setting the scene: after brexit
TRANSCRIPT
@nationalandlord @PorticoProp#postbrexit
Setting the Scene: After BrexitRichard Blanco (NLA)
#postbrexit
IMPACT OF BREXIT ON THE PRS
Impact On Construction• Fallen 1.1% in last quarter
The Broader Economy• Wages (2.3%), Growth (0.5%), Inflation (0.9%), Pound (down 15%)
Immigration & Demand For Rental Property?
Impact On House Prices?• 5.2% UK
International Investors• SDLT 6 x £250,000 = £60,000• SDLT 1 x £1.5million = £138,750
Government Policy• FTB vs Landlords vs Build To Rent
Knowns & Unknowns• March 2017…. 2019, Hard or Soft Brexit
To Buy, Sell, Hold or Trade?
#postbrexit
TAX CHANGES
Now In Force• Replacement of Wear & Tear Allowance• 3% Stamp Duty Surcharge
Still To Come• Withdrawal of Higher rate tax relief on finance costs begins 6 April 2017• Phased over 4 years, moving 1 in 4 to higher tax band
Lack of awareness & understanding…..• 51% say no change, but only 56% understand
#postbrexit
LANDLORD SENTIMENT
Strong rebound in optimism for own letting business• 39% to 54% rate good/v good
12% Report softening of tenant demand
64% expect decrease in profitability because of tax changes (71% have borrowings)
1 in 4 consider moving to Ltd Company
33% think Brexit will have a negative impact
LHA landlords historic low of 16%
#postbrexit
LANDLORDS HAVE ADOPTED A MORE NEUTRAL APPROACH
Perceived Impact of Brexit on the PRS (%)
AllSignificant positive
impactSlight positive impact
Will have no impact
Slight negative impact
Significant negative impact
Q11ai To what extent, if any, do you believe the result of the recent EU referendum will impact the Private Rental Sector?Base: All (900)
Overall, however, sentiment is still, significantly, net negative, with 3 times as many landlords feeling the vote will have a negative impact than positive (33% vs 10%).
KEY METRIC
Profitability:
Net positive
10%No. of properties
% Positive % Negative1 7 362-3 6 374-5 13 326-10 13 3111-19 11 3020+ 15 27
25Not sure
(7%)
(22%)
(29%)
(14%)
(28%) (Q2 2016 results)
#postbrexit
BANK OF ENGLAND BTL REGULATION
• Compulsory stress test of 5.5% (commercial exempt)
• Some lenders increased rental cover to 145%
• New criteria for portfolio landlords
• Will affect maximum loan to value in London
EXAMPLE• 75% of £620,000 is £465,000
• Rent is £2,400
• Mortgage of 2.49% would be £964 per mth
• Mortgage of 5.5% would be £2131 per mth• X 145% = £3,090
• Max loan would be £361,128 = 58% LTV
#postbrexit
REGULATORY HEADLINES
2016 Housing & Planning Act• Banning orders & database, civil penalties, client money protection, electrical safety
checks
Rent Smart Wales • Compulsory registration & licensing/accreditation
Right To Serve Section 21 Notice• EPC, DPC, GSI, Right To Rent
End of No Fault Eviction in Scotland• Consultation until 25 Dec
#postbrexit
REGULATORY HEADLINES
Lower Welfare Benefit Caps• From £22k to £23k (£20k outside London)
Minimum Energy Efficiency Standard• No F & G from April 2018
Homelessness Reduction Bill• “A person in respect of whom a valid notice under section 21 of the Housing Act 1988
(…..) has been given is to be treated as homeless from the date on which that notice expires”
Licensing & Article 4 Directions
#postbrexit