In this week’s Budget, Chancellor Alistair Darling announced that stamp duty of 1% on properties worth between £125,000 and £250,000 would be removed for the next two years for first-time buyers.  But is this enough to revitalise the property market?

Probably not.  It will encourage some first time buyers on the property ladder in those regions where properties on the first rug of the ladder are over £125,000.  However, the greatest impediment to first time buyers is not stamp duty, but the difficulty in securing a reasonable mortgage without a huge deposit.  The banks total aversion to any risk whatsoever is not acceptable when it is the tax payer who has funded their recovery.  Until the banks lend money at reasonable rates and loan to value ratios, activity will be subdued.

However, at least this is a positive step.  This Government’s track record in the property market has been dismal:

HIPS (Home Information Packs) have proved to be pretty useless to the point where they are rarely ever requested or seen by anyone other than the person carrying out the HIP. Solicitors usually carry out the searches again because those in the HIP are outdated (doubling the cost).  So the HIP normally stays in a filing cabinet or on hard disk not seen or used by anybody.

Selective Licensing effectively puts another tax on being a Landlord, a bundle of documentation that a landlord who uses a professional management agent has already adhered to and yet needs to pay £400+ to the council to check over?  Councils of course have leapt on the opportunity and great swathes of Manchester now reside in Selective Licensing areas creating plenty of jobs in the council which has no benefit to anyone.  Yet why has the Government not yet announced the simple provision that all Letting Agents/Estate Agents must be licensed by ARLA/NAEA, thus alleviating most of the difficulties highlighted by the media at a cost of around £0.00?

Housing Benefits.  The decision to pay rent to tenants rather than the landlord or managing agents is perhaps one of the most ill thought out decisions.  Even those tenants that prefer for the landlord to be paid directly, because they openly admit “they are not great at managing money” have this request refused based on some political correctness.  The result?  Agents and landlords alike are reticent to take on Housing Benefit tenants.  The other decision regarding housing benefit of allowing the tenants to get  what is effectively a monetary kick-back for renting a property (for example a property that is up for rent at £495, the tenant is rewarded with a £550 rent allowance, the tenant is allowed to keep £55 per month) without thought to what a tax payer would think of this give-away of their money is another indication the Government is out of touch with public opinion.   The reality should be that the landlord is rewarded for taking on the additional risk and wear and tear that comes with a Housing Benefit tenant.

Of course the tsunami that was the Credit Crunch pretty much covered up the damage that the above policies were causing. However, it is worth remembering that these were doing damage to the property market before the credit crunch and will probably slow recovery to some degree.

We hope going forward that Governments and Councils reappraise their approach to bashing landlords with ill thought out legislation and hopefully engage landlords and talk to all parties before rushing out poorly implemented initiatives in future.

The Government plans to require HMO accomodation to have planning permission after April 6, 2010.

If you are planning to convert an existing property to HMO then you will have to pay £335.00 and wait eight weeks (at a minimum) to receive planning permission before you can legally rent the property.  This is in addition to requiring a HMO license (if the property has 5 or more occupants and 3 stories) which costs in the region of £500 or more.

If you want to let what has been a family house or flat to three or more unrelated people such as students/nurses, etc., you will need planning permission.  If your property is already let you will lose the right to let out to sharers again without obtaining planning permission.

The justification for such draconian measures seems to be related to certain areas being “overwhelmed” with HMO property.  Those areas the Government feels are too overcrowded with HMO properties will be denied planning permission.

In our opinion this smacks of the nanny state and social engineering.  There are reasons why certain areas have more HMO properties, perhaps because they are close to universities or hospitals and have the required infrastructures to support students/nurses.  Trying to move these people in to other areas where such infrastructure is not in place needs careful thought.  Social “cleansing” – moving certain groups of people into different areas could be a step too far for the state involvement.

RLA members have reacted angrily to the new proposals and are asking landlords to write to their local MPs to complain about the new legislation.  Let us know your thoughts.

David Boyd, Managing Director, PAD4U Letting Agents Manchester writes:

Double Dip is an unpleasant term that is doing the rounds at the moment and we’re not talking about Nachos.  The term has been whispered around the City for sometime, but it’s now turning into a shouting match.   But why?  A number of reasons, firstly, Quantitative Easing has been stopped, the Bank of England is no longer effectively printing money which has until now assisted the banks in repairing their balance sheets and allowed some semblance of lending in the mortgage markets.  Secondly, the UK’s debt continues to grow at a pace that the City feels uncomfortable with especially in light of the difficulties that Greece and thus the Euro have suffered as confidence drops in their ability to pay back these huge debts.  The UK balance sheet is in just a precarious state the response so far from the markets has been more muted, perhaps in the belief that a Conservative government would cut the deficit, however with the polls now undecided about which party if any will win outright at the next election, the markets are uncertain and uncertainity is never welcome in the City.

The consequence for landlords in the main is a tightening in lending from the banks, who are ever more concerned about their balance sheets than lending the monies that have been gifted through Quantitative Easing and the various state backed guarantees that tax payers have the burden of.  When mortgages are granted the terms can be eye watering, there is little that the landlord can do, whilst the Government is placing pressure for lending in the residential market there is no such push for buy-to-let mortgages.  Landlords will have to work harder to finance their portfolios.  If you are looking for assistance with buy-to-let mortgages our mortgage brokers can offer free independent advice, please email property@pad4u.com.

The outlook however is not all doom and gloom, the difficulties within the market are throwing up opportunities for savvy investors to capitalize on.  Interest rates are likely to stay low for some time.  Also, the rental market we believe is likely to remain strong throughout the crisis even is pressure remains on rents to stay competitive for the time being.  In additional I’m not certain we’ve heard the last clangs from the printing presses as they produce new money!