Leasehold Reform, BTL Financing, BTR Growth, EPC Regs, Planning Decline - 9th May Property Bulletin

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Transcript

Pending changes to the Leasehold Reform Act
The UK government has committed to introducing further reforms to
the Leasehold Reform Act, which will be addressed in the upcoming
parliamentary session. These sessions typically take place from
spring to spring, and for the 2023-24 session, announcements are
likely to be made in November's King's speech.
The proposed changes aim to simplify and reduce the cost of
enfranchisement for leaseholders.
The reforms will include the abolition of marriage value, the capping of
ground rents at 0.1% of the freehold value, and the introduction of
prescribed rates based on market value to calculate the cost of
extending a lease or buying the freehold.
An online calculator will also be introduced to make the
enfranchisement process easier for leaseholders.
Additionally, leaseholders of flats and houses will have the same right
to extend their lease agreements as often as they wish, at zero
ground rent, for a term of 990 years. Leaseholders with long leases
will also be able to buy out their ground rent without having to extend
their lease term.
Although it is unclear whether the new protections will apply
retrospectively, Lord Young of Cookham, a former Conservative
minister and leader of the Commons, has asked for clarification on
this matter.
Given the pending changes, many leaseholders are waiting for
confirmation before making any decisions. It is recommended to
weigh the costs of extending a lease versus waiting for the new act to
pass. It is also advisable to seek professional advice before making
any decisions regarding lease extension or freehold purchase.
Banks put their money behind Buy to Let
LendInvest has secured £200 million in financing for its buy-to-let
proposition, with Wells Fargo joining the funding syndicate that
includes National Australia Bank. LendInvest's mortgage products are
also supported by other global financial institutions such as Lloyds, JP
Morgan, HSBC, Barclays, and Citi. The buy-to-let platform has grown
to £1.8 billion in assets under management, representing 75% of total
platform assets under management since launching its first buy-to-let
mortgage product five years ago.
Having recently entered the residential mortgage market with a new
range of products, Landinvest targets homeowners with complex
sources of income, such as self-employed or contract workers, who
are currently underserved by many lenders. The launch was in
response to the growing number of such homeowners.
This partnership shows that global financial institutions continue to
have a strong interest in investing in the buy-to-let sector.
Surprise price increase
UK house prices unexpectedly rose by 0.5% in April, following seven
months of falls, according to Nationwide building society.
Economists were predicting a decrease in average prices during the
month. Nationwide predicts a modest recovery in the housing
market as mortgage rates start to decrease, but any improvement
will be slighy due to household finances remaining under pressure
and average earnings failing to keep pace with inflation.
It was reported by Bloomberg, that the recent rebound in house
prices in the UK may be due to delayed transactions following a
mini-credit crunch in Q4 2022, which pushed activity into Q1 2023.
As delayed transactions clear, market may level out. Additionally,
demand for cheaper properties may be driving the market as
demand over a certain price point declines.
Comparisons with other countries, suggests that pausing interest
rate hikes can ease the decline in housing markets.
However, it's unlikely that the boost will continue due to the
unlikelihood of a drastic dip in mortgage rates. There are a few ways
in which the government could intervene to boost prices, such as
relaunching the "help-to-buy" scheme or increasing mortgage
terms. However, these solutions could lead to other problems.
Has the growth of Build to rent slowed down?
According to a study commissioned by BusinessLDN, the British
Property Federation, Dataloft, and the UK Apartment Association,
and with research by Savills, the build-to-rent sector's growth in the
UK was slower in Q1 2023 compared to the same period in 2022.
The report showed that completed or pipeline homes in the sector
increased by 9%, however, it was slower than the 19% increase in Q1
2022.
Growth rate in the regions was twice as fast as in London, with the
number of build-to-rent homes in the regions rising by 12% and 6%
in London.
The report's authors believe that decreased grant funding, rising
construction costs, and building safety issues have hampered the
residential development industry's ability to deliver the 66,000 new
homes per year needed to house current and future Londoners.
According to Guy Whittaker, an associate at Savills, despite the
slower pace of growth, the pipeline for the build-to-rent sector is at
an all-time high. Growth is expected to continue as European
investment community report that half of all investors expect over
25% of their assets under management to be allocated to the 'living'
sector by 2025. The living sector includes Build to rent, student housing,
co-living, residential, senior living and affordable housing.
The new EPC regulations delayed but they are coming
New eco-rules in England and Wales will require landlords to upgrade their
properties to an Energy Performance Certificate (EPC) rating of C or higher
before letting them out. Those who fail to do so will face a £30,000 fine.
However, experts are warning that the costs of upgrading could be as high
as £20,000 per property, which may lead to higher rents for tenants and
could cause some landlords to sell their buy-to-let properties. The new
rules are part of the government's energy-efficiency drive to reduce carbon
emissions and cut household bills. Reported The Daily Mail.
However, industry experts have warned that the new standards are
unattainable for many and that a rush of buy-to-let owners trying to upgrade
their homes at the same time could lead to labour shortages and higher
prices. Some critics say that the government’s criteria for funding under the
£1bn ECO+ scheme, which aims to insulate the country’s draughtiest
homes, are “perverse” as they favour larger properties
Landlords in England and Wales are concerned that they will be unable to
meet the government's new energy performance certificate (EPC)
standard, which will bar them from letting out properties unless they have a
rating of C or higher. The rules are due to come into force in 2028, but EPC
assessors have warned that achieving a C rating would be prohibitively
expensive for many landlords. The cost of internal wall insulation could be
up to £15,000 and there are concerns over finding enough workers to carry
out the work. Those who fail to comply with the new regulations face a fine
of £30,000..
A Significant drop in new planning applications
According to a report by CBRE, planning activity for new-build homes
in Prime Central London (PCL) has seen a significant drop, with
applications, permissions, and construction starts falling by more than
50% between 2018 and 2022 compared to the preceding five years.
Furthermore, new construction applications across London fell by 28%
year-on-year in 2022, with a peak decline of 50% from 2014. CBRE
suggests that developers and house builders now have a clear
opportunity in an undersupplied market, where demand remains
strong. The report also highlights the growing importance of the
Build-to-Rent sector in London, with BTR homes making up 35% of
private homes in London in 2022.