www.landlords.org.uk
National Landlords Association
www.landlords.org.uk
Top Ten Challenges
Facing London LandlordsRichard Blanco, NLA Representative
www.landlords.org.uk
1. Regulation of Buy To Let Loans
• Drivers
– Lots of landlords sell,
could “seriously affect UK
economy”
– Rise in BTL from 5% to
16% of the mortgage
market
– Landlords out of favour –
prefer homeowners and
Build To Rent
• Two Phases: 1 Jan & 30
Sep 2017
www.landlords.org.uk
1. New Criteria
• Phase 1 – Increased stress test - 1 Jan 2017
– Old criteria 125% @ around 5% rental coverage
– New criteria 145% @ 5.5% minimum
– Take into account tax status
– Different approach if remortgaging
– 5 Year fixes are exempt
• Phase 2 – ‘Portfolio Landlords’ – 30 Sep 2017
– 4 mortgages or more
– Assets & liabilities, business plan, cashflow
www.landlords.org.uk
Impact Of Phase 1 On Yields
Yield Max LTV
under old criteria
Max LTV
under new criteria
6% 96% LTV
(theoretically)
75% LTV
5% 80% LTV 63% LTV
4% 64% LTV 50% LTV
www.landlords.org.uk
Impact Of Phase 2
• Example of criteria: BM Solutions
– New cap of 10 properties, min income of £30k
– Whole of portfolio assessed at 145% x 5.5% & max
LTV of 75%
• Use specialist brokers
• Use different lenders
• Borrow less than expected
• Have to use commercial lenders
www.landlords.org.uk
2. To Re-structure or Not…
• 1 in 4 landlords consider incorporation/spouse
• Move to limited company (or LLP or both)
– CGT and SDLT
– 20% corporation tax and dividend tax up to 38.1%
– Corporation tax falling to 19% then 17% (2020)
– 7.5% Tax on dividends over £2,000 from 2018
– Ltd company must provide deposit for loan
– Restricted to commercial loans
www.landlords.org.uk
3. Uncertainty – Four Factors
• House prices
– Land Registry 4.9% in June (Halifax Aug 2.1%)
– Down 6.3% in Prime Central London (Knight Frank)
– Micromarkets: 15.7% W Forest, 14% Newham
– Where are we in the house price cycle?
• Tax Changes
– 19% landlords say they will sell (NLA)
– Opportunity (15%) or Negative portent?
– Landlord optimism at an all time low
www.landlords.org.uk
Uncertainty – Four Factors
• Brexit
– Economy is buoyant
but will this last?
– Impact on rental
demand?
– Falling pound
encourages
international investors
• Government Policy
– Anti landlord, pro FTB
& build to rent
– Letting agent fee ban,
deposit caps
3 year tenancies next?
www.landlords.org.uk
4. Your Business Plan
• Sell Up, Stay Put or
Expand?
• Move into Buy To Sell
(buzz of the refurb)?
• Your Plan Should
Consider
– Tax changes
– Yields
– Rental demand
– Opportunity for capital
growth
– Financing (taking
account of changes)
www.landlords.org.uk
5. Increasing Govt Regulation
• Documents when starting an AST to retain s21
– EPC, GSC, DPC, How To Rent, License, Alarms
• Energy Efficiency
– No F & G after April 2018/Request improvements
• Digital Tax from April 2019 (£85k +)
• Housing & Planning Act
– Electrical Safety, Civil Penalties, CMP
• New HMO Mandatory Licensing Definition
– 5 people in 2+ unrelated households – but when???
www.landlords.org.uk
6. Article 4 & Licensing Compliance
• 22 boroughs have or considering discretionary
licensing
• 8 boroughs have Article 4 directions
• www.londonpropertylicensing.co.uk
• Understand types of license
– e.g. many landlords wrongly or unlicensed in
Newham and Tower Hamlets
• Consider these factors when business planning
www.landlords.org.uk
7. Changes In Rental Demand
• Sales transactions
are down
– Down to 96,910 lowest
now since Oct 2016
– New instructions fell
for 16th month in a row
– Moves by mortgaged
homeowners down by
50%
– Drag caused by Stamp
Duty on properties
over £1m
– Gross mortgage
lending down by 8%
(CML)
– First Time Buyers up
by 8%
www.landlords.org.uk
7. Changes In Rental Demand
• 37% of landlords
report declining
tenant demand in
Central London in last
3 months
– 20% nationally – trend
is growing
– 23% decreased rents
• Brexit related or surge
in sales to April 2016?
• Reconsider your
target market, sell,
adjust price?
www.landlords.org.uk
8. Tips On Avoiding The Void
• Setting the right tone at
the start
• 12 month contracts,
works during tenancy
• Marketing photos on file
• Talk about renewal at
9th month, confirm at
10th month
• Viewings in 11th month
www.landlords.org.uk
8. Avoiding The Void
• Check out letter and
follow up visit
• Help agent – quick
access to keys
• Flexible on price and
furniture
• Line up contractors
• Quickly resolve
deposit return
www.landlords.org.uk
9. Is Build To Rent A Threat?
• 25% of new starts 2016 in London Build To Rent
(but PRS is 26% of housing in the capital)
– GLA estimates top 90th percentile - premium offer
– Drive up standards & expectations?
– Small landlords co-exist in student market
– 3% surcharge and high land values (over £1.05m)
• Could compete with
– High end HMOs
– Drive out lower end of market
www.landlords.org.uk
10. Affordability, Subletting, Scams
• High occupation levels
• Unscrupulous rent to rent
• Fake landlords, serially bad tenants, Gumtree,
Air BnB scams
• Take steps to avoid
– Proper referencing
– Induction and inspections
– Clear guidance and response to subletting
– Tell tale signs: cash up front, not lived in, evidence of
extra people, befriend neighbours
www.landlords.org.uk
Inside Property Podcast
• New monthly podcast
– HMOs
– Expand, Hold or Sell?
– Brexit & Investing
– Crime in the PRS
– Property in the media
– Scotland & Wales
– Maintenance
– Landlord tenant
relations
• insideproperty.org.uk
www.landlords.org.uk
Join Us
• Today for £75 instead
of £99
• Advice line & Library
• UK Landlord
• Discounts on
mortgages, insurance
and other services
• Your voice
• Be a professional
• 87% satisfaction rate
www.landlords.org.uk
What do you think?
Time For Questions
Richard Blanco, NLA Representative
To do business with the NLA
Handout of this session at my blog
www.richardblanco.com
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