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Buying in to build-to-rent

Corporate landlords are tapping into healthy demand for rented property in the UK.

Professional landlord Tipi is urging people to “join the rental rebellion”. Its Soviet-style advert shows a clenched fist holding a key, and the tagline boasts that it is “throwing the rental rule-book out of the window and making renting better for everyone”. Its competitors have similarly utopian slogans. Get Living offers people “a new way of renting”, while Fizzy promises that it is “reinventing renting” with “zero faff”.

These companies are part of the fast-growing build-to-rent sector in the UK, where corporate landlords, often institutional investors, rent out flats in purpose-built towers. These flats are a cut above your typical grotty flatshare: they often come with access to posh gyms, cinemas and additional security. The build-to-rent model is already very popular in the US, but until recently it had been slow to take off in the UK.

The build-to-rent trend crosses the Atlantic

At the end of March there were more than 30,000 completed build-to-rent properties in the UK, according to estate agent Savills. This is an increase of 34% on the same time last year. When you include properties under construction or in planning, the total number of build-to-rent homes increases to 140,000, with the average scheme in planning comprising more than 320 flats.

There are several reasons why build-to-rent is becoming more popular in the UK. Clearly there is a shortage of affordable housing, whether for people to buy or rent, with housebuilding not keeping up with demand. In an effort to level the playing field between landlords and private buyers, the government cracked down on the buy-to-let sector, making it increasingly difficult for landlords to make money from it. As a result, landlords have left the sector in droves, further reducing the supply of rental properties (the number of landlords has fallen by 120,000 in the past three years, according to estate agent Hamptons International).

Yet, over the past ten years the number of rental households has increased by 74% to 4.7 million. So American-style corporate landlords are entering a market with healthy demand – either from people who might have accepted they’re not in a position to buy property, or who don’t want the commitment of home ownership but will pay for a slick rental flat in a fancy block. And it is a lucrative business. On average, the rent on build-to-rent flats is 11% higher than surrounding rented homes, according to an analysis of 25 rental schemes by real-estate services firm JLL. And investment in this sector is going mainstream. For example, investment bank Goldman Sachs recently made its first foray into build-to-rent, putting £184m into what is set to be Birmingham’s largest residential tower. By 2025, investors will have allocated £75bn to the professionally managed private-rented sector, says estate agent Knight Frank.

One way to invest in the build-to-rent trend is through Grainger (LSE: GRI). Grainger is the UK’s largest private landlord with 8,237 units in cities such as Manchester, Birmingham and London. In April it signed a deal with Transport for London to build 3,000 properties above and around Underground stations. Between 2017 and 2018, the group’s earnings grew by 26% to £94m, partly driven by like-for-like rental growth of 4%. Grainger’s shares currently trade at a discount of around 20% to net asset value.

By: Sarah Moore

Source: Money Week

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London house prices suffer UK’s steepest annual fall ahead of original Brexit deadline

House prices in London plunged 1.9 per cent in the year to March, the largest annual fall in the country, ahead of the UK’s original Brexit date.

UK-wide house prices jumped 1.4 per cent over the twelve months, but in London the average property price fell almost two per cent to £463,000, according to HM Land Registry figures.

Homes in the capital also fell 0.4 per cent month-on-month in March as the drop continued in the run up to the anticipated Brexit date of 29 March.

Despite the fall, the figures show an improvement on the 2.7 per cent annual drop to February.

Former RICS residential chairman and north London estate agent Jeremy Leaf said: “Once again, we are seeing London acting as a drag on the rest of the UK housing market as despite improvements in affordability, almost record low mortgage rates and unemployment, combined with a shortage of stock.

“With prices down one month, up the next – no real pattern has emerged.”

Chief executive of online estate agent Housesimple, Sam Mitchell, said the data provided a “distorted picture” as they were based on sales completed during peak Brexit chaos.

He said: “January and February, when offers would have been made for March completions, was approaching the eye of the Brexit storm.

“That uncertainty, and the political squabbling in Parliament, fed through to buyer and seller confidence, particularly in London and surrounding areas.”

He added: “The market has now settled down, and with the EU leave date extended to the end of October, we are expecting more buyers and sellers to take advantage of this Brexit limbo, and relatively calm market conditions, to proceed with sales and purchases.”

By Callum Keown

Source: City AM

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Property transactions dip in April

The number of residential property transactions in April fell on a monthly basis but were up from the same month a year ago, data shows.

Year-on-year, the seasonally adjusted number of property sales rose by 0.8% from 98,620 in April 2018.

Non-residential property transactions

The number of non-residential property sales in April was up on both a monthly and yearly basis.

Year-on-year, transactions rose by 7.1% last year to 11,300 from 10,550 in April 2018.

On a monthly basis, these sales saw a rise of 9.5% from March 2019 where they stood at 10,320.

Investors’ confidence brings transactions up

Joshua Elash, director of property lender MT Finance, said that it comes as no surprise to see transactional volumes in the residential space falling month-on-month.

“We expect this trend to continue while uncertainty over Brexit specifically impacts the end-user market and overly aggressive tax treatment continues to dampen investor activity and appetite.

“However, it’s a tale of two cities as investors turn instead toward commercial property where yields remain attractive and less oppressive tax policies support and encourage investment. Whatever the Brexit debate, investors are buying into commercial property and it is great to see confidence in this sector translating into transactional growth.”

Adrian Moloney, sales director at OneSavings Bank, said: “With house price growth stalling and in some areas falling, and take home pay packets increasing, there are tentative signs that some prospective buyers are taking the opportunity to purchase their first home.

“Nonetheless, caution has not been entirely cast aside as we are unlikely to see any significant activity without more housing stock and some closure to the political and economic uncertainty which is still in the back of many buyers’ minds.”

Written by: Antonia Di Lorenzo

Source: Your Money

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April property transactions remain stagnant

Residential property transactions remained stagnant in April but increased slightly on last year’s figures, latest official data has shown.

In its UK property transactions statistics report released today (May 21), HM Revenue & Customs estimated 99,420 residential and 11,300 non-residential transactions were made in April.

April’s seasonally adjusted residential figure saw a slight drop on the previous month — 0.3 per cent — but increased by 0.8 per cent on the same month the previous year.

The findings reflect last week’s (May 16) figures from UK Finance, which showed the number of consumers borrowing to buy a new property in March was down across first-time buyers, home-movers and buy-to-let purchases when compared with last year.

According to today’s report, non-residential transactions were up on March’s figure by 9.5 per cent and increased by 7.1 per cent compared to last year.

Kevin Roberts, director at Legal & General Mortgage Club, said the figures showed that despite government schemes and greater innovation in the mortgage market, property transactions continued to stagnate.

He said: “To really see a boost, we need to fix our country’s imbalance between supply and demand by building more homes. Not only for first-time buyers, but across all housing tenures – young and old, renters and homeowners.

“As an industry, we are working to provide the solutions needed but we also need to ensure the government is increasing supply and making the UK housing market accessible for all.”

But Joshua Elash, director of property lender MT Finance, said it came as no surprise to see transaction numbers dropping month-on-month in the residential space.

He said he expected this trend to continue while uncertainty over Brexit continued to impact the market for consumers and while “overly aggressive tax treatment” continued to dampen investor activity and appetite in the buy-to-let market.

Meanwhile head of lending at Mortgage Advice Bureau, Brian Murphy, said the figures demonstrated a level of consistency in the market.

Mr Murphy added: “While the number of sales last month doesn’t equate to a ‘spring surge’ by any means and is down slightly on the previous month, equally they potentially point to a degree of resilience in the face of ongoing political headwinds.

“[The figures] indicate that the market continues to turn over steadily, rather than any dramatic peaks and troughs, which many may suggest is no bad thing.”

By Imogen Tew

Source: FT Adviser

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UK housing market weathers Brexit clouds, but sharp gains unlikely – Reuters poll

Britain’s expensive housing market has so far weathered the uncertainty swirling around the country’s planned departure from the European Union, but average prices are unlikely to rise sharply and will fall in London this year, a Reuters poll found.

Nearly three years ago Britons surprised most of the world when they voted to split from the EU, yet it is still unclear how, when or even if the two sides will part ways.

Prime Minister Theresa May said on Sunday she would make a final attempt to get her Brexit divorce deal through parliament before she leaves office, something she has failed to manage three times already.

With no resolution in sight, Brexit uncertainty has affected property prices in the capital – long a magnet for foreign speculators – as people have shied away from investing, despite a fall in sterling since the referendum making UK housing a relatively cheaper investment.

Real estate agent Foxtons, which focuses on the London market, said on Monday UK property sales were running at record lows due to the impact of Brexit on consumer confidence.

According to the May 10-21 Reuters poll, prices will drop 2.0% in London this year, the same median forecast given in a February survey.

But that might not be a bad thing for buyers. When asked to describe the level of London house prices on a scale of 1 to 10 from extremely cheap to extremely expensive, the median response was 8.5, higher than in previous surveys. Nationally they were rated 6.0.

“It’s the same old story – housing is cheap for those with some capital behind them, given low funding costs, but very expensive in terms of the income multiple,” said Peter Dixon at Commerzbank.

The average annual British salary is about 30,000 pounds ($38,100) and yet the average asking price for a home in Britain was 308,290 pounds this month, and more than double that in London, property website Rightmove said.

For those already on the property ladder, borrowing money is cheap. The Bank of England has set Bank Rate at 0.75 percent and is not expected to raise it any time soon. [ECILT/GB]

YOU AIN’T SEEN NOTHING YET

Looking nationally, over 80% of respondents to an extra question in the poll said the housing market had so far weathered the Brexit uncertainty and price rises are expected to prove fairly robust.

Home values will gain 1.2% nationally this year – lagging expectations for general inflation – 2.0% next year and 2.5% in 2021, the poll of 23 housing market watchers said.

“The UK market has remained remarkably resilient,” said Russell Quirk at property website Vyomm.com. “So, just imagine the enormity of the ‘happy-ending’ that will prevail when the current political paralysis ends.”

Economists in another Reuters poll conducted earlier this month said Britain would eventually agree a free trade deal with the EU and London home prices are expected to rise 1.0% next year and 2.5% in 2021.

However, as negotiations to leave the club Britain joined in 1973 have proved protracted it does not bode well for when talks over future deals with global partners need to be agreed. Over three-quarters of respondents to an additional question said the risks to their forecasts were to the downside.

“Whilst everyone is conscious of Brexit we face a further 2-3 years after the Brexit Agreement to deal with the so-called implementation phase,” said independent buying agent Henry Pryor. “If you think getting the Withdrawal Agreement done was hard work, I expect you ain’t seen nothing yet!”

Polling by Sarmista Sen and Hari Kishan, Editing by William Maclean

Source: UK Reuters

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London house prices: How Brexit uncertainty has hit house prices in every borough

London is “acting as a drag” on the rest of the UK housing market, with prices across the capital falling in the last year, according to new figures from property giant Rightmove.

While some regions in the UK such as the midlands and the north west started to kick the Brexit uncertainty that has gripped the housing market in recent years, Greater London average asking prices fell 2.5 per cent annually.

A sales slump in central London saw average asking prices fall 3.8 per cent annually to £757,773 in inner-city areas, while the average in outer London, including cheaper boroughs such as Bexley, Barking and Dagenham fell 0.9 per cent to £512,726.

This came despite the annual spring surge in prices, which only drove Greater London up 1.2 per cent on a monthly basis.

The slumps compared to a record-breaking year in other parts of the UK, however, as average asking prices in Wales, the Midlands and the north west of England bucked any Brexit blues to hit all-time highs, Rightmove found.

London boroughs

Worst hit in the capital was Westminster, where average asking prices fell 6.3 per centannually – but still clocked in at an eye-watering £1.4m. The same was true of Britain’s most expensive area to live, Kensington and Chelsea, where average asking prices fell 3.9 per cent year-on-year to £1.6m.

Kensington And Chelsea Street, Egerton Crescent Named Most Expensive For Second Year Running
Kensington and Chelsea saw a 3.9 per cent annual fall (Source: Getty)

The only boroughs to see an annual rise in average asking price were Bexley and Barking and Dagenham, two of London’s cheapest areas. Bexley rose 0.6 per cent to £408,233, while Barking and Dagenham rose 0.9 per cent to £316,839.

Meanwhile in zones one and two, Lambeth fell 4.7 per cent to £632,590Hackney fell 4.9 per cent to £626,000 and Tower Hamlets fell 6.1 per cent to £559,475.

Jeremy Leaf, north London estate agent and a former Royal Institution of Chartered Surveyors (Rics) residential chairman, said: “London is acting as a drag on the rest of the UK housing market and prices don’t include inflation so have risen or fallen further in real terms.

“The spring bounce is taking place but not reaching to the heights we would have expected and certainly not in the capital.”

Borough

Avg. price May 2019

Monthly change

Annual change

Barking and Dagenham £316,839 1.0 per cent 0.9 per cent
Bexley £408,233 1.2 per cent 0.6 per cent
Hammersmith and Fulham £931,171 0.9 per cent -0.2 per cent
Sutton £470,697 2.5 per cent -0.3 per cent
Southwark £634,232 -1.8 per cent -0.5 per cent
Islington £770,123 1.1 per cent -0.8 per cent
Hillingdon £492,585 1.7 per cent -0.9 per cent
Bromley £530,492 0.5 per cent -0.9 per cent
Waltham Forest £481,926 0.8 per cent -1.0 per cent
Enfield £457,398 0.8 per cent -1.2 per cent
Ealing £555,611 0.8 per cent -1.4 per cent
Havering £406,075 -1.2 per cent -1.5 per cent
Brent £577,818 1.5 per cent -1.5 per cent
Camden £980,210 1.2 per cent -1.5 per cent
Newham £407,868 -0.3 per cent -1.8 per cent
Merton £645,116 2.7 per cent -2.0 per cent
Hounslow £540,484 -0.9 per cent -2.0 per cent
Croydon £437,195 1.2 per cent -2.2 per cent
Kingston upon Thames £610,076 0.4 per cent -2.3 per cent
Harrow £549,634 0.4 per cent -2.3 per cent
Redbridge £451,503 -0.4 per cent -3.2 per cent
Richmond upon Thames £832,012 2.7 per cent -3.3 per cent
Wandsworth £793,014 -2.4 per cent -3.5 per cent
Lewisham £464,200 1.3 per cent -3.5 per cent
Barnet £639,192 0.7 per cent -3.5 per cent
Greenwich £441,287 -0.1 per cent -3.5 per cent
Haringey £602,170 -0.1 per cent -3.7 per cent
Kensington and Chelsea £1,590,380 4.8 per cent -3.9 per cent
Lambeth £632,590 0.8 per cent -4.7 per cent
Hackney £626,095 0.1 per cent -4.9 per cent
Tower Hamlets £559,475 -0.5 per cent -6.1 per cent
Westminster £1,400,270 -1.7 per cent -6.3 per cent

The rest of the UK

The rest of the country painted a very different picture, according to Rightmove.

For homes coming to market this month in Wales, the Midlands and the north western England, average asking prices hit all-time highs, as a shortage of demand pushed prices up.

Wales broke through the £200,000 barrier for the first time ever, at £200,386, rising 4.1 per cent year-on-year, while houses in the west Midlands rose three per cent to £232,247.

Travel Images Of Manchester
The north west of England, including Manchester (pictured) saw an annual rise in prices (Source: Getty)

But for those commuting into central London from outside the capital, prices fell. In the south east of England, the annual average asking price fell 1.1 per cent to £407,239.

Rightmove director Miles Shipside said buyers were largely ignoring Brexit, with buyers spurred into action in the record-breaking regions.

“Despite the ongoing political uncertainty, agents are reporting that the lure of the right property at the right price still attracts good interest. In spite of some of the challenges in the market, interest in property remains very high,” he said.

By Alex Daniel

Source: City AM

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UK house price growth eases, London a drag

UK house price growth slowed in May, while all but two London boroughs saw a decline, according to the latest survey from Rightmove.

House prices rose 0.9% on the month in May compared to a 1.1% increase in April. On the year, prices were 0.1% higher, versus a 0.1% drop the month before.

Rightmove said four out of 11 regions were “bucking the Brexit blues”, with Wales, the West and East Midlands and the North West all setting new asking price records for newly-marketed property.

However, in the capital, just two of the 32 boroughs – Barking and Dagenham and Bexley – saw prices increase.

Mile Shipside, Rightmove director and housing market analyst, said: “Price increases are the norm at this time of year, with only one fall in the last ten years, as new to -the-market sellers’ price aspirations are under pinned by the higher buyer demand that is a feature of the spring market.

“Indeed the 0.9% monthly rise is consistent with the previous two years’ average rise of 1.0% over the same period. What will seem inconsistent to some, given the ongoing uncertainty of the Brexit outcome, is that four out of eleven regions have hit record highs for new seller asking prices.”

North London estate agent and former RICS residential chairman, Jeremy Leaf, said: “Asking prices are not selling prices, which explains why some of these figures do not match results from other recent housing surveys. Overall, although there has been little change, that masks some considerable regional differences. For instance, London is acting as a drag on the rest of the UK housing market and prices don’t include inflation so have risen or fallen further in real terms.

“The spring bounce is taking place but not reaching to the heights we would have expected and certainly not in the capital.

“Looking forward, we are not expecting significant changes one way or the other, at least until Brexit is clarified.”

By Michele Maatouk

Source: ShareCast

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Scots property market attracts new investors

The Scottish property market is attracting a growing number of investors from England as landlord returns outperform the rest of the UK, according to a Helensburgh-based training company.

Touchstone Education, which runs courses in property investment across the UK, found that 78 per cent of its clients believe the greatest investment opportunities exist north of the Border.

In contrast, 50 per cent said they intend to target London, while 53 per cent opted for the south-east and 49 per cent for the south-west of England.

Touchstone pointed to rising rental yields in Scotland, which continue to grow while performance across the rest of the UK has flatlined.

The latest Your Move Scotland Rental Tracker showed average rents increased 1.8 per cent in the past 12 months to reach an average of £580.

Properties generated an average investment yield of 4.7 per cent in March – a six month high – while remaining unchanged in England and Wales.

Touchstone chief executive Paul Smith said: “Central Scotland is now the focus of a great deal of activity. Edinburgh has always provided consistent returns, but Glasgow is now the city that’s setting the pace.

“There’s a great deal of excitement about its growing tech, creative and financial services sectors which are attracting young, affluent workers from elsewhere in the country.

“The main exception in Scotland is, of course, Aberdeen whose property market continues to be negatively affected by the downturn in the oil and gas industries.”

By HANNAH BURLEY

Source: Scotsman

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London house price growth falters despite annual spring surge

House prices in London remain down year-on-year despite the annual spring surge, driven by a slump in inner city sales, according to property website Rightmove.

Greater London recorded a monthly rise of 1.2 per cent, equivalent to £7,339, pushed largely by outer London properties that rose 1.9 per cent. Inner London prices, meanwhile, registered a bump of just 0.6 per cent.

“Price increases are the norm at this time of year, with only one fall in the last ten years,” Rightmove’s housing analyst Miles Shipside said.

“New seller asking prices have risen at this time of year for the last four years, and this year it seems that sellers in outer London are leading the way in asking for higher prices. Given the uncertain state of the London housing market in both London and its surrounding commuter belt, it remains to be seen how successful they will be.”

Compared to 12 months ago, homes in outer London are 0.9 per cent cheaper, whereas prices in inner London have fallen by 3.8 per cent. Homes in Greater London were, on average, £16,157 – 2.5 per cent – cheaper than they were a year ago, and cost, on average, £621,589.

All but two boroughs have new sellers asking less on average than a year ago. Only Barking and Dagenham (+0.9 per cent), in east London, and Bexley (+0.6 per cent), in the south east, have held their year-on-year value, and they were the two cheapest boroughs last month.

Nationally, the more active spring market prompted a modest increase to an average asking price of £308,290, a rise of 0.1 per cent in the past 12 months.

“I’ve noticed an increase in viewings and offers over the last few weeks,” Jak Kypri, director of Harpers & Co Estate Agents in Bexley, said. “I think it’s because there is less talk about Brexit. Things have calmed down now; they all went away for Easter, the sun is shining, people are cutting the grass in their gardens, the country seems slightly less tense.”

Rightmove’s monthly price index measured 133,690 asking prices this month, about 90 per cent of the UK market.

By Sam Buckingham-Jones

Source: City A.M.

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First-time buyer purchases down 2.4%

The number of consumers borrowing to buy a new property was down across first-time buyers, home-movers and buy-to-let purchases in March, when compared with last year.

UK Finance’s mortgage lending trends, published today (May 16), showed there were about 28,800 first-time buyers with new homes in March — 2.4 per cent fewer than in the same month in 2018.

According to the trade body, this was the first month there had been a year-on-year decrease in first-time buyers since September 2018.

There was also a decline in the number of completed home-mover mortgages, which fell by 6 per cent to 25,280 compared to March 2018.

Mark Harris, chief executive of SPF Private Clients, said: “The decrease in number of first-time buyers after continuous growth over the past six months is a concern, and let’s hope it is just a blip in the numbers.

“First-time buyers are so important for the overall health of the housing market, ensuring transactions further up the chain can happen.”

The remortgage market continued to fare better however and in total, there were 4.1 per cent more residential remortgages in March than in the same month the year before.

Within this, there was a rise in the number of those who borrowed more money through their remortgage — up 9.1 per cent to 16,810 — while ‘pound for pound’ remortgages, where the consumer does not borrow any more money, dropped slightly by 1.1 per cent to 15,030.

This was the twelfth consecutive month of year-on-year growth in remortgaging and, according the UK Finance, this reflected the number of fixed-rate deals that are coming to an end as borrowers actively search for better, more attractive rates.

The remortgage market also grew in the buy-to-let sector but the purchase market declined.

About 5,000 new buy-to-let purchase mortgages completed in March, which was 9.1 per cent fewer than in the same month in 2018, while the number of remortgages increased by 3.9 per cent year-on-year to 14,400.

UK Finance stated the buy-to-let house purchase activity continued to contract due to tax and regulatory changes.

Gareth Lewis, commercial director of property lender MT Finance, agreed.

He added: “Remortgaging is up as those who bought before stamp duty hikes were introduced in 2016 are now remortgaging their fixed rates onto another competitive deal.

“Borrowers are taking out longer-term fixes on residential and buy-to-let deals as they protect themselves from wider uncertainty.”

In January, the Intermediary Mortgage Lenders Association warned that landlords would start to feel the pinch of new regulation in their tax returns for the first time, included the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016 and cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said despite potentially disappointing numbers, there were no significant movements one way or the other.

He said: “[These figures] reflect what we are seeing at the coalface — it is a bit busier one month but down the next and then up again.

“It is no surprise either that buy-to-let mortgages are continuing their downwards trend as landlords face an onslaught of tax and regulatory changes with more on the way.

“We are finding buy-to-let remortgaging increasing is down to properties having to work harder in order to maintain profit levels so this is likely to continue.”

By Imogen Tew

Source: FT Adviser