Buy-to-let landlords are buying more properties outside London following the 6th consecutive month of rent falls in the capital according to the UK’s largest estate agent, Countrywide.
Fifty-per-cent of London buy-to-let landlords are looking to buy properties outside London this year according to Countrywide’s new figures. In 2016, London landlords purchased over 22,000 homes outside of the capital – a seven-fold increase on the 3,311 recorded in 2010 when Countrywide first began keeping records.
In April, just 12 per cent of London homes were sold to buy-to-let landlords which is close to a record low.
Countrywide says that London landlords are increasingly looking to northern England for buy-to-let properties with Liverpool becoming a particular hot-spot in the buy-to-let sector.
Landlords looking further afield hope to benefit from better yields and lower stamp duty. Average stamp duty currently stands at £40,000 in the capital which falls to £6,300 outside of London.
Around 9 per cent of buy-to-let properties in the north were sold to London landlords and 26 per cent of London landlords picked up property in the East of England.
Johnny Morris, Countrywide’s research director, said: “In response to slower price growth and government tax hikes, London landlords are looking further than ever to find a return.
“Lower entry costs and higher yields outside of the capital are enticing investors to look further afield than they have previously.
“Rental growth remains low across Great Britain. Mostly driven by London where rents have fallen for the sixth consecutive month.
“The repercussions of the stamp duty rush are still playing out in the rental market as stock levels continue to remain high.
“But with fewer investors buying in the capital we will likely see stock levels fall, driving future rental growth.”
Former Prime Minister Tony Blair has set up a company to manage his £33 million property empire, joining a growing number of landlords who are opting for incorporation to beat tax rises on buy-to-let operations.
Blair, along with wife Cherie and eldest son Euan, are believed to own a total of 38 properties. The families’ property portfolio includes flats in north-west England which Mrs Blair and their son let out via an existing company, Oldbury Residential Ltd, which holds investments worth £2.4m in the year ending April 2016.
The family has reportedly banked at least £1.7m in profits from buying and selling nine properties, and they also have an extensive portfolio of private homes, including a £9m five-storey Georgian townhouse which they purchased in 2004 and a £10m Grade I-listed Buckinghamshire manor house.
Now Mr and Mrs Blair have set up another company, Harcourt Ventures Ltd, to let and manage properties, with Tony Blair owning half of the shares and his wife named as the sole director.
Landlords incorporating to reduce tax liabilities
Setting up a limited company is one of several ways in which private landlords have responded to recent tax changes within the private rented sector. These changes include increases in stamp duty and cuts to mortgage tax relief introduced in April which no longer allow landlords to offset mortgage interest from their rental income.
The reduction of Mortgage Interest Relief, first proposed by former Chancellor George Osborne in the 2015 Summer Budget, eliminated landlords operating as sole traders from deducting mortgage interest payments from their rental income to reduce their tax liabilities.
Cherie Blair Law Firm Hired By Landlord Group
Landlord groups have fought several failed campaigns against the tax changes via petitions and talking their case to the High Court hiring Cherie Blair’s law firm, Omnia strategy, to argue that the tax changes breach landlord’s human rights.
Speaking after the landlords lost a high court review in October last year Mrs Blair said: “We know the case has been supported and followed with interest by a large number of individual landlords. Many of these landlords now face challenging times ahead.
“From the outset, the legal process was just one aspect of our clients’ fight against this unfair measure. Together with their impressive and growing coalition, they will continue to engage with the government, and the legal team wishes them every success.”
Buy-to-let landlords are now incorporating their lettings operations as limited companies to avoid the tax changes and to secure additional finances to buy more properties according to industry statistics.
The proportion of homes available for rent in the UK, owned by a company landlord, reached 20 per cent in the first quarter of 2017 – the highest number since records began in 2010.
Landlords incorporating their businesses to avoid the tax changes would have to pay stamp duty land tax on the transaction, which now stands at 3 per cent. Capital gains charged on the transfer to the company may be deferred until it is sold again and profits are taxed at 20 per cent, though this is set to reduce to 18 per cent by 2020.
The deferment of capital gains tax is called incorporation relief, but in order to qualify landlords must demonstrate that the property is part of an actual business rather than just a passive investment. Some landlords are now claiming to provide additional services such as cleaning or gardening in order to lower their tax liability.
Incorporated landlords can claim £5,000 per year as a tax-free dividend but any income over this amount will be charged at 7.5 per cent for basic-rate taxpayers, 32.5 per cent for higher-rate payers and 38.1 per cent for additional-rate payers.
However, most financial experts advise that the statutory obligations and costs involved in running a company outweigh any tax savings for most landlords unless they have a sizeable property portfolio.
Manchester’s growing housing crisis is expected to worsen sharply over the next five years. New analysis reveals that the city’s population is growing almost 15 times faster than new homes are being built.
Property adviser JLL predicts that house prices in Manchester are expected to increase by 28.2% due to growing demand from a surging population and insufficient supply.
In 2016 alone, Manchester residential property capital values grew by 16%. Overall prices in the North West are predicted to rise 18.1% until 2021.
Low levels of new-build
The North West’s and Manchester’s imbalance between supply and demand is the main reason property value growth rates are currently outpacing the rest of the UK.
According to the latest official figures, just 290 homes were built in Manchester in 2015-16. This brings the total number of dwellings (houses and flats) to around 218,500. At the same time, the city’s population increase by 10,000 according to population projections based on 2014/15 figures.
The imbalance between population growth and new-build is now one of the worst across the whole of the UK. Only Westminster and Kingston upon Thames in London saw a bigger gap between the rate of population growth and new houses being built.
The housing crisis is not confined to the city center alone. In Oldham the population is growing at five times the housebuilding rate. Meanwhile, the populations of Stockport and Salford are both growing three times faster than new homes are being built in the area.
Across the conurbation only two boroughs, Bury and Wigan, saw the number of new homes grow faster than the population increase.
Manchester’s housing shortfall is now publicized widely on property investment forums. In January, the letting agent Martin & Co identifed Manchester, Cardiff and London as the most lucrative places to invest in buy-to-let properties. Rental demand was cited as one of the strongest indicators for profitable buy-to-let locations.
Once again renters will be the biggest losers. According to John Goodall, CEO of Landbay: “Tenants will have little choice but to compete for what properties are on offer. As a result we expect rents to rise faster than the pace of inflation next year, with growth tripling to 3% by the end of 2017.”
Britain’s biggest landlord Fergus Wilson and his wife Judith Wilson have been caught up in the rout of the British Housing sector following Britain’s decision to leave the European Union last Thursday.
The Wilsons who aggressively built a property portfolio since the early nineties, have been trying to sell their £250 million property portfolio of around 900 houses to a collection of foreign buyers and wealthy individuals. However, the Daily Telegraph claimed that Mr Wilson is seeing the cancellation of many sales following Thursday’s Brexit vote.
The Wilsons are perhaps models for Britain’s buy-to-let frenzy and are no strangers to controversy. In 2009, Judith Wilson saw a court case thrown out by a judge for demanding £3,000 for a new bathroom suite from a tenant who had damaged a cistern lid which the tenant offered to replace. In a written judgment, Judge Christopher Cagney branded the claim “exaggerated”, and said he “had doubts” that work to replace the bathroom suite would ever be carried out. Mr Wilson was also found guilty in 2014 of assaulting an estate agent when a boiler in one of his properties failed to work despite a court plea that he was “too fat to hit anyone”. Earlier in January of that year Wilson sent eviction notices to every tenant that received housing benefit saying he had lost around £800,000 because of them.
Undeterred by the market turmoil caused by the Brexit vote, Mr Wilson claims that buy-to-let investors will become richer as Britain leaves the European Union because tighter immigration policies proposed by Boris Johnson and Michael Gove are “likely to improve the quality of tenants.”
According to Mr Wilson: “Ten years ago I housed a lot of single mums and battered wives who were a good category of tenant. They were pretty good at paying the money and looking after the houses. But then in about 2005 the eastern Europeans started coming and they made really good tenants. I haven’t advertised a property for five years because they always ask – can my friend move in?”
Despite the Wilson’s optimism, the housing sector was one of the worst affected industries following Britain’s decision to reject EU membership with shares in housing giants Taylor Wimpey, Redrow and Bovis Homes Group each down around 30% since the vote.
Cherie Blair has spoken at an event organized by Landlord and letting agent groups seeking to overturn Chancellor George Osborne’s planned changes to mortgage interest relief for landlords. The Chancellor’s proposals, introduced in the 2015 Budget and Autumn statements, are intended to eliminate tax exemptions which the Treasury claims are not enjoyed by investors in other asset classes such as shares. Under the proposals, landlords operating as sole traders will be less able to deduct mortgage interest payments when calculating their tax liabilities.
Mrs Blair spoke at the event as council to a legal challenge brought against the Treasury proposals following the failure of a formal Parliamentary petition. The motion started by the Residential Landlord’s Association fell more than thirty-one thousand signatures short of the required hundred thousand to merit debate in Parliament. The failure to exert pressure on the Government using petitions led to a crowdfunding campaign by landlords to finance a legal challenge to overturn the Chancellor’s measures.
Acting as legal council to the complainants through Omnia Strategy, the law firm she founded and chaired, Mrs Blair claims that the Chancellor’s proposed changes warrant a judicial review since they discriminate against landlords according to the European Convention on Human rights. This gives one the right to hold one’s property in a way without unfair taxation. Mrs Blair also purports that the tax changes go against European Union competition laws by favoring large institutions over small individual investors.
Also speaking at the event was the Conservative Life Peer and former member of Parliament Lord Howard Flight who had written a letter to the Government “Why the Government is wrong to attack Buy-to-Let.”
The conference, titled the “Tenant Tax Summit” was held on 9th June at the ILEC Conference Center in Earl’s Court. Sponsorship was provided by various property investors and landlord’s organizations including Platinum Property Partners, Velvoir, the Humber Landlord’s Association and the Residential Landlord’s Association among others.
Two landlords at the center of a legal challenge to Chancellor George Osborne’s tax changes announced in last year’s budget have confirmed that two government departments had provided an “acknowledgement of service”.
The legal challenge to the Treasury’s tax changes was launched by two landlords, Steve Bolton and Chris Cooper, who used a crowdfunding platform to raise sufficient capital to employ Omnia Strategy, a legal firm founded and chaired by Cherie Blair, to seek a judicial review of the Chancellor’s measures.
The legal battle over the Chancellor’s proposed changes to Mortgage Interest Relief follows the failure of a Petition launched by the Residential Landlord’s Association to attract sufficient support to warrant debate in Parliament.
Omnia Strategy, the legal firm founded and chaired by former Prime Minister Tony Blair’s wife, Cherie Blair, has written a formal complaint to HMRC proposing a judicial review of Chancellor George Osborne’s restrictions of deductions of finance costs related to residential property.
The new tax changes, set to be implemented in the autumn of 2017 would limit the ability of landlords operating as sole traders to offset mortgage interest payments from their tax liabilities.
The decision to seek a legal challenge to the Chancellor’s tax changes comes as a formal petition set up by the Residential Landlord’s Association failed to reach the required number of 100,000 signatures to be considered for debate in Parliament.
The legal challenge to the Chancellor’s proposed tax measures was brought by Steve Bolton and Chris Cooper who raised £50,000 in crowd-funding from landlords’ associations to initiate a legal challenge to George Osborne’s tax changes.
Mr Bolton owns around 20 residential and commercial properties is also the founder and owner of Platinum Property Partners, a buy-to-let specialist with a portfolio worth a total of £200million. Mr Cooper is a part-time landlord who is using buy-to-let as part of his pension.
The letter to HMRC lists Miss Blair as one of two legal advisers for the claimants and bases the challenge on several purported breaches of the European Convention on Human Rights. The letter claims that the Chancellor’s measures infringe on one’s right to hold one’s property in a way without unfair taxation and may also go against European Union competition laws by favoring large institutions over small individual investors.
In it’s official response to the petition, the Government has claimed that the tax changes remove tax advantages enjoyed by property investors which are not available to those investing in other asset classes.
A move by a landlord’s organization, the Residential Landlord’s Association to overturn Chancellor George Osborne’s changes to landlord tax exemptions suffered a serious blow as its Parliament petition failed to attract sufficient support.
The petition, “Reverse the planned tax relief restriction on ‘individual landlords’” expired today without reaching the required number of 100,000 signatures necessary to be considered for debate in Parliament closing with only 60,894 signatures.
Begun six months ago, the motion sought to challenge Chancellor George Osborne’s reduction of Mortgage Interest Relief announced in his 2015 Summer Budget and Autumn Statement. However, enough support was obtained to warrant an official statement on the topic whereby the Government rejected claims that the proposed tax changes were unfair. In it’s response the Government added that the tax amendments were partly intended to reduce the tax advantages offered to property investors which were not shared by investors in other assets such as shares. The Government also claimed that only 18 percent of landlords are expected to be affected by the changes which are to be introduced gradually over four years beginning in 2017.
The petition’s sponsors, the Residential Landlord’s Association claimed that the tax changes were unfair and likely to result in higher rents for tenants as landlords seek to offset higher costs by increasing rents.
It is understood that some landlord groups are now seeking a judicial review of the Chancellor’s tax changes.
Two property developers, Steve Bolton, Chairman of Platinum Property Partners, and Chris Cooper are have raised £50,000 through a Twitter crowdfunding campaign to challenge Chancellor George Osborne’s planned tax changes for landlords. Under the Chancellor’s proposals, landlords operating as sole traders would no longer to be able to claim Mortgage Interest Relief when calculating their taxes.
Bolton and Cooper began fundraising towards the end of a Parliamentary Petition launched by the Residential Landlords Association titled: “Reverse the planned tax relief restriction on ‘individual landlords’ which argued that the Chancellor’s plans were unfair to private landlords and may result in higher tenant rents.
The Residential Landlord’s Association petition attracted 60,894 signatures, well short of the required 100,000 necessary for the motion to be considered for debate in Parliament which may leave Court action the only option to challenge the proposed tax changes. The motion did however receive enough support to merit an official response from the Government reiterating the Treasury’s support for implementation of the Chancellor’s measures. In its response the Government claimed that the tax changes were fair and merely removed tax exemptions for property investors which are not enjoyed by those in other asset classes.
Speaking about the Chancellor’s plans, Bolton stated “It’s not clear why the government has chosen to just launch an attack on buy-to-let owner-operators with mortgages. It’s a tax from Alice in Wonderland – truly absurd and divorced from real life. Not only is this tax grab unfair, undemocratic and underhanded, but we believe that it could also be unlawful.”
It is believed that the pair have sought legal advice matter from Omnia Strategy, a legal firm founded and chaired by Cherie Blair.