Lettings in Leeds

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Fewer residential landlords choose to remortgage

Source: http://www.rla.org.uk
The number of residential landlords who remortgage their buy-to-let loans continues to decrease, according to figures released by Paragon Mortgages. The last fiscal quarter of 2009 saw yet another drop in remortgages and fewer still are obtaining loans through financial advisors. In fact, 30 percent of residential landlords were able to receive a loan by applying through a financial advisor in order to remortgage their existing properties. This represents a 9 percent drop over figures from just three months earlier when the proportion of remortgages arranged through a financial advisor stood at 39 percent. Paragon Mortgages has tracked continuous decline in remortgaging for the past four quarters and the firm concluded that the number of landlords choosing this financial arrangement has never been this low since 2006.

Landlords often choose not to remortgage because the Bank of England's base rates continue to hover around historic lows of 0.5 percent, meaning as near good a rate as they are likely to get. The relatively restrictive nature of buy-to-let lending coupled with a scarcity of loan products for the rental sector have also discouraged landlords who might consider remortgaging.

Britain's Council of Mortgage Lenders seems to underscore what Paragon found in its survey. Over the past two years, gross advances in the buy-to-let loan sector have decreased by a staggering 72%. While the value of regular mortgages has also fallen, the decline has been closer to 50%.
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City living reached for the sky and fell to earth, but is it now bouncing back?

The Leeds city centre skyline.

When LS1 became the most fashionable postcode in Yorkshire, developers and investors piled in for profit and an incredible metamorphosis took place.
A flat building frenzy created almost 10,000 new homes in Leeds city centre plus a plethora of property millionaires.

As plans were approved to cap it all with Lumiere, a shimmering glass skyscraper set to be the tallest residential tower in Europe, the
market collapsed.

At the end of 2007, the decade- long party came to an end, the banks stopped lending and the buy-to-let boom went bust.

Leeds city centre was left with one mighty hangover as developers, including city living pioneer and Lumiere partner KW Linfoot, went out of business and scores of schemes were mothballed.

Yet despite the pain, a new report reveals that the credit crunch and ensuing recession have done city living a big favour.

City Living beyond the Boom by respected academic Dr Rachael Unsworth shows that the number of flats is sustainable and demand for them is high.

While there is no figure for overall occupancy available, a poll of six major lettings agents reveals that 92 per cent are let with rents back up to 2007 levels (costing from £550 a month for a one bedroom and from £750 for a two bed).

Buyers are still thin on the ground but after dropping around 20 per cent of their value and a rash of repossessions in 2008, mostly from West Point, Concord Street and City Island, average prices are also up to 2007 levels and are on course for future growth

Figures compiled by Dr Unsworth of the Leeds University School of Geography finally quash fears of oversupply that have plagued the market.

They show that post-recession Leeds city centre is leaner and fitter after the brakes were put on building and only another 600-700 flats have any chance of being built in the next five years.

More than 30 schemes with planning permission for around 10,000 flats have stalled and are unlikely to go ahead before 2015. Many will be reworked and some won't come out of the ground at all.

Another 5,760 proposed flats presently without planning permission are even more unlikely to be built.

It is good news for a market that was battered by a barrage of bad publicity after a national newspaper wrongly claimed that 70 per cent of the flats in Leeds were empty and one commentator said they would be the "slums of the future".

That falsehood has caused lasting damage, but it's easy to see why there were fears of apartment overload three years ago. It felt like flats were being thrown up everywhere and most of the apartments were sold off-plan to investors so when schemes were completed, the owners tried to sell or let them in their hundreds, and there were temporary gluts.

Some flats were also badly- located, poorly-designed and struggled to compete against more central locations.

"There was a three-year media frenzy cataloguing the failures of city living in Leeds and it was all based on something that was nonsense. I have no idea where that 70 per cent figure came from," says Dr
Unsworth, whose independent report was commissioned by five agents all determined to fight back.

Morgans City Living, Knight Frank, Savills, King Sturge and Allsop knew what they were experiencing on the ground was very different to the national reports.

Jonathan Morgan, managing director of Morgans City Living, says: "Mud sticks. Developers trying to raise finance or get underwriters in London to back a scheme still struggle because the perception is that Leeds is oversupplied when, in fact, we aren't and we're much better placed than places like Manchester, Birmingham and LIverpool.

"This image of loads of empty flats still haunts us. It's been very damaging and it's not true."

There is one building that is unoccupied at City Island.

It belongs to the Bank of Kuwait who thought they'd ride the storm and sell when the market recovered. They are now planning to let the properties.

The bank, like others who built and bought at the wrong time, will become a reluctant landlord, but at least they will have some income.

Those who bought land at the height of the boom are effectively paralysed.

The banks aren't keen to fund construction, there are few off-plan investors and the land is worth a third of what they paid for it. No one is keen to sell on and realise that loss.

But the report says this gives time for reflection after a period when the city council was overwhelmed by planning applications resulting in a "less than coherent and admirable set of additions to the built environment".

Jonathan Morgan agrees that some of the flats dubbed "rabbit hutches in the sky" were built for investors rather than occupiers."The buy-to-let bubble that drove the first phase of development is finished and we
won't see it again.

"There will be a demand for better quality, smaller schemes with
larger, well-thought out apartments.

"I know of one developer who is thinking of building a mews and
hopefully this will help in retaining people longer than two or three years before they move out to the suburbs," he says.

"I also think we'll see investors buying ready-rented property, an existing apartment with a tenant."

Better design, together with long-term predictions that people will need to live closer to work due to high fuel and travel costs, means this could be a bright new dawn for city living.

"The city centre is a vibrant, popular place to live and we have shown beyond doubt that occupation is high and the pipeline is under control," says Jonathan Morgan.

"In fact, we're more likely to have an under supply of apartments in the future."

In the city

There are about 1.4 people per household in the city centre and there are around 13,000 living there.

The occupation is thought to be 60 per cent tenants and 40 per cent owner occupiers.

City dwellers include young professionals, health workers from the hospitals, a growing gay community, middle-aged people downsizing and high fliers who need a pied à terre. There are students, but they are in a minority and tend to be from overseas. Different nationalities prefer certain developments and tend to group together.

Flats cost around £125,000 for one bedroom and from about £175,000 with parking to £240,00 for a two-bedroom in the popular Brewery Wharf development. Most are back to 2007 levels, with some exceptions. A two bed-flat in the less favourably located Trinity One cost £185,000 in 2007 but recently sold for £150,000. An apartment at 1 Dock Street was £297,500 and recently sold for £325,000.

Facilities have improved and there are now convenience stores and a drop-in health centre. More are in store, as well as tree planting, pocket parks and an arena.

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Warning of money transfer scam for 'phantom' flats

Source: http://www.citizensadvice.org.uk

The charity's network of Citizens Advice Bureaux are reporting cases of people falling victim to a scam where Landlords - who often state they live out of the country - ask prospective tenants to make a 'secure' money transfer to a friend or relative and then send a copy of the receipt to the Landlord to prove they have sufficient money for deposit and rent.

The would-be tenants are reassured that no-one else can access the money, but find when they go to collect it that the money has already been withdrawn and the room or property doesn't exist.

One case saw a student who had been asked to transfer £1,800 to a friend via money transfer to prove she had enough money to rent a room she found online. She did so and sent the receipt to the Landlord as proof. When her friend went to collect the money they found it had been collected by someone else, and were told by the transfer agency that the person had given the Money Transfer Number and shown I.D in the correct name. When the client went to report the crime to the police they said there was no case because she was unable to give sufficient information of how the funds had been collected. Having tried to get this information from the money transfer company, she was told they couldn't give details without a crime reference number due to data protection - so she found herself in a Catch-22 situation and nearly £2k out of pocket.

Citizens Advice Consumer Affairs Policy Officer Susan Marks said "Money transfer, used in any situation other than to send money to someone you know, is not secure. It should never be used as a way of proving funds or as a method of payment to someone you don't know - sharing your money transfer number or copy of your transfer receipt is like handing over your PIN number to a stranger. It's not the same as transferring money from one bank to another, and isn't covered by the same safeguards."

The charity has some Top Tips for anyone thinking of making a money transfer and/or searching for property to let online:

* Never share your money transfer number or copy of the receipt - it's not secure

* Never agree to transfer money, even to yourself, to prove you can afford deposit and rental payments

* If you or the prospective Landlord live abroad, offer to provide references from previous Landlords and other professionals such as a G.P or employer who can vouch for you, rather than transferring money

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Buy to let golden rules: 'Avoid large families and flats in northern cities'

Judith and Fergus Wilson have between them nearly 40 years' experience as landlords. Here are the golden rules they say you should follow for success

Fergus and Judith Wison have some tips for any future buy-to-let landlords. Photograph: Graham Turner

• Buy houses. "An Englishman's home is his castle. He doesn't want to live in a flat," says Judith. The couple own only 30 flats out of 700 properties. "All the problem tenants we've had have been in flats," says Fergus.

• Buy two-bed, not three or four, preferably in the south-east. Yields on two-bed houses with small gardens are the highest, says Fergus. Rents achievable on larger properties don't sufficiently reflect the higher purchase cost.

• Avoid flats in Sheffield, Manchester and Leeds. "They're the new council houses in the sky," says Fergus. "People always want to buy the cheapest property, but you've got to have an exit strategy. What happens when you want to sell? There's a reason they're cheap. They won't be able to sell flats in those blocks for years."

• Avoid large families. "I now take a maximum of two children," says Fergus, following a battle with a tenant and her three children. At the end of the tenancy, the Wilsons deducted £400 from the deposit to cover wear and tear caused by the children to the paintwork. It was challenged by the tenant, under the Tenancy Deposit Protection Scheme, who argued the Wilsons were aware she had three children when she moved in and that they caused only a reasonable amount of wear and tear. Fergus says he won – the tribunal ruled a deduction of £375 was appropriate – but doesn't want to go through that hassle again.

• Only accept tenants with a rental guarantee. The Wilsons take out rent guarantee insurance, which costs around £100 to cover a £650-a-month tenant for a year. To obtain insurance, the tenant has to pass various checks and be in regular employment. So it's thumbs-down to students and some benefits applicants among others.

• If a tenant fails to meet the requirements of the rental guarantee scheme, the Wilsons ask them for an upfront payment of at least 12 months' rent. "Oddly enough, I never get asked for a discount on the rent when tenants pay upfront. I'd ask for one if it was me," says Fergus.

• Use a letting agent, but understand their limitations. The Wilsons pay a 10% fee to agents for finding tenants and managing their properties.

• The older the tenants are, the better. Fergus says younger adults still have the capacity to leave and get a mortgage of their own. Older tenants won't be able to find finance, so are likely to stay longer.

• Don't take on tenants who share your surname. Judith was threatened with a spell in Holloway prison, north London, after allegedly failing to pay council tax. However, the local authority had mixed up her name with that of a tenant.

It shouldn't happen to a landlord …

The cannabis farm The occupier of a semi-detached house adjoining one of his properties called Fergus to discuss the need for repointing a chimney. To examine it, Fergus went into the back garden and it was then he noticed something odd about the house. "It was like something out of a science fiction plot inside," says Fergus. "In the cellar and in all the bedrooms, the walls were covered with plastic sheeting, huge ultraviolet lights and hydroponics. Cannabis plants were growing everywhere." He took a video of the scene and called the police. But he was stunned when they said they weren't interested. "I even offered to let them install a camera in one of my properties across the road so they could catch the guys. But they said, 'Mr Wilson, you've been watching too many television shows'." Soon after, the criminals cleared the house of its crop and equipment, escaping conviction.

According to the National Landlords Association (NLA), gangsters are attracted to rented properties for growing cannabis and manufacturing crystal meth because they are often in quiet residential areas where their activities can continue undisturbed. Typically, they pay the rent six or 12 months in advance. The NLA gives advice to landlords on spotting a cannabis factory. These include blacked-out windows, heat emitting from the property and some rather pungent smells.

Cops and robbers A tenant stopped paying his rent, claiming he was no longer working and was applying for housing benefit. Fergus later discovered the tenant had been in receipt of housing benefit from the outset of the tenancy, having lied about his status. But that was just the start of the story. It later transpired the tenant, who happened to own a business and some property of his own, was convicted for his part in one of the biggest multimillion pound robberies the UK has ever seen. The police were rather more interested in this case than in the cannabis factory, and information supplied by Fergus, who had files of information on the man, helped in their enquiries.

Fergus says that as a major landlord, inevitably some tenants will be engaged in crime. He says four murders have been in some way connected to his tenants – all renting flats, not houses. "It's another reason I don't like buying flats," he says. He has received a number of death threats but has never taken any seriously.

Dodgy boilers Parts of Kent have the hardest water in the country, claims Fergus, who won a court case against a boiler maker when new combi boilers in his properties broke down after failing to cope with chalky water.

At their peak, the Wilsons employed 20 workers to deal with maintenance issues, but in his early years as a landlord Fergus tried sorting out problems himself. "One Friday I got a call from a tenant complaining that her hot water was not working. I taught maths and physics when I was a schoolteacher and fancied myself a bit when it came to fixing things. But I couldn't work out what was wrong; the pilot light was on and there were no electrical faults. Then I discovered the problem. It wasn't the hot water – there was no water at all. She hadn't paid her water rates and those were the days when they could still cut you off for non-payment. Somehow she thought they had only cut off the cold water."

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Buy-to-let tax break could hurt FTBs

A proposed tax incentive for buy-to-let landlords could freeze more first-time buyers out of the market.

According to lobby group PricedOut, buy-to-let investors already have an unfair advantage when it comes to property purchase, which could be exacerbated if the planned tax breaks are introduced.

A consultation paper published by the Treasury last month proposed to allow professional investors to pay Stamp Duty separately on each individual home they buy, even when they buy a large portfolio of properties. As Stamp Duty is tiered according to the cost of a property, this could reduce their overall tax bill.

For example, at present, if an investor buys five properties at £150,000 each, they would be charged 3% tax on the total cost of £750,000 - £22,500. Under the new proposals, they would pay just 1% tax on each property - £7,500.

The boom in the buy-to-let sector in the past decade, which has resulted in 10% of all mortgages being accounted for by landlord borrowing, was widely blamed for inflating property prices and creating a shortage of first-time buyer properties, as these are the type of homes often bought by property investors.

PricedOut, which campaigns on behalf of those first-time buyers who cannot afford to get on the property ladder, says the proposal is grossly unfair to first-time buyers.

William Griffith, spokesman for PricedOut, said: “The large tax breaks that buy-to-let currently enjoys mean that they can always outbid first-time buyers. It is astonishing that the government is seeking to further entrench this disparity in the housing market. High house prices and buy-to-let speculation have been behind a large growth in wealth inequality and have caused increased financial instability.”

PricedOut believes that high house prices have frozen 1.2m prospective first-time buyers out of the market and led to about 1.4m fewer first-time buyer mortgages since 1999. It calculates that, in the last six years, 647,300 homes have been bought by buy-to-let investors which otherwise might have gone to first-time buyers.

Griffith added: “The public face several years of higher taxes and spending cuts – it is frankly baffling that the government is trying to give further tax breaks to a sector that helped get us into our current economic mess.

“Unless we want future home ownership to be a preserve of the wealthy few, we need the government to tax property speculators more, not less. Removing buy-to-let tax breaks would be a very popular and practical way for the chancellor to start addressing the deficit.”

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