Why Harpurhey is popular with property investors

The district of Harpurhey is situated approximately three miles from the centre of Manchester. With a population of around 18,000, Harpurhey is a vibrant and popular area with plenty of local amenities. This makes it a favourite among renters who want to be close to the city centre but can’t afford high-end property prices. Despite its somewhat variable reputation, Harpurhey has an active property rental market and offers some great prospects for landlords and agents.

Neighbouring districts of Harpurhey include the popular residential areas of Cheetham Hill, Monsall and Moston. The areas of the Shiredale Estate, Barnes Green, the Kingsbridge Estate and the Baywood Estate are all classed as being part of Harpurhey.

Road and public transport links

Located to the north east of Manchester city centre, the area enjoys excellent public transport links with the city and the surrounding areas. The A664 (known locally as Rochdale Road) runs through the Harpurhey area, offering good road links to Manchester city centre, to the south west, and to the M60 to the north east. The circular M60 motorway provides easy access to the region’s other motorways and major roads, ensuring reasonable commute times to many of the towns and cities of the north west.

Harpurhey does not have a railway station, but enjoys excellent bus links. Many major routes pass through the area, offering quick and frequent journeys into the city centre. Bus services also operate to Oldham and Salford, in addition to many other areas of Greater Manchester. Harpurhey is also convenient for Manchester’s Metrolink tram network; while there is no tram station in Harpurhey itself, those at Central Park North and Monsall are within easy reach.

Local amenities

North City Library, situated on Harpurhey’s Rochdale Road, is a local landmark and hub of the community. Sharing the building with the local sixth form college, the library features state of the art solar panels on its roof and is built in an impressively contemporary style. As well as offering all the usual lending and internet access services, the library is home to a number of local groups and societies who use the building to host meet-ups and events.

The North City Family and Fitness Centre is a sizable leisure centre located near to the local shops and daily market. With a 25-metre swimming pool and a number of other fitness and leisure facilities, the centre is popular with residents of all ages. The gym and health suite offer state of the art fitness facilities, as well as steam rooms, saunas and a spa area. The centre hosts a number of regular fitness classes for all ages and abilities.

Harpurhey has a popular shopping precinct with a number of high street chain stores, discount retailers and supermarkets, including Asda, Iceland and Lidl. Harpurhey Market operates on Tuesdays, Fridays and Saturdays and is completely under cover, making it a popular shopping destination all year round. Stalls include a wide variety of food retailers, as well as clothes, homewares and electronic goods.

Parks and green spaces

Harpurhey’s Queen’s Park is popular with families, thanks to its play area and frequent outdoor events. Originally developed over 150 years ago, the park was one of Great Britain’s earliest municipal parks. Hendham Hall originally stood in the park, but was demolished in the late 19th century. In addition to children’s play areas, paths and trails, the park has rose gardens and often hosts nature hunts for local schools.

Located to the east of Harpurhey, Moston Vale is another popular outdoor spot in the area. After being notoriously run down for many years, recent regeneration projects have transformed Moston Vale into a green oasis. Primarily used as a pedestrian access route, Moston Vale has been planted with wildflowers and had new fences installed to make it a really pleasant part of the area.

Harpurhey property news

Harpurhey offers a variety of options for the private buyer or property investor, with prices more affordable than other areas of the city centre, offering strong return on investment. Prices for traditional, two-bedroom red brick terraced houses start at around £70,000, with many available for under £100,000. There are also a number of newer properties in Harpurhey, with the modern Kingsbridge Road development extremely popular with families. Offering sizable gardens, excellent parking and modern fixtures and fittings, the new-build homes make an excellent rental opportunity for investors looking for properties that do not require any modernisation and which are easy to let.

Buy-to-let investors – is Landlord Ltd. the answer?

As far as buy-to-let landlords are concerned, April 2017 is not so much a red-letter date as a red ink one. That’s the date when a series of tax changes start to come into force which are going to decrease their profits and increase their tax liability.

Until now, landlords have been able to subtract mortgage interest from rental income, before calculating how much tax they owe. Not after April. Changes will be phased in from April onwards which by 2020, will result in landlords paying tax on the entire rental income their property earns. If the fat-cat landlord ever really existed, they are certainly a thing of the past.

Needless to say, given the world-beating complexity of the UK tax regime, the changes aren’t that simple. The landlord will be due a tax credit of 20% of the total interest they pay, but the entire rent will be taxable. Higher rate tax payers will be much harder hit because the rent will be taxable at the higher rate. And of course, a landlord who is paying 45% tax, will be worse off still.

The people at MoneySupermarket.com have been busy crunching the numbers and they reckon that if you are a higher-rate taxpayer and the mortgage interest is 75% or more of your income from the property, the tax changes will eliminate your return on the investment. For someone paying the additional rate of tax, this will happen when the interest is at 68% of the rent.

If you are a small landlord with just one property, you may be breathing a sigh of relief, if you are on the basic rate of tax. But wait a moment. Since your taxable income will go up as a result of the changes, you may well become a higher rate tax payer.

Is there any way to protect yourself from the changes?

Companies which own property and let it out are not affected by the rental tax changes. They can carry on paying corporation tax on the profits and paying dividends and salaries to the company directors. But before landlords rush to become limited companies, they need to be aware of the many tax complications and possible pitfalls in taking this step. They certainly need to take professional advice.

The company needs to be set up properly to buy the property, and this has to be achieved with the correct paperwork. So don’t necessarily assume the cheapest set-up that you find is the best choice. It is better to get an accountant to do this for you.
And although companies aren’t affected by the tax changes on rents and interest, they are affected by the stamp duty changes which mean that there’s 3% extra stamp duty payable by any person or company buying a second property when they already own one.

As for transferring properties you already own into a company, there are a host of tax complications.

Buy to let investments still competitive

The fact is that many people, not just those on very low incomes or on benefits, need to rent property and in Manchester lettings agents are as busy as ever. Tenants need landlords to provide a stable and active property rental market.

Professional landlords, holding large portfolios of property can probably look after themselves but the small landlord with one or two properties is going to be more adversely affected. One of the effects may be that the average age of landlords rises, as people in work are not going to want to be pushed into higher tax bands by the income from a rental property. They may wait until they retire to move into buy-to-let.

For retired people looking for additional income, even though the tax benefits of buy-to-let have been greatly reduced, given the woeful returns on savings, the income from owning rental properties looks very attractive and there is always the possibility of increases in property values.

Furthermore, mortgages for buy-to-let are becoming increasingly available for older people. For many retired people with lower outgoings and perhaps no mortgage left on their own home, the affordability criteria for these mortgages are not stumbling blocks to anything like the same degree as they are for younger borrowers.

The Chancellor has done his worst, but buy-to-let is still with us and while interest rates on savings are below 1%, landlords are unlikely to give up on their investments.

Britain’s biggest buy-to-let investors have sold nearly half their £250m property portfolio – Should You?

The Wilsons are an extraordinary couple. Fergus and Judith were both previously maths teachers. But starting in the mid-1990s they built up a buy-to-let property empire that eventually led to them owning 900 houses in Kent.

They put their success down to the appearance of buy-to-let mortgages with favourable terms which enabled them to expand their portfolio quickly. In those days, it was easy to get loans with a high loan-to-value ratio that were also interest-only. In fact Fergus Wilson has claimed in an FT interview that in those days, the only requirement was that you could spell your name and that checks were almost non-existent.

However, recently the couple have sold off about 400 of their properties in Kent, mostly to overseas buyers. Mr Wilson thinks that the era of the amateur landlord is over and that life is much tougher these days for people trying to acquire a buy-to-let property. In the article, he quotes 60% loan to value mortgages as a particular problem.

The FT quotes OneSavings Bank which has decided, since Brexit, to focus on professional buy-to-let investors since it considers that they will be better able to ride out any market volatility. It has also tightened lending criteria for smaller landlords.

Meanwhile Mr Wilson, who one suspects never listened to this kind of advice but ploughed on regardless, is waiting to complete the sales of property within his portfolio, pay off his mortgages and hopefully walk away with £200 million profit.

Although he doesn’t own property in London, he describes a type of overseas buyer who is desperate to obtain a property in the UK. He believes that Brexit will in the short term assist these buyers, as the fall in sterling will help them to afford a property in the UK.

He believes that in the longer term, UK property prices will be underpinned by the shortage of housing and that the developers cannot possibly deliver the numbers of houses that are needed in the next 15 years.

It’s likely that one of the Wilsons’ motivations may be retirement as both are at the age where the challenges of running a large property portfolio may be just a little too much. It’s certain that a new generation of keen private landlords are seeking to replicate their success, no matter what the challenges.

One of the challenges for landlords who are in the business long term is to keep up with the constant changes in legislation that affect the property rental business. This is a key reason to employ an agent who can keep up with them on your behalf and let you know about the issues that are relevant to you.

The Association of Residential Letting Agents (ARLA) has apparently said that there are currently 160 regulations that apply to property rental. Add to this the assured landlord schemes and guidance that landlords are supposed to take on board, and you can see how someone who has say, two or three Failsworth lettings, might feel overwhelmed by the level of regulation with which they must comply. What’s more, with the law constantly being challenged by court cases, the interpretation of it can change rapidly.

This is why landlords who don’t want to find themselves on the wrong side of the law employ a professional lettings agent to advise them. Only an agent who has looked at your particular property can advise as to what specific legislation you may need to take into account.

Of course, some new laws can be helpful to landlords. For example, landlords are now able to carry out checks known as “Right To Rent”. This will allow them to check that the person they are thinking of signing up as a tenant has the right to be in the UK. This will help them to avoid the potential £3000 fine for each tenant who is here illegally.

Some commercial finance websites are also reporting that around a half of landlords are intending to raise their rents next year. If returns are falling, many landlords will feel under pressure to increase rents in order to restore some profitability to their portfolio.
The Wilsons may feel that it’s all become too much effort and that now is the time to cash in their portfolio.

Possibly so, but one thing is certain – there will still be plenty of willing buyers out there.

Should You Let to DSS Tenants?

Some landlords won’t let to DSS tenants under any circumstances, but others recognise that not all DSS tenants are going to wreck the house and turn it into a crack pad. In fact, some DSS tenants have more regular, stable incomes than employed people and may be a better bet for a buy-to-let landlord. So how do you sort the wheat from the chaff?

Delays in Payments

One of the key factors with DSS tenants is that they are dependent on the efficiency of the benefits systems which pays them. Universal credit has acted as a gigantic spanner in the works here. Because it involves a switch from the previous benefits system to a new set of processes, it was always going to be difficult, but add in the necessity to alter computer systems, which has never been a strength of government, and you have a recipe for tenants who are not getting the money they need to pay their rent.

This is not their fault, and if they were employees who had not been paid because the banking system had gone down, there would be abject apologies on their behalf. However government appears to think that not paying claimants is a risk-free activity, and government has also decided that DSS tenants who live in private rented accommodation are now personally responsible for paying housing benefit to their landlord.

Clearly, if there are delays in processing a person’s claim, they will not get their housing benefit on time and will be in a position where they must pay the landlord late. DSS tenants are people who are in receipt of housing benefit. How much they get depends on their circumstances and any other income that they have.

But tenants are usually very clear with landlords about the amount of benefits they receive, because if they manage to secure a tenancy, they need to inform the Housing Officer of the new rent that they have agreed to.

Poor Publicity has Affected the Better Tenants

Many tenants who are claiming benefits and want to pay landlords rent from their housing benefit are in their current situation through no fault of their own. They may have been diagnosed with a serious illness that has meant they could not continue in work. Or they may have lost their jobs, been unable to keep up their mortgage payments, had to sell their house, spent the resulting equity in private accommodation and finally ended up claiming housing benefit. Anyone dealing with lettings and Manchester property in general will have come across these cases.

Unfortunately, some reality TV programmes have given the impression that anybody claiming any kind of benefit is a drug-addled waster who will trash the property and leave without paying six months’ rent. This simply isn’t the case, any more than employed people who appear to have a lot of income are really faking it and waiting to sublet the property to another dozen tenants.

In the employed sector and the DSS sector, there are good and bad people who may make excellent or dreadful tenants. The key thing is to be able to distinguish between the two.

How to Get a Good DSS Tenant

One of the things you need to look for is any disparity between the amount that the tenant is receiving in housing benefit, and the amount that you are charging. The tenant has to make up the shortfall every month and if they are disabled or have no access to extra income, they are going to find this extremely difficult. So, to avoid rent arrears, make sure that your tenants can afford the rent from their housing benefit.

Make sure that you have a suitable landlord’s insurance policy in place and don’t gloss over the fact that you are letting to DSS tenants. Yes, they are slightly higher risk and you may need to pay a slightly higher premium but let’s face it, these tenants tend to be renting in areas where property is cheaper, and therefore rental yields are higher. Just accept slightly higher insurance as the cost of doing business.

And always meet the tenants personally. Your gut feeling is probably a better guide than any risk assessment. Look at why the tenants are dependent on DSS payments and you’ll get some insight into whether they are seeking a secure home or are irresponsible and likely to cause you problems.

North Manchester Lettings: Advice for First-time Landlords

The decision to enter the property market as a landlord is not one to be taken lightly, but if you’ve been thinking about it for a while, there’s no time like the present to set the ball rolling on your new venture. Manchester is a great spot for property investors – one of the UK’s major cities, it is well connected to the rest of the country by road, rail and air, and has a large student population. Both these factors mean there is always a steady stream of renters looking for the perfect property. If you choose wisely and research your target rental market, you should have no trouble generating interest in you property (or properties).

This article aims to provide practical North Manchester landlord advice for those who are new to the area, or new to the property market.

Decide What Type of Tenant You Want

You might not have any firm ideas of what type of tenant you would like to rent out your property to, but it’s very helpful to know who your market is. North Manchester is popular with a wide variety of renters – including students, young professionals, families and older couples – but not all groups will want to rent the same types of property. Students have become increasingly demanding in the last couple of decades, and the traditional cramped, damp, run-down red brick terraced student properties of the past will no longer cut it. Many students prefer to live in designated student apartments with all mod cons, excellent facilities and good transport links. It’s still possible to rent private properties to groups of students, but students tend to congregate in certain areas, particularly to the south of Manchester, so are unlikely to want to live in a district that is predominantly home to families.

If you want to target families, you will need to think about the proximity of schools. North Manchester has a large number of primary and secondary schools, some more popular with parents than others. Proximity to a good school can have an impact on house prices, but you might also be able to command a higher rental fee if you are in a catchment area of a top school, so you should bear this in mind if your target renters have children.

Young professionals are likely to want a property that’s close to nightlife and shops, or at least has excellent transport links to the nearest decent nightlife. In the case of North Manchester, this is likely to mean excellent links to the city centre – so look for good train, bus or tram links, or at least somewhere that is a short and affordable taxi ride away. North Manchester’s Metrolink tram system is very popular with commuters, so properties near a tramline are always a good bet.

Don’t Over-estimate the Market

As an investor, you have the advantage that you are not part of a chain and you do not need to wait for your own property to sell before you complete. This can be a big attraction to vendors, and may allow you to drive down the price on your chosen property. Emphasise your ability to commit and proceed with the sale immediately when you make an offer, but don’t get carried away and be tempted to pay more than you can realistically afford, or more than makes sense given your likely return on investment. While North Manchester has some highly desirable areas, many districts – such as Harpurhey and Moston – are known for their affordable housing and tend to have something of a rough reputation. No matter how desirable or modern any property you purchase in areas like these, you will struggle to attract renters prepared to pay premium level rents.

Seek Professional Advice

If you have never let out a property before, you will need to ensure you fulfill all your legal obligations. There have been moves to clamp down on unscrupulous and negligent landlords in recent years, and tenants have a number of rights you will need to be aware of. If you are not entirely sure of all your responsibilities as a landlord, seek advice from a professional who can ensure you don’t fall foul of the law. There are numerous agencies with specialist knowledge of the North Manchester rental market and these can help you target the right renters for your property, and help ensure a mutually beneficial relationship for both you and your tenants.

Is “Buy-to-List” the New Buy-to-Let?

Some people have been saying that traditional buy-to-let is past its sell-by date and that new players such as AirBnB are set to disrupt the entire model. It has certainly been the case that in cities with young populations such as Manchester, London and Brighton, we have started to see a new breed of landlords buying property in order to let it out for very short-term lets.

These may be what are referred to as “party pads” – accommodation for people coming in from other parts of the country, or abroad, to spend the weekend partying. Alternatively these properties can be marketed as holiday lets at very high rents during vacation periods, with often no attempt to let them at other times.

However, the whole AirBnB rental arrangement in big cities looks like it might be strangled at birth. And once again, those crying out that traditional buy-to-let is over look likely to be proved wrong.

For those unfamiliar with how it works, AirBnB allows landlords to list their properties at the price they choose for short periods. If you saw the recent TV ads, you’ll have been given the impression that this is a flat sharing site for young travellers who want to experience life in another city. The reality, at least in our big cities, is somewhat different.

People who live in blocks of flats in London for example, have found increasing numbers of flats rented out to very short-term tenants which means a constant procession of strangers in and out of the building. Added to this, where traditional buy-to-let adds to the housing stock available across a range of income groups and household types in any city, short-term lets can take housing stock out of supply. This is because what were residential units essentially become short-term holiday homes – in other words you have mini hotels springing up everywhere, that are not licensed.

Sadiq Khan, Mayor of London, is only the latest leader of a major city to put up a red flag. He is going to investigate what impact these short-term lets us having on the capital’s housing supply and has said that he is prepared to take a look at the relevant legislation. With 42,000 listings in London, he probably needs to. He referred to the “negative amenity impacts” of these lettings. Quite what this means is anyone’s guess.

However he went on to speak more plainly about the concern that permanent housing is disappearing into short term lettings.

The residential landlords Association (RLA) did some research into those short-term lettings on-air B&B that were available for more than 90 nights – in other words, that appeared to be a professional rental. They found that 65% fell into this category. A relaxation of the law in London last year allowed people to rent rooms for up to 90 days a year on short-term lets. It may have been this that created the boom in AirBnB lets in the capital.

All of a sudden, Khan is making it clear that the much vaunted “sharing economy” is going to have to be balanced against protecting local residents and making sure that housing is kept for long-term use. He said that he intends to talk to the boroughs to see if the legislation needs revising.

New laws to curtail Airbnb lettings have already been introduced in Amsterdam, Barcelona, Paris, Berlin, New York and San Francisco (the latter must hurt particularly since that is AirBnB’s home city).

So what about Manchester?

It has to be said that AirBnB listings in Moston seem to be mostly single rooms in occupied houses, so the party economy may have some way to go before it affects M40 lettings. However, it’s clear that flats in central Manchester are definitely being listed on the site.

The French, who as we know, do not tend to mess about once they have decided something is unacceptable, have been raiding “illegal” AirBnB apartments in Paris, particularly those that have been bought purposely as – well, it’s not really buy-to-let – perhaps we need to invent a new term – “buy-to-list”?

Like Uber, which recently lost a tribunal case on whether its drivers were self-employed, AirBnB is finding that its business model is not quite as straightforward as it thought, and that local councils, laws and politics may throw a major spanner in the works as far as its operations are concerned.

A Quarter of Landlords Want Out Because of Tax Changes

The Telegraph reported this week that 25% of buy-to-let landlords intend to sell the properties they are currently renting out, because of the government’s campaign of swingeing tax increases in the sector.

Unintended Consequences of the Tax Grab

This news has caused alarm not just in rental circles but throughout the professional property market, because such a large volume of property hitting the market at the same time could destabilise the entire sector. Another factor here is that rental properties are often concentrated in certain areas. Many landlords favour terraced or semi detached houses in reasonably modest areas because the prices are lower but rents are still reasonable, giving a workable investment yield.

The property market is always essentially local, as landlord advice in Manchester shows. In a local area, a large number of buy-to-let landlords selling up at the same time will definitely affect house prices. In fact if landlords feel that they need to beat a rush to market they will get in early and market their properties at higher prices, hoping to avoid a stampede of rental properties on the market once the buying season starts in spring.

The other undesirable effect of a wholesale dumping of buy-to-let investments will be that rents will rocket upwards because the property being sold will not be bought by other investors but by homeowners. This will remove large amounts of rental property from the market and cause major problems for those tenants who simply do not have the option to buy a property. As a result, the demand for council properties will almost certainly increase.

Nearly 1,000 experienced buy-to-let landlords were surveyed by the Residential Landlords’ Association and the results were pretty staggering. Almost 25% have either already sold their properties or are planning to sell them as a result of the government’s decision to stop mortgage interest being offset against rental income when landlords are working out their taxes.

The draconian changes to taxes on rental income were announced in the 2015 budget but will not come into effect until next year. The tax changes are hardest on those landlords who pay tax at the higher rates (40% or 45%) and those who have bigger mortgages. Taxpayers who aren’t on the higher rates so far, may find that because their taxable income has gone up, they are transferred into a higher rate tax band, a double whammy.

Tenants to Bear the Brunt

Tenants are going to bear the brunt of the new tax regime – not only will they find that there are far fewer rental properties around, but those that remain will be at significantly higher rents. The reduction in supply will of course mean that since demand is still constant, rents on available properties will rise, and landlords will need to make more from their property in order to get a yield that makes the investment sensible.

In fact a previous study found that nearly 60% of landlords were intending to increase their rental charges to offset the loss in income caused by the tax changes. Kent Reliance building society carried out a survey in June that found that landlords planning to increase rents were looking at an average figure of 5.6%.

Each Year Will See Further Effects

The tax changes are not coming in all at once one but are being phased in over a number of years and won’t be fully implemented until 2020. Therefore we should be able to see the effect that the changes are having year-on-year. Any changes in the first year in terms of landlords selling their properties and tenants finding that rents are rising can be expected to be magnified in every year that follows.

And the Icing on the Cake…

The detrimental effects on tenants and on local property markets described above, will be magnified by the sneaky new rules that state that when a lender offers a loan on a buy-to-let property, to a landlord who owns four or more properties, the lender will have to financially assess their entire portfolio.

The official reason given for this is that the more properties a landlord owns, the higher their mortgage arrears are likely to be. The actual effect will be that lenders will make fewer loans to landlords who own multiple properties, so the few landlords left in the game will not be able to buy new property.

It’s no way to run a housing policy.

Interesting New Developments in Buy-to-Let Mortgages

The buy-to-let mortgage market appears to be bouncing back from both Brexit and the best efforts of the Chancellor to tax it out of existence. Perhaps landlords and letting agents are actually pretty resilient individuals who will make the best of a bad job and seek out fresh opportunities. Whatever the reason, there have been some interesting new developments in the mortgage market for those looking to buy rental property.

First up is New Street Mortgages. They are an online-only lender but they work through brokers and they have two interesting features in their business offer. The first is speed – they are promising that some borrowers could get their mortgage money in as little as five days after applying.

Second, they are are offering mortgages that are based on “verified underwriting” and not simply the run-of-the-mill credit scoring that is traditionally used by most high-street mortgage lenders. According to the company, this means they can consider applications from people whose circumstances mean that they might get a lower score on the standard credit rating measurements.

They will make their lending decisions on the basis of the credit profile of the specific borrower, unlike traditional lenders who use credit scoring methods. This can be a disadvantage to those who are self employed or who have an income with peaks and troughs over the financial year. This is good news, because it balances the more stringent affordability tests being used on those who want to buy properties to rent out.

New Street has partnered with several major mortgage brokers including John Charcol, London and Country, and LSL, specifically to provide mortgages for buy-to-let based on personal credit profiles rather than credit scores. The firm describes its method of assessing applications for mortgages as driven by intelligent analysis that gives an informed credit profile. It says that this means it can be more flexible when it comes to lending criteria.

More Mortgages Available for Older Borrowers

One example of this is that they don’t have an upper age limit for lending. Pensioners with a completely reliable income from pensions, often index-linked, have found themselves cut out of the market purely on the basis that they don’t fit the lender’s traditional profiles. These frequently don’t allow lending beyond a completely arbitrary upper age limit. Yet these borrowers may be excellent risks, in that they are sure of receiving their income every month, and can’t be made redundant.

The approach from New Street may mean a fairer deal for these older borrowers. Similarly, both self-employed and employed applicants will be assessed on their risk profile, not on arbitrary lending criteria.

Anyone thinking of approaching New Street for a mortgage will need to check their rates against competitors, and weigh up where they are likely to get the best deal.

Surge in Mortgages to Limited Companies

The other development in the buy-to-let mortgage market has been a surge in the number of limited companies applying for loans. This means that many landlords have not waited around but have rushed to beat the tax hikes by setting up limited companies, and that they are now using these vehicles to add to their property portfolios.

The specialist broker, Mortgages for Business, quoted on the This Is Money website, has noted that nearly 40% of its applications last December were from limited companies. These developments in the mortgage market for landlords wanting to let through limited companies will certainly be welcome. Previously, limited company mortgages were subject to extra fees and often charged at a higher interest rate, but this is changing because of the higher volume of business following the tax changes.

However landlords do need to be aware of the costs and risks of doing this. Although companies can still get interest relief on the mortgage amount and therefore only have to pay tax on the profits from their rental, there are many complications. Only businesses which have more than 15 rental properties can get exemption from the 3% extra stamp duty imposed by the Chancellor.

There are many other tax and legal implications, so this is an area where you definitely need to get professional advice before acting. Similarly, if you’re a landlord in Moston, use a Moston based agent who knows the local area well and can give sound advice.

Nevertheless, the health of the buy-to-let mortgage market in these new forms is an indication that buy-to-let is far from over.

What experts and commentators have to say about Section 24

These quotes have been taken from the recent publication by Property 118 titled: “SECTION 24 of the Finance (no.2) Act 2015: “The unjust legislation that will make the UK housing crisis much worse”

Richard Dyson, Finance Editor at The Telegraph:

…It is a tax from Alice in Wonderland, a truly bonkers tax, a tax you’d laugh at – if it were being applied in a Third World country by a lunatic dictator.’

 

The Institute of Chartered Accountants of England and Wales:

‘The idea that landlords will be taxed on the profit of their businesses, but not be allowed to offset the costs of creating that taxable profit is absurd, unjust and unsustainable. It overturns a fundamental, centuries-old principle of taxation.’

Paul Johnson of The Institute of Fiscal Studies:

‘This line of argument [about the ‘level playing field’] is plain wrong. Rental property is taxed more heavily than owner occupied property.’

Read all the expert feedback in the Full Report from Property118 

What does the Budget Mean For Us?

What does the Budget Mean For Us?

Earlier this week we met as a team and were notably hawkish about what may come to light this week in the the budget. The chancellor told us what we all already knew, the future is indeed uncertain. In this, the so-called “budget for the next generation” we have a number of key takeaways and thoughts.

Keeping politics and personal opinions out of the blog, we have included below just the facts as we see them, and the major factors that will cause an impact to the people we work with on a day to day basis. We are happy to discuss any of the key points here and how they will affect you. Either call us on 0161 681 3724, or leave a note in the comments section at the end of the blog and we’ll respond and open up the debate.

 

Landlords and second homeowners

Stamp Duty

A 3% Stamp Duty surcharge on second homes and Buy to Let properties from 01 April 2016 will be introduced and larger investors will not be exempt as previously thought from the stamp duty charges, meaning all purchasers of Buy to Let properties will pay the additional tax. This was expected not to be of concern to people owning 15 or more houses however this isn’t the case it applies to everyone.

 

21st March – Mortgage Credit Directive

From 21st March consumer buy-to-let mortgages (on rented properties that are not being used as part of a business) will be regulated by the Financial Conduct Authority (FCA). Second charge mortgages (also known as secured loans) will also come under regulation. This could mean that financing deals become a little harder

 

Taxation

Capital Gains Tax (CGT) will be cut from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers. Residential property sales and carried interest will be exempt from Capital Gains Tax (CGT) being introduced on 06 April 2016.

There will be an 8% surcharge to landlords selling a buy to let property meaning this benefit is not being passed onto landlords. We consider the reason behind this that because of recent tax changes in stamp duty and also the clause 24 meaning less tax relief on mortgages of BTL property’s (unless held in a ltd Company) many landlords are already considering selling if they were to benefit from the CGT reduction this would encourage more meaning an increased amount of property to the market that may create a crash in prices.

 

Rents

We consider all the recent changes in tax and legislation on current landlords will increase the rents. There will be more landlords moving out of the market along with no large increase in building will increase demand. As LHA rates are frozen for the next 4 years this will mean either attracting working tenants or expecting LHA tenants to top up their rents.

 

THE NOTHERN POWER HOUSE

We all have our own views on the current effectiveness of the Northern Powerhouse, or lack thereof, but the budget statement did have some promising news for our region, my key takeaways were:

Homelessness

A major issue for Manchester – and one the government has been under pressure to address.In response the Chancellor strayed out of his usual territory to set up a £115m fund to help tackle rough sleeping. Most of that will be used to provide ‘low cost’ accommodation for people leaving hostels before they get into regular housing, creating 2,000 new beds.

It is also delaying a planned cap to local housing allowance by a year – and getting immigration officials to work more closely with local authorities to send back EU migrants who end up sleeping rough, a significant problem in Manchester.

The city has seen rough sleeping rise tenfold since 2010 and there is no sign of that rise slowing.

It is so far unclear how that money will be allocated – whether it will be done according to population size or the current rough sleeping figures.

Nevertheless the big structural problems that underpin our rising homelessness still remain: cuts to benefits and a chronic housing shortage but this is only expected to get worse by the unfair taxing of landlords

Buisness Rates

Greater Manchester has been handed control of all its business rates in replacement of its main central government grant.

Along with Liverpool and London, the area will move towards a model where it is far more reliant on the taxes it raises from local firms going forward.

At first sight the figures for 2016 would suggest Greater Manchester as a whole will be £80m better off as a result.

However there are all sorts of unknowns – including what happens if a huge economic downturn hits the region, such as when the steel industry collapsed in the north east.

There are currently revaluations taking place across the country, due to come in in 2017, that will be used to reset the amount paid by businesses in rates – so that could dramatically alter the amount of income available to councils.

Within Greater Manchester there is the issue of how the money will be redistributed, given that as it stands areas such as Rochdale and Oldham would lose out significantly compared to those such as Manchester and Trafford, which would gain enormously.

But perhaps the biggest danger is also contained within the Budget: thousands of small businesses – 90,000 across the north west – being taken out of business rates altogether.

That looks dangerously close to making a very generous tax cut – and making town halls pay the price.

Transport

High Speed III train between Manchester and Leeds has been given the green light. This will only help as increased infrastructure and improved transport can only help house pricesProbably the most significant part is £161m for the Highways Agency to speed up improvements to the M62 on both sides of Manchester , but money was also committed towards bringing town train journeys between the two cities to half an hour.

He also found £4m towards the eventual transformation of Manchester Piccadilly – and other northern stations – ahead of HS2’s arrival in more than a decade’s time.

CRIMINAL JUSTICE

Greater Manchester is to become the first English region to get new powers over the criminal justice system.

Chancellor George Osborne used the Budget to announce further devolution of powers to the area.

The change means decisions on offender management, education in prisons and work with youth offenders will be made locally.

The region’s Labour mayor, Tony Lloyd, said “we will have to read the fine print” to make sure there is “no loss”.

The Chancellor also announced the region will get a new prison and will keep 100% of business rates, beginning next year. Greater Manchester Combined Authority, which comprises the region’s 10 councils, said it will have more control of funding to support both offenders and victims of crime.

It is proposing devolving other budgets, including for female offenders, young offenders and those sentenced to fewer than two years in prison, which would mark a major change to the current system.

Announcing the change, Mr Osborne said: “This is the kind of progressive social policy that this government is proud to pioneer”

 

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