Posts with tag: Buy-to-Let

How will the property market change in 2016?

Published On: January 11, 2016 at 1:59 pm

Tags: Buy-to-Let,first time buyers,landlords,property market,rental market

2016 looks to be a key year for the property market. Certainly, there is much more to consider than whether property prices will go up or down!

It looks increasingly likely that the Bank of England will follow the decision of the US Federal Reserve and raise interest rates in the coming months.

So just who and what will be most affected in the market over the coming year?

Landlords

Unfortunately, it seems as though buy-to-let landlords will see a particularly difficult 2016.

Stamp Duty

One alteration certain to have an impact on the market is the stamp duty hike coming into force on April 1^st. Buy-to-let landlords and property purchasers buying a home that is not their main residence will face an extra cost of 3% in tax.

It is suggested that these changes will deter some potential buyers. With sales and mortgages being revived over recent years, the property market is set to receive some setbacks in 2016.

Tax Breaks

On top of stamp duty rises, a reduction in tax break privileges has been slated for, after an announcement in the Chancellor’s summer budget

What’s more, the Bank of England has indicated that it wants power to limit lending to buy-to-let borrowers and it appears likely that the Chancellor will side with this view.

The Government seemingly puts the blame for lack of affordable housing at the feet of private landlordism, with a booming private rental sector seeing potential home-owners out in the cold.

Buy-to-let

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS) noted that, ‘the Government is very motivated to reverse the trend in owner-occupation-this is now a very important part of the Government’s housing strategy.’[1]

‘Buy-to-let landlords have had a very good run-holding property has been a very lucrative investment, so if the Government has to squeeze the buy-to-let landlord it will take that in it’s stride,’ Rubinsohn added.[1]

Property commentator Henry Pryor called the moves, ‘an extraordinary about-turn for landlords.’ He went on to say, ‘because rents are unlikely to rise to compensate for the increase in stamp duty, capital values are likely to fall-which is the Government’s intention.’[1]

How will the property market change in 2016?

Right to Rent

Just next month on February 1^st, the controversial Right to Rent scheme will be rolled out in full across the country. Landlords will be responsible for checking the immigration status of potential tenants and could be fined up to £3,000 for non-compliance.

Pryor suggests, ‘many landlords are finding this is a rather frightening prospect and are talking of giving up as a result.’[1]

The Council of Mortgage Lenders forecasts that the number of new loans made to landlords will dip substantially, from 116,000 in 2015 to 90,000 in 2017.

Mortgages

It is now nearly seven years since the Bank of England cut interest rates to a record low of 0.5%. From then, economists have predicted that rates would begin to rise again, but have consistently been wrong.

However, it looks as though 2016 could well be the year where rates do eventually rise. The majority of independent economists believe that the first rises since July 2007 will occur in this year and will come in two increments of 0.25% each.

Ed Stansfield, forecaster at Capital Economics, thinks, ‘the economy is probably a little bit healthier than the collective wisdom of the Bank’s Monetary Policy Committee thinks. We think that one of the things that will convince the Bank to act is continued signs that incomes are recovering.’[1]

Thankfully, a growth in incomes should soften the blow of any interest rate hike.

Troubled Times

For many years, the low base rate has led to very low mortgage rates, making large mortgage rates seem affordable.

Schemes such as Help-To-Buy have buoyed house prices and sales, meaning many thousands of potential homeowners have received money to buy a property when previously they would not have been able to do so.

A steady growth noted in the economy, coupled with rising employment and income, means that prices and sales should remain at least even.

However, Ray Boulger, of mortgage brokers John Charcol, suggests that there could be some turbulence in the early months of this year. He believes that many people will rush to purchase buy-to-let property before the higher rates of stamp duty take effect.

‘Those people who want buy-to-let properties are clearly going to be incentivised to complete before 31 March. Till then I think we will see some quite strong growth in prices, then I expect to see prices falling for the next few months as that element of demand is taken out of the market,’ Boulger added.[1]

[1] http://www.bbc.co.uk/news/business-35135639

Time ticking to avoid Stamp Duty hike deadline

Published On: January 10, 2016 at 10:08 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,landlord,landlords,Stamp Duty

Buy-to-let investors are being warned that time is already running out for purchases to go through before the 3% Stamp Duty charge takes effect on April 1^st 2016.

One mortgage business in particular believes that it takes an average of 95 days for a buy-to-let mortgage application to be completed. From today, there are just 79 days until the new legislation comes into force, meaning agents, valuers, conveyancers et al face an extremely busy period.

Completions

Keystone Buy to Let Mortgages has urged brokers to submit applications as soon as they can in a joined effort to try and ensure that cases are completed in time. In addition, the business said that they will prioritise all applications submitted before the 29^th January.

David Whittaker, MD of Keystone, said, ‘since the surcharge was announced we have been preparing for an increase in applications, making sure that systems are in place and staff are ready.’[1]

Time ticking to avoid Stamp Duty hike deadline

‘We have also been working closely with our valuers and solicitors to ensure that they too are prepared for what we anticipate will be a very busy period. Getting purchase applications over the line before April 1^st is our priority. It will save borrowers thousands of pounds,’ he continued.[1]

Concluding, Whittaker said, ‘the deadline will give us a little over eight weeks to take cases from submission to completion. In most instances, that will be do-able-even for limited company applications which, because they require a greater underwriting skillset, can take longer to process.’[1]

[1] http://www.propertyindustryeye.com/clock-already-ticking-for-buy-to-let-deals-to-escape-stamp-duty-penalty/

Flatsharing is answer to save cash-Rightmove

Published On: January 8, 2016 at 11:38 am

Author: Em Morley

Categories: Finance News

Tags: Buy-to-Let,flatsharing,rents,tenants

Save-to-buy renters can save up to £210 per month for a deposit by flatsharing, according to a new report by Rightmove.

Newcastle was found to be the city offering most value, with a two-bed flat just 11% more expensive than a one-bed.

Rises

Average asking rents were found to have increased in all regions during 2015. This was particularly felt in the East of England, where rental increases were higher than anywhere else in Britain. Rents here rose by 6.5%, compared to 0.5% in London.

Rightmove also hinted at a strong start to 2016, announcing that page views for both sellings and lettings increased by 22% over the Christmas period, in comparison to 2014. Renters in Bristol, Birmingham and Manchester were most likely to put down their mince pies to look at the site.

The traditional seasonal fall in quarter four couldn’t prevent all regions ending 2015 with an annual rise in rental costs. However, Rightmove believe that flatsharing is the answer to a number of tenants’ financial problems.

Cost-effective

In Newcastle, a typical one-bed flat sets a renter back £553 per month, with an average two-bed costing just £614. This indicates a possible saving of £246 per month, should a renter choose a two-bed with a housemate.

‘The potential saving of renting and sharing a two-bed rather than a one-bed flat is before factoring in reduced costs from splitting the bills,’ noted Sam Mitchell, Rightmove’s Head of Lettings. ‘It could be a good option for renters looking to save up for a deposit to buy or other financial commitment. The Government has various well-publicised initiatives to encourage the home-ownership that some tenants would love to achieve and while sharing can have its pitfalls it is a potentially lucrative solution.’[1]

Neighbouring Gateshead offers the second best value for a two-bed flat in comparison to a one-bed, with the difference being 11.3%. In Swindon, a two-bed flat is 16.9% more expensive, in Bracknell 18.7% and in Milton Keynes 20.5%.

Flatsharing is answer to save cash-Rightmove

Highs

Mitchell went on to say, ‘demand from tenants is at an all-time high and the amount of properties available to rent hasn’t been keeping pace. This has led to more people considering house sharing, a trend that is already very common in London and now growing in other areas. Rather than look at house shares or studios, tenants could team up with friends and look at bigger flats in some of these best value areas, they just need to make sure they’re aware of their legal obligations when signing a joint tenancy agreement. For those that want to buy but are struggling to save a deposit this could help speed up the savings process.’[1]

Concluding, Mitchell observed that, ‘after a 7.8% annual rise in London asking rents last year, a slowing of the rate of growth was due as more and more tenants found their affordability stretched. Outside of the capital last year rents rose by just 0.3%, so this year’s 3.8% could be a result of more professional renters moving into areas outside of London, to sought-after cities like Bristol and Birmingham. Looking ahead to 2016, it’s likely there will be an initial injection of supply onto the market as investors rush to complete purchases before the stamp duty change in April, so renters thinking about moving could find they have a better choice early in the year. From April onwards, we could see a restriction in supply which could feed through into even higher rents. [1]

[1] http://www.propertyreporter.co.uk/finance/sharing-a-2-bed-flat-could-save-%C3%A3%C2%A2200-claims-rightmove.html

Serious rental arrears up by 13.8%

Published On: January 8, 2016 at 10:12 am

Author: Em Morley

Categories: Finance News

Tags: Buy-to-Let,landlords,rents,tenants

A concerning new report has indicated that the numbers of tenants in significant rental arrears has risen significantly during the third quarter of the year.

The latest Tenant Arrears Tracker from estate agency pairing Your Move and Reeds Rains indicates that the number of tenants behind on rent has increased by 13.8% in the three-month period.

Behind

According to the report, there are now 84,200 tenants in excess of two months behind with rental payments, in comparison to 74,000 in the second quarter. Annually, this represents a rise of 13,2000 households, or 18.6% from the same period in 2014.

Historically however, the latest drop in arrears remains fairly mild and a long way below the 116,600 recorded in the second quarter of 2012. Worryingly, the figures for quarter three of 2015 represent the highest levels in more than two years.

Adrian Gill, director of estate agents Your Move and Reeds Rains, notes, ‘the chance of an individual tenant falling into serious arrears remains very low.’ He believes that, ‘in general, renting works for most people. Over the last decade the private rented sector has expanded at an unprecedented pace, providing homes for millions of households at the same time as absorbing the worst financial crisis in living memory.’[1]

‘In the current climate, optimism feels increasingly reasonable. Most households are beginning to earn more, the cost of living is stable and the chance of falling into unemployment is diminishing. For the majority of tenants, paying the rent is becoming easier rather than harder. But beneath this rising tide there are inevitably some households and individuals who are not yet feeling any new economic buoyancy. As others bid rents higher there will be a minority who are still struggling to keep up. Landlords and tenants have a mutual responsibility to be aware of this small but significant risk,’ Gill continued.[1]

Serious rental arrears up by 13.8%

Evictions

Higher levels of serious rent arrears are yet to be mirrored by rates of eviction. The Tenant Arrears Tracker shows that in the third quarter of 2015, there were 26,712 court order regarding the eviction of tenants. This was 4.3% less than in the second quarter of the year, where eviction orders totalled 27,909.

In addition, there were 7.8% fewer evictions than at the same time in 2014, where the total stood at 28,959.

Gill continued by saying, ‘landlords and buy-to-let lending have been targeted from a variety of angles in 2015-under a harsh political spotlight, subject to new taxes and freshly scrutinised by regulators. There could be a real debate about the role of landlords and indeed the urgent need for more investment to keep up for demand for homes to rent. However this should be done constructively-and any worriers about the financial health of landlords should consider the reality of buy-to-let mortgage arrears at record lows.’[1]

‘In the context of resurgent tenant arrears, landlords are the buffer delaying a parallel peak in evictions. And healthy landlord finances make that tolerant approach more likely. So while penalising landlords may win easy political points, making investment in new homes to let harder could be counterproductive-especially in the face of new challenges,’ he concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/serious-rent-arrears-up-138.html

New Year’s Property Resolutions

Published On: January 7, 2016 at 2:36 pm

Author: Em Morley

Categories: Property News

Tags: Buy-to-Let,landlords,letting agents,new years resolutions,property

A run has been put off. A small glass of wine has been poured. A chocolate bar wrapper is all that remains…

2016 is already 7 days old. For many of us, New Year’s resolutions have already been broken. However, there is still time to make amends!

Whether you are a landlord, agent or would-be property investor, using the following checklist can see you set yourself up for a successful New Year-whatever the status of your previous resolutions!

As always, planning is paramount to a successful outcome, whether selling, purchasing or renovation a rental property.

Owning in 2016

For those looking to invest in a property in 2016:

Make sensible goals on how much deposit you will save and by when
Draw up a budget to help make goals
Set a maximum price
Think about moving savings into a high interest ISA
Talk to a lender about the amount you can borrow
Locate and research your target area
Compare house prices and typical rents

New Year’s Property Resolutions

Selling in 2016

Look at listings and sales prices in the local area
Make relevant improvements and renovations to the property
Update tired features
De-clutter, put things into storage units and throw away tat!
Tidy and clean gardens

Renovating in 2016

Make a realistic budget
Decide what can and can’t be done to the property
Leave any expertise to the professionals!
Enjoy it! Choosing features from cushions to curtains should be a fun factor as your new decoration begins to take shape

BTL landlords well set to deal with interest rate rise

Published On: January 7, 2016 at 11:55 am

Author: Em Morley

Categories: Finance News

Tags: Buy-to-Let,interest rates,landlords,UK landlords

Buy-to-let landlords in Britain are sure to be pleased with the results of a new survey by YouGov, which suggests that they are well placed to cope with expected higher borrowing costs in the coming year.

In addition, the study found UK landlords are financially resilient, with 75% of those questioned believing they would have no problems paying their mortgage, should a 1.5% rise in the bank rate materialise.

Planning

Over 60% of respondents said that their rental income would stay above their mortgage payments if a rise was to occur, with 40% stating that they already had enough cash saved to cover increased borrowing charges.

The Council of Mortgage Lenders (CML) said that it expects buy-to-let purchases to dip in 2016, but with buy-to-let remortgaging remaining robust.

Data collated by the CML from lenders accounting f or 90% of new lending suggests that the typical stressed mortgage rate being used by the industry has risen by 50 basis points to between 5.6% and 5.7%.

Bob Pannell, chief economist at the CML, believes that landlords have a list of range of strategies for coping with increased mortgage costs. He says that these include the positive cash flow provided by rental payments and access to stored contingency funds.

Dampening

Mr Pannell also pointed out that the number of upcoming tax measures announced in recent months are likely to have a dampening effect on the sector’s future growth prospects.

‘The reduction of tax reliefs available to private landlords from 2017/18 onwards, announced by the chancellor in the summer 2015 Budget, will adversely affect the future cash flows for affected landlords,’ Pannell noted.[1]

He went on to say that, ‘landlords should be able to mitigate the direct financial impact in a number of ways,’ before claiming that, ‘the YouGov research corroborates our view that the overall impact will be to lift rents higher and to narrow the availability of homes in the private rented sector.’[1]

‘The direct effects appear modest, but are likely to be reinforced by the stamp duty changes, announced in the chancellor’s autumn statement. The rapid succession of recent tax changes also risks having a significant indirect effect on investor sentiment, altering the direction of travel for buy to let lending and the further expansion of the private rented sector,’ he continued.[1]

BTL landlords well set to deal with interest rate rise

Future

Statistics from the CML’s latest market forecasts suggest that house purchase activity from buy-to-let landlords will slip in 2016-17. With the significant lags in Government housing initiatives moving to improve further housing supply, questions are being asked about the future of rental accommodation.

‘In this context, macro-prudential intervention, if or when it is applied to buy-to-let lending, carries a significant risk of unintended consequences for the wider housing market. We will continue to work closely with the Bank of England, to reinforce its understanding of the sector and to ensure very careful calibration of any forthcoming measures,’ Pannell concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-buy-let-landlords-2016010611398.html