Will The General Election Bring Joy To Buy To Let?

From a political perspective, UK-based buy-to-let landlords have had little celebrate over recent times. New affordability criteria for (re)mortgaging, the controversial “right-to-rent” scheme, and the tax “triple whammy” have hardly left buy-to-let-investors in the UK filled with good cheer. Nevertheless, the buy-to-let market continues to hold strong, there’s a very simple reason for this. In the UK there is a chronic shortage of housing in general, coupled with a significant percentage of people for whom renting is clearly the best choice for their life stage. The fact that international investors are making the most of the weak pound to buy up UK-based assets is merely a reflection of this, rather than a key driving force for behind the strength of the market. Now we have a forthcoming General Election, could this provide a welcome boost to buy to let? Answering this question requires looking at three others.

What is the impact of having an election?

Elections, fundamentally, are a choice between the status quo (the current government or their direct successors) and change and any time there is the potential for change there is an element of uncertainty. This means that the period just before an election can, in many ways, be the equivalent of a person holding their breath while they wait to see what is going to happen, hopefully followed by a sigh of relief. It’s also worth noting that even when an election result is as widely expected, it can take a little while for people to absorb the fact and decide what, if anything, they need or want to do about it. In the short term, that may mean that the buy-to-let market is “on hold” in many respects, until everyone concerned has a clearer idea where they stand.

Who will win the election?

People may feel cynical about opinion polls these days, but it’s a hard fact that Theresa May had to ask parliament’s permission to call an election about three years earlier than scheduled and therefore it’s a reasonable assumption that she thinks she can win it, or, perhaps it would be better to say, she thinks her opponents can’t. For their part, her opponents, theoretically, have a lot to gain, in that they have at least some sort of chance of taking power, and very little to lose in that the election will only extend the Conservatives’ mandated by another two years, assuming they win. A quick scan of newspaper headlines reveals that this seems to be a widespread assumption even former Labour leader Tony Blair saying that he expected Theresa May to win it.

What is the Conservatives’ attitude to buy-to-let?

If we assume that the Conservatives win the election, then it also seems reasonable to assume that, at least in the beginning, they will carry on along much the same path as they have been on so far. This includes a promise to “fix the broken housing market”. That’s a pretty broad statement, but the last couple of budgets give an indication of what the Conservatives currently see as their preferred approach. There has been money to build more new homes and higher taxation on buy to let. At current time, the government is also discussing a ban on letting agents’ fees to tenants. In short, the government seems to be trying to make it more of a buyers’/renters’ market. The problem is that the main reason housing in the UK has long been a sellers’/landlords’ market is because of the lack of supply and this is highly unlikely to change overnight or even in the next five years. What may well disappear are “amateur” landlords, possibly to be replaced by “buy-to-let” housing funds, which would allow people to invest in the buy-to-let market without actually becoming direct landlords. This would allow for a consolidation and, indeed, professionalisation of the market and perhaps create a more effective industry force to allow landlords to get their point of view across to decision makers. So, in short, although the election may cause some short-term pain in the buy-to-let market, it has the potential to bring a lot of longer-term benefits.

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New Home Manifesto – What Does It Mean?

Annual budgets serve many purposes, one of which being to show that governments are making good on election (or other commitments). Affordable housing (or the lack thereof) has long been a political hot potato in the UK and therefore it was only to be expected that the government would take some form of action to address this in the budget.

The promises in brief

There were two key points which directly relate to housing throughout the UK. The first was the promise of a £2.5bn housing infrastructure fund, which should lead to the building of 100,000 new homes in areas of high demand. The second was the promise of £1.4bn which was specifically for the provision of 40,000 affordable homes. With regards to this second point, it’s worth noting that this pledge actually goes even further than simply providing the funds. The government has relaxed the rules around bidding for the funds, meaning that companies have more options open to them than previously. In addition to this, there was a £3.15bn funding pot provided to London for the provision of affordable homes.

The budget also contained a number of promises relating to infrastructure, which could feasibly have an impact on the property market, for example increasing transport options may make it viable for people to travel to work from places they would otherwise have been forced to overlook and similarly rolling out superfast broadband may increase the options for home/remote working, which again could have a knock-on effect on the property market.

A stick for buy-to-let, a carrot for new homes

In 2015 the government delivered two sucker punches to BTL landlords. It made changes to stamp duty so that those owning more than one property paid an increased fee and it reduced the amount of mortgage tax relief which landlords could claim. The 2016 statement left BTL landlords alone, although plans were announced to clamp down on fees charged to tenants by letting agencies, but contained the announcement that the government would be supporting house building in general and the provision of affordable homes in particular.

However with new taxes and stricter lending controls coming into force in a few months the buy to let market is not looking as promising as it once did.

The outlook for 2017 and beyond

At the moment it’s rather hard to say what effect all these changes will have in practice. First of all, the autumn statement was only a few months ago and happened right before the Christmas period which has its own set of rules (some economic sectors being frantically busy, while other go into seasonal limbo). Secondly some of the changes are yet to be enacted and in some cases, it’s unclear at what point they will be implemented. For example Philip Hammond’s promise to put the brakes on agency fees is to be implemented “as soon as possible”. Thirdly, and possibly most importantly, there is very little clarity on how these pledges are going to be implemented in practice. For example, the government has relaxed rules around bidding for funds to develop affordable housing so that, in principle, bidders could develop homes for affordable rent instead of having to offer some sort of ownership option, be it shared ownership or rent to buy. These new rules, however, have yet to be tested. In other words, at this point it’s entirely unknown whether or not bidders will consider it worth their while developing property intended purely for rent or whether their applications will be accepted if they do. It’s also unclear where the priority will be in the “high demand areas”. London would be an obvious example of a place where housing is desperately needed, but it has already been designated its own pot of affordable housing funds. Presumably the answer to these questions will be revealed in time, but the government acknowledging the importance of home building in the UK is, at least, a positive sign.

https://www.theguardian.com/housing-network/2016/nov/23/autumn-statement-2016-social-housing
http://www.homesandproperty.co.uk/property-news/autumn-statement-2016-five-ways-it-will-affect-the-property-market-a106501.html
http://www.bbc.co.uk/news/uk-politics-38075649

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Rice’s Hill, East Grinstead update – March 16

The Bastien Jack team are pleased to confirm planning permission has been granted for a new development of twelve new One and Two bedroom apartments in East Grinstead, the site will also incorporate two penthouses. We have appointed a design team who are developing conception/planning drawings  to construction drawings.

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The site has already had Soil Investigation tests and a Topographical Survey to assist with the foundation design and all results so far have been positive.

We are developing the internal specification but will base on our current well received spec used in Phoenix House Phase 1 and Phase 2.

Joseph Gilbert, our newly appointed Project Manager will take the lead on this site as well as Saxley Court.

There is keen interest in the properties, please give our Lincoln office a call if you want to reserve off plan.

Kind regards

Rick

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Saxley Court, Horley update – February 16

The team are now pleased to confirm we have the necessary Party Wall Licences and Access agreements to allow us to demolish part of the existing structure and commence the development at Saxley Court. We have also secured sales for 31 apartments and the legal exchanges will be sealed over the next couple of weeks.

It has been necessary to have lead in period for this project. In the past Bastien Jack developments have been smaller and work has started on site as soon we have legally completed. Saxley Court is a lot larger and more complex meaning we couldn’t have started this site as soon as we purchased it. We have tenants in five existing and trading retail units which we need to accommodate throughout the project.

The design also fills the whole site, therefore building up the to the curtilage requires license awards form our neighbours both freehold and leasehold before we can begin. After we bought the site last year, we embarked on the process of obtaining the necessary licenses/agreements. Unfortunately, there is no time limit for a neighbour to agree or disagree to the licenses, it’s down to the appointed surveyors to carefully negotiate and agree consideration payments. It is therefore difficult to account for a timeframe and include this into a lead in programme. For simple non contentious requests it takes three months to agree an award from the point of issuing the request, however Saxley Court was not a straightforward application.

As well as the Party Wall Awards, the project was further complicated by initial requests to develop in two phases. This created more planning considerations and practical methodology to ensure the build was achievable. We are now able to consider the conversion of the existing building and new build section in one phase, which will assist us in practical construction and successfully accommodate the existing retail units.

Bastien Jack has the experience to alter its entity, we have split up the development into separate Sub Contractor packages where Bastien Jack takes the role of Main Contractor and we’ll drive the project with a full time Site Manager and site staff, overseen and supported by our Project Manager. Firm labour and material prices for the defined sub-contractor works are being gained, we’ll award accordingly and commence on site with the knowledge the project will deliver all the objectives previously communicated.

With the benefit of this knowledge, we projected to commence on site in January 2016, we will now look to commence as soon as Sub Contractors have been appointed and conclude by September 2017.

Regards

Rick.

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