UK private and social rented sector headlines 17 June 2021
Welcome to the June issue of the PayProp Rent Report. Today is Agents Giving Day, the annual charity drive organised by the UK’s biggest property industry charity, Agents Giving.
It’s always inspiring to see people in our industry giving back to their communities, not least because of our own philanthropic roots. PayProp supports and shares resources with the GivenGain Foundation, a global non-profit fundraising platform that enables individuals and businesses to support their favourite charities anywhere in the world.
This month as usual, we bring you the most exciting stories about the lettings and social housing industry. In our lead article, we look at the impact of the stamp duty holiday, and ask what will happen to the property industry now that it is coming to an end.
In our second story, a new survey has revealed how much landlords spend on renovations. Where is the money going, and how can agents help their clients to direct future spend wisely?
UK short-term let providers are looking forward to a long, hot summer. In our third story, we look at how the staycation boom is reviving holiday rentals.
It’s back to tax for our fourth story. The Office for Tax Simplification is looking into moving the end of the tax year, with some implications for agents.
In story number five, new environmental rules mean that halogen lightbulbs will soon vanish from shelves – and agents can make sure that their landlords aren’t left in the dark (as well as tenants, more literally).
Lastly, we talk in more detail about Agents Giving’s massive charity event today, and share how you and your agency can get involved.
The government’s cuts to Stamp Duty Land Tax (SDLT), which led to record housing demand, will be reversed in stages from 30 June – leaving agents wondering what happens next.
Since the stamp duty holiday began last July, most homebuyers in England and Northern Ireland have not been taxed on the first £500,000 of any home purchase – although the 3% surcharge for landlords and other second home buyers still applied throughout.
Despite calls from MPs and the property industry to make the cut permanent, the government has confirmed a return to the original rate by 30 September.
The tax will be brought back in stages. From 30 June to 30 September, houses under £250,000 will still be exempt, but full rates will apply to more expensive properties. From 1 October, purchasers will once again pay tax on all houses over £125,000 – although first time buyers will still be exempt from SDLT on purchases of up to £300,000.
The tax break was meant to give the housing market a boost during the COVID-19 pandemic, and it seems to have succeeded. In the most recent UK House Price Index, HM Land Registry found that March prices had grown by 10.2% year on year thanks to unprecedented demand – potentially wiping out stamp duty savings for many buyers. Other housing professionals like conveyancers have also been able to increase their prices.
But with the tax breaks about to end, what will happen to demand? Mortgage borrowing has been falling since April as buyers lose faith that they can hit the deadline, and a fall in demand could put downward pressure on prices. On the other hand, a falling supply of homes for sale may just keep prices rising.
While many estate agents have lobbied to once again extend the stamp duty holiday, its cessation may not be all bad news for letting agents and landlords. The staged reintroduction of stamp duty means that properties up to £250,000 will still be SDLT-free until October, enough to purchase rental properties in many of Britain’s highest-yielding areas. Meanwhile, booming prices and a supply shortage may convince many prospective buyers to wait for the market to settle – and in the meantime, keep renting.
Landlords spend £839 million per year on improving new buy-to-let purchases, according to a new survey by Paragon Bank. Letting agents can help them understand what they need to spend it on to meet strict rental rules.
The buy-to-let lender found that 77% of landlords invest in renovating new properties that they have bought, spending an average of £8,720 per renovation. Some of the most common improvements are painting, electrical and plumbing upgrades and new flooring.
In fact, the total amount that landlords spend on their properties is likely to be much higher. The Paragon Bank survey only includes renovations immediately after purchase, but not any upgrades that landlords make during or between tenancies.
Evidence of this can be found in the most recent English Housing Survey, which reports that the share of "non-decent" privately rented homes fell from more than 40% in 2009 to less than 30% in 2019. The share of homes containing a category 1 hazard (the most dangerous type, with an immediate risk to health and safety) has also fallen quickly over the same period.
New rented sector regulations, such as rising energy efficiency standards and electrical safety checks, have also driven renovations. The same Paragon Bank survey found that 24% of landlords install a new boiler on buying a buy-to-let property, and 23% replace windows. Owner-occupiers are less heavily regulated than landlords, which may account for some new buy-to-let properties not meeting the required standards at the time of purchase.
Letting agents can help landlords to choose the right renovations by making them aware of new government standards – and also use in-depth local market knowledge to suggest upgrades that will attract higher-paying tenants.
Short-term let operators are looking forward to a big summer season this year thanks to increased demand for domestic holidays.
A survey by the UK Short Term Accommodation Association, Britain’s biggest short-term lets trade group, found that 89% of owners are feeling positive about the rest of the year. Three quarters believe that they will return to profitability by the end of 2021.
The sector has been boosted by government advice to take holidays in Britain this year and by mandatory quarantine on people re-entering the country from almost all foreign destinations.
Many hosts and holiday rental firms are already reporting record demand, with some properties booked up until the end of the year as people scramble to secure their holidays. Some have also blamed the boom for a shortage of longer-term rented accommodation, as landlords chase higher yields in the short-term market even while rents are rocketing in the traditional private rented sector.
However, it won’t entirely be back to pre-pandemic business as usual this summer. Short-term lets platform Airbnb is standing by its COVID rules banning parties, limiting occupancy and stopping guests under 25 years old from booking entire properties until at least the end of the summer. Short-term accommodation providers are also keeping enhanced cleaning procedures and socially distanced check-ins in place.
How much difference could five days make? The Office for Tax Simplification (OTS) has announced it will look into the implications of moving the end of the tax year from 5 April to 31 March, bringing it in line with the end of the financial year and potentially making life easier for letting agents.
According to tax experts, the current gap between the end of the tax year and the end of the financial year can cause administrative problems and result in transactions getting missed out of accounts.
In fact, the complexity being targeted by the government goes deeper for some letting agents. While businesses are already allowed to use 31 March as the end of the accounting year, most landlords receive rent as personal income. Hence, letting agents who deduct income tax at source (for example, when the landlord is based overseas) may currently be dealing with two separate tax calendars.
The OTS will also look into the more radical option of moving the end of the tax year to 31 December. Several major economies, including the United States, China and Germany, already use this date.
The OTS's recommendations will be published later this summer.
From 1 September, most halogen lightbulbs and light fixtures will no longer be sold in the UK, leaving landlords and agents with some forward planning to do.
The ban is part of the government’s effort to meet environmental commitments. Energy use in homes accounts for around 14% of total UK carbon emissions, and a move to more energy-efficient lighting could be an easy win. The government predicts that the new rules will cut carbon output by 1.26 million tonnes every year.
Lightbulbs are a consumable, so changing them during a tenancy is usually the tenant’s responsibility. However, as compatible bulbs will soon vanish from shelves, it may be a good idea to replace any fixtures that require halogen bulbs. Agents can ensure that landlords know about the upcoming ban and have thought about which lights in their properties may be affected.
With the new rules about to come into force, now could be the right time to switch over to LEDs completely. Fluorescent lighting will also be banned from September 2023, leaving property owners with little choice but to use LEDs after that deadline.
Additionally, replacing low-efficiency bulbs with LEDs helps to improve a property’s Energy Performance Certificate score. With minimum energy efficiency standards for rented homes likely to continue rising, landlords may not want to leave easy points on the table.
Happy Agents Giving Day! Britain’s biggest property industry charity, Agents Giving, is once again hosting its annual day of generosity.
To celebrate, it has organised a food drive for The Trussell Trust, which runs more than 1,200 food banks across the UK.
Estate and lettings agencies across the country are acting as collection points for food donations, and the charity hopes that 2021 will be the event’s most successful year yet. In 2020 the appeal collected 20,000 food items during a year of unprecedented need.
Agents Giving is also encouraging agents and the public to donate directly to their local food banks – or, if possible, to volunteer with them. To find your local Trussell Trust food bank, click here. Alternatively, you can support Agents Giving through their GivenGain page.
Workplace fundraising can be a great way to bring your team together and give back to your local community. If you’d like to start your own fundraising drive for your favourite charity, go to leading online fundraising platform GivenGain (PayProp’s group Foundation). If you need help getting started, e-mail robyn@givengain.com.
