No way out of renting for four in ten tenants

Home ownership is out of reach for 42% of tenants, who say they cannot afford to save for a deposit at all, and other want-to-be homeowners are unable to save enough.

fap_average_ftb_450 The average amount saved by the 35% of tenants who do save for a deposit is £12,125 – about 7.3% of today’s average house price of around £165,000. That’s significantly less than the 10 to 20% which is typically required (approx. £16,000 to £30,000).

What many people aren’t aware of are the alternative co-ownership options available to them. With Joint Equity, for example, the minimum deposit required is 5% of the home value which for today’s average house is £8,250.

Surprising still is that nearly one-third of tenants are spending more than half their take-home pay on rent, and 35% of those managing to save a deposit are having to dip into it, either regularly or to pay for holidays. Among the under-30s, 60% have already used their home savings pot for other things.

These statistics are all from the property-sharing website SpareRoom, and another interesting and perhaps unexpected statistic shows that the large majority (79%) of those polled described themselves as employed professionals.

Matt Hutchinson, director of, said: “A significant proportion of the people we polled expect to live in rented accommodation for at least five years, and many believe it will be much longer than that.

“The facts speak for themselves. Soaring living costs mean it’s a struggle for many households just to keep their heads above water each month, let alone have enough spare cash to put aside towards a deposit. The survey shows that even those who are squirreling away funds have not managed to save anywhere near enough to buy the property they want.”

percentageBrad Bamfield CEO of Joint Equity said, “These stats continue to shock us which is why we’re determined to help educate people about alternative home ownership options. For instance, our Resident Partners can now live in their own home in co-ownership with us on a 50/50 basis. In nearly all cases if you can afford to rent you can afford to buy with Joint Equity.”

“We aim to help over 25,000 people leave the rented sector for their own home every year and our vision is that no one who does not want to rent should be forced to stay in it longer than really necessary”

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Offshore advantages now over for property developers operating in the UK

Our friends over at Goodman Jones Solicitors have written a succinct article on new rules are about to come into effect that effectively remove the tax advantages that non-UK based property developers enjoyed when developing UK property.

Yet another nail in the coffin of Buy to Let as most of the properties on theses sites are sold to Buy to Let landlords. How many nails can a coffin take until it collapses.

The full article is reproduced here and if you need help on this issue contact Goodman Jones at

New legislation

Hidden away in this March’s Budget announcements was a detailed paper produced by the Government to highlight its concerns that some property developers use offshore structures to avoid UK tax “Profits from Trading in and Developing UK Land“.

Levelling the playing field

how-much-for BTLThe paper describes in detail, the way in which offshore developers use these structures and how it is perceived to give them an unfair advantage over UK developers, who are liable to UK tax on their trading profits from developing property in the UK.

HMRC have for many years been challenging such structures, but the Government have proposed changes to UK tax legislation so that all profits arising from UK property development will be taxed in the UK. The new laws will take effect with the 2016 Finance Bill, but anti-avoidance rules are already in force to catch existing structures being unwound.

HMRC Task Force

As well as changes to tax legislation, a new task force is being created to identify and pursue offshore entities that do not toe the line with the new legislation.  There are rumours that some 100 structures are already under scrutiny.

Bad news for UK property developers based overseas

Clearly, those developers that operate in this way will be looking at their tax affairs and considering the additional cost that these changes will bring on them.  They’ll have to formulate a strategy to adopt the new rules and this may well lead to significant tax liabilities; something that is unlikely to have been taken into development projections that formed the basis of funding and investment appraisals.

Good news for UK based developers

However, for UK developers, this must surely be considered to be good news.  Such businesses operate in the same market place as the offshore developers, but historically have been unable to match the prices that overseas developers can pay for land given that they pay 20% corporation tax on the profits they make on each development.

Collateral damage

There will also no doubt be collateral damage.  We are likely to see legitimate overseas structures (for example, bona-fide property investors) being challenged simply by virtue of their ownership of UK property.   The aggravation factor alone will be unwelcome and the risk of HMRC challenge should mean that anyone based offshore and owning UK property would be well advised to review their position now.

In conclusion

We may find that this ultimately makes no difference to the situation as it currently stands, but my view is that it will level the playing field between UK and overseas developers as their overall post tax returns will be more closely aligned.

What remains to be seen, however, is whether this eventually puts downward pressure on residual valuations of suitable sites, which certainly over the last few years have been one of the key factors determining the shortage of supply of available land for housing.

Buy to Let tax hike will bite deep into profits

Buy-to-let investors have been battered by bad news over the past year which will have prompted many to consider what to do next.

The stamp duty hike that arrived with a bang at the start of April caught plenty of eyes, but it is the forthcoming cut to mortgage interest tax relief that will hurt many existing investors a lot more. The stamp duty is a one off hit the tax rise will hit every single year.

No longer will Buy to Let landlords be able to offset all their mortgage interest against their rental income and only pay tax on the profit in-between. Instead, the relief will be whittled away and replaced with a 20% tax credit against mortgage interest. For the large number of buy-to-let investors who pay 40% or 45% tax this will represent a sizeable hit.

Those punished the most will be landlords who took greatest advantage of borrowed money so increasing leverage to maximise capital growth.

how-much-for BTLMortgage broker London and Country gives the example of a landlord taking in rent of £1,250 a month, with mortgage payments of £900. All else being equal, as a 40% taxpayer they will see their tax bill rocket from £1,680 this year to £3,840 after 2020.

This takes post-tax profit down from £2,520 a year to £360 a year. That is an extreme example: the mortgage payments are high compared to the rent received, but it highlights how hard these changes could hit.

I imagine many landlords are still unaware of how their profits could be eaten, but between now and 2020 there is plenty of time for them to find out about it. The question will then be whether the effort and cost of being a landlord is worth it for the return they get.

As long as house prices keep rising they will have capital gains building up, but those who have made huge sums in profit from those rising values over the years will wonder whether it is worth cashing in. ]

50-50 splitIt has been suggested this could prompt a wave of sales, but the problem for buy-to-let investors who do cash in or those that want to continue to invest in UK residential property, but at a better return, is what to do with the money instead that will make a better return?

Many will look at the choice as simply property or cash, they won’t even consider investing it for an easy and relatively steady but low return from shares and bonds instead.

However, there is now a new way to invest in UK residential property without any hassle of being a landlord, which is simple straightforward and provides good rates of return.

JEIPs offer Joint Equity investment Bonds that offer either fixed returns or appreciating interest rates with attractive terminal bonuses either at a fixed annual rate or linked to Halifax Property Index.  All Bonds are saleable so you are not locked in until maturity.

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More information at the JEIP web site and at Joint Equityy