Posts with tag: Buy-to-Let

Demand for UK property at lowest for 3 years

Published On: June 30, 2016 at 10:57 am

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The uncertainty surrounding the EU referendum result caused demand for new property to slip to the lowest levels seen for over three years.

Research from the National Association of Estate Agents shows that the number of property sales agreed in the last month fell sharply.

Demand falls

There were an average of 304 house hunters registered per member branch during May, down 6% from April and the lowest levels seen since November 2013.

In addition, the statistics show that in comparison to May 2015, demand has fallen by 21% year-on-year.

Similarly to demand, the supply of properties available to buyers rose marginally from 35 properties to buy per branch in April to 37 in May.

During the last month, 41% of agents suggested that house prices would fall. 30% said that demand would decrease as a result of the referendum result.

Uncertainty

Despite the number of house hunters per branch falling in the last month, the number of sales to first-time buyers increased, albeit marginally.

Mark Hayward, director of the National Association of Estate Agents, said, ‘the EU referendum, without doubt meant that May was a month of uncertainty for potential house buyers and demand dropped significantly and is currently at the lowest level we have seen in the last three years.’[1]

‘As a result of the vote for a Brexit, we expect international investors to look a lot harder at the UK as a potential market to buy in and this will have a knock-on effect on the house building sector, as investments may be delayed or put off completely,’ he continued.[1]

Demand for UK property at lowest for 3 years

Demand for UK property at lowest for 3 years

Short term stability

Hayward appreciates, ‘in the short term, we believe that house prices will remain stable, we cannot be certain about the next quarter as political uncertainty and market unrest could affect the housing market.’[1]

However, he continued by saying, ‘as we continue to say, there are simply not a sufficient number of houses available in this country to cater for everyone’s needs and a Brexit could impact the skills required to drive property developments in the UK. This means that in the longer term, something will need to give which regrettably could mean a surge in house prices or buyers struggling to find a suitable property in order to move or get that first foot on the ladder.’[1]

[1] http://www.propertywire.com/news/europe/uk-residential-property-demand-2016062912085.html

Evictions up by 5% in Q1 of 2016

Published On: June 29, 2016 at 10:54 am

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Categories: Landlord News

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Seasonally adjusted figures released from the Ministry of Justice indicate that the number of households evicted from rental properties in England and wales during Q1 of 2016 rose by 5%.

Pleasingly, repossession rates for homeowners have fallen to record lows.

Repossession rates

The figures show that there were 10,732 repossessions of rented homes between January and March 2016. This was a rise from the 10,253 recorded in the final three months of 2015.

During 2015, a record number of tenants were removed from their rental properties by bailiffs. 42,728 households were forcibly evicted in the year.

Welfare cuts and a lack of affordable homes have been cited as reasons for the rise. More than half of the evictions are thought to have been conducted by private landlords.

A separate survey from online letting agent PropertyLetByUs shows that one-quarter of buy-to-let landlords served an eviction notice to tenants during the past twelve months. 5% of these landlords pursued an eviction through the courts.

Evictions up by 5% in Q1 of 2016

Evictions up by 5% in Q1 of 2016

Increasing arrears

Jane Morris, Managing Director of PropertyLetByUs, noted, ‘landlords are increasingly facing rent arrears, as rent escalation continues to outstrip gross income. According to HomeLet, rents on new tenancies signed on UK rental property outside London over the three months to April 2016 were on average 5.1% higher than a year earlier.’[1]

‘Landlords are also facing a financial squeeze due to restrictions on their tax breaks and some may be raising rents to supplement their income. Pushing up rent rises further will put huge pressure on those tenants who are already struggling to pay their rent.  We may well see evictions continuing to rise over the next few months. These uncomfortable statistics highlight the need for landlords to protect their rental income and ensure they carry out thorough references with all new tenants. Times are very tough for many tenants and demand for rental accommodation is soaring in many parts of the UK,’ she continued.[1]

Concluding, Morris said, ‘landlords need to be extra vigilant when they take on a new tenant. But a few simple checks will help identify if a tenant is in a good financial position or not.’[1]

[1] http://www.propertyreporter.co.uk/landlords/eviction-numbers-up-5.html

UK landlords not concerned about Brexit

Published On: June 22, 2016 at 4:04 pm

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A report from the Association of Residential Letting Agents has revealed that UK landlords believe the market will not be affected by the EU referendum result.

The investigation suggests that whatever the outcome of tomorrow’s vote, UK buy-to-let investors feel that supply, demand and rental fees will not be substantially affected.

Referendum realisation

65% of ARLA agents think that supply will stay the same, should Britain vote to leave the EU. This is in comparison to just 22% who believe that it will fall, with international landlords removing themselves from the market.

31% believe that demand will decrease, with relocating to Britain becoming a less attractive proposition. Over 55% feel that demand will be unchanged.

In London, 43% of agents feel that number of potential tenants per property will fall should Britain choose to leave. Only 19% said a Brexit will cause rents to rise even further.

UK landlords not concerned about Brexit

UK landlords not concerned about Brexit

Impact

David Cox, managing director of ARLA, noted that, ‘there is no avoiding the EU Referendum at the moment; and whatever the outcome, we are likely to feel the impact of the fallout of this debate in different ways. However, it’s important to put this into perspective and not get carried away in a zeitgeist.’

‘As outlined in our recent Brexit Report, the lettings market hosts a large number of non-UK born citizens and any change in migration policy is likely to have an impact down the line, especially in London. However, our monthly report clearly shows the sentiment amongst members is that the immediacy of this effect is likely to be minimal.’[1]

Concluding, Mr Cox said, ‘the EU Referendum debate in many ways has stalled policy making and following the vote we need to move from political debate to action. We need supply to increase dramatically and quickly to really deal with the housing crisis as this is one of the most pressing problems facing UK society today.’[1]

[1] http://www.propertyreporter.co.uk/landlords/landlords-unphased-by-possible-brexit.html

Rental prices fall as market floods

Published On: June 20, 2016 at 9:53 am

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Categories: Landlord News

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Latest figures have indicated that rents in the UK have started to dip, with landlords who had rushed to buy property before the Stamp Duty changes beginning to rent them out.

In turn, this has provided tenants with a larger selection of properties to choose from, according to the buy-to-let index from Your Move and Reeds Rains.

Rental falls

Rents for residential properties available to be let across England and Wales have fallen by an average of 0.2% during May, in comparison to April. Typical rents now stand at £792 per month.

Annually, rents are 1.8% greater than in May 2015, half of the 3.6% annual rate of rental growth recorded four months ago.

Adrian Gill, director of letting agents Your Move and Reeds Rains, notes that the number of properties coming onto the market has narrowed the supply-demand imbalance.

Gill said, ‘this is the equivalent of a flash food for the market. Just a month ago rents were heating up and spring was in the air-but this has been put on hold as a tide of new properties to let has disrupted the normal dynamics of supply and demand.’[1]

Slows

Further analysis of the data shows that rental increases in the capital fell to just 1% in the year to May 2016. This was substantially lower than the peak of September 2015, when London rents were up by 11.6% year-on-year.

In contrast, the East Midlands saw rents rise by 7.3% in the year, followed by the West Midlands, where a 5.5% rental increase was recorded in the year.

All 10 regions of England and Wales experienced a rental rise during May, in comparison to the same month of last year.

Despite monthly rents falling as a whole, rental yields are seemingly resilient, due to a similar dip in property prices on a month-on-month basis. Gross yields on typical rental property, pre account factors such as void periods, stand at 4.9%, the same as in April.

Rental prices fall as market floods

Rental prices fall as market floods

Rising returns

When rental income and capital growth are taken into account, before property-specific costs such as maintenance, the average landlord in England and Wales saw returns of 10.2% in the year to May.

This was slightly lower than the 10.7% recorded on month previously, which reflects the slowdown in house price growth.

However, in comparison to the year ending May 2015, this stood at 9.4%, showing that landlords have seen stronger returns over the last 12 months.

In absolute terms, this means that the typical landlord in England and Wales has seen gross returns of £8,712 in the last year.

Mr Gill concluded by saying, ‘Landlords are vital in matching an escalating demand for homes from tenants. Such a scale of demand doesn’t look set to change dramatically just because of a few tax tweaks – so professional and accidental landlords will always be an essential part of the solution. Financial rewards for investing in property, taking on risk and maintaining homes will have to reflect the importance of landlords for our economy and our society.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/6/rents-fall-as-landlords-flood-rental-market

Investors could pay £10,000 more to secure mortgage

Published On: June 16, 2016 at 8:53 am

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Buy-to-let landlords are set to fork out a further £10,000 to secure a mortgage, following a crackdown on so-called dangerous debts by British lenders.

This new clamp down on worrying debts by lenders is pushing up mortgage costs for buy-to-let landlords. It is thought that banks and building societies will begin to make the substantial fee changes from September 2016.

PRA crackdown

Industry watchdog, the Prudential Regulation Authority (PRA), is concerned that some buy-to-let landlords are stretching themselves too thinly and will as such face difficulties when interest rates eventually rise.

As a result, the PRA is to force lenders to enforce stricter criteria tests, to ensure their investor can afford the repayments on the loan.

At present, investors must prove they can earn enough from their rental yields to cover their repayments. However, the new plans will require plans to see whether or not they could continue to meet these payments, should rates rise by 2%.

Tests

Under these new tests, banks and building societies will demand evidence of a yield of at least 5.2% to qualify for a 25% deposit loan. In essence, this would mean that a borrower would have to earn £7,800 per year in rent on a £150,000 home before paying their mortgage.

This means that investors would either have to raise rents or cut borrowing to ensure that they are covered.

Peter Armistead, of Armistead Property, believes savvy investors will be able to cope with these changes by purchasing cheaper property, with greater yields.

Mr Armistead said, ‘clearly, the investors most at risk are those with smaller deposits who buy property in parts of the UK where rents are low compared with house prices.’[1]

Investors could pay £10,000 more to secure mortgage

Investors could pay £10,000 more to secure mortgage

Regional rates

Continuing, Armistead said, ‘this is a particular problem in places such as London and the South-East where the average annual returns between 2010 and 2015, was just 4.86% in outer London and 4.71% in the City, according to LendInvest. House prices in London are about five times what they are in parts of the North West, but salaries are only 30% higher.’[1]

‘Manchester and Liverpool deliver some of the best rental yields, with Manchester recording average annual rental yields of 6.02% over five years, followed by Liverpool with 5.15% yields. An average residential property in Manchester is just £155,000, while a flat in a 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,’ Armistead added.[1]

Concluding, Mr Armistead said, ‘Landlords will find the best returns in urban areas, with a concentration of students and young professionals. If investors can purchase cheaper properties with better yields, they will have the opportunity to protect and boost their profits in the longer term.’[1]

[1] http://www.propertyreporter.co.uk/landlords/pra-crackdown-sees-btl-investors-pay-an-extra-10000.html

Serious rent arrears down by 4% in Q1 of 2016

Published On: June 15, 2016 at 9:48 am

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Encouraging new data has revealed that 3,100 less households were in serious rent arrears in the first quarter of this year, in comparison to the final quarter of 2015.

This represented a fall of 4%, believed to be a direct result of the improving employment market.

Falling arrears

In absolute terms, 86,200 tenants in Britain are in excess of two months behind in paying their rent. This is in comparison to 89,300 in quarter four of last year.

Since 2008, there have been an average of 92,600 tenants in serious rental arrears during the first quarter of each year. This underlines the positivity of the most recent figures.

Adrian Gill, director of estate agents Your Move and Reeds Rains, noted, ‘fewer tenants in serious arrears reflect the health of the jobs market. With an extra 44,000 jobs created in the first quarter of this year, thousands of tenants have been able to get their finances back on track and pay down late rent. Serious rent arrears peaked in Q3 2012 when 124,800 households owed more than two months’ rent-and when unemployment in the UK stood at 7.9%. Since then a boom in employment has been responsible for lifting many of the most precarious tenant households out of serious rent arrears and onto a more sustainable course. The direction of travel looks very positive.’[1]

‘A reduced risk of serious rent arrears will be welcome news for existing landlords, facing so many artificial challenges posed by government meddling. But no-one should be complacent – managing a property is never simple.  Some landlords are being held back from buying property by the Stamp Duty Surcharge. If this stems the flow of new homes into the rental market, then shortages in some areas could push up rents – hitting affordability,’ Gill continued.[1]

Serious rent arrears down by 4% in Q1 of 2016

Serious rent arrears down by 4% in Q1 of 2016

 

Drops

The total number of tenants more than two months behind with their rent has dropped by 16% since just before the financial crash in Q2 of 2008. Then, the total number of tenants struggling with serious arrears stood at 102,900.

This is particularly encouraging when looking at how the sector has grown during the same period. In 2008, there were 3.6m households living in the private rental sector in Britain. After just 8 years, this has grown by 62% to hit 5.8m households.

Gill observed, ‘the massive growth in the number of homes available to rent – driven by both deliberate landlords and accidental landlords coming into the market – has ensured that rents have not outpaced the ability of tenants to pay. The affordability of renting and the number of tenants falling behind on rent also needs to be seen within the context of the rapid expansion of the private rented sector and the addition of millions of extra houses and flats to rent.’[1]

Eradicating evictions

More positivity came with the news that the number of eviction orders has dropped considerably. In Q1 2016, there were 26,230 court orders made for eviction as a result of possession claims by landlords, down from 26,964 in the final three months of 2015.

Concluding, Gill said, ‘the evidence is clear – landlords’ finances are the healthiest they’ve been for nearly a decade. Back in 2009, with a distressed purchase market, many owners didn’t want to sell their properties if they inherited or no longer wished to live in their old home – which led to more accidental, DIY landlords. As a result of this, and with more tenants in financial difficulties, buy-to-let mortgage arrears were far higher.’[1]

‘Since then the private rented sector has changed. Now, with the rise of deliberate landlords with a professional attitude to their investment, the average property investor is more likely to have a business plan and a more professional approach to letting their property.’[1]

[1] http://www.propertyreporter.co.uk/landlords/serious-tenant-arrears-fall-4.html