UK landlords should upgrade to cavity walls to reduce energy bills

The introduction of the Energy Performance Certificate from October 1 for landlords and house sellers has made the improvement of energy efficiency all the more important from a savings point of view, said Mike Malina, an energy efficiency expert.

Malina has suggested installation of cavity wall insulation to those looking at reducing the energy bills of their homes and striving to improve their EPC rating. He commented that expensive double glazed windows were mainly cosmetic. He felt that one should not invest on double glazed windows unless there was drastic need for replacement.

He argued that if the windows were in sound condition, replacing them with a double-glazed variety was not a good idea since many more cost-effective approaches could be undertaken first to get much higher returns on investment.

Malina recommended thermostatic radio valves and draft stripping in homes to enhance energy efficiency without the need to spend large amounts.

An improvement in energy efficiency would also mean reduction in carbon emission. According to the department of Communities and Local Government reports the existing old UK homes emitted 1.6 tonnes of carbon on average per year which was almost twice (0.9 tonnes) the average in the newly constructed homes.

The Government has introduced the Landlords’ Energy saving Allowance (LESA), which is a gift to the savers of energy. It is a tax break which entitles landlords for tax returns against expenses incurred in installing energy saving items or equipments.

Insulations help in consumption reduction. Amount spent on insulations, hot water systems and cavity wall will attract tax return up to maximum £1,500 per property.

Homeowners getting wiser – stop availing equity release

The Bank of England’s figures indicate that UK homeowners have stopped making use of cash against their homes.

The equity release scheme was designed to release cash to the homeowners from the value of their property. According to the reports from Central Bank, the scheme was at its peak with the maximum withdrawals in 2003, thereafter number of withdrawals started going down steadily.

The housing withdrawal figures of the Bank of England have slid to a negative for the first time in 10 years, indicating homeowners were more concerned with reducing their debts rather than withdrawing cash from value of their property.

The second quarter of the year witnessed an interesting trend. Borrowers have increased their equity on homes by £2.8 billion rather than withdrawing cash. Injection of £2.8 billion cash in the Bank was the biggest of its kind since 1970 when it started compiling data.

Howard Archer at Global Insight, who had been a close observer of the developments of the sector, explained that attraction towards housing equity release scheme had been waning due to slump in housing prices, increase in mortgage rates and tightening of lending criteria.

Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors added that equity withdrawals have gone to negative side for the first time since 1990. He concluded that downturn in the property market was cutting down equity built up over recent years.

Helping landlords to minimise their worries

It is quite essential for the distressed buy-to-let landlords to get all the information about tax relief and allowances to which they are entitled and make their own life bit easier by availing those benefits at the earliest.

According to Melanie Bien at Savills Private Finance mortgage market was becoming less welcoming with lesser choice, tighter lending criteria and higher rates of mortgages. Lenders such as Woolwich and many others increased their lending rates up to 0.5 percentage points recently.

Under such circumstances landlords must keep few points in mind and make use of them without fail.
Avail relief on energy efficiency – Effective October1 every landlord is required to obtain Energy Performance Certificate (EPC) and show it to potential tenant. A higher energy-efficient home would attract tenant more and help you in avoiding void period. You would also be entitled to tax relief on expenses up to £1,500 on energy efficiency measures including floor insulation and loft. An EPC costing about £100 would be valid for 10 years.

Boost your rental income by making alterations in your home, say by converting a living room into another bedroom and putting in some furniture. You would be able to get more rent and recover cost on room conversion within few months. However you don’t want to use expensive furniture as any damages or losses could get expensive. It’s better to use cheap furniture in letting to minimise the risk of you losing out, such as cheap ‘catalogue’ bedroom furniture or cheap cane furniture for the conservatory.

Bargain for higher rent. Rents in the UK are already on rise since many people are putting off buying and opting for renting. Rents were up by 9.3% in June 2008 compare with June 2007. According to Steven Bolton of Platinum Partners Group you are in stronger position to demand higher rents if your property was getting rented within record time without any objections on price.

Buy-to-let lenders withdraw products, make landlords run out of option

Landlords looking to re-mortgage are left with no options since buy-to-let lenders have resorted to the withdrawal of good products and started hiking rates in the backdrop of the Bradford and Bingley (B&B) collapse. Nationwide subsidiaries Mortgage Works and UCB were quick in temporarily withdrawing buy-to-let deals following B&B’s retract on it entire range and deals offered by its subsidiary Mortgage Express.

Lenders, NatWest and the Pricipality Building Society, Cheltenham & Gloucester, were still offering buy-to-let deals, but landlords were reluctant to buy due to higher fees, tightened criteria and lower loan values.

BM Solutions hiked its rates from 5.595 to 5.99% for 75% loan-to-value. For 85% loan-to-value it hiked rate to 6.49% from 5.89%.

Andrew Montlake of Cobalt Capital said that borrowers of 85% loan-to-value would be in trouble when their fixed rates would come to an end forcing them in paying standard variable rate till normalcy returned.

According to Melanie Bien of Savills Private Finance, landlords looking to re-mortgage should consult broker 3 months prior to end of their deal. He is anticipating fall in interest rates towards end December leading to reduction in monthly payments for borrowers. He also predicted that majority of landlords would survive in spite of more difficult outlook.

A caution note for landlords regarding tax liabilities

It is important that buy-to-let landlords know about their tax liabilities and keep their accounts in order before impending crackdown by HM Revenue & Customs.

According to the Target Chartered Accountants, tax officers have been empowered to visit landlords’ homes and verify their documents. It cautioned that HMRC had gathered details of the landlords through the UK and overseas letting agents and was planning a crackdown on tax evaders.

According to Mark Tuckwell at Target, a misconception has been prevailing amongst the landlords that loss making owners were not supposed to declare their income. HMRC however does not hold the same view. Those having a source of income are supposed to declare income and will be liable for any inquiry on this issue by the tax officers. Even if there was no tax liability, the enquiry could cause lots of hassles and incur significant cost.

Mark also mentioned that many landlords mistakenly believed that they would never be detected by the taxman. HMRC has an easy access to the information on relevant properties to track those not disclosing their incomes. He advises that landlords should avoid knock on their doors and spare themselves of heavy penalties by voluntarily disclosing their income. Voluntary disclosures are being rewarded with generous concessions by the authorities.

Mark also points out that many landlords who did not take advice from tax consultants were unnecessarily paying more tax due to ignorance about allowable expenses on property. He suggested landlords to avail of experts’ advice on tax matters.

OFT market study for evolving Consumer Code of Practice

A consumer protection code of conduct is in the offing for the rent back market, as the Office of Fair Trading (OFT) is expected to publish its findings of the market study in next ten days.

The National Landlords Association of the UK informed that it had proposed legal sanctions and financial penalties in its draft of the code of conduct for non-compliance.

The NLA’s draft was published in August 2008 for suggestions. It received wide response from stakeholders including Shelter, Crisis, Council of Mortgage Lenders, Citizens Advice, Royal Institute of Chartered Surveyors, Chartered Institute of Housing, National Federation of Property Professionals and British Property Federation.

The draft was also welcomed by private landlords and major companies of the rent-back market. The respondents opined that Code of Practice would serve as an effective framework and foundation for developing robust system. It would provide protection to consumers by scrutinising rent-back transactions.

According to NLA’s chairman David Salusbury, protection of vulnerable consumers at the earliest was the critical factor irrespective of whether NLA’s voluntary Code of Practice was a step in the direction of sale and rent-back regulation or an end in itself.

Salusbury remarked that sale and rent-back was an inappropriate practice but admitted that ethical practices needed to be explored for those families which could no longer afford to buy home of their own.

The association has been acknowledging that there were some investors who lost no opportunity in making a quick buck, and a code of practice was essential to keep a check on such people.

Landlords getting high return from University towns

The latest University Town House Price Review by Halifax, revealed that landlords letting their properties in university towns were enjoying high returns, while others are helplessly suffering from unprecedented downslide of the property market.

The Halifax survey, which tracked movements of the house prices in university towns across the UK, pointed out that buy-to-let landlords and parents who bought properties in university towns for their student children have been benefitting handsomely from returns on investment in the last 5 years.

The study highlighted that in 35 out of 64 towns covered under the survey, the house prices were higher by £20,335 on average than those prevailing in the surrounding areas. Winchester attracted highest premium of £114,489, nearly 50% above the average price for Hampshire.

The other university towns attracting premium above £20,000 included Bath (43%), Warwick (46%), Cambridge (44%), Oxford (14%), Stirling (13%) and Newcastle (16%).

According to Halifax, students paid £96 as the average weekly rent for private accommodation. Region wise costs varied from £116 in Greater London to £64 in Northern Ireland. Manchester, with the largest student population, witnessed 63% increase in the house prices in past 5 years as compared to national average of 44%.

Guildford is reported to be the costliest university town in the UK where average house cost stood at £363,503; followed by Winchester at £343,332 and Bath at £326,403. Hull is the only university town with lowest average cost at £124,108.

Energy Performance Certificate is now mandatory for residential landlords

Effective 1st October 2008, residential landlords in England and Wales are bound by the new government scheme to furnish new tenants a certificate regarding energy efficiency of their rental property.

An Energy Performance Certificate (EPC) would allow a potential tenant to know fuel costs before renting property.

Rented buildings would be given EPC detailing efficiency on A to G scale. Grading would involve examination of boiler performance, efficiency of appliances, double-glazing and insulation.

Landlords failing to comply with the scheme would incur repeatable fine of £200 for each un-assessed property.

The cost of an EPC varied from £50 to £150 depending on region and the accredited assessing agency.

All the EU members are supposed to implement the Energy Performance Certificate scheme before the beginning of next year.

Tenants seeking energy-efficient properties and value for money have welcomed the new scheme.

The National Landlords’ Association has urged its members to obtain EPC as soon as possible and avoid being debarred from re-letting property after expiry of existing rental contract. According to its chairman, compliance to EPC was necessary to avoid void periods which no landlord liked to afford.

The list of accredited assessor could be availed on the Landmark Information Group’s website.

UK’s mortgage market under pressure – hikes rates

Buckling under pressure due to the recent financial turmoil in the financial markets, the UK’s frozen mortgage market is seeking a hike in the mortgage rates. HSBC, the major High Street bank acted swiftly in raising its rates.

Both the mortgage costs and bank’s borrowing costs for wholesale funds have been showing a downward trend. The financial market crisis seems to be setting a trend in a negative direction.

As per the Bank of England figures, the average 2-year fixed-rate mortgage on 25% deposit deals has gone down to 6.08% in August from 6.6% prevailing at the end of June 2008. However, Libor (London Interbank Offered Rate), the rate of lending between two banks, has increased substantially and has reached its highest level above 6% since December 2007.

This has prompted many lenders to hike interest rates, while others were planning to revise it in the next few days.

HSBC is proposing to raise mortgage rate from 5.97 to 6.27% for deals with 10% deposit, while enticing borrowers with reduced rates on deals which offered 25% deposit. Yorkshire Building Society has already raised its rates by 0.4%

The news of rising rates has come at a time when it was estimated that a first time buyer could take 15 years on average to save a deposit which could help in fulfilling dream of owning a home in the UK.

Bristol Alliance opens its Cabot Circus Shopping Centre in Bristol

The Bristol Alliance has opened its £500m Cabot Circus Shopping Centre in Bristol which will let 140 shops.

Bristol Alliance is a joint venture between Hammersons and Land Securities. The centre, which had been under development for the last 8 years, offers one million square feet of retail and leisure area.  It is situated on the M32 approach to Bristol. Of the provision for 140 shops, 75 are new to Bristol. Around 100 retailers opened their stores on opening day, while the remaining stores should be opening in coming weeks.

90% of the space is currently being let at the centre and it is anticipated that better shopping facilities would attract more consumers to Bristol. With 25 restaurants and cafes, Cabot Circus is aspiring to establish itself in the top ten destination centres of the UK, hoping to attract 24m visitors every year.

An estimated 20,000 workers were involved in the construction of the Cabot Circus Shopping Centre.

Bristol Alliance, in partnership with SOLON South West Housing Association, will be releasing 24 affordable homes and 32 neighbouring apartments. A 15-storey residential tower with 200 apartments is due to be constructed above Harvey Nichol’s store by the MCD Developments.

Construction of new offices on 161,500 sq ft space will commence in 2009, and Future Inns will be starting a 140-bed hotel in the centre next year.