Written By Em

Em Morley

Property Investment is Booming in Manchester – the Next Silicon Valley

Published On: September 28, 2017 at 8:03 am

Tags: Manchester,property investment,tech

Property investment is booming in Manchester, as ever more businesses move into the city, giving it the name of the next Silicon Valley.

Property Investment is Booming in Manchester – the Next Silicon Valley

The latest report from Savills, titled Manchester Office: Market Spotlight, reveals that the city has seen a 20% annual increase in the take-up of office space, with experts claiming that this expansion will result in significant employment growth over the next five years.

These growth opportunities are primarily the result of the ongoing Northern Powerhouse initiative, which is supporting expansion in different sectors across Manchester – particularly the tech industry.

“Things are changing fast in Manchester, giving the city the very real potential of becoming the next Silicon Valley,” remarks Jean Liggett, the CEO of Properties of the World.

According to Wired, Manchester is already home to almost 52,000 tech workers – the largest tech workforce outside London – with the fourth highest digital turnover in the UK, at £2.9 billion.

The city’s Mayor, Andy Burnham, has pledged his commitment to creating a world-leading tech hub, and a growing number of tech start-ups are already snapping up office space across the city – 40% of business enquiries for office space are coming from the tech industry, according to Colliers International.

Indeed, the digital tech growth potential of Manchester is due to be further enhanced by the major expansion of the BBC. MediaCityUK, already the BBC’s second home in Salford Quays, will welcome 200 new employees this year. In addition, Indian firm 42Gears, which specialises in professional mobile software, is setting up a European technology and innovation base in Manchester city centre.

“Interest in Manchester is growing stronger and stronger as the city enjoys a bright economic outlook,” says Liggett. “Savills has predicted Manchester to be in the top five fastest growing cities from 2017 to 2021, which, in turn, is boosting demand for housing and investment properties.”

With so many tech professionals moving to the city, this is a great opportunity for landlords to snap up some rental properties to house them in before prices become inflated.

Could Manchester be your next property investment spot?

First Time Buyers Driving the Housing Market in Huge Shift

Published On: September 27, 2017 at 10:11 am

Author: Em Morley

Categories: Property News

Tags: first time buyer,first time buyers,housing market,mortgages

Although housing market activity has been growing modestly since the start of the year, first time buyers are now driving the market in a huge shift, according to the latest market commentary from UK Finance, for September 2017.

Overall housing market activity resembles what we saw just over two years ago, in 2015, the organisation reports.

The rise of the first time buyer

However, the mix of activity has shifted, with first time buyers driving the market, rather than cash and buy-to-let. The level of property transactions seen of late, of just over 100,000 a month since the turn of the year, is not expected to change much in the short-term, as the leading indicator of activity – house purchase approvals – has now returned to where it was at the beginning of the year.

First Time Buyers Driving the Housing Market in Huge Shift

The Bank of England’s (BoE) Agents’ survey suggests that part of the strength in first time buyer activity is down to demand for new build homes using the Help to Buy equity loan scheme. There are also several other Government schemes aimed predominantly at first time buyers, such as the Help to Buy ISA, which are no doubt helping to boost their numbers.

Benefitting much less from Government schemes, home movers have largely been treading water over the last few years. The shortage of homes on the market for sale has also meant that some would-be movers are struggling to find suitable homes, and so do not put their properties up for sale.

In the buy-to-let sector, Government interventions, coupled with regulation, have led to a flat market, with around 6,000 property purchases a month since April 2016, after the Stamp Duty surcharge on additional homes came into force.

Regional shift

As well as a change in the type of activity, there is some evidence to show that the regional mix has also shifted, away from London, the South East and East Anglia, towards the north of England, Wales and Scotland.

The common characteristic in this divergence is that regions that have typically been less affordable have shown signs of weaker activity, while regions that are relatively more affordable have been more buoyant. The latest Royal Institution of Chartered Surveyors (RICS) and BoE surveys also reflected this shift.

At a regional level, the difference in affordability (as measured by the typical income multiple for homeowners) between the most and least affordable regions has diverged since 2013, with the gap doubling over this period.

This trend may reverse, and we may see some rebalancing, if the shift in activity is sustained. It’s also the case that sentiment and price expectations in regions where affordability is stretched have weakened or are negative.

Remortgage activity

On the remortgage side, strong competition and low funding costs have meant a growing number of homeowners are taking advantage of the near record low mortgage rates. UK Finance expects more homeowners to refinance in the coming months, as prospects of the first interest rate rise in over ten years gain new impetus.

Buy-to-let remortgage activity has been growing until very recently, but the number of loans made over the past 12 months has been lower compared with the previous 12 months. Tax changes that come into effect in April this year are likely to restrict the ability or willingness of landlords to re-leverage their portfolios.

Lending in August

Despite the shift in housing market activity, by buyer type and region, total mortgage lending has been stable, estimated to be £24.2 billion in August. Adjusting for seasonal factors, this figure would be £21.4 billion, which is in the same ballpark as monthly lending over the course of 2017.

While we won’t have the breakdown of August lending for some time yet, the drivers of lending are likely to be first time buyers and homeowners remortgaging, as has been the case for July. The picture in July is also similar to that of April, May and June, so a continuation doesn’t seem too unreasonable.

Looking ahead, UK Finance expects more of the same, though it anticipates that the pace of growth will slow somewhat, dampened by a potentially more challenging economic outlook.

Portfolio landlords

From 30^th September 2017, portfolio landlords – those with four or more buy-to-let properties – will be subject to more specialist underwriting standards when applying for a new buy-to-let mortgage. This includes looking at the landlord’s experience in the buy-to-let sector, the cashflow associated with all of their existing properties, and inspection of their business plans.

UK Finance does not expect this to cause a surge in activity before the change, followed by a lull in buy-to-let purchases.

Some Landlords may be Banned from Lenders under new Rules

Published On: September 27, 2017 at 9:31 am

Author: Em Morley

Categories: Finance News

Tags: mortgages,portfolio landlords,PRA changes,underwriting changes

Some landlords may be banned from certain lenders under new mortgage lending criteria from the Prudential Regulation Authority (PRA).

From 30^th September 2017, landlords with four or more mortgaged buy-to-let properties will be subject to stricter lending criteria when remortgaging or taking out a mortgage on a new property.

Some Landlords may be Banned from Lenders under new Rules

The new rules mean that lenders will have to take a landlord’s total income versus borrowing across their whole property portfolio into account. This change is designed to ensure that borrowing on any new properties does not have a negative impact on the landlord’s ability to repay loans on other properties within their portfolio.

Currently, lenders assess a landlord’s application based on the rental income and value of the property they are lending against. The new regulations will mean that, not only is the property being lent against considered, but also the rental income, geographical spread, value and any loans across all properties in a landlord’s portfolio.

The new rules will only affect a very small proportion of landlords, as many either own their properties outright or have fewer than four properties. Data from UK Finance shows that just 11% of the UK’s 1.9m landlords own four or more properties, while an even smaller amount use mortgages to finance their investments.

Only those with poor cash flow or a high number of properties in one geographical location should be concerned. This highlights the importance of obtaining regular and up-to-date rental valuations, to ensure that your properties are marketed at the correct prices. And, for those with multiple properties in one location, seeking expert financial advice before the changes come into force is advised.

The stricter criteria mean a lot more work for lenders, which could result in them refusing to offer mortgages to landlords with large portfolios.

The main impact of these changes on landlords will be the time it takes for a mortgage application to go through. With all of the additional considerations for lenders, it’s recommended that you allow a minimum of three months for the application to be processed.

However, the new rules are likely to mean that landlords will have a more limited choice of lenders and products to choose from when it comes to purchasing a new property or remortgaging an existing one.

It’s also advisable that you check that your current lender will be continuing to offer their services to portfolio landlords and, if required, whether you can refinance with them in the future.

The changes also highlight the importance of keeping up-to-date, detailed records for all of your properties. This way, when the time comes to remortgage, you will have all of the information needed for your application to hand. This should include: your current mortgage value; rental income; outgoings; and rental profits, along with tax returns for all of the properties you own.

If you have not done so in the past six months, now is definitely the time to review your portfolio and any associated mortgages, to ensure that you are on the best possible rate, making the maximum amount of profit and, most importantly, won’t run into any difficulties in financing or growing your portfolio in the future.

Scrap Mortgage Interest Tax Relief Changes, RLA Urges Government

Published On: September 27, 2017 at 8:54 am

Author: Em Morley

Categories: Finance News

Tags: Autumn Budget,mortgage interest tax relief,tax changes

The best way for the Government to support the country’s small-scale landlords would be to scrap its controversial reduction to mortgage interest tax relief, insists the Residential Landlords Association (RLA).

The RLA has submitted requests to the Government ahead of the 2017 Autumn Budget on 22^nd November 2017. We have the National Landlords Association’s recommendations here: /nla-recommendations-treasury-autumn/

Scrap Mortgage Interest Tax Relief Changes, RLA Urges Government

The RLA’s main point of focus is that the Government should follow the lead of Ireland by scrapping the mortgage interest tax relief changes.

It is also calling for action on the mortgage lenders that prevent landlords from offering longer tenancies, which some renters want, and the introduction of a scheme allowing tenants with good payment histories to have them recognised by credit reference agencies.

But the submission isn’t all about problems; the RLA includes viable solutions.

It has put forward a number of proposals, including calls for the Government to introduce tax incentives for landlords that are willing to sell their properties to sitting tenants, those offering longer tenancies, and those investing in energy efficiency improvements.

The organisation believes that, where a landlord is prepared to sell their property to a sitting tenant, the 20% rate of Capital Gains Tax (CGT) should be applied, rather than the current 28%.

DJS Research findings for the RLA show that 77% of private landlords would consider selling their properties to tenants if the tax liability was waived.

The group would also like to see unused and abandoned plots of public sector land redeveloped as new sites for private rental sector homes, as all projections indicate that demand for rental housing will continue to grow, with predictions that 25% of all homes will be in the private rental sector by 2021.

But supply is a huge problem. And, although the Government has encouraged greater institutional investment in the private rental sector, evidence suggests that this will never be enough to meet the rising demand.

The RLA insists that the market will continue to be dominated by individuals and small firms letting a few properties – and these people need support.

It has been campaigning tirelessly for the reversal of the changes to mortgage interest tax relief since they were announced, with thousands of members either contacting or meeting their MPs to press home the devastating consequences of the plans on their tenants and businesses.

The Chairman of the RLA, Alan Ward, says: “RLA research shows many landlords have stopped investing in more properties as a result of recent tax changes, instead moving into short-term holiday lets or ceasing to rent to groups deemed high risk, such as the young and those on benefits.

“These decisions have far-reaching consequences for a country in the grip of a housing crisis, and we will do everything in our power to convince the Government that this unfair tax must be reversed.”

Homeowners in “London’s Coolest District” Named the Greediest

Published On: September 27, 2017 at 8:08 am

Author: Em Morley

Categories: Property News

Tags: homeowners,house prices,London,selling a property

Government Publishes Key HMO and Selective Licensing Changes for Rental Properties

Homeowners in up-and-coming Tooting – so-called London’s coolest district – are the capital’s greediest, according to independent estate agent James Pendleton.

This rapidly gentrifying hotspot recently made it onto Lonely Planet’s top ten coolest neighbourhoods in the world, but new research shows that it is also where homeowners’ properties languish longest, as they hang on hoping for a higher price.

Homeowners in “London’s Coolest District” Named the Greediest

Unsold properties in the Wandsworth district, which is home to its famous Bec, Broadway and market, have sat around for an average of 313 days (45 weeks), compared to a London average of 163 days.

Peckham, where unsold homes have sat around for 286 days, closely follows Tooting.

This phenomenon is even present in upmarket Knightsbridge, which claimed third place, with 253 days, mirroring a slowdown in the prime London property market.

James Pendleton’s experts said that it was telling that every location in the top ten, besides Tooting, were prime inner London areas, where vendors typically feel that they can rely on extremely high demand to inflate prices. This is despite the annual rate of growth for the UK property market more than halving in the year to August.

Almost all sellers price in an optimistic premium when they sell their homes. However, in times of a slowdown, it is the most nimble vendors – those that are willing to move with the market and act decisively – who benefit.

An army of such sellers are likely to be in Tolworth, Kingston-upon-Thames, where the average unsold property has been marketed for just 30 days, followed by Charlton, Greenwich at 33 days, and Wallington, Surrey on 50 days.

The Founder Director of James Pendleton, Lucy Pendleton, says: “In the world of financial markets, it is often said that hope is not a strategy. Well the same is true of property.

“Some will call it optimism, some will call it greed, but that’s what it means to hang on for a better price in a market that’s not willing to meet your highest expectations.”

She continues: “These statistics reveal the huge numbers of homes that aren’t selling. They’re just sitting there growing stale while their owners resist marketing them at a more realistic price.

“It is remarkable that the distinction is so clear between high-end areas like Knightsbridge, where vendors might not feel the pressure to sell so quickly, and areas in outer London, where property clearly doesn’t hang about.”

She explains: “The market is moving faster in these areas because sellers are keener to sell and willing to do battle on price, shifting their expectations in line with the market as they compete fiercely for buyers.

“That is the approach to take at a time when growth has slowed. The alternative is holding on for that price you dreamt off when you first put your home on the market, but are you then at risk of staring at the same four walls far longer than you expected?”

If you’re looking to sell a property, it may be wise not to take advice from homeowners in London’s coolest district and price your property accordingly!

Is the Housing Market Starting to Rebalance?

Published On: September 26, 2017 at 9:40 am

Author: Em Morley

Categories: Property News

Tags: buy-to-let landlords,first time buyers,housing market,mortgages

The latest high street banking data and mortgage market commentary from UK Finance suggest that the housing market may be starting to rebalance…

UK Finance estimates that overall gross mortgage lending in August stood at £24.2 billion, of which high street banks lent £15.1 billion. Accounting for seasonal factors, this figure is in the same ballpark as monthly lending over the course of 2017.

Is the Housing Market Starting to Rebalance?

House purchase approvals by high street banks reached 41,807 in August, which is stronger than the monthly average of 41,133 over the last six months and 11% higher than in the same month last year, when the market was subdued following the EU referendum result.

The Senior Economist at UK Finance, Mohammad Jamei, is pleased to see the housing market starting to rebalance: “Housing market activity is in Goldilocks’ territory, growing only modestly since the start of the year, though the mix of activity has shifted towards first time buyers, away from buy-to-let and cash. There is also some rebalancing across regions, as activity picks up in the north of England, Wales and Scotland, away from London, the South East and East Anglia.”

John Eastgate, the Sales and Marketing Director of OneSavings Bank, also comments on the new figures: “Mortgage lending remains on a fairly even keel, if somewhat in the doldrums. Lack of confidence can be seen across the market, with the possible exception of first time buyers, who represent a Help to Buy-driven growth zone. The potential for a rate increase sooner rather than later might well stimulate some remortgage activity but, overall, the market remains relatively directionless.

“Meanwhile, the buy-to-let market faces up to yet more change. We have seen demand from many portfolio landlords seeking finance ahead of the PRA’s [Prudential Regulation Authority] next wave of changes to underwriting standards, although awareness is far from universal. It will take some time for the dust to settle and, in the meantime, the outlook for tenants is one of higher rents.”

The Marketing Director of Foundation Home Loans, Jeff Knight, continues: “Record low mortgage rates continue to sustain market activity but, given even the most dovish members of the Bank of England’s Monetary Policy Committee are now adding to the calls for an interest rate rise, this picture could very quickly change. A wait-and-see approach is best avoided for first time buyers and existing owners considering remortgaging.

“With the PRA changes for portfolio landlords fast approaching, we are likely to see a spike in activity from those hoping to finalise deals ahead of the underwriting changes coming in. While it will take some getting used to, the changes will go a long way to professionalise the sector and help to expel rogue landlords, so, in the long-term, it’s important that decent landlords are properly engaged and supported to ensure the rental sector remains a positive option for those not yet ready to buy.”

John Goodall, the CEO and Co-Founder of buy-to-let specialist Landbay, concludes: “Mortgage lending levels rose steadily in August, with borrowers continuing to reap the rewards of record low mortgage rates and loan-to-value deals. The Bank of England’s rate-setting committee has fuelled speculation that the first rate rise in almost a decade is now likely, and soon, so those looking to buy a property or remortgage their current property will now be moving fast to lock in a mortgage rate before the change.

“In the buy-to-let market specifically, October’s PRA changes are fast approaching, so some of this uplift is likely down to landlords making changes to their portfolios before the stricter lending and reporting criteria kick in. The changes are a good thing for the ongoing sustainability of the private rental sector, but many landlords are unaware of what the changes mean for them, so we could see a dip in Q4 [fourth quarter] lending levels while the industry adjusts to the new rules.”