Posts with tag: Buy-to-Let

Interest rates held at 0.5%

Published On: July 15, 2016 at 9:06 am

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Interest rates in the UK has been frozen once again at their all-time low of 0.5%, following the Bank of England’s decision not to cut them further.

It was widely expected that the Bank would slash rates to boost economic growth already slowing before Britain’s decision to leave the European Union. However, the nine-member monetary policy committee yesterday decided that a cut was not necessary at the present time.

This decision came despite the fact that latest figures indicate that the UK economy slowed during the end of the second quarter of the year.

Mortgage rates

Now, it looks likely that rates could be cut in August. Presently, mortgage borrowing costs will remain fairly consistent, particularly with tracker mortgage deals which will automatically marry-up with the fall in interest rates.

Buy-to-let landlords with fixed mortgages would have not benefitted from this cut until their deal has expired.

Even if there is a cut in interest rates during the next month, this could not be passed on in full by mortgage providers.

David Whittaker, managing director of Mortgages for Business, noted, ‘lenders may even be keen to sustain current rates, or increase pricing in order to regain recent months’ lost margins.’[1]

Whittaker also said that there is a strong core of sustainable low loan to value lending to property investors, including buy-to-let landlords, who are not likely to heighten instability.

Welcome

The decision to hold interest rates at 0.5% whilst waiting for the full impact of the Brexit vote has been welcomed by Simon Checkley, managing director of Private Finance.

Checkley said, ‘we fully support today’s decision by the MPC to hold the Bank Rate at 0.5% whilst it waits for the longer term impacts of the EU Referendum result to become clearer.’[1]

‘We anticipate a further review in August once the new economic forecasts are published where we would expect the committee to cut rates by as much as 50bp, achieving a zero percent interest rate, which would be in line with Mark Carney’s most recent comments about the need for the implementation of monetary easing over the summer,’ he continued.[1]

Interest rates held at 0.5%

Interest rates held at 0.5%

Buy-to-let growth

Stuart Law, CEO at Assetz Property, feels that there will be continued growth in the buy-to-let sector. This is due to the fact investors can get roughly three-times as much income as they could get from a bank account.

Law said, ‘Buy-to-let landlords investing in Northern property in particular will continue to thrive as the market appears to be remaining stable post-Brexit. Prices continue to be modest versus the South, while gross yields are reaching up to 8.5% on average, compared to just 3.5% in the capital.’[1]

‘Amid these current times of uncertainty and unanticipated outcomes, we expect investors to concentrate on investing for yields as the small dividends from the stock market do not really compensate for fluctuating share price risks.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/7/bank-of-england-slash-interest-rates-to-shore-up-economy

Property prices up by 0.6% in June

Published On: July 14, 2016 at 10:14 am

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Categories: Property News

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Latest data released by LSL reveals that the average price of a property in England and Wales rose by 0.6% during June. This comes as a welcome break following three consecutive months of falling house price values, including a 0.9% drop in May.

Rise and falls

This said, property prices in the capital fell by 1.4% month-on-month, the largest drop seen since May 2011.

Across England, year-on-year prices have risen by 6%, with the typical house sale amounting to £293,444. The East of England saw the largest increase of 9.4%.

What’s more, sales in the three months to June increased by 8% in comparison to the same period in 2015. Of course, these figures were driven up by investors surging to beat the additional Stamp Duty deadline on April 1st.

During June 2016, roughly 72,000 sales were completed, 13% lower than in 2015, but up on the 55,250 figure seen in May 2016.

Property prices up by 0.6% in June

Property prices up by 0.6% in June

Brexit consequences

Adrian Gill, director of Your Move and Reeds Rains, has suggested that the Brexit result will bring with it wide ranging consequences for the housing market.

Gill observed, ‘exactly how the implications will play out in the sector over the coming months is yet to be seen and whilst London is likely to feel the effects more acutely, it is important to remember that the outlook is not all doom and gloom. Already lower interest rates promised by the Bank of England to stave off any slowdown are set to ease affordability and support prices.’[1]

‘What is clear is that the impact of April’s Stamp Duty increase has now largely played out, and there’s little evidence to suggest it has significantly hit investor appetite: first time landlords seem no less common and there’s new interest in mixed commercial and residential purchases, such as flats over shops that escape the increase. Ultimately, with interest rates set to remain lower for longer, the Bank of England reducing banks’ capital requirements and changes in Government imminent, the short-medium term outlook for the housing market could well remain positive after all,’ Gill added.[1]

[1] http://www.propertyreporter.co.uk/property/june-house-prices-see-a-06-rise.html

HMO yields greater than other rental property types

Published On: July 13, 2016 at 8:57 am

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Categories: Landlord News

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The most recent report from Mortgages for Businesses shows that HMO’s are outperforming all other types of rental property in terms of yields.

Average yields on a HMO stand at just below 10% since 2011.

Rising product numbers

Buy-to-let products have risen during the second quarter of the year, in comparison to the first, albeit more slowly. Products increased by an average of 75 in quarter two, compared to 142 in the first three months of the year.

This slower rise during the second quarter can be attributed to lenders creating separate offerings, with more stringent stress test calculations for borrowers.

Remortgaging followed a similar trend and house purchase activity slid to levels seen in 2015. This was due to the surge in investment transactions before the Stamp Duty deadline.

LTV increases

Average LTV values of HMOs also increased quarter-on-quarter, from 62% in Q1 to 75% in Q2. When data from the last five years is analysed, LTV’s on HMO’s have remained steady, averaging 69%.

LTV’s on vanilla buy-to-lets have also stayed consistent, averaging 67% during the same period.

However, LTV’s for multi-units and semi-commercial property have seen a more up and down few years. The average LTV of a multi-unit stood at only 56% in quarter two of this year, in comparison to an average of 64% in the last five years. Average LTV’s for semi-commercial property was 60% in the second quarter of the year.

HMO yields greater than other rental property types

HMO yields greater than other rental property types

Consistent yields

David Whittaker, managing director of Mortgages for Business, said, ‘we now have five years’ worth of data against which investors can benchmark their portfolios. Both Vanilla BTL and HMO property offer fairly consistent yields. Fort the more cautious investor and for those who like a mix of risk within their portfolio, 6.1% average yield on a standard BTL still represents a good return. And for the more experienced investor, HMOs certainly perform better than all other types of rental property averaging just below 10% since 2011.’[1]

‘Average yields on multi-units grew to a very positive 9.5%, well above the five-year average of 7.4% demonstrating that landlords can often achieve greater yields by taking on more complex property types. Semi-commercial property performed less well than expected considering these buildings are not subject to the residential stamp duty surcharge. Going forward it will be interesting to see whether any trends develop as more investors are expected to move into this niche,’ Whittaker added.[1]

[1] http://www.propertyreporter.co.uk/landlords/hmos-outperforming-all-other-types-of-rental-property.html

UK rents for new tenancies rise in Q2 of 2016

Published On: July 12, 2016 at 9:02 am

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New statistics released today indicate that rents on new tenancies continued to rise in the second quarter of 2016.

The latest HomeLet Rental Index shows that the price of a new tenancy in the UK, excluding Greater London, rose by an average of 3.5% during the last three months. Rents for new tenancies currently stand at £773 per month.

However, the figures represent a fall from the 4.4% annual rise noted in the three months to May.

Rental rises

Data from the Index shows that rental prices rose in 10 out of the 12 regions of the UK. This growth was led by East Anglia and the East Midlands, where rents were up by 8.2% year-on-year. Scotland came next, with rental gains of 7.4% over the same period.

In London, the average rent on a new tenancy is presently £1,575, up 3.9% year-on-year. This said, rental prices slowed from the 6.2% growth seen in the previous month.

Of all the UK regions, the North East and North West were the only ones to see a drop in yearly rents, which were down by 3.6% and 0.2% respectively.

Encouragement

The data from the HomeLet Rental Index will give encouragement to both landlords and tenants alike. This follows the increase of rental stock, following the surge to purchase properties ahead of the higher stamp duty rate, which came into force on April 1st.

Martin Totty, chief executive of Barbon Insurance Group, parent company of HomeLet, noted, ‘the June HomeLet Rental Index shows that the rental market remains resilient in the face of the various economic and political headwinds the sector has faced recently. Landlords are continuing to secure rental growth whilst there are some early signs of affordability criteria beginning to bear on the rates of rental price growth.’[1]

UK rents for new tenancies rise in Q2 of 2016

UK rents for new tenancies rise in Q2 of 2016

Brexit uncertainty

‘The impact of the EU referendum vote will now play out over the months ahead: if, as expected, the result acts as a restraint on the supply of new housing, the gap between demand and supply in the private rental sector will remain market; all the more so if more people decide to rent while waiting to see what happens to house prices,’ Totty added.[1]

Concluding, he stated that, ‘landlords will be considering their position carefully, particularly in the light of further taxation changes to come next year, which could reduce net yields; with long-term drivers such as net population growth still in place, it is likely that rents will continue to rise, though affordability will continue to be crucial. The recent slowdown in rental growth rates may suggest an affordability ceiling is being approached.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/7/rents-continue-to-rise-across-the-uk

Buy-to-let purchases at six-year low

Published On: July 11, 2016 at 11:55 am

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Categories: Landlord News

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A new report has suggested that in the three months from the additional 3% Stamp Duty surcharge, property purchases from landlords accounted for just 8% of total property sales. This represents the lowest proportion since 2010.

Further statistics from the report by Countrywide shows that the largest shift in activity was prominent in the North, Midlands and Wales.

Stamp Duty slowdown

The slowdown came after a surge in transactions during the first quarter of the year, when landlords made up 18% of the total number of home buyers in the country, the highest level seen since 2010.

In the North East, 29% of homes sold were purchased by buy-to-let landlords during the first quarter of the year. However, this figure dropped to 9% in the second quarter.

Wales saw a drop from 19% to 3% and the East Midlands 22% to 8%.

Increased purchasing activity from buy-to-let landlords at the beginning of 2016 has led to the number of homes available to rent rising by 22% in June in comparison to June last year.

London and the South West have seen the largest increase in homes available to rent, which numbers in these regions rising by 33% and 55% respectively.

Buy-to-let purchases at six-year low

Buy-to-let purchases at six-year low

Slower growth

Rising supply, coupled with affordability issues, has cut the annual rate of rental growth. The majority of British regions have seen slower growth rates in the course of the year.

Typical rents in Britain rose to £960 during June, 3.6% greater than at the same time last year.

Johnny Morris, research director at Countrywide, noted, ‘the lull in landlord activity is mostly due to investors bringing forward purchases in the first three months of the year but upcoming changes to mortgage tax relief and the prospect of heightened uncertainty in economy during the lead up to the referendum, will also have made investors warier of entering the market.’[1]

‘Those extra homes bought by landlords at the start of the year are still making their way to market. Despite tenant numbers still growing, the increased supply is slowing rental growth,’ he added.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/7/countrywide-says-buy-to-let-purchases-now-at-a-six-year-low

 

PCL rents in check despite rising demand

Published On: July 11, 2016 at 9:26 am

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Yearly rental value growth in prime central London was down again during June, according to a new report.

The investigation by Knight Frank revealed that annual rents were down by 3%, despite an increase in rental demand for properties in the capital. Large stock levels and uncertainty in the financial market is keeping this growth steady.

Economic and financial uncertainty

The report indicates that the rise in rental stock is partly down to the ongoing uncertainty in the sales market. Early figures are suggesting that some vendors are holding fire on letting their property until further clarity over Brexit is established.

However, demand remains strong and the number of new prospective tenants registered in June was the largest seen since September 2015. Meanwhile, the number of new tenancies agreed in June of this year was nearly the same as in May.

Tom Bill, head of the capital’s residential research at Knight Frank, said, ‘for investors able to see through the current bout of political uncertainty, there are also grounds for longer-term positivity.’[1]

Yearly yields

Gross yields in June stood at 3.1%, substantially greater than the current record-low yield on ten-year Government bond of around 0.8%. Bill notes that financial indecision has been heightened since before the Brexit vote, something he feels will cause tenants to rent for longer.

Bill observed, ‘more broadly, uncertainty over the result of the referendum has been replaced by uncertainty over the more nuanced question of the UK’s relationship with Europe and demand will strengthen further as clarity emerges surrounding key negotiating positions. As this process unfolds, it should be remembered that no candidate for prime minister has indicated any willingness to relinquish London’s role as Europe’s leading financial centre during negotiations with the EU.’[1]

PCL rents in check despite rising demand

PCL rents in check despite rising demand

Tax cuts

Chancellor George Osborne has suggested that he may move to cut corporation tax, meaning London will strive to stay competitive in comparison to other European cities.

Mr Bill feels that the possibility of an interest rate cut in Britain is likely to push activity up. He noted that the likelihood of further cuts by central banks in other countries will lead to overseas investors to look for higher returns on offer from rental property in London.

Concluding, Bill said, ‘this search for yield will be allied to a favourable currency play due to the current weakness of Sterling. Meanwhile, other fundamentals that remain unchanged after the referendum include the supply shortfall and projected population growth over the next decade in London, factors that will continue to underpin demand for rental property.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/7/prime-central-london-rents-remain-in-check-despite-greater-tenant-demand