Generation Rent is a popular term used to describe young adults, normally between the ages of 18 – 35, who live in rented accommodation because of high house prices. They are generally regarded as having little chance of becoming homeowners. However, how do the UK’s Generation Rent compare to others around Europe?
In November 2017, Countrywide data showed that an average of 7.6% of homes listed to let had previously been listed for sale, which in turn has led to an increase in people renting in the United Kingdom. However, in Europe, Germany leads the way when it comes to the percentage of the population living in a rented dwelling, with a huge 54.3%.
We’ve recently seen dynamic changes on the residential property market across Europe, with the average square metre cost of a property varying significantly. The United Kingdom still has the highest per square metre average transaction price in Europe of €4,628, despite a decrease of 9.0% due to the pound’s depreciation. This in turn has made it hard for new buyers to get onto the property ladder.
Comparing the average cost of 4,628 EUR/m2 in the UK to other nations in Europe, you can get more space for the equivalent value elsewhere. This leads to higher rental costs, once the properties find there way onto the rental market.
Back in the UK, we saw the average rental cost increase by 2.55% between August 2016 and 2017, with the South East being the only region to become more affordable with a percentage decrease of -0.2% in rental costs.
In the previous 10 years, the increase in house prices has outpaced the rise in average salaries. This has led to first time buyers not being able to raise a deposit to purchase a property, which has led them to rent.
However, research from the Yorkshire Building Society has shown that buying a home in Britain has become more affordable across 54% of the country over the past decade (07-17).
If you have a buy-to-let property business in a limited company, the Office for Tax Simplification (OTS) is proposing some big changes that could increase the amount of tax paid on dividends.
On 25th May, the independent office of HM Treasury, recommended the changes as currently the tax paid on dividend income is less than other income sources.
The OTS gives the government advice on how to simplify the tax system and as currently they described dividend tax calculations as “complex” so they are proposing dividends should be taxed at the same rate as income.
Its report stated: “A more radical option would be to end the differential tax rates for dividend income. If all taxable income was taxed at the same rates, it would not matter how the personal allowance was used.
“Making this change would have the effect of increasing the amount of tax due from those who receive amounts of dividend income above the allowance. It would also impact on the taxation of profit extracted as a salary or as a dividend, from family owned companies.”
Currently, basic rate tax payers pay 7.5% tax on any dividends received, if they exceed the £2,000 allowance. Higher rate tax payers it is 32.5% tax and additional rate tax payers pay 38.1%. If the change is implemented, these amounts would increase by 20%, 7.5% and 6.9% respectively. For the basic rate tax payers, that is an increase in tax payments on limited company properties dividends by 125%.
Effectively, it means that the property can only be occupied by someone who currently works in - or is retired from - agriculture (or related rural industries such as horticulture and forestry). So, while there would be nothing stopping you buying the property, you couldn’t actually live in it!
AOCs are in fact very common - they originate when a planning application is submitted by someone like a farmer, who wants to build a house on what is otherwise agricultural land, either for his own use or for one of his workers. Ordinarily of course, such applications would be turned down, since there is a general presumption against allowing residential development in open countryside. However, they may be granted - with an AOC - if it can be proved that there is a special need. Since this is a local rather than a national planning matter, the precise nature of the AOC will vary from place to place. So, someone who works for a fencing contractor, for example, may be acceptable in one area but not in another.
Unsurprisingly, with strict limits on who can occupy such a property, the impact on selling prices can be significant – hence why the property you’ve seen looks like such a bargain!
Most Local Authorities are very reluctant to revoke AOC’s – if only to stop speculators buying up rural properties on the cheap with the aim of making a killing by selling them on later at the full market price. Even where councils are prepared to consider it, they certainly don’t make it easy - the current owner might first have to go through a full marketing exercise, perhaps for a year or more, in order to prove that there is no market for the property encumbered.
So, all in all, even if it sounds like a bargain, a property with an AOC is still not likely to be all that cheap and as a buyer without any agricultural links, you should tread carefully.
LSL Property Services surveyed 3000 tenants and have found the special features that tenants would most like to have in their rental properties. These are interesting for landlords as it’s these things that could attract tenants prepared to pay a premium price.
Pets are so frequently a perceived issue from a landlord’s perspective. 28% of tenants surveyed said they would be willing to pay an average of £24 extra a month if they could have their four-legged family live with them too. With regular inspections, fully documented professional inventories and the correct check in/out procedures, Robert Williams Sales & Lettings has minimised the likelihood of pet-related problems, with several 100 properties managed that do allow pets.
From fur babies to technology, high-speed internet is seen as a priority. On average, tenants would pay £19 per month more for properties with it.
Of least interest to the tenants surveyed, was a concierge service (3%) and somewhere to store their bikes (4%). Exercise was important to 41% of tenants who would pay £20 extra for use of a communal gym. Even a communal garden was popular with an extra £10 on average would be paid by 32% of tenants. A communal games or recreation room would be welcomed by 27% of tenants too.
Q. I only put my house on the market a few days ago and I’ve already had an offer. I am tempted to wait for a better one, but my agent is advising me to accept. What should I do?
A. This really all comes down to the question of how much you trust your agent. If you chose them purely because they were the cheapest, or because they obligingly gave you a higher valuation than anyone else, then I can readily understand why you may now be having doubts about the quality of their advice. Agents who routinely overvalue in order to gain the instruction are not being strictly honest with their clients at the very outset of the relationship – while when it comes to lower fees, it’s worth remembering that you generally get what you pay for in life!
If, on the other hand, you chose your agent wisely – either on the basis of their professional reputation or through personal recommendation -- then I would strongly suggest that you trust their advice. After all, they are the experts on the local property market. Naturally, like any vendor, you want to get the very best possible price for your most valuable asset, so it’s tempting to believe that there are always higher offers just around the corner. Nevertheless, you know what they say about a bird in the hand!
Of course, you can always try hedging your bets by accepting this first offer while keeping your home on the market. After all, under the English system nothing is legally binding on either party until exchange of contracts. But I would be very cautious about doing so, not least because your agent would be obliged to inform your buyers of the fact, in writing – and you could end up losing them.
Indeed, all things considered, I would say that you are really quite fortunate to have received a reasonable offer so quickly. And on a positive note, the fact that you already have a firm offer under your belt means that you now have a much clearer idea of how much you can afford to spend on your next purchase.
Robert Williams Estate Agents, 2 Southernhay West, Exeter, EX1 1JG
Tel: 01392 204800 | Sales: firstname.lastname@example.org Lettings: email@example.com