Cambridge granted 100% control of business rates

“The Cambridgeshire business community is delighted with George Osborne’s announcement that the county can now claim 100% control of its business rates. This will allow the local councils to realise their ambitions and further invest in much needed infrastructure for the county’s burgeoning population due to the influx and expansion of major global firms in the area such as AstraZeneca and ARM Holdings.

Cambridge’s GVA forecasts highlight the city will out-perform the UK national annual figure for each of the next ten years. The city’s rate of GVA growth is also predicted to steadily increase over this period, highlighting the continued out-performance of the Cambridge economy when compared to the national level.

With biotech, education and Information & Communications Technology (ICT) sectors conglomerating in and around the city, we praise the Chancellor’s decision to grant this opportunity for Cambridge to continue to reinforce its position as an economic powerhouse.”

Will Mooney MRICS
Partner
Commercial, Cambridge

Osborne's Help to Buy ISA

With just six weeks to go until the General Election, we were not expecting anything drastic from Mr Osborne’s sixth budget . Interestingly, the Chancellor announced a new Help-to-Buy ISA to assist first time buyers saving mortgage deposits whereby the Government will top-up every £200 saved by the individual with an additional £50. Mr Osborne commented that it will “tackle two of the biggest challenges facing first-time buyers — the low interest rates when you build up your savings, and the high deposits required by the banks.”

Our research analyst, Lee Layton, believes that; “The proposed scheme will (like the Help-to-Buy equity loan & mortgage guarantee schemes) undoubtedly boost demand for starter homes, but unlike Help-to-Buy, this demand should be better distributed as participants save and enter the market at different times, preventing a possible super-charging at the lower end of the market.”

This initiative will not however alleviate the severe shortage of stock affordable to first time buyers; it will essentially create more demand. We were anticipating that this year’s Budget would address the escalating lack of supply and focus more on incentivising institutional investment in the Private Rented Sector, which would offer a bridge or transition for many people between the current levels of unaffordability of buying property and a longer-term rebalancing of the house price/ affordability ratio. However we await the revelation of the 20 ‘new housing zones’ with great expectations.”

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

PRS - A political hot potato

The private rental sector (PRS) is in danger of becoming as hot a political potato as the EU.

Labour currently has no intention of a referendum on EU membership while Ukip has driven the Tories to despair with its relentless campaign to abandon the EU - and a referendum policy as a populist idea.

But what could be more populist than introducing controls for the PRS, driven by the urge to do highly visible things such as ending letting agents’ fees, which Labour has failed to push through before the General Election in May 2015 but which it promises will be on its agenda, along with three year tenancy terms and fixed rents?

Rent caps in places of high property values are one of the biggest fears that could drive the PRS into terminal decline. Yields become ever smaller as rents are constrained during periods of strong capital growth. Many owners would find it more beneficial to cash in and invest the money somewhere more sensible. Even a bank deposit account with three per cent interest could be better than renting at two per cent yield with all the accompanying risks of repairs, dilapidations, and the costs of regaining possession when yesterday’s dream tenant becomes tomorrow’s nightmare as their economic circumstances change.

Figures from ARLA show that 17 per cent of landlords are expected to sell one or all of their properties in the next 12 months, the highest proportion since 2008. The same source also revealed 59 per cent of lettings agents are reporting more would-be tenants than properties available. Just as the PRS needs to retain landlords, many are plotting their escape route to reap the benefits of the property price surge.

When you talk to lawyers and owners of high end properties in London’s prime quarters it becomes apparent that what interests buyers more is long term capital growth than short term low yield income. Buy to let is out, buy to reap substantial profit could well be coming in if it’s not here already.

Rent caps across the country are unrealistic because there are so many regional variations in property prices and therefore what seems like a fair return on investment. Are we to return to the days of the regional Rent Tribunals as the first avenue of escape for tenants served with notice to quit? The Tribunals, chaired by lawyers, could fix rents as well as deflect a notice to quit and were readily accessible to tenants with some savvy and no lawyer.

With commentators predicting that in very short time there will be more private sector renters than owners, restrictions on landlords and lettings agents could be as good for Ed Miliband as the right to buy council houses turned out for Margaret Thatcher.

Longer tenancies are also a real issue. A tenant who seems heaven-sent on day one could be the tenant from hell by month seven but then it would be too late to serve notice so easily. Employers, who see their staff and assess their performance every day, get four times the trial period it’s proposed to give landlords even though contact with the tenant is frequently non-existent and, at best, sporadic. Three year tenancies by default with a six month trial period will be seen as too risky to be realistic by many landlords. What is designed to protect tenants could actually reduce their chances of finding a home in the first place if availability shrinks. Rents would then rise because the cap is intended to be assessed through market conditions.

Lettings agents’ fees are another conundrum. It’s wrong, it’s said, for agents to charge for referencing or administration such as the inventory but under current plans landlords, and their agents by default, will soon be responsible for checking the immigration status of tenants and their right to live and work in the UK. This would need to apply to every tenant, with a birth certificate and some form of photographic identification to be safe even for those claiming UK birth and lifelong residence. Let to the wrong person and there’s a £3,000 penalty. If that person is working without the right to do so the penalties are stiffer still. When a tenant with the right to live in the UK arrives on the doorstep and it then transpires they don’t have the right to the employment they are using to pay the rent what does the landlord do - allow the tenancy because there’s no right to deny it and then report the tenant for paying the rent?

Someone has to fund the lettings agent’s time in processing all this as Civil Service substitutes because few landlords will want to undertake the task. If there are no fees for tenants, only for landlords, then rents will have to rise to cover the cost. But when the rent is capped, how can the cost of fees be applied?

There is too much fag packet planning and not enough real thought going into all this regardless of which political party happens to be having another bright idea today. Everyone is agreed on the importance of the PRS, everyone agrees it could be fairer all round, but who is going to sit down and work it all out as a policy and not a series of knee-jerk responses to the latest comment article?


Lisa Simon, 
Partner
Head of Residential Lettings
T: 020 7518 3234 
E: lisa.simon@carterjonas.co.uk

"Events, dear boy, events."

Asked when he was Prime Minister what he most feared, Harold Macmillan responded with the now-famous quote: “Events, dear boy, events.”

The circumstances in which, about what and to whom ‘Super Mac’ was referring have never been established once and for all as the Profumo Affair (there’s one for the under 50s to google) but it’s a sentiment with which we can all sympathise.

No matter how much or to what level of detail we undertake research and prepare for or forward plan – even for an anticipated crisis scenario - events have a nasty habit of taking over.

Just ask the current Prime Minister. For all the expert advice from policy wonks and spin doctors in order to control the political messaging and the news agenda to the nth degree – it rained. And it rained. And it rained again. And it’s still raining.

Eighteen months out from David Cameron’s first General Election in-residence, the rain began. From where we are now, coming towards the end of the winter, an administration whose first term in office looked all set to be defined by austerity and, latterly, recovery, risks being overtaken and characterised – even caricatured – by a lack of both sandbags and ministers and state officials in wellington boots in the early days of the flood event.

Events are a great leveller for those in public life. Tony Blair’s premiership became characterised by wars in Afghanistan and Iraq and was defined by the terrible milestones of the 9/11 and 7/7. Not at all what New Labour had in mind on assuming power in May 1997 - no amount of political planning and message control freakery could have anticipated those terrorist events or their lasting impact.

The Bank of England policy, ‘Forward Guidance’ – whose feel-better factor I welcomed in these pages at the end of last summer – has also succumbed to events.

As the unemployment rate in January and early February looked like it was edging forward to that magic 7 per cent figure (as it turned out, it’s currently 7.2 per cent) which would mean that, under Forward Guidance, the Bank would have to take a view on increasing interest rates, Governor Carney announced that other variables were part of the interest rate policy too.

To be fair, Mark Carney was at pains to point out last August that 7 per cent was not a target at which point interest rates would definitely rise.

The direction of travel of interest rates is far easier to anticipate and prepare for a change of course than the unpredictable precipitations of Atlantic storms and the direction of the pesky Gulf Stream in winter 2013/14.

Yet not all big events are surprises. Under the Fixed-Term Parliaments Act of 2011, for the first time we’ve known exactly when the next General Election will be – 07 May 2015 – and plans will have been well underway for at least four years by the time it comes round.

This year sees another big constitutional event - some might argue the biggest since 1801 – the Scottish Independence referendum.

If, in line with a quote attributed to the US’s longest serving First Lady Eleanor Roosevelt, ‘Great minds discuss ideas; average minds discuss events; small minds discuss people’, the debate about Scotland’s independence and the accompanying political and cultural stushie has got the lot.

September 18 is bound to rain on someone’s parade.

Will Mooney MRICS
Partner
Commercial, Cambridge