PROPTECH-X ‘Proptech & Property News’ Weekly Roundup: Mould crisis | Capital Gains | Landlord exodus | Zoopla market report

Changes to capital gains causing landlord exodus

PRESS RELEASE: The reduction in Capital Gains Allowance is an “unwelcome blow” and has seen the number of landlords looking to sell up hit a 13-year high. Jeremy Hunt announced that the amount you can make from the sale of certain assets before paying tax  will fall from £12,300 to £6,000 in April and then to £3,000 in April 2024 in the Autumn statement on Thursday.

And Tom Cranenburgh from Get An Offer Estate Agency, said many landlords are now opting to exit the market. He said: “The changes to Capital Gains Allowance couldn’t really have come at a worse time for landlords. Right now many are already facing a reduction in property values, rafts of new regulation and the prospect of many of their tenants struggling to pay their rent due to the cost of living crisis. “That’s why many are reacting to this unwelcome blow by already opting to quit the market and sell up. Mr Cranenburgh said data indicated the number of landlords looking to exit the market had hit a 13-year high.

He said: “We track all enquiries really carefully, and landlords looking to sell are coming to us more than I can remember since we began back in 2009. Some are hoping to sell with tenants remaining, others have given two months notice and want the place sold as soon as it’s empty to avoid paying all the costs with no rent coming in. Landlords looking to sell are up nearly 65% in November versus October and nearly 300% versus November 2021.”

Basic rate taxpayers pay 10 per cent CGT on most asset sales and 18 per cent on property. Higher rate taxpayers pay 20 per cent CGT on most assets and 28 per cent on property.

A landlord paying higher-rate tax would pay up to £1,764 more tax on a property gain above the threshold if they sold between April 2023 and April 2024 (when the threshold is £6,000), and up to £2,604 more after the threshold drops to £3,000, according to the investment platform AJ Bell.

A landlord paying basic-rate tax would pay up to £1,134 more in CGT if they sold their property between April 2023 and April 2024, and up to £1,674 extra from April 2024.

Landlords who manage their buy-to-let portfolio through a limited company and pay themselves in dividends will also be hit by changes to the dividend allowance, which is the amount that an individual can receive in dividends before paying tax on them.

The allowance will be cut from £2,000 a year to £1,000 in April, and then halved again to £500 in April 2024.

Last month the number of limited companies set up to hold buy-to-let properties passed 300,000 for the first time as more landlords moved properties from personal to company names. 

---

ZOOPLA: A quarter of homes for sale see asking prices reduced with transactions set to fall to 1 million in 2023

• Current UK house price growth is 7.8% – the slowest since November 2021
• 1 in 10 homes have had a price reduction of 5%+ since September 2022
• Almost 1 in 3 homes in the South East and East of England (outside of London) have seen reducing asking prices to attract more demand
• Demand since the mini budget is -44% with sales -28% from a year ago
• Mortgage rates expected to start 2023 at 5%

PRESS RELEASE: The UK’s current house price inflation has slowed to 7.8%,  the slowest rate of growth recorded since November 2021 following October’s mini budget which then saw the property market stall.

The housing market is transitioning from an unsustainably strong market to one more balanced, albeit with affordability challenges for homebuyers most reliant on mortgage finance and a weaker economic outlook for 2023. Buyer demand is -44% YoY with a slower decline seen in sales at  -28%, which are now back to pre-pandemic levels.

Hottest markets have seen biggest drop in sales volumes

Property sales are still being agreed by those who still have low rate mortgage offers and amongst certain buyers including would-be first-time buyers facing steep rent rises or buyers less reliant on mortgages. 

New sales have fallen by up to 50% in the previous market hotspots and high-value areas where higher mortgage rates will hit buying power hardest such as the mid to upper price bands in Southern England (excluding London), East Midlands and Wales. Sales have fallen less in more affordable areas and London where market conditions have been weaker.

More homes are coming to the market for sale with the total stock of homes available up 40% vs 2021 – but still almost 20% below pre-pandemic levels and rising supply will boost choice for consumers.

House price inflation is losing momentum fast. The headline, annual rate of UK growth, at 7.8%, is the lowest since February 2020. 

Looking at more recent trends over the last quarter growth rates are running at less than a third of the last year. However, Zoopla’s data is yet to record price falls over the last 3 months across UK countries, regions or major UK cities. We expect price growth to dip into negative territory in H1 2023 as the market adjusts to weaker buying power and concerns over the economic outlook..

Discounts to asking prices set to widen further  

Sellers are now having to accept discounts to asking prices in order to achieve a sale – a trend that has become more apparent in recent weeks. The average price achieved in recent weeks has been 3% below asking price when for much of 2021 and the first half of 2022 it has been 0%. We expect discounts to widen further in 2023. History shows that when discounts reach 5-6% this points to flat to falling prices. It’s important sellers who want to achieve a sale are realistic on selling prices and speak to agents for the right advice for their home.  

There is a widespread repricing of housing underway

Falling demand and sales means new and current sellers are being forced to set asking prices at more realistic levels to help secure buyer interest. 1 in 10 homes (11%) have recorded a price reduction of 5%+ (although this remains below 2018 levels) and 1 in 4 (25%) have experienced a price reduction of any size since 1 September 2022.

Asking price reductions are greatest in Southern England, where sales volumes have fallen the most with almost 1 in 3 homes in the South East and East of England reducing asking prices to attract more demand.

Mortgage rates to start 2023 close to 5%

The outlook for mortgage rates is the most important factor for home buyers and those planning to move in 2023.  The underlying cost of 5-year fixed-rate mortgages has fallen back over the last month and signals mortgage rates closer to 5% as we start 2023. Whilst this is a  better position than rates of 6.25% previously seen, it still represents hundreds of pounds a month in average buying costs for the 7 in 10 households reliant on mortgages.

Looking ahead, we expect sales volumes to drop back to 1 million over 2023 (from 1.3m in 2022) with house price falls of up to 5%, concentrated in the high-value markets most sensitive to higher borrowing costs

Richard Donnell, Executive Director at Zoopla says, “The housing market is adjusting to a reset in the level of mortgage rates but the likelihood of double-digit house price falls at a UK level remains low. 

While the outlook for house prices is weak, we see a shift to more needs-driven motivations to move in 2023 and beyond which will support sales volumes. Ongoing pandemic impacts, increased labour market flexibility plus more retirement will continue to encourage moves. Cost of living pressures will compound these trends encouraging homeowners to consider their next move. The rapid growth in rents, which shows little signs of slowing, will add to cost of living pressures and add continued impetus to first-time buyer demand.   

Sharing advice for sellers looking to list their home for sale, Polly Ogden Duffy, Managing Director at John D Wood & Co. comments: “Tidy up, freshen up, and clean up! Presentation is everything when it comes to selling a home in a competitive market. As well as setting realistic expectations on the price you will achieve. If your property comes with a compromise, such as having a small garden, it’s on a busy road, or it requires a replacement kitchen or bathroom – you need to price accordingly. Competing with other properties at the same price point that come without these drawbacks, will only mean that yours will be last to sell. A combination of waiting too long to adjust your price, and more property coming to the market in the New Year will only provide even more choice for buyers.”

---

“Young children dying due to mould and poor housing is underreported”, says leading expert

PRESS RELEASE: A leading building expert fears several more children have died because their homes were riddled with mould.

Professor Mike Parrett told GB News he’s aware of more fatalities in the south east of England due to poor housing conditions that have not yet been reported.

He was speaking after an inquest found that two-year-old toddler Awaab Ishak died due to breathing in “severe” levels of mould in a one-bedroom flat in Rochdale.

Professor Parrett told GB News: “When I look at the disparity of knowledge, particularly among social housing – it’s even worse in the private sector, it fills me with horror that we’ve arrived at the situation we have.

“My office has received calls from some sources where there are allegations of further fatalities Involving young children. I knew the day would come, I knew that this would happen.

‘It wouldn’t surprise me prior to this case, there were other cases which have slipped through the net. They’ve slipped under the legal radar. In America there’s been many claims of a proven causal link between mould spores in the air – inhalation and fatality, that is a fact. This sadly, is going to be the first of many, and I say sadly because my whole life…I’m a doctor I’m trying to do the best I can for my patient. It’s an uphill struggle, I’m trying to roll a boulder uphill with this. Sadly there will be more fatalities before this is all eventually sorted out.”

GB News reporter Alice Porter also spoke to Dan Whiteside who lives in a leasehold flat in south London with his wife and two children.

He said they have been suffering leaks, mould and damp since February, which has left them sleeping on the sofa and unable to use the master bedroom.

“Mushrooms are coming through the wall, which then quite quickly started turning into a large area of black mould,” said Mr Whitehead.

“I’ve been calling my housing association L&Q twice a week and they finally sent out a damp expert to come out and have a look and that was two weeks ago.”

He told GB News: “It’s pretty difficult to ascertain that you have something related to the news story of the child who sadly passed away.

“They mentioned on the phone we couldn’t have a newborn baby living in these conditions, which obviously makes me quite angry because my wife was pregnant throughout this.

“We have to bring a newborn baby back to this, we pay a mortgage and a service charge and we’re living in a nightmare.”

In a statement, L&Q Housing Association said it was sorry for the delay in carrying out repairs, as establishing the cause has proved more difficult than anticipated.

---

Stellar Raises $20M in Series B Funding, Propelling its Position as a Leading Proptech

Stellar, a venture-backed technology-driven marketplace which solves maintenance at scale for the Single-Family Rental (SFR) market, announced today $20M in Series B growth equity financing. The funding round was led by new investor Weatherford Capital and was also supported by existing investors Brick & Mortar Ventures, S3 Ventures, Alerion Ventures, and Navigate Ventures. This round brings the company’s total venture capital to $35M and will be used to enhance the company’s technology and platform, invest in new talent, and expand into additional U.S. markets.

“We are thrilled with the support from both our new and existing investors who see the impact Stellar’s customers are realizing through hassle-free maintenance,” said Dustin Marx, Founder and Chief Executive Officer of Stellar. “This funding will allow us to meet the rising demand for our maintenance marketplace, evolve into more agile technology including a new mobile app, and expand our talent and market reach. We are uniquely positioned in this extraordinary macro-economy to create a revolutionary marketplace that thrives and provides new opportunities for SFR stakeholders, enabling them to experience home maintenance that is fast, frictionless, and done right.”

Stellar’s mission is to increase asset value, reputation, and retention to build thriving businesses and communities. The company marries tech with an intimate knowledge of property maintenance to solve the challenges that residents, property managers, and contractors collectively face, and now serves 10 of the 11 largest SFR operators across 150,000+ properties.

The equity financing round positions Stellar to enhance its platform which leverages artificial intelligence and machine learning to enable property managers and contractors to successfully resolve home maintenance issues, giving residents peace of mind. Unlike local contractors, Stellar uses technology to make the maintenance experience seamless, simple, and scalable. Work is completed with integrity and heart and quality is guaranteed. The company will invest in new talent and plans to scale the staff by nearly 100% by the end of 2023 in the areas of Operations, Sales, Marketing, and Technology. U.S. market expansion is also on the horizon.

In conjunction with the financing, David Seider, Principal at Weatherford Capital, has been appointed to Stellar’s Board of Directors, effective upon closing of the investment. With the addition of Seider comes a deep history of technology solutions impacting highly complex and regulated industries given his Board Director and Advisor roles with Branch, High Definition Vehicle Insurance, and The Zebra.

“As a firm focused on backing high-quality leaders who manage rapidly growing B2B technology companies, we have a keen eye for identifying startups solving real problems in the market,” said Seider. “Stellar’s impressive growth, combined with a rising number of U.S. households choosing to rent instead of owning a house, underscores the company’s position as a market leader. We are proud to align with them on this next phase of growth to continue to solve challenges across the property lifecycle.”

The announcement comes on the heels of Stellar punching up its tech through the appointment of Renaud Casanova, former Facebook leader, as the new Chief Technology Officer. The Series B raise amid a challenging VC growth investment market is a testament to Stellar’s maturity, growth, and trajectory.

For more information about Stellar, please visit mystellar.com.

---

The Proptech-X Weekly Roundup in association with Estate Agent Networking.