposed to be let under an assured tenancy.”

All fees must be shown inclusive of VAT but agents do not need to publicise the rent payable to a landlord or the tenancy deposit which is taken as security against damage or violation of the tenancy agreement.

The requirements will be enforced by Trading Standards and any agent that does not comply could be fined up to £5,000. 

“Lower penalties will only being applied in extenuating circumstance which will not include ‘I did not know about the law’ or ‘I did not know what to do,’” said Sean Hooker, head of redress at the Property Redress Scheme. “The fees should be clear and specific without surcharges or hidden costs. Generic terms such as ‘administration fee’ are no longer acceptable and all charges should be displayed inclusive of tax.” 
Letting agents are now also required to display which of the three redress schemes they have joined (The Property Ombudsman, The Property Redress Scheme or Ombudsman Services: Property) and whether they have Client Money Protection (CMP). 

Friday 22 May 2015

Citizens Advice claim half a million children are living in unsafe private rented homes

Rogue landlords are raking in £5.6billion a year for unsafe homes that fail to meet legal standards, a report by Citizens Advice claims. The study says that 740,000 households in England live in privately rented homes that present a severe threat to tenants' health.

The report, A Nation of Renters, says these properties have category 1 hazards – the most serious of problems. These can include a host of dangers, such as: severe damp, rat infestations and risk of explosions.

The charity says that latest available data shows these properties contain 510,000 children and 180,000 have a disabled person. It also says that landlords are receiving £5.6bn a year on rent for homes with category 1 hazards, which includes £1.3bn of housing benefit.

Gillian Guy, chief executive of Citizens Advice, said: “Rogue landlords are putting profits before safety. With a growing private rental sector, increasing numbers of people – including more than 500,000 children – are falling prey to landlords who fail to meet decent standards.
“The Government has rightly said it wants to tackle the country’s housing crisis – it must make targeting dodgy landlords, giving tenants better rights and driving up standards a major part of that effort."

Citizens Advice says private renters are woefully under-protected and have to navigate through numerous pieces of complex legislation to seek legal redress from landlords.
It says that taking court action against a landlord can be long, complicated and expensive. This is compounded by the fact many complaints have to be made to local authorities, which often do not have the capacity to act quickly.
Responding to the report, the Residential Landlords Association (RLA) said better enforcement is needed of laws and regulations to protect tenants in private rented housing.
Figures from the Institute for Fiscal Studies show that during the last Parliament, the budgets of local authority enforcement departments were cut by over 37% per head of population in England.

Recent research conducted by the Local Government Information Unit and Management Journal has also found that 54% of local authorities believe that they are in danger of being unable to fund their statutory services which include Environmental Health Services.

The RLA claimed that with landlord investment running at £50 billion a year, the standard of private rented housing has improved by 36% between 2006 and 2013.

Chairman of the RLA Alan Ward said: “No tenant should ever have to put up with unsafe housing, and those landlords that wilfully provide such accommodation have no place in the market.
“Today’s report highlights the growing need for better enforcement of the wide range of powers already available to local authorities. The hazards identified by CAB are already illegal and calls into question the use of housing benefit for unfit properties.

“With council enforcement departments under serious pressure we are calling on the Government to review the capacity and resources available so that we can crack down on the small minority of criminal landlords that are causing misery for their tenants.”

Housing crisis will halve number of young homeowners in five years

Housing charity Shelter warns only 20% of 25- to 34-year-olds will be on the property ladder in 2020 compared with 60% recorded 10 years ago
If house prices continue to rise only around one in five people aged 25 to 34 will be on the housing ladder by 2020. In 2004 the ratio was three out of five.

The number of young adults able to buy homes could fall nearly 50% within five years unless the government addresses the housing shortage, a report has claimed. Over the past decade, home ownership among 25-34-year-olds has dropped by a third, from 1.8m to 1.2m, and analysis by the housing charity Shelter published on Friday suggests that if current trends continue, the number of young homeowners will drop to about 616,600 by the end of this parliament. This would mean that less than 20% in that age group would have made it on to the property ladder, compared with nearly 60% a decade ago. In recent years, soaring house prices and problems with getting mortgages have pushed more young households into the private rented sector. In 2004, just over 675,000 people aged 25-34 were tenants. However, by 2014, the number was 1.6m. As home ownership becomes increasingly difficult, Shelter said the number of renters could rise to 2.3m by 2020. In addition, it said, a “clipped-wing generation” of young adults living with their parents had emerged.

The report followed government figures showing that the number of new homes built last year remained well below the level needed to meet demand. A total of 125,110 homes were built in England in 2014-15, up from 112,400 the previous year, but this is half the rate some experts say is needed.

Those stuck in rented accommodation have seen rents rise by 4.6% over the past year, according to figures from letting agents Your Move and Reeds Rains. The increase, the fastest recorded by the index since November 2010, pushed the average rent in England and Wales to a new high of £774 a month. In London, the average was up 7.8% year-on-year at £1,204.

Thursday 21 May 2015

Nice Southampton 1 bed yields 6.4%

This modern one bedroom flat is located just off Shirley High Street. The property is furnished and includes white goods. The property is on the second floor and benefits from electric heating and allocated parking. The flat is a good size at 480sq.ft.however the bedroom is a little tight but there maybe space to extend it slighly. The property will appeal to a wide tenant pool and will command a rent of £625pcm. Gross yield based on asking price is good at 6.4%. Ground rent and service charges are also reasonable within this scheme as there are no lifts.
The property is well located being close to the main bus routes on Shirley High St, The Sainsburys Supermarket and the General Hospital. Voids should be minimal.

Your Pension could now buy a Southampton Buy to Let property

We are all well aware that the pension rules changed in April and I want to look a little deeper into the subject of your pension and the Southampton property market. George Osbourne, in last years’ Budget, announced pension reforms that came into effect this April, which will give people with pension’s unprecedented access to their pension pot and the freedom to look for alternatives. In a nutshell, since the 6th of April, anyone aged over 55 will be allowed to withdraw all or part of their pension pot and spend it as they wish. Until now, you were allowed to take out a quarter of it and were forced to buy an annuity policy with the rest.

However, there are always two sides to a story, good and bad. Let me tell you the bad news first. There are some hefty tax implications by taking money from your pension pot. As before, as per the old rules, the first 25% can still be withdrawn from the pension pot tax free, but here is the sting in the tail, if you take more than a quarter of your pot, anything above that initial 25% level will be taxed as income. So if you took the whole lot out, the first 25% will be tax free but the remaining 75% will be taxed at your marginal income tax rate of 20%, 40% (or even 45% if you earn over £150,000 a year).

.. And now the good news!

Under the old scheme, if you bought an annuity, when you died your annuity normally died as well. You would have no asset to pass on to your family. Also, the returns from pensions are awful at the moment.  Hargreaves state if you were 55 years old, the best rate you would get on your annuity pension would be 4.4% fixed for life or 2.2% but the payment would go up with inflation.  The sort of rates (also known as yields in property investing) being achieved in Southampton are in the order of 5% to 7%, and they tend to rise in line with wages. 

The other aspect of property investment is how property values have risen consistently over the last 50 years.  According to the Office of National Statistics, the remaining life expectancy of a 65 year old male in Southampton is 18 years exactly (its only 17 years 7 months in Portsmouth). If we roll the clock back 18 years to May 1997, property values in Southampton have risen by 164.65% to today. You wouldn’t have had that with your pension!   But this is the biggest win, even by taking a hit in income tax now,  by buying a property, you buy an asset that you can pass on to your family when you die.....Food for thought.

So where next? It totally depends which strategy you are going to look at, one strategy is to look to achieve relatively small rental returns (ie low yields) in an up market area which has decent capital growth or, alternatively, another strategy is to buy properties in not so good areas known to produce a high returns (ie high yields) but low capital growth (ie how much the value of the property goes up). It is best to speak with a financial advisor about your pension pot and long term wealth management and now, maybe, is the time for property to be considered in the portfolio.