Posts with tag: Buy-to-Let

Cost of a BTL mortgage set to rise as investors choose longer deals

Published On: December 1, 2016 at 1:03 pm

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Concerning new forecasts indicate that buy-to-let investors face having to pay an extra £6,700 on their mortgage, when new rules on the length of loans are introduced next year.

At present, many landlords opt to take out two-year deals as they are cheaper than long-term loans. However, the Bank of England’s Financial Policy Committee intends to make it harder for landlords to secure short-term loans, after recently being granted more powers by the Government.

Concerns

Many regulators have expressed their concerns over aggressive buy-to-let lending practices at some banks. They feel that a number of investors are simply taking on too much debt and as such, will sink under the pressure of increased interest rates.

As a solution, they want to see more landlords signing up to longer-term, five-year deals, which tend to be higher. This means that borrowers will have to pay more, maybe thousands of pounds, over the life of the loan.

The figure of £6,700 is based on a £150,000 loan at a two-year rate of 1.59%-£199 per month-in comparison to borrowing the same amount at a five-year deal of 2.49%-£311 per month.

This additional £112 per month would mean the borrower has to pay an extra £6,720 over the course of the loan.

Cost of a BTL mortgage set to rise as investors choose longer deals

Cost of a BTL mortgage set to rise as investors choose longer deals

Hike preparation

Andrew Montlake, of London based mortgage broker Coreco, observed: ‘A lot of landlords won’t qualify for a two-year deal, so they have to prepare themselves for a potential hike in their mortgage payments.’[1]

The crackdown from the Prudential Regulation Authority comes into effect in January 2017 and will involve lenders conducting stress tests to make sure borrowers can repay their mortgage payments should rents rise.

Over the last few months, a number of lenders have increased stress tests for potential borrowers from 125% to 145%. The pressure is already on landlords, following a tough year of legislation changes and it will certainly be interesting to see how they cope.

[1] https://www.landlordtoday.co.uk/breaking-news/2016/11/btl-mortgage-costs-set-to-soar-as-new-stress-tests-push-landlords-into-longer-deals

 

 

Rent rises fall, but ban on fees will see them pushed upwards

Published On: December 1, 2016 at 11:49 am

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The latest data released by the Association of Residential Letting Agents has revealed that during October, rent increases fell to their lowest since last December.

However, the falls are not predicted to last for very long, given the decision to ban letting agent fees announced in last week’s Autumn Statement.

Rent rise falls

According to the figures, the number of letting agents experiencing rent rises for tenants was at the lowest since December 2015. Only 18% saw rent rises in October, down from the 24% recorded in September. In addition, this will well down on the 32% seen in March.

The table below indicates the percentage of agents seeing rent hikes for tenants over the last year:

Rent rises fall, but ban on fees will see them pushed upwards

Rent rises fall, but ban on fees will see them pushed upwards

[1]

Supply

During October, the number of rental properties managed per branch was 180. This was a significant drop from September, when a record 193 properties were managed per branch. What’s more, this was the lowest level seen since June, when there were an average of 176 properties per branch.

Demand from would-be tenants also fell during October, with 34 registered per branch, down from 40 in September.

David Cox, Managing Director at ARLA, said: ‘Just when rents were starting to stabilise, the Chancellor has thrown the biggest curve ball, meaning that rents will unpreventably rise when the tax changes and letting fees ban come into effect. In terms of supply and demand, this month’s findings reflect seasonal expectations and show the market is slowing in the final quarter. With fewer properties available to rent and a drop in the number of prospective tenants registering interest, tenants tend to stay in their current properties until the New Year arrives.’[1]

[1] http://www.propertyreporter.co.uk/landlords/arla-letting-agent-fee-ban-will-speed-up-rent-hikes.html

 

Renting couples in London priced out of starting a home

Published On: November 30, 2016 at 12:49 pm

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Concerning new research conducted by crowdfunding platform property partner Property Partner has revealed bad news for renters in London looking to start a family.

Data from the investigation shows that those wanting to start a family while renting in London must pay an average of 55.6% of their combined monthly wage to rent a typical three-bed property.

This means that in one year, a couple would have to pay £29,520 in rent, before they even consider childcare and other associated costs.

Monthly expenses

The research looks at average monthly costs for rental prices for one and two bed flats in London. It then looked at how much it would cost to progress to an average three-bed house in each of the capital’s 33 boroughs.

Using the total average net monthly of earnings of a couple in London, amounting to £4,417, the investigation looked at the proportion of salary required to make the step-up.

Worryingly, it indicates that tenants are facing a nigh-on impossible task to rent larger properties in London. In Kensington and Chelsea-the last affordable borough-an average one-bedroom flat would cost more than 59% of their combined income. This rises to 92% for a 2-bed flat and 168% for a three-bed house!

The table below shows that 10 least affordable boroughs in London:

Borough Average rent for 1 bed flat Rent as a % of combined salary for 1 bed flat Average rent for 2 bed flat Rent as a % of combined salary for 2 bed flat Average rent for 3 bed house Rent as a % of combined salary for 3 bed house
Kensington & Chelsea £2,634 59.63% £4,059 91.89% £7,434 168.29%
Westminster £2,602 58.90% £3,864 87.47% £5,978 135.33%
Camden £1,814 41.06% £2,738 61.98% £5,383 121.86%
Tower Hamlets £1,439 32.58% £2,399 54.31% £2,437 55.17%
Hammersmith & Fulham £1,695 38.37% £2,389 54.08% £2,887 65.35%
Islington £1,738 39.34% £2,355 53.31% £3,461 78.35%
Southwark £1,589 35.97% £2,194 49.67% £2,608 59.04%
Hackney £1,600 36.22% £2,167 49.06% £2,811 63.63%
Wandsworth £1,480 33.50% £2,152 48.72% £2,591 58.65%
Lambeth £1,485 33.62% £2,099 47.52% £2,325 52.63%
London average £1,311 29.68% £1,839 41.63% £2,460 55.69
Renting couples in London priced out of starting a home

Renting couples in London priced out of starting a home


Shocking

Dan Gandesha, CEO of Property Partner, said: ‘Our research will come as a shock to tenants in the capital. With London house prices now so high, the ranks of Generation Rent are rapidly expanding. And, as demand for larger rental properties has grown, finding affordable accommodation is increasingly difficult.’[1]

Those unable to buy but hoping to start a family and move up the rental ladder may just be able to make ends meet in outer London boroughs. But the harsh reality is that they’ll be forced to bring up their children in a flat rather than a house. Although everyone knows Kensington and Chelsea, and Westminster, are totally out of reach on an average London salary, the surprise comes with Camden and Islington too.[1]

Sobering

Continuing, Mr Gandesha noted: ‘Another sobering thought is that our research assumes both partners are in full time employment and earning the average London salary. The figures do not take into account that if a couple have one or two children, the costs of childcare and household bills would make meeting the monthly rent unachievable.’[1]

‘It’s welcome news that the new Chancellor announced £1.4 billion for affordable homes in last week’s Autumn Statement, and that this is across a ‘wider range of housing’. This sounds like a sage commitment to increase the supply of affordable rental stock which will also help control rental prices.’[1]

Concluding, Gandesha said: ‘Traditional landlords though are suffering from recent tax changes including cuts in mortgage interest relief due to kick in next April. With increasing constraints on making a profit or even balancing the books, buy-to-let investors could be forced to either sell up or increase rents. We must ensure more rental homes are built to balance this out.’[1]

[1] http://www.propertyreporter.co.uk/property/renting-couples-priced-out-of-starting-a-family-in-london.html

 

Which regions have seen the highest property price rises in 2016?

Published On: November 30, 2016 at 10:08 am

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Categories: Property News

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With the end of the year on the horizon, home services marketplace Plentific has released it’s 2016 Property Price Index. This gives an overview of how Britain’s house prices have performed during the last 12 months and has revealed some surprising results.

Property price rises

The study has indicated the top ten best and worst performing regions in terms of property price fluctuations.

Aylesbury led the way, with the average price of a home rising by an eye-watering 21.5% over the course of the year.

It appears that prices in new commuters hotspots have risen substantially, with Aylesbury thriving as a result. In fact, the top-ten is dominated by regions in London and the South East.

Greenwich (+19.91%), Hammersmith (+17.46%) and Chelsea (+18%) all represented the top-ten in London. Meanwhile, St Albans (+17.28), Sutton (+17.39%), Reading (+16.9%) and Brentwood (+19.43%) are other commuter regions that saw a surge in values.

The full top ten list is:

Town Dec 2015 Average Sold Price Current average value (2016) Change % Change £
Aylesbury £314,236 £381,787 21.50% £67,551
Greenwich £509,710 £611,169 19.91% £101,459
Ipswich £221,805 £265,267 19.59% £43,462
Brentwood £447,220 £534,094 19.43% £86,874
Chelsea £1,836,338 £2,166,805 18.00% £330,467
Hammersmith £875,132 £1,027,929 17.46% £152,797
Sutton £396,757 £465,750 17.39% £68,993
St Albans £511,418 £599,772 17.28% £88,354
Reading £380,989 £445,375 16.90% £64,386
Wirral £197,244 £229,950 16.58% £32,706

[1]

Which regions have seen the highest property price rises in 2016?

Which regions have seen the highest property price rises in 2016?

North/South divide

The Index reveals a distinct North/South divide, with only the Wirral representing the North in the top-ten locations for house price growth.

However, there are a number of northern regions among the worst performers, including Rotherham (+3.48%), Salford (+3.08%) and Bradford (+2.99%).

Bottom of the list though is Westminster, with values actually falling by 3.67% over the period. Demand in prime central London has seen substantial falls, with Westminster taking the brunt of the lower interest.

The worst performing regions were found to be:

Town Dec 2015 Average Sold Price Current average value (2016) Change % Change £
Highland £166,542 £174,898 5.02% £8,356
Stoke-on-Trent £137,048 £143,924 5.02% £6,876
Newquay £252,426 £262,010 3.80% £9,584
Rotherham £142,032 £146,975 3.48% £4,943
Hackney £580,438 £599,139 3.22% £18,701
Salford £150,820 £155,462 3.08% £4,642
Bradford £124,921 £128,655 2.99% £3,734
St Ives £333,669 £334,376 0.21% £707
Middlesbrough £145,812 £143,448 -1.62% -£2,364
Westminster £1,247,719 £1,201,932 -3.67% -£45,78

Stephen Jury, spokesperson for Plentific, noted: ‘Our report shows the winners and losers in property this year. More importantly, it gives valuable insight to those wanting to get onto the property ladder or invest in property in areas with good potential for price increases.’[1]

‘We have found a fifth of homeowners carry out home improvements to increase the value of their property. Buying a renovating a fixer-upper in the right area will increase the value significantly, so this is worth considering when hunting for property,’ he added.’[1]

[1] http://www.propertyreporter.co.uk/property/2016-property-price-index-reveals-whats-hot-and-whats-not.html

 

Scottish letting agent offers his view on agent fees ban

Published On: November 29, 2016 at 12:27 pm

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It is still less than a week since the Chancellor announced that letting agent fees are to be banned, but the debate on the overall impact on the sector continues to rumble on.

Now, the managing director of one of the leading letting agencies in Edinburgh and Glasgow has aired his opinion on how Scotland has adapted to the changes. Letting agent fees have been banned north of the border since 2012.

Ban on fees

The ban of agent fees in England is still subject to further clarification, with a consultation process expected early in 2017.

David Alexander, of Alexander Lettings, noted: ‘As is the case in England just now, established Scottish agents were initially strongly opposed to the change. Most took the view that fees were fair and reasonable and that the problem lay with a relatively small minority within the industry who charged tenants more than was necessary.’[1]

He noted that many reputable agencies simply got on with it and complied with the new law.

‘Individual agencies, of course, adapted in different ways. In our own case, with circa 5,000 properties under management in Edinburgh and Glasgow and with a substantial number of tenants coming from the corporate sector, we were able to pursue various alternative revenue options. Indeed, the need for change opened a number of new doors and led to an overall increase in the efficiency of the company,’ he continued.[1]

Scottish letting agent offers his view on agent fees ban

Scottish letting agent offers his view on agent fees ban

Buoyant

Concluding, Mr Alexander said: ‘Four years on, the markets in Scotland’s two biggest cities are buoyant but with supply and demand reasonably balanced, to the general benefit of both landlords and tenants. And established bona fide letting agents, who learned to live with the legislation, are continuing to thrive.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/11/advice-from-a-letting-agent-where-fees-are-already-banned

 

How to get the most from your student property investment

Published On: November 29, 2016 at 11:15 am

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Categories: Landlord News

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Landlord News spoke to Benjamin Hodds, the Managing Director of YourNest to share some of his top tips for investors, specifically in the student property market. This particular sector is known for high yields and high risks and here, Mr Hodds shares his experience of how to be successful in this market:

‘The property market is bouncing back, however we are seeing more and more barriers with taxes taking its toll on the buy to let market. With an increase in stamp duty, property prices back on the up and the ever-increasing costs of owning a buy to let property we must be creative to make our investments more profitable.

YourNest properties are on the forefront of these changes, working with landlords to manage their properties with many landlords requiring support to adapt their nest eggs in order to remain profitable in today’s market.

Improvements

Student properties are often at risk from long void periods and in today’s market students are becoming more demanding expecting more from their home and with the standard of properties improving the weaker properties are left until the very end of letting season, risking a lengthy void period.

In our opinion we are happy to see landlords improving their homes for students, there are far too many properties unsuitable for tenants and ultimately getting the most from your student property investment really boils down to how much you put into your property.

Investors often fail at the first hurdle and kit out their houses with low quality furnishings as we are as an industry in the mind-set that our properties will need a full over haul at the end of term. Our first piece of advice is to ditch the bargain shopping spree and invest in good quality furniture to limit having to replace this every year. It may seem an expense to start with, but throwing in a £300 faux leather sofa for the year is asking for trouble, invest in quality for those key pieces and save money down the line.

We’re fed up of seeing head to toe IKEA but if carefully selected teaming up some IKEA accessories with a luxury kitchen and finishing touches often does the job.

The cost of living is increasing, however if we take care and improve our ‘product’ we can offer our homes at an increased price resulting in an even higher yield.

How to get the most from your student property investment?

How to get the most from your student property investment?

Competition

There is tough competition out there with some fantastic properties on the market and you really must stay one step ahead. Students are looking for houses with TV’s, en-suites and trendy furnishings and if yours doesn’t fit the bill there are plenty that will. We really advise our landlords to invest the extra cash and limit the need for a re-haul every year. In our experience tenants respect their surroundings if they are given pleasant surroundings.

We visit a number of properties which just don’t make the cut and in today’s market we advise our landlords to implement specific changes or we kindly decline management. Keeping your tenants happy really is the key to getting the most out of an investment and if tenants are expected to live in anything below standard this is often the reason why our hard earned income is shrinking.

Once your house is up to scratch and we would advise making sure you or your managing agent is visiting every 6 months and inspecting the property, keeping you in the loop with any issues and pre-empting any large costs and protecting your income at the end of their tenancy.

Lastly, our ultimate tip would be to keep your student investment for some time and generate a healthy monthly income as well as that nest egg to release cash and build up your property portfolio.’