July 13, 2018
In this week’s post, we’re looking at the new Housing Minister, how millennials are dependent on inheritance to buy property, whether the Bank of England should freeze house price growth, the landlord EPC deadline and Purplebricks’ losses.
Kit Malthouse confirmed as the 8th Housing Minister in 8 years
It’s been a tumultuous week at Downing Street following the resignations of David Davis and Boris Johnson, and as Dominic Raab replaces Davis as Brexit secretary, his position as Housing Minister opened.
It was confirmed on Monday that Kit Malthouse will be taking over as Housing Minister, leaving his previous position as Parliamentary Under-Secretary of State for Family Support, Housing and Child Maintenance at the Department of Work and Pensions.
It’s worth noting that Malthouse will be the 8th Housing Minister in just 8 years, and this has raised concern for many in the industry. Questions have been raised regarding the frequency of change within the role – many wonder what the impact has been on policy progress and professionals in the property market.
Study suggests over a third of millennials are dependent on inheritance to purchase property
A recent study conducted by Sanlam UK, an investment and wealth management company, shows how reliant ‘millennials’ are on future inheritance.
The report found out how 25-45 year olds would spend their inheritance. 38% said they’d use either save or invest the money, 34% would use it to purchase property, and 24% claimed they’d use it to pay off debt.
31% of participants confessed to ‘living in the now’ and putting off saving because they know they’ll receive an inheritance, while 34% said they’re ‘totally dependent’ on inheritance to help with future finance.
On average, parents pay £18,000 to help get their children on to the property ladder, and research suggests that ‘the Bank of Mum and Dad’ will contribute to 1 in 4 house sales this year.
Of course, these figures differ from region to region. The average amount handed out by parents in Scotland is £10,800, in the North East it’s £12,000. The amount rises quite significantly as you go down south, with the average amount standing at £21,700 in the South East of London, and £30,600 in the capital itself.
Think tank calls on the Bank of England to freeze house price growth for 5 years
The Institute of Public Policy Research (IPPR) say that the Bank of England should freeze house price growth for at least 5 years as an attempt to stabilise the UK economy.
The think tank argues that property values shouldn’t rise by more than 2% per year once expectations of ever-growing house prices have been ‘reset’.
The IPPR suggest that zero growth would reduce the appeal of property investment and this, in turn, would lead to more money being invested into other areas of the economy, thus preventing another financial crisis.
According to the think tank, this movement would see a 10% fall in property value in real terms over the 5-year period, making room for wages and other prices to continue rising.
Landlord EPC deadline
New Minimum Energy Efficiency Standards (MEES) came into effect in April this year which require all rental properties on new lets or renewals to have a minimum Energy Performance Certificate (EPC) rating of E.
Commercial Trust Limited – a specialist buy-to-let mortgage broker – stress the consequences if these standards aren’t complied with. If the MEES are not met, landlords could face a fine of up to £5,000. These standards will apply to all tenancies from April 2020.
Specialist landlord insurer ‘JustLandlords’ conducted research into the awareness of these changes, finding that just 4% of their 400-landlord sample were aware of the new legislation. 80% claimed to be unaware that an EPC could provide a clear insight into the environmental impact a property has.
The Department for Business Energy and Industrial Strategy has made available a guidance document that aims to help landlords understand the legislation and improve the energy efficiency of their property. It also outlines any exemptions and how appeals will work.
Purplebricks experience losses grow following overseas expansion
Purplebricks started its company in the UK in 2012, and has since launched offices in Australia in 2016, the US last September and now Canada this financial year, through the £29.3m acquisition of real estate group DuProprio.
However, following its expansion, the “hybrid” estate agency has reported a pre-tax loss of £26.1m in the year to April. This is up from a £6m loss the year before.
Their losses in Australia rose to £11.8m from £6.1m whereas their newer US business saw losses rise to £16m from £100,000 in the same time. In contrast, the UK operating profit rose to £6.5m from £1.1m in the past financial year. Purplebricks’ total revenue increased to £93.6m from £46.7m in the previous year.
“The UK business is profitable and considerably more profitable than it was last year, it is growing considerably,” says chief executive and founder of Purplebricks, Michael Bruce, when asked if they had expanded too quickly. “We’ve recently launched into places like Australia and the US and they are earlier in their evolution, but as far as the business is concerned it is very, very well positioned for future growth.”
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