New green tax for buy-to-letters

Hundreds of thousands of buy-to-let landlords may soon have to pay up to £5,000 to upgrade the energy efficiency of their properties, writes Steven Swinford in The Daily Telegraph. Until July 2015, landlords could apply for loans to cover the cost of energy-saving measures such as insulation, cavity wall filling and new boilers through the government's "Green Deal" scheme. The intention was that tenants, who benefited from lower energy bills, would repay these loans. Yet only 1% of households took out loans under the scheme, according to the National Audit Office.

But from April 2018, buy-to-let owners may be required to pay for these improvements up front, in order to raise the energy efficiency of their properties to at least "Band E" level. This means that more than 330,000 houses that are currently in bands F and G the worst insulated are likely to need major improvement works.

In a "buy-to-let" briefing, the newly created Department for Business, Energy and Industrial Strategy (BEIS) suggested a "hypothetical £5,000 spending cap" on improvement works, with the expectation that most landlords should only have to pay £1,800 to meet the standards. BEIS also suggested landlords could borrow against their properties in order to cover upgrade costs, says Swinford. The likely outcome of these new rules is that costs will be passed on to tenants in the form of higher rents.

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Investors withdrew £1.4bn from UK commercial property funds in June, according to the latest fund flows data from the Investment Association. This accounts for 6% of the sector's total assets. While this exodus was partly driven by post-Brexit fears of a downturn in the commercial property market, outflows had been increasing in the months leading up to the referendum, with £148m pulled out from funds in April and £367m in May.

Several funds remain closed to investor redemptions, having suspended trading in early July to stem further withdrawals. Those still closed include Standard Life UK Real Estate and Henderson UK Property. However, Aberdeen Asset Management, which imposed a 19% withdrawal charge instead of suspending trading, has now cut this figure down to its pre-referendum level of 1.25%.

It's unclear when property funds will resume trading, but it is likely that the fund management companies will reassess the situation 28 days after the suspensions were initially introduced. Investors should be notified when the company decides to end the suspension.

More than half (58%) of 45- to 54-year-olds see the wealth built up in their homes as a "key part of their retirement income plans", according to a survey by insurer Aviva. Some clearly expect to unlock this to fund retirement by moving to a smaller house, and those planning to downsize typically expect to release an average of £57,140.

However, the vast majority of over-45s would still prefer to transition into retirement "by not transitioning at all, if possible", says the report. When asked about their retirement plans, 80% of this age group responded that they intend to stay in their homes as long as they are physically able to. This figure rose to 89% of those aged 65-74 and 96% of the over-75s.

These findings suggest rising prices, especially in London and the southeast of England, will result in increased use of equity-release products by people who want to stay in their family home during their retirement years, concludes the report. (This may not be surprising, given that Aviva is a big player in the equity-release sector.) Quarterly equity-release lending went over £500m in April to June this year for the first time, according to data from the Equity Release Council, an industry association.