The disadvantages of the Immigration Act
As we mentioned in last week’s newsletter, the Immigration Bill has now been granted Royal Assent and has become the Immigration Act. Criticised for demonstrating political expediency over constructive policy making, we have considered the extra burden this new act will impose on letting agents and landlords, and how this will affect tenants.
Cost – Additional checks will have to be conducted on tenants’ immigration status to ensure that they are not living in the UK illegally, meaning the extra costs for those industries responsible for assessing that information will need to be absorbed by the landlord or passed on to the tenant in the form of higher rents.
Administration – landlords and some letting agencies may not be fully equipped to assess the required documents and will be faced with heavy fines of up to £3000 if they fail to do so correctly. Should landlords be expected to recognise counterfeit naturalisation and right of abode certificates? Or should this be left in the hands of skilled immigration officers at UK Border Agency?
Discrimination – As a result of the complex procedure and the heavy penalties involved, landlords will become more hesitant to rent their property to non-British tenants or those who can’t prove their nationality, causing them to discriminate unintentionally. For example, British citizens with housing benefits may not have passports, which coupled with the modified DSS regulations will make it even harder for those tenants to rent a property.
We are examining the best way that we can carry out these checks on behalf of landlords, just like we do with credit and reference checks, and will announce our findings shortly.
A nation of landlords
According to figures released by BDRC Continental, the average UK landlord using buy-to-let mortgages currently owns around eight or nine properties worth 1.2 million and receives a yearly salary of £60,000; more than double that of the average UK salary. Thanks to buy-to-let mortgages, landlords have been able to purchase properties which have provided them with strong long-term returns. In the last 3 months, average yields have risen to 6.2% across the country, and an increasing number of landlords are optimistic about the future of the market.
According to statistics released by the ARLA, the average of buy-to-let properties owned by landlords at the beginning of 2012 was 7 and peaked in the last quarter to 8. With the average now leaning towards 9, accompanied by the increase in confidence amongst landlords, it remains to be seen if this level of growth can be sustained.
Tip of the week
HMRC have put together a learning resource for property investors which you might find useful. Although it’s aimed at people who have just started renting out a property, it takes you through the basics of tax obligations and relief in a more user friendly way than the dry official guidance. It can be said to be a bit basic, but could be useful if you’re just starting out or want a refresher on your tax affairs.