Recent UK property news highlights a surge in equity release agreements and a significant injection of new mortgage lending.
Meanwhile, landlords look to the advantages of operating as a limited liability company although many are also in danger of quitting the buy to let market altogether if faced with rent freezes, ongoing tax demands, and the challenge of sheer red tape.
Let’s take a peek behind the headlines.
Equity release is booming
Older homeowners looking to unlock some of the capital value in their property have fuelled double the usual number of equity release agreements in the past seven years, according to a story in the Daily Mail on the 8th of September.
Whereas there were fewer than 2,000 equity release deals signed each month in 2015, the monthly average so far this year has reached more than 4,500.
Citing reasons such as escalating inflation and the general cost of living, homeowners can borrow up to 60% of the value of the equity they own in their homes yet still continue to live there, pending the lender’s recovery of both the capital and rolled-over interest payments when the owner dies or goes into long-term care and the property is sold.
Tax benefits drive surge in landlords forming buy to let companies
The tax benefits available to landlords who run their buy to let business as a private limited company rather than on their own private account has led to a surge in company formations, revealed Landlord Today in a story on the 12th of September.
Recent surveys have shown that during the year to the end of August, the number of landlords incorporating their businesses rose by two and a half times the number who had formed limited liability companies in the previous 12 months. New company formations have grown by 11% each month since the beginning of this year.
The sound business case for incorporation includes the protection afforded by limited liability together with the tax advantages of paying corporation tax rather than personal income tax.
UK’s property market sucks in £84bn of new mortgage lending
The second quarter of this year has seen new mortgage lending reach a total of £83.9 billion – some 1.7% up on the previous month – according to figures published by Yahoo Finance on the 13th of September.
New lending of this order underlines the current strength of the UK property market even while house prices have reached a record high of £294,260 for the average home, an increase in interest rates, and a fall in the number of mortgage products available – August registered a 13% drop or 517 fewer such products.
As inflation and increases in the cost of living begin to bite, however, average house prices nevertheless continue to rise faster than average salaries. Against that background, analysts predict a slowing down or easing of the housing market.
Taxes, rent freeze and red tape will drive out landlords
In a story on the 14th of September, Landlord Today revealed predictions by the online listings website Zoopla, that more landlords risk being driven out of the buy to let market.
The commentators argue that an intensifying tax regime and a raft of legislation and regulation are compelling many landlords to sell up. As the pool of available rental accommodation decreases but existing tenants look to renew their tenancies, the widening gulf between supply and demand will inevitably fuel further increases in rent levels.
In place of more legislation, it is argued, further investment needs to be stimulated so that more accommodation becomes available to rent.
