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Best London Property Investments For Buy To Let

The best London property investments for buy to let have been revealed in the 2018 lettings report from Foxtons.

According to the London lettings agent, the best London property investments over the past year have been three-bedroom apartments, which have seen the biggest year-on-year increase in average weekly rent, growing by 3.9 per cent to reach £658 per week in 2018.

This was followed by one-bedroom flats, up by 2.2 per cent to an average of £366 per week. Two-bedroom flats and studios saw rents rise by 1.6 per cent and 1.5 per cent respectively to averages of £461 and £289 per week.

However, when seeking the best London property investments, it is also preferable to avoid ground floor flats.

According to Foxtons, buy to let landlords renting out standard ground-floor flats are suffering losses, with the ‘rental premium’ – the buying price per square foot compared with the rent per square foot – commanded by such properties down at -9.4 per cent. In contrast, the premium for ‘raised ground floor’ flats (properties above street level, often accessed by a flight of steps) is 6.2 per cent, and a premium of 4.7 per cent was seen for ‘lower ground’ (i.e. basement) flats.

When it comes to location, London property investments in Zone 1 saw the strongest growth in annual rent, though Zone 2 was the most popular with renters.

Zone 1 saw the average rent grow by 3.9 per cent year-on-year to hit £554 in 2018. In Zone 2 rents average £459 per week – an increase of 1.7 per cent – and in Zones 3-6 it’s £394 (2.2 per cent).

Zone 2 properties attracted the most interest from renters, with 41 per cent of the prospective tenants registering with Foxtons in 2018 requesting a Zone 2 location.

By comparison, 29 per cent of tenant registrations were for Zone 1 properties and 30 per cent were for Zones 3 to 6.

Source: Residential Landlord

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UK Investment Property Rental Growth Slowing

Investment property rental growth in the UK is slowing according to the latest Landbay Rental Index.

Annual rental growth in the UK without London is at its lowest point in nearly six years at 1.16 per cent, the lowest since the 1.13 per cent seen in February 2013.

Rental growth in London has seen relative stagnation over the last couple of years since the Brexit vote, but across the other English regions total rental growth has been seven times that of London (3.69 per cent to London’s 0.52 per cent).

However, the latest indications show that the rest of the UK is also seeing a slowdown in rental growth. Wales is currently at the lowest it’s been since April 2014 (1.39 per cent) and in Northern Ireland growth of 0.54 per cent is the slowest since the Rental Index began collecting data in January 2012.

Scotland, however, has seen annual rents grow at 1.66 per cent, having steadily grown over the last six months. The average rent in Scotland is now £746, higher than Northern Ireland (£573), Wales (£656), and creeping up to the English average excluding London (£776).

This Scottish growth is led by high annual growth in Edinburgh City (5.88 per cent), Inverclyde (3.56 per cent), and Glasgow City (2.49 per cent). Only Aberdeen City (-6.62 per cent) and Aberdeenshire (-5.42 per cent) are dampening the Scottish rental growth rate.

CEO and founder of Landbay, John Goodall, said: ‘Falling rents in London have masked relatively strong growth in the rest of the UK since the Brexit vote, but we are now firmly in the midst of a nationwide rental growth slowdown. This may be some relief to renters, but the cost of renting a property remains high. House prices continue to outpace wage growth, dampening the ability of aspiring homeowners to save for a property of their own, meaning demand for rented accommodation remains robust.’

He continued: ‘Rental growth may be slowing, but the pace of change varies wildly between regions. Landlords and brokers alike need to be tuned into these variations in order to maximise their profits, using variations in rental growth and yields over the past year to pick out some of the most promising regions for buy to let. Consistent rental demand will obviously drive returns in the long-term, but by selecting the right location yields will be even greater.’

Source: Residential Landlord

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Number of buy-to-let mortgages at post-crisis high

The number of buy-to-let (BTL) mortgage products on the market has reached a post-financial crisis high giving landlords the most choice in nearly 12 years.

Almost 400 BTL products have been added to the market in the last year, taking the total to more than 2,000 and the highest number since October 2007, when 3,305 deals were available.

According to Moneyfacts there are 2,162 BTL deals available today – up from 1,765 last March and 1,982 in September, including 467 for limited company landlords not using special purpose vehicles.

However, in contrast to the residential mortgage market, where intense competition is driving interest rates down, BTL lenders have pushed rates up over the last five months.

Between March 2017 and September 2018 the average two-year fixed rate buy-to-let mortgage was around 2.86% to 2.96%. However, it is now at 3.12%.

The average five-year fixed rate deal has also increased since September 2018, rising from 3.46% to 3.61% – although this is not quite as high as the 3.77% in March 2017.

For limited company products not involving special purpose vehicles, the average two-year fixed rate is at 4.08% and the average five-year fix is at 4.53%.

Moneyfacts spokesman Darren Cook said: “The disparity in the direction of movement between BTL and residential interest rates may be due to the way these two types of lending are primarily assessed. BTL mortgage providers generally consider the potential rental income and affordability during assessment, whereas residential mortgage providers typically look back at income earned by the borrower and affordability.”

Source: Your Money

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Number of first-time buyers in the UK reaches an all-time high

The number of first-time buyers wanting to get their foot on the property ladder has reached a 12-year high in the latest report from UK Finance.

In the new study, they have revealed that during 2018 the number of first-time buyers applying for mortgages reached 370,000 — 1.9 per cent more than the previous year. This is the highest number of first-time buyers since 2006, when 402,800 mortgages were completed.

It also reveals that £62 billion of new lending in 2018 was up by 4.9 per cent in comparison to 2017.

With government incentives such as Help to Buy lending a hand to the new generation of homeowners, more buyers were able to purchase their first home without the hefty deposit.

Elsewhere, the study also reveals that there were 5,100 new buy-to-let home purchase mortgages completed in December, which has fallen by 5.6 per cent on the same month of the previous year.

‘The mortgage industry helped 370,000 people buy their first home in 2018, the highest number in 12 years, as competitive deals and Government schemes such as Help to Buy continue to boost the market,’ explains Jackie Bennett, the Director of Mortgages at UK Finance to Landlord News.

‘Homeowner remortgaging also saw strong growth, driven by customers locking into attractive rates, a trend we expect to continue in 2019, as more fixed rate mortgages come to an end.

‘Demand for new buy-to-let purchases continues to be dampened by recent tax and regulatory changes. However, the number of buy-to-let remortgages reached a record high of almost 170,000 last year, suggesting many landlords remain committed to the market.’

Planning to buy your first home this year? With house prices rising just £714 in a year, now could be the time.

Source: House Beautiful

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Negative rates could be on the cards in no-deal Brexit chaos

Interest rates could be slashed into negative territory for the first time in history to combat the fallout from a chaotic no-deal Brexit, a former Bank of England policymaker has warned.

David “Danny” Blanchflower – who sat on the Bank’s Monetary Policy Committee (MPC) from June 2006 to June 2009 – told the Press Association that policymakers may be left with little option but to take rates below zero if a no-deal Brexit sends shockwaves through the economy.

In a savage critique of the Bank’s recent scenario analysis of Brexit, he said Governor Mark Carney and his team were “stupid” to indicate that rates could even rise in a disorderly withdrawal.

Bank of England Governor Mark Carney has come under fire over Brexit analysis which warned that rates could rise to 5.5% (Daniel Leal-Olivas/PA)

It comes after the Bank’s controversial “doomsday scenario” report, published at the request of MPs on the Treasury Select Committee, warned that interest rates could rise as high as 5.5% if a plunging pound sent inflation soaring.

Mr Blanchflower said: “It was stupid what they said.

“That was a big error. It would kill the British economy stone dead.

“The first thing you would have to start thinking about would be negative rates.”

The British-born economist, who moved to the US in 1989, said the bank had “very few arrows in the quiver” to boost the economy, with rates at just 0.75% having only recently been lifted off all-time lows.

0.75%
Current Bank of England base rate

He said this would mean negative rates “have to be on the table, because you’d be trying to encourage people to spend and not save”.

His comments come after current MPC member Gertjan Vlieghe also took aim at the Bank’s Brexit analysis, saying in a speech earlier this month that rates were more likely to be cut than hiked in a no-deal scenario.

The warning over negative rates confirms that the UK could be heading into uncharted economic territory if a deal is not secured.

While the financial crisis was unprecedented, the Bank at least had plenty of room to cut rates to help contain the fallout.

But Mr Blanchflower – a lone voice on the MPC calling for rates to be cut in 2008 when others failed to see the scale of the recession on the horizon – said the Bank could also look to rekindle its quantitative easing programme again if needed.

He said it could “broaden out what it buys” under QE, perhaps looking to buy student loans or property.

Whether attributable to Brexit or not, there’s a slowdown coming

David ‘Danny’ Blanchflower

But monetary policy alone would not be able to fix the crisis that would be sparked by a cliff-edge Brexit, with government and fiscal measures also vital, he said.

“The obvious thing would be to cut VAT by five basis points, increase spending like there’s no tomorrow and scrap austerity,” he said.

While the Bank’s last inflation report kept open the prospect of further rate rises, Mr Blanchflower said hikes were “dead in the water”.

With the global economy slowing and growing whispers of a US recession around the corner, he said Brexit was coming at a bad time.

“Whether attributable to Brexit or not, there’s a slowdown coming,” he warned.

Source: Express and Star

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First-time buyers dominate property purchase market for first time in a generation

First-time buyers now account for the majority of mortgaged property purchases, overtaking the joint numbers of subsequent-time buyers and buy-to-let investors, for the first time since 1995.

According to the latest Halifax First-Time Buyer Review, first-time buyers now account for just over half of all property purchases funded by a mortgage, rather than cash transactions, up 38% on a decade ago. The average price paid for a borrower’s first home is up 39% on average, from £153,030 in 2008 to £212,473 in 2018. Over the same period the average deposit has jumped by 57% from £21,133 (14% of purchase price) to £33,252 (20%)

The research shows that the total number of individuals or couples buying property for the first time has increased by 2% in the past year, continuing a seven year upwards trend. Growth last year was considerably slower than 2017 (7.6%) and 2015 (9%), but overall the numbers are up 92% on the low of 192,300 seen in 2008.

The number of first-time buyers has gone up 2% in the last 12 months, continuing an upward trend over the last seven years. Although growth in 2018 was at a slower rate than 2017 (7.6%) and 2016 (9%), first-time buyers overall have increased by 92% from an all-time low of 192,300 in 2008.

First-time buyers now account for just over 50% of all house purchases with a mortgage, an increase from 38% a decade ago. Halifax data revealed that the average price paid for a typical first home has gone up by 39%, from £153,030 in 2008, to £212,473 in 2018, and the average deposit has increased by 57% from £21,133 to £33,252 over the same period¹.

Borrowers buying in London are putting down a staggering £110,656 on average,  while those in Wales are paying the lowest average deposit of £16,449.

Terraced houses, closely followed by semi-detached properties have continued to be the first-time buyer’s home of choice over the past decade, making up two-thirds (67%) of mortgages for first homes in 2018.

The average age of a first-time buyer in 2018 has remained at 31 – two years older than a decade ago. In London it has grown from 31 to 33 since 2008 – the oldest in the UK. The biggest increase in age was in Northern Ireland, up by three years from 28 to 31.

Russell Galley, managing director, Halifax, said: “New buyers coming on to the ladder are vital for the overall wellbeing of the UK housing market, and the continued growth in first-time buyers shows healthy movement in this important area – despite a shortage of homes and the ongoing challenge of raising a deposit.

“Last year was the first year that first-time buyers accounted for the majority of the market since 1995, which shows that the factors reducing some of the associated costs – such as continued low mortgage rates and Stamp Duty – are supporting the increasing number of people taking their first step on to the property ladder.”

Source: Your Money

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Commercial property: High street challenges need addressed

The currently volatile environment for UK retailers presents a significant challenge to the commercial property sector. Along with the estimated 85,000 jobs lost in UK retailing in 2018 is the worrying rise in empty commercial units.

Figures published in the Scottish Retail Consortium-Springboard Footfall and Vacancies Monitor show hat one in eight high street shop premises lay vacant last month, with a 12 per cent town centre vacancy rate in Scotland, up the 11.1 per cent recorded last October.

Steps are being taken across the nation to repurpose some of these vacant premises for residential, hotel, leisure or community use.

However, UK retailers must also continue to repurpose their businesses to ensure they are relevant to the changing nature of consumer demands.

Many of those which managed to avoid insolvency last year are now embarking on store closure plans and rationalising their portfolios. The trend of traditional retailers extending their online offering also continues, with some smaller stores diversifying by installing convenient customer options such as Amazon lockers and becoming click-and-collect points for larger retailers.

Technological advances, including the use of mobile payment, scan and payment checkout apps, are also making the sector more efficient, while further progress in areas such as VR and AI offers an additional strand of support.

In spite of these positive developments, there is no doubt that many of the larger retailers will continue to struggle with the size and cost of their property portfolios. Debenhams is continuing discussions with its lenders and is not ruling out a company voluntary arrangement, while the new management at Marks and Spencer is promising dramatic changes in range, style and customer focus.

Meanwhile, other big high street names seek to negotiate reduced rents with their landlords to keep themselves trading. The changing nature of the marketplace requires retailers to make bold decisions to entice consumers and leverage value from their physical premises.

Apple and Selfridges are both successfully doing this by making shopping at their outlets an experience. Selfridges credits its successful Christmas trading period to the staging of festive events which drove people into its stores, and Apple delivers added value for customers in its premises by holding free events.

The progression of some online retailers moving to a bricks and mortar model could also make a positive impact on the commercial property sector. Amazon Go is reportedly looking at expanding its app-based convenience store brand into London with the potential of Amazon Books stores opening in the UK.

Physical premises supported by a strong online presence point to the future direction of travel in retailing. While we expect more casualties in the year ahead, the changes that are currently being implemented provides some comfort to commercial property landlords as retailing continues its challenging evolution.

The UK retail market is one of the most dynamic in the world and is the biggest employer in Britain; it is also one of the most adaptive to change. But landlords and tenants must act quickly to stem the tide of store closures and declining footfalls.

Source: Scotsman

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London house prices to fall three per cent after a no deal Brexit

London house prices could dip three per cent after a no deal Brexit, new research has found.

In the event of Britain and the EU failing to reach an agreement, housing prices in London could fall three per cent in the six months following the 29 March deadline, according to a Reuters poll out today.

A drop in housing prices would be coupled with a weak pound following a no-deal Brexit, according to Reuters, making homes in the capital more attractive to foreign investors.

“There will be a palpable shock to the UK economy in terms of GDP, inflation, job creation, etc,” Tony Williams of Building Value told Reuters.

Williams said that this would affect the housing market in the UK, with the poll predicting that a no deal Brexit will result in a one per cent drop nationally in house prices.

“This will spill over dramatically to the residential market, with London bearing the brunt given the international catchment of prospective buyers,” Williams told Reuters.

However, if an agreement is reached, property prices are expected to rise 0.5 per cent in the capital and 1.5 per cent nationally.

The poll, which was conducted between 13-20 February, supports previous reports that a no deal Brexit could impact an already cooling housing market.

Peter Dixon, a global financial economist at Commerzbank, told Reuters, “Prices have clearly come off the boil of late but on the assumption that the UK does not leave the EU without a deal, there is scope for the resumption of a modest upward trend.”

A poll of 25 market watchers found that London homes will drop 2 per cent this year, but expect the market to rebound with a rise of 0.5 per cent and 2.5 per cent in the next two years, respectively.

National house prices were predicted to rise in the next three years, starting at 1.5 per cent this year, 1.8 per cent for the next, and then 2.3 per cent in 2021.

Russell Quirk, an online estate agent told Reuters: “The fundamentals of the UK housing market remain as they are: lack of supply; a growing population; cheap money – a Brexit of any flavour will not dent those fundamentals.”

Source: City AM

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More Competition For The Buy To Let Private Landlord

The private landlord has a hard time; whilst many are aware that tenants will seek private rented properties because of better standards, sometimes better areas, there will also be those who believe that private rented accommodation is the worst deal available for tenants and strive to persuade others of this stance. 

I wrote a little time ago of the encouragement that seems to be given to the corporate landlord, the large companies who build new properties in large numbers; they would make up the shortfall there is between what social landlords can provide. Easier to control perhaps than the small private landlord?

I was surprised to read recently that a number of private builders have decided that as they cannot make profitable enough deals with housing associations, they will register themselves as social landlords. Hopkins Homes has a turnover of £166 million; with concerns that the homes they are building will not be affordable without branding as a housing association, they have registered Peal Community Housing as a housing association.

Others have gone the same way; Larkfleet Homes opened Swift Homes as an association in 2018. The Chief Executive of Larkfleet, Karl Hicks, stated ‘It is becoming increasingly difficult for associations to obtain the funds to buy new homes. We have therefore set up Swift…to take on this role directly’.

It seems probable that if these housing associations, and the others like them, operate with success, there will be others that will swiftly follow. Chris Wakefield, a director of Park Properties which registered in September said that there were problems with bureaucracy (there’s a surprise) but echoing other private builder Housing Associations, that the original housing associations, had been known to offer ‘less than build cost’ for developments. Of all the people that should be working for charity and negative profit, it is not fair to expect private builders to join that number.

But are a housing association the way to ensure houses get built and a fair deal be found all round? I think it will be confusing for many people. Will the properties be offered on the same terms as a social property? Will the tenants appreciate the differences, if there are any?

Why is this challenge for the private landlord? Brand new properties will always seem more appealing to some than a characterful, and probably more spacious, older property. I think the grants that landlords used, having diminished, will disappear; the landlords that the Government will want are the corporate lettings. I hope it will work, but not to the detriment of the many caring and responsive private landlords that the local authorities have relied on.

I cannot fail to mention this week that Amber Rudd has had the courage to say that Universal Credit is not working and that more changes need to be put in place if it is to effectively provide benefits to those that need them. Well said, Ms Rudd. Is she making a place for herself as the landlords’ friend? There may be a general election before long – Amber Rudd as Prime Minister? Remember you heard it here first!

Source: Residential Landlord

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A Brexit-induced price drop won’t fix the housing crisis

The average home has leapt from £81,536 in 1988 to £473,882 in 2018 – that’s a 481 per cent increase.

If the cost of a pint of milk (26p in 1988) had jumped up at the same pace, it would now cost a whopping £1.52 – three times the current price.

Anyone who has watched the news or read the papers in recent years will know that we are neck-deep in a housing crisis, and it extends way beyond the capital. Half of young people in the country have no chance of ever buying a home, and private renters on lower incomes spend an average of 67 per cent of their earnings on rent.

Already the situation is out of control, and that’s before we factor in Brexit, the harbinger of economic instability.

Many have blamed Brexit for the recent slowing and occasional fall of house prices in London – but could this actually be a blessing in disguise?

Could falling prices mean that a few more young professionals will be able to climb onto the first rung of the housing ladder?

As they move into homeownership, will that free up rented homes, causing private rents to fall? Will those on lower incomes then be able to afford their rent again? Will the whole market become more affordable, suddenly meaning that – hallelujah – the housing crisis is over?

Alas, I’m afraid not. And here’s why.

First, falling house prices are often a symptom of an economic downturn or recession. This affects people’s spending power, whether they are first-time buyers saving for a deposit, or homeowners who see the value of their existing property stall or fall into negative equity.

That will make houses harder to either buy or sell in relative terms.

Second, inflation is expected to go up after Brexit, which means that people’s incomes will be squeezed regardless of their homeownership ambitions. And banks are generally less keen to lend when house prices are heading downhill.

And finally, house prices are still at historic highs. In London, the average property is 13 times the average wage.

House prices may fall, but it’s the fundamentals of the London market – volatility resulting from under-supply – that causes these problems.

A drop in house prices is yet another symptom of the crisis, not a cure for it. We have a severe and worsening housing shortage in this country, and in particular a shortage of homes at the more affordable end of the market.

There are more than a million households on the social housing waiting list, but the government only delivered 6,000 new social homes in the whole of England last year.

The sadness we all feel at the number of rough sleepers on the streets turns to dismay when we realise that this is just the tip of the iceberg: almost 280,000 people in England are currently homeless.

To truly solve our housing crisis, we must build a whole raft of homes that are affordable to a whole lot more people. That is why Shelter is calling for 3.1m new social homes over the next 20 years.

Some naysayers will claim that it’s impossible to do, but we’ve done it before – after the Second World War – to great economic success and public acclaim. We can do it again.

Our vision for social housing would offer the chance of a stable home to millions of people who fail to qualify under the current system. It would provide much-needed security and a step up for younger renters desperate to get on in life and build a brighter future for themselves and their family.

The current housing situation amounts to a national emergency. Brexit-induced price falls won’t solve the problem. Building more will.

Source: City AM