Posts with tag: Buy-to-Let

Landlords’ habits changing after SDLT rise

Published On: May 16, 2016 at 9:28 am

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The 3% increase in stamp duty land tax on buy-to-let properties has led to many landlords to change their buying habits, according to a new report.

Data from Countrywide suggests that buy-to-let landlords are targeting cheaper properties to try and offset the additional charges.

Falls

The average house price paid by residential landlords dropped by 8.3% month-on-month in April. Figures show that investors paid £178,000 on average for a home last month, in comparison to £194,000 in March and £188,000 in April 2015.

London experienced the sharpest drop in property price paid, with landlords spending £365,000 in comparison to £436,000 in March. Overall house price values in the capital rose by 13.9% in the last twelve months, with landlords paying 8.2% less than they did in April 2015.

What’s more, April saw less landlords buying homes, following the rush to beat the stamp duty deadline. 61% more landlords purchased an investment property in the first quarter of 2016, in comparison to one year earlier. With many sales completed in March that would have probably been completed in April, there was a fall of around half of landlords purchasing during the month. However, sales to first-time buyers increased by 19% in the same period.

Landlords' habits changing after SDLT rise

Landlords’ habits changing after SDLT rise

Adjusting behavior

Average rents increased nationwide by 2% in the last year, which has lead the typical UK rent to stand at £932. In addition, rental growth is only half the rate as it was during 2015. This is due to a number of contributing factors, such as affordability concerns and an increase of homes coming onto the market.

Johnny Morris, Research Director at Countrywide, noted, ‘April’s fall off in investor activity seems to be the consequence of landlords bringing forward purchases to beat the stamp duty deadline. Rather than being dissuaded by the new 3% charge it seems that landlords are already adjusting their behaviour. In response to the extra purchasing costs many are choosing to buy cheaper homes that offer a higher yield and of course a lower stamp duty bill.’[1]

‘There’s early signs that first time buyer numbers are increasing as investor activity has declined. But it’s too early to tell whether this is simply the after effects of the stamp duty rush or the start of a longer term trend,’ Morris added. [1]

[1] http://www.propertyreporter.co.uk/landlords/landlords-change-tact-and-lock-on-to-cheaper-properties.html

 

New rental listings rise by 11.5% in April

Published On: May 13, 2016 at 10:43 am

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There was an 11.5% rise in new rental properties being listed in April, as the results of the pre stamp duty rush were absorbed.

Research conducted by Property Partner examined the total number of new rental properties being advertised in the last month, in comparison to March. The analysis looked at results from 90 towns and cities across Britain.

The study found that in 82% of these locations, there was a rise in the number of new rental listings.

Regional rises

Worcester saw the greatest rise in new rental listings, seeing a surge of almost 48.9% during the last month. Chelmsford saw an increase of 38%, Stevenage 36.4% and Southport 34.4%.

Of the major towns and cities, London saw a 9.1% rise in new property listings during April. Birmingham saw the greatest rise of the larger cities, recording an increase of 20.7%. In Manchester, there was a rise of 14.3%.

The table below indicates the towns and cities in Britain that experienced the largest rise in new rental listings in April:

Town/City Region % increase in new rental property listings
Worcester West Midlands 48.9%
Chelmsford East 38.0%
Stevenage South East 36.4%
Southport North West 34.4%
Telford West Midlands 32.3%
Cheltenham South West 30.3%
Watford East 29.4%
Bath South West 29.3%
Newport Wales 27.0%
Woking South East 26.8%
Gloucester South West 26.4%
Milton Keynes South East 24.7%
Oxford South East 24.5%
Oldham North West 23.3%
St Helens North West 22.5%

[1]

New rental listings rise by 11.5% in April

New rental listings rise by 11.5% in April

Boost

Dan Gandesha, CEO of Property Partner, noted, ‘the rental market experienced a much-needed boost in April. Unfortunately, this was created by investor frenzy to beat the stamp duty hike and supply is unlikely to continue on an upward trajectory.’[1]

‘If anything, options for tenants could become more limited in the next couple of months as traditional landlords balk at the prospect of paying the surcharge now and losing mortgage interest tax relief from next year. There is still strong tenant demand but the Government has changed the traditional buy-to-let landscape and this will have ramifications for the rental market longer term. That demand will increasingly have to be met by professional landlords like Property Partner, offering tenants a better product and investors a better deal,’ Gandesha concluded.[1]

 

Uncertainty Causes Slowdown in Mortgage Approvals in April

Published On: May 13, 2016 at 9:13 am

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A slowdown in mortgage approvals in April was caused by uncertainty in the economy, according to the latest Mortgage Monitor from the UK’s largest chartered surveyor, e.surv.

Uncertainty Causes Slowdown in Mortgage Approvals in April

Uncertainty Causes Slowdown in Mortgage Approvals in April

Seasonally adjusted house purchase approvals in April totalled 57,512 – down by 19.4% from the 71,357 loans granted the previous month. This significant decline follows a previous three-month average of 72,693 house purchase approvals since the start of the year.

e.surv believes that economic uncertainty is playing a role in this decrease, as are new tax changes for buy-to-let landlords.

Annually, house purchase lending has fallen by 14.9% from the 67,594 loans recorded in April 2015. Preceding this decline, annual rises of 20.2%, 17.9% and 14.7% were seen, as Stamp Duty changes triggered an uplift in overall lending levels. The drop also follows record high lending during the previous quarter, fuelled by buy-to-let borrowing.

The Director of e.surv, Richard Sexton, comments on the figures: “The mortgage market is entering a more turbulent phase. As lenders steer for safety, three different forces are at work. First and foremost are the effects of the looming EU referendum on confidence and certainty for the UK. Whichever way the result, financial markets could see rapid shifts in the days and weeks beforehand, and especially immediately afterwards.

“Secondly, the lending market is in one sense beginning to return to its normal rhythm after suffering a hangover from the party of buy-to-let activity seen earlier this year. As this excitement begins to wear off, a more normalised lending climate is beginning to reassert itself. Home lending is solid beneath this predicted surface slowdown, but now the headache is by no means over, as new economic risks cause understandable caution from lenders.”

He adds: “The third major break on mortgage lending is a deeper foreboding about the solidity of the UK economy – quite subtle, but potentially more major.”

Sexton advises lenders: “It’s crucial for lenders to manage risks in the coming months. There now looks to be completely different interest rate speculation on the horizon and all eyes will be on the Bank of England to see the next steps taken. With some calls to cut interest rates rather than raise them, lenders will have to remain even more alert to economic conditions. And slowing growth is a further sign which is adding to doubts over economic security in general.”

However, he concludes: “Despite all these ongoing risks, the underlying core of the lending market appears strong enough to weather such tests. For some first time buyers, prospects are improving and despite rising house price costs, lenders remain keen to help credit-worthy borrowers get on the property ladder.”

Recently, mortgage lenders were warned to tighten their lending criteria on buy-to-let products, due to new rules in the sector.

Typical tenancy duration just 18 months

Published On: May 13, 2016 at 9:02 am

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A new survey has revealed that tenants are now taking on tenancy agreements for an average of just 18 months.

Research conducted by Direct Line for Business indicates that tenants are adopting a shorter-term view on renting property.

These figures are surprising, given that previous investigations indicated that the average tenancy length was longer.

Regional renters

The smallest tenant turnover was found in Birmingham, where renters stay for an average of two years and four months in the same location. This was followed by London, with tenants staying for one year and nine months. Leicester was the third best city for longevity, with tenants staying put for one year, eight months.

Edinburgh, Liverpool and Sheffield all have average tenancies of one year, seven months.

On the other hand, Cardiff has the greatest turnover of tenants in Britain, with tenants staying in the same rental property for less than one year (11 months). Leeds sees its tenants stay for exactly one year, with Bristol seeing renters stay put for 14 months.

Voids

In addition, the survey showed that the typical annual void period for buy-to-let landlords currently stands at 22 days. Looking at existing rental values, this could see losses of £547 in rent that is not collected.

Of course, this will have a negative effect on overall rental yields. Landlords should consider taking out unoccupied property insurance, to protect themselves against damages.

Birmingham again leads the way for filling vacant properties in the quickest time, with a landlord in the second city finding a tenant typically within 11 days. Buy-to-let landlords in Liverpool and Aberdeen fair the worst, taking an average of 33 days to fill their property

Direct Line for Business analysts suggest that this gap between tenancies could cost landlords as much as £761 in Liverpool and £913 in Aberdeen.

Typical tenancy duration just 18 months

Typical tenancy duration just 18 months

Moving

Further data from the investigation shows that landlords cannot rely on their tenants to see their tenancy agreement through. One in eleven renters were found move on before the conclusion of their contract.

The greatest rate of tenancy turnover is found in Aberdeen, where 19% of tenants leave their property before the end of their agreement. Leeds and Sheffield were both close behind, with 13%.

Nick Breton, head of Direct Line for Business, observed, ‘this research highlights the pressure landlords are under to replace outgoing tenants in their properties. Vacant properties are obviously a worry for landlords but it’s vitally important that they take into account void periods when calculating the affordability of owning a rental property.’[1]

‘Staying on top of the on-going changes within the industry can be time-consuming and a battle for landlords and we fully appreciate the challenges they face when it comes to managing their rental properties,’ Breton added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/average-tenancy-is-now-18-months

Rental arrears and repossessions fall in Q1 of 2016

Published On: May 12, 2016 at 10:51 am

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Categories: Finance News

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According to the most recent report from the Council of Mortgage Lenders (CML), repossessions in the first quarter of 2016 fell to their lowest on record.

Data from the report shows repossessions fell to 2,100, with 1,500 home-owner properties and 600 buy-to-let.

Should this rate continue during 2016, this would put the yearly number of repossessions at 8,400.

Falls

In addition, mortgage arrears continued to drop. For the first time in more than ten years, the number of mortgages in arrears of 2.5% or more dipped below the 100,000 mark.

There were 96,200 loans in arrears at the end of March, falling from 101,700 recorded at the end of December. What’s more, this was significantly down on the 111,200 recorded in the first quarter of 2015.

The decline in mortgage arrears and repossessions in recent years underlines the positivity surrounding the private rental sector. However, further data from the Ministry of Justice shows that eviction rates are much higher.

Statistics show that there were 42, 728 rental evictions in England and Wales by county court bailiffs in 2015. This was against just 5,594 mortgaged property repossessions by county court bailiffs.

Rental arrears and repossessions fall in Q1 of 2016

Rental arrears and repossessions fall in Q1 of 2016

Experiences

A more detailed look at the CML data highlights experience in both the home-owner mortgage market and the buy-to-let market. Arrears rates are greater amongst home-owners than buy-to-let landlords, but the repossession rate is less. Lenders obviously look to avoid repossessions to allow home-owners breathing space. However, many landlords look to protect their position more quickly on buy-to-let as tenants move on.

CML director general Paul Smee commented, ‘we cannot completely avoid the risk of any individual household experiencing arrears or repossession. But lenders continue to work very effectively to help their borrowers through periods of difficulty when they do occur and borrowers should be reassured that most cases of arrears can be resolved and will not lead to repossession.’[1]

Smee believes, ‘the key to dealing with difficulty is to tackle it early and to communicate with your lender as soon as you think you may be facing problems.’[1]

[1] http://www.propertyreporter.co.uk/property/repossessions-and-arrears-continue-to-fall.html

 

Buy-to-let leads other asset classes

Published On: May 12, 2016 at 9:17 am

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Record-low mortgage lending rates, unshakeable demand from tenants and increasing rental yields have lead many people to turn to buy-to-let investment as a viable means of supplementing their regular income.

Poor returns from banks and building societies have also contributed to a rise in buy-to-let activity.

Performance

Buy-to-let investment continues to outperform all major asset classes. With the population of Britain set to drive demand, rental prices look set to soar even further.

The most recent PPRMI buy-to-let index for Property Partner indicates that residential property continues to thrive as an asset class. Returns on buy-to-let property are continuing to outstrip those generated by shares, bonds and cash investment.

Data from the Index shows total returns from buy-to-let property in England and Wales increased by an average of 9.6% over the last year. This was driven by gains in London, where buy-to-let landlords saw typical yields total 16.5%.

Increases

‘Total returns for residential property crept up to 9.6% in the year to March, as investors rushed to beat April’s stamp duty deadline. This was especially true of London, where annual returns were in double digits, reaching an eye-watering 16.5%. The East was strong too and from firsthand experience the Northern Powerhouse regeneration plan is boosting investment activity in the North West and in particular Manchester.’[1]

Despite the fragile nature of monthly figures, the report indicates clear regional disparities in the housing market. Yorkshire and the Humber and the North East regions in particular are looking extremely fragile.

‘Investors are understandably showing caution ahead of the EU referendum. But the fundamentals-high employment, wage growth, cheap borrowing and the chronic shortage of supply-remain in place and are positive,’ Mr Weaver continued.[1]

Buy-to-let leads other asset classes

Buy-to-let leads other asset classes

Substantial returns

Alternative research conducted late last year by economists at the Wriglesworth Consultancy for lender Landbay indicated that buy-to-let landlords have gained returns of around 1,400% since 1996.

This figure is significantly greater than other mainstream investments, such as shares, bonds and monetary transactions. With existing poor supply of housing failing to quell demand, present signs indicate that this growth will continue.

Additional data from HomeLet shows that typical rents in the UK outside of London stand at £764 per month, a rise of 5.1% year-on-year. The investigation found that rents rose in 11 out of the 12 regions of Britain annually in the three months to April 2016. The North West of England was the only region to see a fall, albeit of just 1%.

Martin Totty, chief executive of Barbon Insurance Group, Homelet’s parent company, noted, ‘rental price growth in most areas of the country is unchanged from the trends observed over almost three years.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/buy-to-let-returns-top-all-other-asset-classes