Real estate agency news

Money Laundering in the U.K.

Money Laundering in the U.K. and its effect on the London Property market.

Money Laundering is the process of making illegally obtained money appear legal.

How money laundering occurs-

  • Money is obtained through illegal means.
  • It is covertly reintroduced to the financial system.
  • Multiple complex transactions occur to disguise the moneys’ true origin.
  • The money can then be used to purchase secure assets.

 

Money Laundering in the U.K.-

In 2015 1.2 million property transactions took place in the U.K. But from those 2.4 million buyers and sellers only 355 suspicious activity reports were generated according to the National Crime Agency.

The National Crime Agency system of reporting suspicious transactions brings together information from banks and law enforcement agencies. It receives approximately 382,000 reports each year, yet the service was only designed to deal with 20,000.

 

 

Money Laundering in the London Housing Market-

  • It is considered highly likely that the influx of corrupt money into the housing market has pushed up prices, some would even go as far to say that prices are artificially being driven up by overseas criminals who want to sequester their assets in the U.K.
  • Since 2014, £180 million of U.K. property has been subject to criminal investigation according to Transparency International data from 2015.
  • Most of these properties were bought using anonymous shell companies based in off-shore tax havens such as the British Virgin Islands.
  • Land Registry data shows that 100,000 in England and Wales are owned by overseas companies.
  • According to Transparency International data, almost 1 in 10 properties in Kensington and Chelsea is owned through a ‘secrecy jurisdiction’.
  • The National Crime Agency believes that hundreds of millions of pounds are laundered through the U.K. every year although it is not clear how much criminal proceeds are invested into the property market.
  • Since 2006 £100 billion of hidden inflows have entered the U.K.
  • Transparency International claim that over 40% of apartments in a tower block on the Southbank Place development, next to The London Eye, has been bought by companies that are registered in The British Virgin Islands.

 

 

Faulty Towers Report (March,2017): Transparency International

Key Findings-

  • Corruption causes increased instability abroad which leads to ‘crisis capital’ being placed in safe havens like London.
  • House prices are affected by the influx of illicit wealth and crisis capital into the U.K. as often it is used to purchase luxury assets such as property, this has increased demand in the London housing market particularly at the top end; but the effects this increased demand creates effects the rest of the London housing market.
  • New build developments are now built in prime locations targeting wealthy international investors and thus the demand for affordable homes is not being met.

To see the full report: http://www.transparency.org.uk/publications/faulty-towers-understanding-the-impact-of-overseas-corruption-on-the-london-property-market/

London Properties bought by overseas companies

Area Number of Properties
Kensington and Chelsea 3,583
Westminster 6,527
Lambeth 1,154
Camden 1,273
Tower Hamlets 1,120

 

tenancy agreement UK

Managing Tenancy Best Practice.

Managing tenancy-Best practise

 

Landlord responsibilities

You’re a landlord if you rent out your property. This means you have responsibilities, including:

  • Checking your tenant’s right to rent
  • Keeping your rented properties safe and free from health hazards
  • Making sure all gas and electrical equipment you supply is safely installed and maintained
  • Following fire safety regulations
  • Providing an Energy Performance Certificate for the property
  • Protecting your tenant’s deposit in a government-approved scheme
  • Complying with carbon monoxide & smoke detector Regulations

 

Right to rent immigration checks from 1 February 2016

 

·        It is a legal requirement for landlords renting out private accommodation to check documentation to ensure a prospective tenant has valid permission to be in the UK. Failure to do so could lead to a financial penalty of up to £3000 per tenant.

·        Tenancies signed before this date are not affected if there is no break in the tenancy agreement. All adults (aged 18 and over) living in the property should be checked regardless of whether they are named on the tenancy.

·        If a student is arranging a tenancy in advance from overseas, these can be agreed in principle if document checks are carried out before the property is occupied.

 

Carbon monoxide & smoke detectors requirements from 1 October 2015

·        From the 1st October 2015 regulations require both smoke alarms and carbon monoxide alarms to be installed in rented residential accommodation.

·        Changes are also made to the licence requirements in relation to houses in multiple occupation (HMOs), such as shared houses and bedsits which require a licence and also in relation to properties which are subject to selective licensing.

·        This Guidance is based on draft regulations which have been published. The Regulations apply both to houses and flats.

·        Failure to comply can lead to a civil penalty being imposed of up to £5,000.

Tenancy deposit protection schemes

  • “In England and Wales, if you rent out your home on an assured shorthold tenancy that started after 6 April 2007, you must place your tenants’ deposit in one of the following tenancy deposit protection (TDP) schemes:”

 

Gas safety responsibilities

“Your landlord must:

  • Make sure gas equipment they supply is safely installed and maintained by aGas Safe registered engineer
  • Have a registered engineer carry out a gas safety on each appliance and/or flue annually
  • Give you a copy of the gas safety check record before you move in, or within 28 days of the check “

 

 

Energy Performance Certificates

Energy Performance Certificates (EPCs) are needed whenever a property is:

  • Built
  • Sold
  • Rented

 

accommodation leeds

Leeds Student Population Demand.

 

DEMOGRAPHICS AND STUDENT NUMBERS

  • Leeds University had 540 places unfilled and Leeds Metropolitan had 141 places unfilled, (although this has since fallen to 123 after students started at the

university).   Leeds Trinity filled all its courses in 2012.

  • Fees increased to £9,000-a-year which may have deterred some young people from applying or to defer their applications.
  • Analysis from UCAS suggests there has been a 3.5% increase in student applications at January 2013 in comparison to the same time point last year.
  • There has been a 10.5% increase in applications from 19 year olds suggesting that some people had stalled their applications.
  • Table 2: Total Projected student numbers in Leeds 2012/13 – 2014/15
  • Year 2012/13 2013/14 2014/15 2015/16 Student category University of Leeds 29,405 29,330 29,172 29,325 Leeds Metropolitan University and total 20,600 20,200 19,000 17,870 50,005 49,530 48,172 47,195

 

CURRENT SUPPLY OF STUDENT ACCOMMODATION

  • Research undertaken by Unipol in 2012 showed almost 13,000 students living in purpose built accommodation, either university maintained, or offered through head-leasing or nomination agreements between Universities and developers/providers, or provided directly by private sector providers.
  • This increased from 5,200 in 2007. Currently 55% of students live in such accommodation compared to 31% in 2007.

 

DEMAND FROM STUDENTS

  • 2012-2013 sees the last year of the “bulge” in intake made by previous over-recruiting by Leeds Metropolitan University disappearing, reducing student demand for accommodation by 1,200 bed spaces in 2013-2014.
  • There was also a reduction in the number of students in Leeds of 2,500 in 2012-2013, this is mainly undergraduates and will run through 2013-2014 and 2014-2015.
  • With the reduction in student numbers overall, in addition to the increasing popularity of city centre flats and availability of purpose built student accommodation, the estimated numbers of students in the non-purpose-built sector is 25,262.
  • The reduction in student demand is startling. Unless student intake picks up the 2,500 reductions in intake will build across the years to a reduction of around 7,000.
  • For a long time, demand from ‘returning students’ i.e. 2nd, 3rd, 4th year students have tended to be for living in shared housing in areas close to the universities.
  • Indications from purpose built accommodation providers suggest a constant minority of bed spaces are taken up by returning students. Research by renew for Unipol in Leeds in 2012, found a clear preference from students for housing options closer to the universities and the city centre, and accordingly this may translate into increasing demand from returning students for purpose built accommodation.

 

COMPARISONS OF SUPPLY AND DEMAND

  • If the projected trend in student applications manifests itself, then it would appear that there may be scope and justification for some small scale increases in new purpose-built accommodation to meet demand changes, although this needs to be considered in the context of any surplus provision.
  • It is easy for attention to focus on the numbers of new students needing to be accommodated each year and upon the housing requirements of 1st year students.
  • It is likely that there could be a surplus of between 7,000 and 10,000 bed spaces in purpose built bed spaces over likely demand, depending on whether proposed new build accommodation proceeds.
  • Currently 45% of students meet their accommodation needs through living in Purpose Built Student Accommodation, with the remainder either living in off-street private rented housing (47%) or living at home (8%).

 

PLANNING POLICY

  • The Leeds Unitary Development Plan (UDP) Review 2006: Volume 1: Written Statement (7.5.29, p171) states that in terms of the needs of students planning policy seeks to control the growth of the student population in the wider Headingly area with measures to disperse students to other appropriate parts of the city.
  • Leeds City Council’s approach to the use of areas of the city which have been designated as Quarters (e.g. Education, Hospital, Entertainment, and Prime Office Quarters) states that “…there is a need to establish a strategic approach which is flexible enough to cope with the innate uncertainties facing the development future of a city like Leeds”. Leeds UDP (2006), p289.
  • Outside of Leeds and Yorkshire, many examples have come to light that may impact on consideration by Leeds City Council of the provision of new student accommodation.

 

 

Incoming Changes to Landlord Income Tax.

Changes to landlord’s income tax

The amount of Income Tax relief that landlords can claim on residential finance costs will be restricted to the basic rate of tax.

Finance costs such as mortgages will no longer be taken into account when working out taxable property profits and therefore the taxable profits will be a larger amount. The introduction of the legislation would mean that once income tax on property profits and any other income source has been assessed, Income Tax liability will be reduced by a basic rate ‘tax reduction’. It is suggested that for the majority of landlords, this will be the basic rate value of the finance costs.

 

Who will be affected? –

  • Individual U.K. residents that let residential properties as individuals, or as part of a trust.
  • Non-U.K. resident individuals that let residential properties in the U.K.
  • Trustees or beneficiaries of trusts that are liable for Income Tax on the property profits.

While all residential landlords with finance costs will be affected, only some will have to pay increased levels of tax.

 

What is included under the Finance Cost restrictions –

The Finance costs that will be restricted include interest on:

  • Mortgages.
  • Loans (including loans to buy furnishings).
  • Overdrafts.

 

Other costs affected are:

  • Alternative finance returns.
  • Fees and any other incidental costs regarding mortgages or loans.
  • Discounts, premiums or disguised interest.

 

If loans are taken for both residential and commercial properties, reasonable apportionment must be used on the interest to work out the Finance Costs for the residential properties. Only Finance Costs for residential properties have been restricted by the new legislation.

This also applies if the loan taken out was party for a self-employed trade and for residential property.

 

 

Implementation of the restriction-

  • The restriction will be phased in gradually beginning 6 April 2017 and will be fully implemented by 6 April 2020.
  • During this transitional period, it will still be possible to deduct some Finance Costs when calculating taxable property profits.
  • The deductions will be gradually withdrawn, and replaced with a basic rate relief tax reduction.

Some Finance Costs will be able to be used to work out property profits. The remaining Finance costs can be used to work out basic rate tax deduction.

 

Other implications –

  • These restrictions mean that the way taxable income is calculated will change which, in turn, may have other implications for some.

For more information on landlord income tax changes –

https://www.gov.uk/government/news/changes-to-tax-relief-for-residential-landlords

 

For more information on how to calculate tax relief for residential landlords –

https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

 

 

Increasing Demand for Northern Property.

 

Investments in the North

Leeds-

  • £600 Million Victoria Gate Development.
  • £350 Million Trinity Leeds Retail.
  • Hotel construction has increased by 72%, 4 new hotel developments underway.
  • Southbank expansion which includes expansion to headquarters for companies such as ASDA and Ernest and Young. It is also home to Leeds City College, Leeds College of Building and UTC Leeds all of which have invested in new campus buildings in this area.
  • Sky Bet had also invested heavily at Allied London’s Leeds Dock where it employs 650 staff in its new centre for digital technology services.

 

Completions in the Last 10 Years in Leeds-

  • £766 Million in Offices (20%).
  • £735 Million in Retail (19%).
  • £524 Million in leisure (13%).
  • £626 Million in City Centre Apartments (16%).
  • £268 Million in Manufacturing and Distribution (7%).
  • £983 Million in Other Property Schemes (25%).
  • £16 Million in Mixed Use Schemes.

 

Economic Strength in the North-

  • Manufacturing was worth £46 Billion in 2014, and was responsible for over a quarter of the U.K.’s manufacturing output.
  • Over 650,000 cars were manufactured in the North in 2015.
  • The North Exported over £7.3 Billion worth of Pharmaceutical products in 2015, which accounted for 45% of all medicinal exports attributed to the U.K. regions.
  • 31% of the U.K.’s renewable electricity was generated in the North in 2015.
  • The North is also home to 7 of the 27 U.K. key tech clusters, including the largest tech cluster outside of London.

 

The Financial times recently Reported that the North’s Economic Value by Gross Value added was £304 billion in 2014, this would make it the 10th largest economy in Europe if it were a country.

 

 

House Prices and Buy- to-let properties

Rental Return-

Area Average Rental Return 2016 (%)
U.K. Average 6.2%
Central London 5.5%
North West and North East 6.2%

 

 

In 2016 the U.K. experienced an average house price rise of 10% whilst the average London property price only increased by 4%.

In some areas of the North House Prices are expected to rise as much as 18% over the next 5 years and rents in some areas are expected to increase as much as 20.5% by 2021.

Hunters Property group has experienced a 30%-40% rise in investors looking to invest in property in the North.

By 2037 the average house cost in the North will be £380,735.

House Building Shortage in the U.K.

House Building Shortage

 

The demand for housing in the U.K. is much greater than the current supply.

Due to population growth, increasing life expectancy, decreasing average household size and an increase in the number of buy-to-let investors there is an increasing demand for more housing to be built in the U.K.

Factors

  • The number of households each year has been greater than the number of new homes completed in every year since 2008, this had led to a price increase in areas of high demand.
  • Local authorities no longer build homes in large numbers, and so non-profit organisations are responsible for building new social housing with the help of government subsidies and private finance.

Planning Factors

  • Constraints within planning is often highlighted as one of the reasons why it has proved difficult for construction to keep up with demand.
  • In 2012 the government made significant changes to the National Planning Policy Framework in order to help boost housing supply.
  • Changes to this include “presumption in favour of sustainable development” which makes it more difficult for local authorities to refuse planning consent without up to date local plan housing policies.
  • In 2013 the Growth and Infrastructure Act was introduced to provide developers with a way to renegotiate affordable housing requirements where they were no longer economically viable.
  • Development rights were added to allow the conversion of existing buildings into homes without the need for planning permission.
  • It has been reported that planning approvals have increased by 20% since the introduction of the National Planning Policy Framework.
  • But there are still concerns surrounding the lack of growth in planning approvals for the most needed types of housing.

The Greenbelt

  • The lack of available land is also considered to be a factor that has led to a housing shortage, as some land is protected by policy in order to maintain greenspaces.
  • While Greenbelt areas help provide a distinction between city and country it has also been said to prevent houses from being built where they are most needed.

 

 

The number of completed new builds between 2009- 2014 has remained at a low rate and at no point have the number of new builds completed been greater than 119,910 homes annually. These statistics are much lower than industry experts have suggested of between 250,000-300,000 homes to be built annually in order to keep up with housing demand.

Why Leeds is growing.

Why Leeds growing fast…

 

  • Leeds is the UK’s fastest growing city and is the main driver of a city region with a £64.6 billion economy, a combined population of 3 million and a workforce of 1.37 million.
  • Over the next ten years, the economy is forecast to grow by 21% with financial and business services set to generate over half of GVA growth over that period.

 

Employment and key sectors

  • Financial and business services account for 38% of total output.
  • In 2016, Leeds saw the fastest rate of private sector jobs growth of any UK city and has the highest ratio of public to private sector jobs of all the UK’s Core Cities.
  • The city has the third largest jobs total by local authority area with 480,000 in employment and self-employment at the beginning of 2015.

 

Business in Leeds

·        Over 32,000 VAT-registered businesses are based in Leeds and more than 6,000 small and medium-size enterprises, which account for more than half of employment.

·        Companies which have achieved three years of 20% growth in revenues or employees –Leeds is one of the UK’s foremost centres for fast growing firms, behind only London and Cambridge.

·        Companies with more than 1,000 employees based in Leeds include Asda Group, First Direct, Centrica, Ventura, BT, Direct Line Group and Yorkshire Bank.

Investment and development

·        More than £3.9 billion has been invested in large scale development projects over the last decade and there is a further £7.3 billion worth of development under construction and in the pipeline.

·        Leeds city centre has assumed an increasingly important economic role in recent years.

·        It is effectively becoming the city centre for the Leeds City Region as a whole, with a growing concentration of private sector and high skilled, knowledge intensive jobs.

Located at the intersection of the national motorway network, Leeds is just over 2 hours by rail from London Kings Cross. Leeds Bradford Airport is the UK’s fastest growing regional airport.

Universal Credit Explained.

What is Universal Credit

 

  • Universal Credit is a new benefit to support you if you’re working and on a low income or you’re out of work.
  • Universal Credit is a single monthly payment for people in or out of work.
  • It replaces some of the benefits and tax credits that you might be getting now
  • Income-based Jobseeker’s Allowance, Income-related Employment and Support Allowance, Income Support, Child Tax Credit, Working Tax Credit, Housing Benefit.

 

Universal Credit key facts

·        More job centres are now taking claims from couples and families.

·        If you’re in an area which offers a full service and are entitled to the benefits being replaced, you’ll be asked to claim Universal Credit.

  • If you get help with your rent, this will be included in your monthly payment – you’ll then pay your landlord directly.
  • UC is paid monthly in arrears so it can take up to six weeks after you make your claim to get your first payment.
  • There are no limits on how many hours a week you can work if you’re claiming UC. Instead, the amount you get will gradually reduce as you earn more, so you won’t lose all your benefits at once.

 

When will I be paid Universal Credit?

·        If you make a new claim for Universal Credit you will not be paid for the first seven days. These days are known as waiting days.

·        Don’t let this stop you making your claim and apply as soon as you are entitled to do so as it can take up to six weeks after you claim for your first payment to reach your account.

When the seven-day waiting period won’t apply

 

  • Have claimed Universal Credit within the past six months
  • Are splitting up from or moving in with someone who’s already claiming Universal Credit
  • Are moving on to Universal Credit from another benefit
  • Are terminally ill
  • Are vulnerable, for example you’ve recently been a victim of domestic violence or are leaving care or prison

 

How much is Universal Credit?

  • You will get the maximum award if your household has no other earnings and savings or capital of £6,000 or less.
  • If you or someone in your household has other earnings and/or savings, these will be considered when working out your Universal Credit payment.

 

What is the work allowance?

 

  • If you’re entitled to the work allowance, you can earn up to the threshold for your circumstances.
  • Your Universal Credit payment will then go down by 63p for every £1 you earn above this amount. This is called the earnings taper.
  • If you don’t qualify for the work allowance, your Universal Credit payment will go down by 63p for every £1 on all your earnings.

 

How does other income affect Universal Credit?

Some income that you didn’t get from working can be deducted from your maximum award. This is called unearned income

Unearned income that will be taken off your Universal Credit payment includes:

  • Some benefits that aren’t replaced by Universal Credit
  • Statutory Sick Pay
  • Statutory Maternity, Paternity or Adoption Pay
  • Pension income.

Usually £1 will be deducted from your Universal Credit payment for every £1 of unearned income.

Unearned income that won’t be taken off your Universal Credit payment includes:

  • Child Benefit
  • Personal Independence Payment
  • Disability Living Allowance
  • Maintenance payments
  • Income from boarders and lodgers.

 

How your savings are affected if you move from Tax Credits to Universal Credit

 

  • Under the rules for Tax Credits, any savings or capital you had over £6,000 was ignored, although some income from savings was counted.
  • If you move onto Universal Credit from Tax Credits and you have savings or capital of over £6,000, the government has said that you will still be entitled to get a top-up payment – known as transitional protection – to make sure that you are not worse off.

 

 

 

 

 

 

 

 

 

 

The Benefits Cap and Housing Benefit.

The Benefits Cap and Housing Benefits.

There is a limit on the total amount of benefits you are entitled to receive if you are between the ages of 16 to 64.

If the amount of benefits you receive weekly is over the cap amount certain benefit amounts currently received may decrease.

Benefits affected by the cap –

  • Housing Benefit
  • Bereavement allowance
  • Child Benefit
  • Child Tax Credit
  • Employment and Support Allowance (unless you receive the ‘support’ component)
  • Incapacity Benefit
  • Income Support
  • Job Seekers Allowance
  • Maternity Allowance
  • Severe Disability Allowance
  • Widowed Parent Allowance
  • Universal Credit (unless you’ve had a work capability assessment)

Benefit Cap Amounts-

Outside Greater London

  • £384.62 Per week (£20,000 a year) if you’re in a couple, whether your children live with you or not.
  • £384.62 Per week (£20,000 a year) if you’re single and your children occupy the same residence.
  • £257.69 Per week (13,400 a year) if you’re single and do not have children, or that they do not occupy the same residence as you.

 

Inside Greater London

 

Exemptions –

You might be exempt from the benefits cap if:

  • You qualify for Working Tax Credit, even if you don’t receive it.
  • You’ve reached the age for receiving Pension Credit- although this can vary if you’re a mixed age couple.
  • You or your partner get certain benefits for sickness or disability.
  • You or your partner have been in employment for a least 50 weeks out of the 52 weeks before your last day of work.
  • You or your partner get War Windows or Widowers Pension.

For more information on exemptions-

https://www.citizensadvice.org.uk/benefits/the-benefit-cap/the-benefit-cap-and-housing-benefit/the-benefit-cap-and-housing-benefit-who-is-exempt/

 

Examples of how the Benefit Cap can affect Housing Benefit payments can be found at-

https://www.citizensadvice.org.uk/benefits/the-benefit-cap/the-benefit-cap-and-housing-benefit/the-benefit-cap-and-housing-benefit/

 

Right to rent, and immigration checks

Right to rent, immigration checks

 

  • Before you can rent a property, you will need to provide information and documents to show you will be a good tenant. You will also have to show you and any other adults that will be living with you have the ‘right to rent’ in the UK.
  • Having your documents ready can help you rent more quickly.
  • Get your landlord’s or letting agent’s name and contact details before you give them your documents.
  • Your landlord or letting agent will ask to see your immigration documents or passport when you start or renew your tenancy. They will also ask to see the documents of any other adults living with you. They do this to check you have the right to live in the UK and to rent – this is called the ‘right to rent check’.

You must prove that you have a right to rent property in England if you’re:

  • starting a tenancy on or after 1 February 2016.
  • renting it as your main home.

 

Exemptions

You won’t have to prove your right to rent if you live in:

  • student accommodation, e.g. halls of residence
  • accommodation provided by your employer as part of your job or training
  • social housing
  • accommodation provided by the council
  • hostels and refuges
  • a care home, hospital or hospice
  • accommodation with a lease of 7 or more years

 

What your landlord must do

Your landlord (or letting agent) must:

  • check your original documents to make sure you have the right to rent a property in England
  • check the documents of any other adults living in the property
  • make copies of your documents and keep them until you leave the property
  • return your original documents to you once they’ve finished the check

 

Reference checks

You will be asked to give references to show you can afford the property, and will be a good tenant.

You’ll usually have to give a reference from:

  • your current landlord and previous landlords if you’re renting from a letting agent
  • your employer – to show you have a job and it will continue

If you’re asked to give your recent bank statements to show your income, make sure you cover over your account numbers for security.

If you’re self-employed, you might need to give copies of your trading accounts and an accountant’s reference.

 

Getting a guarantor 

  • You might be asked to provide a guarantor, for example if you haven’t rented before. A guarantor is someone who agrees to pay the rent if you don’t – you could ask your parents or someone else in your family to do this.

 

You can’t give a reference

  • You might still be able to rent, even if you can’t get a reference.
  • Explain to your landlord or letting agent why you’re not able to get a reference. If you paid rent on time in the past, show them your tenancy agreement and rent book or bank statements to prove this.
  • You could also ask for a ‘character reference’ – a letter from an employer or someone who knows you well, to show that you’re reliable.

 

Credit checks

  • Your letting agent and some landlords will do a credit check to see if you’ve had problems paying bills in the past. They must get your permission first.
  • It’s less common for private landlords to do credit checks because they can make it take longer to rent out a property.
  • If you’ve got a bad credit history, it’s best to be honest and explain the situation. If you’re renting through a letting agent, do this before you pay them any fees – if you fail a credit check, you might not get your money back.
  • If you fail a credit check, explain why you think this might have happened. If you know you can pay the rent, tell your landlord or letting agent. They might still rent to you if you offer to pay a larger deposit, more rent in advance or if you can get a guarantor.