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Em

Em Morley

Prime Central London Property Investment Opportunity

Published On: July 7, 2016 at 9:26 am

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A new opportunity to invest in prime central London property is now open to investors.

London Central Portfolio (LCP) has announced London Central Apartments (LCA) III, its latest listed residential property investment company. Alongside its tax benefits, LCA III is set to take advantage of current market conditions.

The chance to invest in the new scheme will close on Monday 25th July.

LCA III offers investors an opportunity to subscribe for shares in a quoted investment company holding around 40 high performing properties. Further acquisitions are expected to be made, targeting central London’s buoyant private rental sector. A projected portfolio return in excess of 10% per year is forecast.

Why invest in prime central London property? 

Prime Central London Property Investment Opportunity

Prime Central London Property Investment Opportunity

Prices in the capital’s prime market have risen by 10.2% per year on average over the past 20 years, now standing at over £1.67m.

Although past performance may not be repeated and projected returns may not be achieved, growth in the market is supported by many factors:

  • Central London’s international appeal
  • Strength in the City of London
  • Strong education sector
  • Rule of law
  • Political and economic stability

Additionally, stock is limited in the capital and demand substantially outweighs supply. Each year, on average, just 289 new units are developed.

Current market conditions

Following the UK’s vote to leave the EU and the resignation of the Prime Minister, David Cameron, prime central London property is expected to benefit from a flight to quality and the security of blue-chip tangible assets, against a background of highly volatile financial markets.

LCA III focuses on the private rental sector, which represents 38% of prime central London’s residential market. The company intends to take advantage of the predicted bounce-back following the Brexit.

For international investors, LCA III is a chance to capitalise on attractive foreign exchange rates, as sterling has been driven to historic lows. It is expected that the Bank of England will at least keep interest rate rises on hold, although a cut is probable, further benefitting investors.

The scheme 

LCA III will acquire a portfolio of one and two-bedroom units in prime locations, add value through refurbishment and professionally let and manage the properties.

Although recent tax announcements could be subject to change, LCA III is exempt from most of the new UK residential taxes being introduced – such as a reduction in mortgage interest tax relief – providing investors with higher returns than direct buy-to-let investment.

LCP believes that the Brexit vote creates an investment opportunity for new investors, but is obliged to warn potential backers that there is investment risk and a possibility that the value of any investment may go down.

However, it claims that despite the negative sentiment surrounding the UK economy post-Brexit, prime central London property will prove resilient to the downturn and will respond in a similar way as it did following the global financial crisis, when prices surged.

It adds that this strength is likely to contrast to the rest of the housing market across the country and commercial property funds, which are both much more susceptible to a domestic economic downturn.

With a very short window to invest in the scheme, find out more information here: http://www.londoncentralportfolio.com/Hidden-Files/LCP/LCA-III/LCA%20III%202016%20V30.pdf

Falling mortgage rates favour FTB’s over renters

Published On: July 7, 2016 at 9:07 am

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New analysis from AmTrust International has found that falling mortgage rates have seen the average interest payments for first-time buyers fall over two years.

The average interest payments for first-time buyers have gone down from £11,327 during Q1 2015 to £10,019 in Q1 of 2016-representing a saving of £1,308.

Low interest rates

Record low interest rates during the first three months of this year has seen interest on a 95% LTV mortgage much more easy to maintain. These types of mortgage are usually used by first-time purchasers who are not able to save for a substantial deposit.

This will come as good news in comparison to Q1 2015, with would-be homeowners recently struggling with spiralling house prices and rising rents.

The table below indicates how two year interest repayments have reduced for a 95% LTV mortgage:

  Two year mortgage interest costs Annual difference (£) Annual difference (%)  
2013 Q4 £11,804 – –
2014 Q1 £11,757 – –
Q2 £12,491 – –
Q3 £13,091 – –
Q4 £12,816 £1,012 9%
2015 Q1 £11,327 -£429 -4%
Q2 £11,078 -£1,413 -11%
Q3 £10,787 -£2,304 -18%
Q4 £10,455 -£2,361 -18%
2016 Q1 £10,019 -£1,308 -12%

[1]

Falling mortgage rates favour FTB's over renters

Falling mortgage rates favour FTB’s over renters

Rising rents

With the costs of servicing the interest on a high LTV mortgage decreasing, the cost of renting of property continues to rise. During the past 12 months, the annual cost of rent has risen by £300 (3%) from an average of £9,188 in Q1 2015 to £9,488 during Q1 of 2016.

When the cost of renting is compared to the interest cost of a mortgage, renting is £4,415 or 87% more expensive. This difference is £111 more than the £4,305 extra it costs to rent in comparison to paying mortgage interest in the final quarter of 2015.

The cost of servicing a 95% LTV mortgage is also cheaper than it has been at any point since the Help to Buy mortgage guarantee was introduced at the end of 2013. The average interest rate of a high LTV mortgage has been dropping since this inception.

Growing gulf

Simon Crone, Commercial Director at AmTrust International, Mortgage and Special Risks, noted, ‘there is a large and rapidly growing gulf in the cost of housing that favours first-time buyers over renters-providing they can get a foot on the ladder. Record low interest rates mean that those lucky enough to buy their own property are benefitting from lower payments, while rental costs continue to rise, penalising those unable to save enough for a deposit. Such is the gap that homebuyers with 95% loans are able to make savings of more than £4,400 a year and reap the added benefit of paying off the capital of their mortgage.’[1]

‘However, many first-time buyers are unable to save deposit sums-largely as a result of high rental costs-and are therefore reliant on being able to access high LTV mortgages. It is therefore vital that we have a strong, sustainable supply of high loan to value lending to support those with smaller deposits who want to buy a home,’ he continued.[1]

[1] http://www.propertyreporter.co.uk/property/housing-costs-continue-to-favour-ftbs-over-renters.html

Annual House Price Growth Eases in June

Published On: July 7, 2016 at 8:36 am

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Annual house price growth eased off in June, down from 9.2% in May to 8.4%, according to the latest House Price Index from Halifax.

The report found that the annual rate of house price growth seen in the three months to June is the lowest since July 2015, when it was 7.8%.

Over the quarter, house prices were 1.2% higher in the three months to June than in the preceding three months (January to March). This was slightly below May’s 1.5% increase and is the lowest

Annual House Price Growth Eases in June

Annual House Price Growth Eases in June

rise on this basis since December 2014.

On a monthly basis, house prices rose by 1.3% between May and June, following a 0.9% increase in May. However, the report notes that month-on-month changes can be erratic, and the quarterly data is a more reliable indicator of underlying trends.

The average house price in the UK now stands at £216,823.

The Housing Economist at Halifax, Martin Ellis, comments on the figures: “There is evidence that the underlying pace of house price growth may be easing. House prices in the three months to June were 1.2% higher than in the previous quarter, down from 1.5% in May. The annual rate of growth fell from 9.2% in May to 8.4%, the lowest since July 2015.

“House prices continue to increase, albeit at a slower rate, but this preceded the EU referendum result, therefore, it is far too early to determine any impact since.”

The latest research by estate agents suggests that property sales and new instructions have surged since the Brexit outcome.

Halifax has found that home sales stabilised in May, following the introduction of the 3% Stamp Duty surcharge for buy-to-let landlords and second homebuyers in April.

A rush to complete sales ahead of the tax hike caused a sharp rise in March, followed by a significant decline in April. However, sales stabilised in May, rising by 1.5%. Despite this, the number of sales recorded over the month (89,700) remained 16% below the average over the six months to February.

The index also shows that mortgage approvals rose modestly in May, after the Stamp Duty change affected the market. The volume of mortgage approvals for house purchase – a leading indicator of completed property sales – rose by 1.3% between April and May. However, approvals in the three months to May were 6% lower than in the previous three-month period.

The founder and CEO of online estate agent eMoov.co.uk, Russell Quirk, comments on the data: “Today’s figures show, even in the wake of Brexit, that the UK housing market is fundamentally strong. With a continuing, acute shortage of new housing being built and a growing population, even if immigration numbers are now curtailed, the demand vs. supply imbalance and the prospect of even low interest rates will underpin the market – even if there are short-term confidence wobbles fuelled by a media hungry for bad news.”

More over 50’s renting than ever before

Published On: July 6, 2016 at 11:42 am

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The changing demographic of the UK housing market has been underlined with the news that the number of over 50’s residing in rental accommodation has risen steadily over the last five years.

New research from Saga Home Insurance has revealed that one-third of people aged 50 or over currently live in rental accommodation. This is a rise from just over one quarter at the start of 2011.

Changing circumstances

Reasons for the rise in over 50’s residing in rented accommodation vary. Of course, spiralling house prices mean that many are cashing in for their retirement years.

However, a rise in divorces for couples over 50 has also had an impact. More people over 50 are getting divorced than ever before, with 20% of renters in this age bracket being single and trying to get back onto the housing ladder.

For people living in rented accommodation as a whole, there has been an increase in the number of people under 70. The largest increases have been for those between the 50-54 age bracket.

In addition, people over the age of 50 living in rented accommodation have on average £20,000 worth of contents in their property. However, 59% of people over the age of 50 living in rented accommodation do not have home insurance, leaving them liable to large bills should anything happen to their property.

More over 50's renting than ever before

More over 50’s renting than ever before

Social impact

Roger Ramsden, chief executive of Saga Services, noted, ‘social changes certainly seem to be having an impact on the homes of the over 50’s. It is concerning that so many do not have insurance for their belongings, whilst the landlord has responsibility for repairing the building should anything happen, they are not responsible for replacing valued possessions should they for example be damaged by fire or even a significant water leak.’[1]

‘Without insurance, it is not just people’s own possessions they would have to foot the bill for if they were damaged. Any fixtures and fittings or other items tenants are listed as responsible for in the inventory agreed with the landlord will have to be replaced if they are damaged by tenants, which could add up to a significant sum,’ Ramsden added.[1]

[1] http://www.propertywire.com/news/europe/uk-home-rental-research-2016070612110.html

Property Sales and New Instructions Surge After Brexit

Published On: July 6, 2016 at 11:06 am

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London estate agent Douglas & Gordon has reported a surge in both property sales and new instructions for the week following the Brexit vote.

Instructions almost trebled compared to the previous week, while sales were up by 11%.

Many of these property sales were completed by people taking advantage of the weak pound in the immediate aftermath of the shock result. At the current sterling/dollar exchange rate of USD1.31, London’s prime central areas are now 25% cheaper than they were two years ago.

Property Sales and New Instructions Surge After Brexit

Property Sales and New Instructions Surge After Brexit

Douglas & Gordon has reported interest from individuals based in Nigeria, the USA, UAE, Russia and China – all of whom are buying in USD, and most of whom were interested in property priced between £1m-£2m.

Since the start of the year, Douglas & Gordon Corporate Services has received 24% more enquiries from relocation agents, reflecting an annual increase in the amount of companies looking to move employees to London.

Enquiry levels last week, following the Brexit vote, were at their highest level since the start of the year.

The CEO of Douglas & Gordon, James Evans, comments: “Politically we may be in uncharted waters. However, many of our clients who delayed listing their property until June 24th were simply waiting for a result one way or the other.

“London property transactions happen for a variety of reasons and our experience is that those who are wanting or needing to buy, sell, rent or let will continue to do so.”

Outside of the capital, Berkshire-based Romans reports that in the week after Brexit, just 20 out of 900 property sales agreed were cancelled. The agent claims that this is only marginally more than during a normal trading period.

The firm also experienced an 8% rise in traffic to its website in the week after the leave vote.

The Managing Director of Romans, Peter Kavanagh, says: “I strongly believe that in six months, if not before, we’ll be looking back and wondering what the fuss was all about.”

Adam Hesse, of Aston Mead Land & Planning, insists that the industry should work together to send out positive signals: “There is a danger that people will believe the warnings and then it becomes a self-fulfilling prophecy.

“It was a democratic decision, so we have to abide by the outcome and move on. In effect, we’re all Brexiteers now. All this talk of a second referendum is only making things worse. The result on the day was conclusive. What if a second vote went the other way? What do these campaigners want – the best of three?”

He adds: “The reality is that we’ll be leaving the EU, and our job in the property sector is to help the transition work as effectively as possible. That means we need an end to scare stories and doom-and-gloom scenarios.”

Rise in ltd companies marks change in landlord trends

Published On: July 6, 2016 at 10:49 am

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Lending to buy-to-let landlords looking to borrow via limited companies was up markedly in the first six months of the year, according to a new report.

The results of the H1 2016 Limited Company Buy-to-Let Index also suggests that the number of products available to limited company borrowers also went up.

Stamp Duty impact

Data from the report shows that the number of buy-to-let mortgage applications completed by limited companies rose to 30% of the total number of buy-to-let completions in H1 2016. This was an increase from the 21% seen in the final half of 2015.

Many landlords moved to incorporate their business, to avoid paying the additional 3% stamp duty surcharge on their investment. In response, the number of lenders offering specific products to limited company borrowers stood at 14, up from 12 last year.

In total, lenders offering limited company products now stands at 42% of the total sector, up from 30% in the first half of 2015.

Stabilised

Mr David Whittaker, managing director of Mortgages for Business, noted, ‘both applications and completions for limited company borrowers appear to have stabilised at around one third of all buy to let business. However this masks a dramatic change in the investment pattern for new purchases where the proportion investing through limited companies has risen from less than 20% by number (25% by value) in the first half of 2015 to over 50% in 2016, with second quarter applications by limited companies running at over 60% of total applications related to purchases of buy-to-let properties. This increasing proportion will also drive an increase in the proportion of completions in the next quarter.’[1]

‘There has only been a slight uplift in the proportion of remortgaging activity that relates to limited company borrowers, due to historical investment patterns. It would, however, appear that some landlords who already own property personally are sitting on their hands somewhat and holding back from remortgaging, probably waiting to see how the economy pans out post-referendum. With the Chancellor announcing his intentions to lower corporation tax to 15% following the Brexit result, we may even witness more landlords financing buy to let property via corporate vehicles. Clearly, the trend for limited company buy to let represents a real step change in behaviour as landlords adapt their investment strategies to mitigate the increased costs brought about by recent changes in the tax regime,’ Whittaker continued.[1]

Rise in ltd companies marks change in landlord trends

Rise in ltd companies marks change in landlord trends

Rises

During March of this year, the number of completed limited company buy-to-let applications increased by more than three times, due to investors rushing to beat the Stamp Duty deadline.

Whittaker concluded by saying, ‘Last year I had thought that limited company pricing might come down a bit as some lenders, including our own lending brand Keystone Property Finance, chose to absorb the increased costs and offer the same rates to landlords borrowing both personally and via the limited company route. The fact that this has not happened may encourage more lenders to enter the space.’[1]

[1] http://www.propertyreporter.co.uk/landlords/growth-of-limited-company-btl-marks-change-in-landlord-behaviour.html