Setting the Scene: After Brexit
- 2. Setting the Scene: After Brexit Richard Blanco (NLA) #postbrexit
- 3. 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
- 4. 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
- 5. 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
- 6. LANDLORDS HAVE ADOPTED A MORE NEUTRAL APPROACH Perceived Impact of Brexit on the PRS (%) All Significant positive impact Slight 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 % Negative 1 7 36 2-3 6 37 4-5 13 32 6-10 13 31 11-19 11 30 20+ 15 27 25Not sure (7%) (22%) (29%) (14%) (28%) (Q2 2016 results) #postbrexit
- 7. 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
- 8. 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
- 9. 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