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Em Morley

Buy-to-let landlord numbers continue to rise

Published On: May 31, 2016 at 10:56 am

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Categories: Landlord News

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New buy-to-let landlords are continuing to invest in the sector, according to new figures released by estate agent ludlowthompson.

Record low interest rates, stock market volatility and more than healthy demand are all contributing in driving new landlords to the sector.

Buy-to-let boom

Ludlowthompson’s data, collated with HM Revenue & Customs, indicates that the number of UK landlords increased by 7% during 2013-14 to hit 1.75m. This was in comparison to 1.63m in 2012-13.

During 2013-14, landlords accumulated £14.2bn in net income from their rental assets, a rise from the £13.1bn in the previous twelve months.

The data provided from HMRC is the most up to date information available on landlord numbers. However, the actual volume is greatly expected to have increased, given the surge in mortgage lending to landlords ahead of the Stamp Duty alterations earlier this year.

Buy-to-let landlord numbers continue to rise

Buy-to-let landlord numbers continue to rise

Undeterred 

Despite the Stamp Duty changes, alongside the reduced tax breaks for buy-to-let landlords coming into force in 2017, early signs are that investors are not being deterred.

A recent report discovered that buy-to-let is performing better than all other asset classes, including UK Government bonds, shares and commercial property.

Stephen Ludlow, chairman of ludlowthompson, observed that buy-to-let returns, ‘routinely outperform those of other investments.’

Mr Ludlow went on to say, ‘investors continue to be drawn to the buy-to-let market as the returns routinely outperform those of other investments. Buy-to-let investments are a highly popular alternative to the volatility investors often risk when investing in the stock market.’

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/5/number-of-uk-landlords-edges-closer-to-two-million

 

Rental Supply Drops Annually, Reports ARLA

Published On: May 31, 2016 at 10:23 am

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The level of rental supply has dropped annually, according to the April Private Rental Sector report from the Association of Residential Letting Agents (ARLA).

Rental Supply Drops Annually, Reports ARLA

Rental Supply Drops Annually, Reports ARLA

Although the number of rental properties managed per letting agency branch rose by 8% in April on a monthly basis, supply has fallen by 5% compared to April last year.

The jump between March and April this year marks the highest level of rental supply seen so far since the start of the year and follows a rush of buy-to-let landlords looking to complete on property sales ahead of the 1st April Stamp Duty deadline.

However, supply has continued to decline year-on-year. In April 2015, the average number of rental properties managed per branch was 193, compared to 183 in April this year.

Demand is also decreasing annually, says ARLA. Last month, the amount of prospective tenants per branch was 34, down from 36 in April 2015.

Following the introduction of the 3% Stamp Duty surcharge for buy-to-let landlords, ARLA expects rent prices to rise, with two-thirds (66%) of member agents predicting rent increases for tenants in the future.

Worryingly, ARLA agents also reported an increase in the number of landlords selling their buy-to-let properties – an average of four per branch, up from three in March. This marks the first increase in landlords leaving the sector for a year.

The Managing Director of ARLA, David Cox, comments: “It’s likely that this increase in supply is only temporary. At the end of April, we saw a flurry of landlords seizing the last few moments before the Stamp Duty rise to complete sales, triggering an increase in the supply of empty rental homes to be filled this month.

“However, we expect that fewer investors will be taking on buy-to-let properties over the next six months, following the price hikes, meaning that once these properties are filled, we’ll see supply nose-dive once again.”

Are you thinking of leaving the buy-to-let sector?

Seaside property prices soar in last decade

Published On: May 31, 2016 at 9:41 am

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New research from the Halifax has discovered that British seaside property prices have enjoyed substantial rises during the last decade.

Data from the report shows that prices of towns on the coast have seen a 32% rise during the past ten years. Values have increased from £166,565 in 2006 to £219,386 in 2016. This equates to an average rise of £440 per month.

Seaside property prices soar in Scotland

The analysis indicates that Scottish seaside towns have seen the greatest price growth. Seven of the top ten locations were found to be in Aberdeenshire, with profitable growth in the oil and gas sectors bearing fruit.

Fraserburgh saw the most substantial house price growth, with rises of 139% in the last decade. Prices in the region have grown from £63,540 in 2006 to £151,719 in 2016, equivalent to a monthly rise of £735.

The top five house value increases in Scotland were located in:

  • Fraserburgh-139%
  • Macduff-102%
  • Peterhead-95%
  • Cove Boy-94%
  • Newtonhill-91% 

English increases 

Outside of Scotland, Brighton recorded the largest increase in property price growth in the last decade, with 59%. Prices here have risen from £214,863 to £341,235 over the decade.

The top five house price increases in England were found to be in:

  • Brighton-59%
  • Whitstable-53%
  • Shoreham on Sea-53%
  • Leigh on Sea-52%
  • Truro-50% 
Seaside property prices soar in last decade

Seaside property prices soar in last decade

Expensive England  

Despite the substantial growth seen in property prices in Scotland during the past decade, nine of the most expensive seaside locations in Britain are located in England. Of these, eight are located in the South West. Sandbanks in Poole tops the list, where average house prices stand at £664,655.

The top five most expensive seaside towns were located in:

  • Sandbanks-£664,655
  • Padstow-£443,396
  • Aldeburgh-£439,379
  • Lymington-£426,112
  • Dartmouth-£401,361

Seaside soars

Martin Ellis, housing economist at the Halifax, said, ‘seaside towns are highly popular places to live, offering sough-after scenery, weather and lifestyle which no doubt come at a price. They also attract those looking for holiday properties, which add upward pressure on house prices, which our research shows have increased by an average of £440 per month since 2006.’[1]

‘Over the 10-year period, coastal towns north of the border have been the strongest performing in terms of house price rises, but locations in the South West remain the most expensive. So if you’re looking for a bargain, it’s still easier to find the further North you go, where average price in several areas is still below £100,000,’ he added.[1]

 

[1] http://www.propertyreporter.co.uk/property/oh-i-do-like-to-live-beside-the-seaside.html

 

 

 

House Price Growth Causes Surge in Multi-Generational Households

Published On: May 31, 2016 at 9:36 am

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Sharp house price growth has caused a surge in multi-generational households, according to data from Aviva.

While many young adults aspire to get on the property ladder, house price growth of 52% over the past decade has led to the number of multi-generational households rising by 46%.

This includes adult children or couples either moving back in with their parents or never leaving home.

House Price Growth Causes Surge in Multi-Generational Households

House Price Growth Causes Surge in Multi-Generational Households

In 2015, there were around 2.8m adults aged 21-34 living with their parents, or 23% of people in this age group, according to figures from the Office for National Statistics (ONS). This is up by 32%, or more than half a million (684,000) people, since 2005, says Aviva.

Additionally, the ONS data shows a 46% increase in the number of people living in multi-generational households across all age groups between 2005-15, up from 1.1m to 1.5m.

However, a huge 66% of people currently living in this type of household say the benefits far outweigh the disadvantages.

More than half (57%) say that this living arrangement helps with saving for a deposit for their own home, while 71% have moved back in to care for a relative.

The main benefits of living in a multi-generational household are having people around for company, shared living costs and sharing chores, found the Aviva study.

If house price growth continues to soar, Aviva expects there to be 2.2m people living in multi-generational households and 3.8m 21-34 year olds living with their parents by 2025.

The firm’s Lindsey Rix comments: “Multi-generational living is often seen as a necessity rather than a choice, particularly when adults are forced to move back in with family to help save for long-term goals, like buying their own house. But rather than being an inconvenience, our report shows it is often a positive experience, with shared living costs reducing financial strain and the added benefit of constant company.

“If house prices continue to rise at their current rate, we can expect the number of multi-generational houses to continue to grow. What we need from our properties – and how we go about protecting them – will also adapt as the UK’s way of living evolves.”

Do you have adult children living at home? Or maybe you’re saving for a deposit yourself?

Best Rental Yields Found in University Towns in the North West

Published On: May 31, 2016 at 8:36 am

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Landlords can find the best rental yields in university towns in the North West, according to a new study by LendInvest.

Although London is a very popular buy-to-let hotspot, the research found that the North West has been the most lucrative area for rental yields in the past five years.

Between 2010-15, Manchester and Liverpool came out on top for rental yields, while the south dominated for capital growth and return on investment.

Best Rental Yields Found in University Towns in the North West

Best Rental Yields Found in University Towns in the North West

The highest average annual rental yields were seen in Manchester at 6.02%, followed by 5.15% in Liverpool. Returns in London are surprisingly low – just 4.86% in outer London and 4.71% in the centre of the capital.

Estate agent Savills reports that the five largest rental markets outside of London are Manchester, Liverpool, Leeds, Bristol and Birmingham – all popular university cities, where an average 23% of the population live in the private rental sector.

Property investor Peter Armistead, of Armistead Property, advises: “Landlords will find the best returns in urban areas with a concentration of students and young professionals. Yields in Houses in Multiple Occupation (HMOs) can be high. If you’re targeting the student or young professionals market, buy a multiple-bedroom property near the university or city. Students and young professionals are looking for high-spec accommodation with good appliances and a quality finish that have good transport links nearby, such as train stations and main roads.

“It is important to remember that yields are calculated before maintenance costs, void periods, mortgage payments and letting agent fees. So before acquiring a rental property, ensure you factor in all these costs.”

He explains: “An average residential property in Manchester is just £155,000, while a flat in good area costs as little as £120,000. A property in Manchester can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and, by comparison with other regions, housing is cheaper.

“House prices in London are about five times what they are in Manchester, but salaries are only 30% higher. Manchester is a very affordable place to live, and demand for property is soaring in the city, thanks to the expansion of the Metrolink tram system, the trendy Northern Quarter and the BBC Media City. It has vibrant restaurants, bars, clubs, plus a great music scene, galleries and museums.”

Armistead concludes: “In the second half of this year, we may start to see a shift in investment focus away from London and towards the more lucrative and profitable buy-to-let areas in the UK. Many investors will be looking at ways to protect potential new investments in 2016 from the impact of the Chancellor’s new tax measures.

“If investors can purchase cheaper properties with better yields, they will have the opportunity to protect and boost their profits in the longer term. Certainly the recent changes have made it a lot harder to make money in buy-to-let. But where there are challenges, there are opportunities if you can think outside the box.”

A Landlord’s Guide to the Mortgage Interest Tax Relief Changes

Published On: May 30, 2016 at 8:03 am

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Many buy-to-let landlords are set to see their profits decline after Chancellor George Osborne revealed plans to reduce mortgage interest tax relief in the summer Budget.

At present, landlords can reduce their taxable income by deducting the cost of certain expenses from their rental income. Until now, these allowable expenses have included costs such as repairs, letting agent fees and mortgage interest.

Under the new rules, landlords will still be able to deduct repairs and other legitimate expenses from their taxable income, but will only be able to offset a portion of their mortgage interests costs against tax, if they are a higher rate taxpayer.

Example

To demonstrate exactly how this will work, London estate agent Portico has calculated the impact of the change for a higher rate taxpayer. The firm assumes that they purchased the property for £500,000, are renting it out for £400 per week, and have a 75% loan-to-value (LTV) mortgage with a 3.5% interest rate.

A Landlord's Guide to Mortgage Interest Tax Relief Changes

A Landlord’s Guide to the Mortgage Interest Tax Relief Changes

Under the new rules, this landlord would end up being £2,625 worse off, with their profits falling from £4,000 to little over £1,000.

Although there is no doubt that this change will make things more difficult for landlords, the majority of buy-to-let investors will not be affected quite as severely as this example, explains Portico.

To begin with, landlords that are still classed as basic rate taxpayers after the changes are introduced will not be affected at all.

Secondly, most landlords have a lower LTV than 75%. Additionally, landlords in London have enjoyed substantial capital and rent price growth in the past decade. This means that interest payments represent a much smaller proportion of rental income than shown in the example above. Therefore, landlords with lower mortgage costs will lose less under the change.

Another bit of good news is that the change will be phased in gradually. In the current tax year (15/16), there will be no change at all. The tax change will begin with four equal increases over the next four years. For the example above, this means that the landlord will be unaffected this financial year, around £650 worse off next year, £1,300 the year after, £2,000 the year after that, and finally £2,625 by the time they pay their tax bill at the end of 2021.

Putting it simply, the current rules give most landlords a 40% discount on their interest costs. Under the new system, this drops to 20%.

Portico advises landlords to cut their interest costs by remortgaging.

With buy-to-let mortgage interest rates falling significantly since the financial crisis, current deals are substantially better than those arranged a few years ago.

Portico also suggests having your rental property re-valued to take house price growth into account. This would make your mortgage lender recalculate your LTV, and a lower LTV means a better interest rate.

Ahead of the tax change, ensure that you protect your rental income with Rent Guarantee Insurance, which covers rent payments if your tenants fall into arrears.