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Landlords nervous about adding to portfolios even in areas where rents are rising

Landlords are operating a “buy and hold” strategy with even areas with strong rental growth suffering from a dip in transactions, a proptech platform claims.

Online buy-to-let mortgage platform LendInvest’s second quarter Buy-to-let Index – which uses rental and house price data on Zoopla and transaction figures from the Land Registry – found that sales to landlords have slipped annually in all 105 postcodes it analyses.

This was despite annual rental growth being as high as 5.28% in areas such as Romford, Essex, and capital gains in Luton hitting 7.29% year-on-year.

The provider said its own data suggested landlords were focusing on remortgaging rather than adding to their portfolio with new buy-to-let mortgages.

However, LendInvest said many landlords will now be at the end of two-year fixed rate deals they took out ahead of the introduction of the extra Stamp Duty charge in April 2016, so are likely to be weighing up their options – which could boost transactions.

Ian Boden, sales director at LendInvest, said: “It’d be so easy to look at the underlying data that tells us transaction volumes are down and make dire predictions about the health and wealth of the rental market.

“Instead, what our index proves once again is that looking at one metric in the housing market is never enough. One metric on its own can’t clearly define the performance of a city’s property market.

“Each of the very top performing buy-to-let locations this quarter is experiencing a slowdown in transactions – substantial falls in places, dips in others.

“But the best places this quarter continue to outperform the competition well thanks to strong performances on other equally important metrics like rental yield, capital gains and rental price growth.

“Data from the index, UK Finance and our own experience as a mortgage lender strongly suggests that right now a ‘buy, hold and remortgage’ strategy is some investors’ preference while the market works through a possible slowdown.”

Top 10 buy-to-let postcodes

Yield Capital gains Rental price growth Transaction volume
Luton 3.91% 7.29% 3.70% -6.15%
Colchester 3.63% 6.33% 4.77% -6.73%
Romford 4.09% 4.99% 5.28% -7.84%
Birmingham 4.55% 5.00% 3.66% -6.46%
Manchester 5.36% 4.38% 3.71% -7.35%
Cambridge 3.26% 4.57% 4.76% -6.63%
Northampton 3.99% 6.59% 2.17% -7.36%
Bristol 3.83% 5.51% 2.75% -6.20%
Ipswich 3.42% 5.77% 2.76% -6.16%
Southend-on-Sea 3.62% 6.05% 2.53% -6.93%

Source: Property Industry Eye

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Northern Ireland set to enjoy strongest UK house prices growth

NORTHERN Ireland is set to enjoy the strongest growth in house prices in the UK over the next four years, with residential property prices predicted to lift from their current average value of around £128,000 to reach £154,000, according to PwC’s latest UK Economic Outlook (UKEO).

The report points to the local market being more resilient than the rest of the UK, where there will be some softening of national property price growth between now and 2022.

Data on annual property price growth reveals thatNorthern Ireland is currently the seventh highest among the UK regions, with PwC forecasting the region will rise to third in 2019 and will top the list by 2022.

But even if prices do increase at this rate, they will still be around 28 per cent lower than the 2007 pre-recession average.

The UKEO says the the Northern Ireland economy is set to growth by a mere 0.8 per cent in 2018 and around 1.2 per cent next year – still well below the forecast UK average of 1.3 per cent and 1.6 per cent, making it the slowest-growing of the UK’s 12 regions.

PwC NI chairman and UK head of regions Paul Terrington said: “The Northern Ireland property market continues to perform better than expected, with a positive balance between earnings and house prices. But prices remain well below their peak level in 2007, and this gap is unlikely to close in the near future.

“We have also considered the effect of future interest rate rises, and believe that only around 11 per cent of UK households would be immediately affected if rates increased.”

The PwC report also highlights the impact that artificial intelligence (AI) may have on UK employment in the two decades to 2037 and, while estimates suggest the overall net effect will be broadly neutral, this is not true for individual sectors.

The most positive effect is seen in the health and social work sector, where PwC expects the number of jobs to increase by nearly one million, equivalent to around 20 per cent of existing jobs in this sector.

On the other hand, the report estimates that the number of jobs in the manufacturing sector could be reduced by around 25 per cent due to AI and related technologies, representing a net loss of nearly 700,000 jobs.

Applying this formula across the UK regions suggests that the impact on Northern Ireland will be broadly neutral, amounting to a net loss of around 4,000 jobs by 2037, considerably less than other industrialised regions.

Mr Terrington said the overall outlook for 2019 was mixed, adding: “The UK economy held up well in the six months after the EU referendum, but growth slowed from early 2017 and continued into early 2018, while higher inflation has squeezed real household incomes, which has taken the edge off consumer-led growth.

“The stronger global economy should continue to have some offsetting benefits for net exports this year, although there are downside risks in 2019 and beyond if recent US tariff policy changes were to escalate into a wider international trade war.

“Brexit-related uncertainty and the absence of any UK-EU agreement may also continue to hold back business investment across the UK while the absence of an Executive and the continued uncertainty around post-Brexit border controls impacting inward and indigenous investment and general business confidence.”

He went on: “The next 12 months will be crucial for Northern Ireland’s medium-term growth, but as at today, the signs are not especially hopeful.”

Source: Irish News

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City of London records smashed as office investment soars to 28-year high

Investment in City of London office space has defied Brexit uncertainty to hit a record high as demand for real estate in the Square Mile soars, especially from Asia.

Despite the slowdown in other parts of the property sector such as the housing market, investment in City of London offices jumped to £3.6bn in the second quarter of this year, reaching a peak since global real estate advisor CBRE began records 28 years ago.

The elevated level of activity was led by the £1 billion sale of UBS headquarters at 5 Broadgate to Hong Kong-based investor CK Asset Holdings, according to the CBRE, which pointed out that it was the third £1bn-plus building to sell in the last 18 months.

The City figure was part of a total £5.3bn invested during the quarter in Central London as a whole, which represented an 85 per cent increase on the £2.8bn transacted in the first three months of the year, and a 67 per cent increase on the same period last year.

Thirteen deals over £100m were transacted over the course of the quarter, more than in any quarter since the first three months of 2016, as overseas investors dominated the market, representing 82 per cent of the quarterly figure.

Last year a series of landmark skyscrapers in the City were sold for record sums, such as the Walkie Talkie and the Cheesegrater, which were both snapped up by investors from Hong Kong.

As well as activity from Hong Kong, investors from Singapore and South Korea have also become more active.

“International investors remain hungry for real estate in London and we have seen a diversification in the origin of this capital, albeit the majority is still coming from Asia,” said James Beckham, who sold the Cheesegrater last year and is now head of London Investment Properties at CBRE. “The low level of investment seen in the first quarter of this year has proved to be an aberration.”

He added: “Even in the face of the continuing uncertainty surround Brexit outcome, we think we will continue to see investors coming into London market. Property fundamentals are good in London, with low vacancy rates, good resilient occupier take-up and stable rents.”

Nick Braybrook, a commercial property expert and head of City capital at Knight Frank, told City A.M: “London is still the gold bullion of real estate markets. Compared to other big cities, London has all the big attractions: a more attractive legal system, markets which are more liquid and transparent, and more favourable tax arrangements than quite a few overseas locations.”

Last year the level of overseas investment in commercial real estate in London was more than the next four global cities combined (New York, Frankfurt, Berlin and Paris), according to figures from Knight Frank.

Braybrook added: “Investors who have billions, if they want to buy in the West End they have to do a lot more deals, whereas in the City they could buy one big deal, let to one tenant, and boom! – you’ve spent your billion in a single deal.”

Source: City A.M.

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Property P2P lending: a new choice for investors

Whether fed up with the hassle of buy-to-let or nervous of the ups and downs of the stock market, peer-to-peer lending could help.

In today’s turbulent environment, it might seem like the trade-off between risk and return isn’t as favourable as it once was, with political and economic upheaval across the globe seeing volatility jump, according to Reuters.

Even for investors with a medium-term investment horizon of, say, five years, the risk of loss that the equity markets bring might be too much to bear.

It’s why many alternative and potentially more stable asset classes have proved popular with investors over the last few years, such as energy, infrastructure or property. Investors have been hesitant in the past to consider such investments, as returns are traditionally difficult to benchmark, and they can be less liquid than the likes of equities. However, new technology is managing to overcome these barriers to entry.

Take peer-to-peer (P2P) lending, for example. By connecting those with money to invest with those looking to borrow, it allows you to target what could amount to a healthy, inflation-beating return, with less of the ups and downs of the stock market. And transaction costs are often minimal, too, with many platforms totally free to use.

Property-backed P2P lending in particular has proven popular because the loans are secured on bricks and mortar. It means, should the borrower be unable to repay the loan, the property can be sold to help pay the debt, ultimately reducing the risk to the investor.

However, remember that your capital will still be at risk and investments in property can be affected by
market conditions.

The P2P sector came to being in 2005 and has seen dramatic growth since. In 2015, it was also approved to be included within the ISA wrapper, so interest earned through eligible P2P platforms can now be tax free. In 2016 alone, people in the UK invested £3 billion through P2P lending platforms, according to a 2017 report by MoneyWise.

Octopus Choice is one example. It enables everyday investors to invest their money in a diversified portfolio of property loans. To reduce the potential for downside, all loans are made with a maximum loan-to-value ratio of 76 per cent, although the current July 2018 average is closer to around 61 per cent. This means the value of the asset would need to fall quite some way before any capital would be lost.

What’s more, Octopus invests 5 per cent of its own money in every loan and this is put at risk ahead of an investor’s. It’s totally free to use, too, and you’re able to request a withdrawal at any time, but it’s important to note that with any of these sorts of offerings, instant access can’t
be guaranteed.

So far, Octopus Choice has helped more than 5,600 people invest more than £196 million, earning £5.27 million in the process. Although it must be noted that past performance is not a reliable indicator of future results. And P2P lending, like all investments, comes with risks. Octopus Choice is not a cash savings account; your capital is at risk and interest is not guaranteed. You may get back less than you put in.

Is the property ladder leading you nowhere?

P2P lenders are also expecting an influx of interest from the unsettled buy-to-let sector. A raft of new legislation introduced in 2016 may have dramatically reduced the appeal of being a landlord. Stamp duty was increased by 3 per cent for those buying second homes, while landlords were told they are no longer able to make tax deductions for wear and tear.

Furthermore, higher-rate taxpayers are now unable to offset their mortgage interest against rental income, when calculating the amount of tax to pay. The Financial Times reported in June that already buy-to-let is falling in popularity as a result of these tax changes.

And it’s not hard to see why. Research from Octopus in May shows that if house prices grow at 2 per cent a year and not 3 per cent, and the buy-to-let property in question is yielding 4.5 per cent, the investor could lose money after all costs are incurred. Whereas data from the Bank of England suggests yields are now at their lowest since records began in 2001.

With some buy-to-let investors beginning to see a strain on their returns and all the work that can come with being a landlord starting to feel like too much effort for too little reward, it might leave some asking the question: is there a better place for me to put my money?

New choice

So, whether you’re a buy-to-let landlord who has decided the returns are no longer worth the hassle of renting, or a stock market investor who’s tired of the heartache brought on by the volatile stock market, the growing P2P lending sector might finally have provided the alternative you’ve been looking for.

The growing P2P lending sector might finally have provided the alternative you’ve been looking for

Source: Raconteur

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Carney – no deal Brexit would prompt interest rate review

Bank of England Governor Mark Carney said on Tuesday that a no-deal Brexit would have “big” economic consequences, prompt a review of interest rates and leave many bankers idle.

Britain and the EU have negotiated a transition deal that would effectively keep Britain as non-voting member of the bloc from Brexit day next March until the end of 2020.

But it has not been ratified yet, meaning the UK could crash out and have to rely on WTO trading terms which, Carney said, would leave the country worse off.

“Our job is to make sure we are as prepared as possible,” Carney told MPs at a parliamentary hearing held at an air show in Farnborough, southern England.

Crashing out would prompt the Bank’s monetary policy committee to reassess the economic outlook and interest rates.

“It would be a material event. I wouldn’t prejudge in which direction, though,” Carney said.

“Speaking very narrowly about the financial services side, in the event of a no-deal scenario… there would be big economic consequences. We might have a lot of idle bankers as there is not a lot of demand for their services,” Carney said

Lenders, insurers and asset managers in Britain are playing safe and opening new EU hubs by March to maintain links with customers there irrespective of whether a transition deal of generous future trading terms are secured.

But they worry that without a transition deal, existing cross-border contracts such as derivatives and insurance policies would be disrupted, leaving consumers unable to make claims or companies not covered against adverse moves in currencies or borrowing costs.

Britain has said it will legislate to ensure “continuity” in contracts and that the EU must reciprocate, but the bloc says it was up to banks and not public authorities to get ready.

COLD COMFORT

“Yes, we are concerned that the EU has not yet indicated its solution. The private sector cannot solve these issues,” Carney said.

“This is fundamentally about taking responsibility to protect the financial system… It’s cold comfort, but it will be worse in Europe than it is here.”

Britain’s banks, however, hold enough capital and cash reserves to withstand a disorderly Brexit, Carney said.

Britain last week published its proposals for a future trading agreement with the EU after Brexit, saying it wanted close ties in goods, but with financial services having less access to the bloc than now.

The financial sector attacked the government for not backing the industry’s more ambitious proposals that seek to replicate existing market access.

The industry’s proposals, which the Bank had also backed, were rejected by EU officials in Brussels who say it would mean Britain getting all the benefits of EU membership without the costs and obligations.

Carney said it was too soon to judge what the government’s proposals meant for financial services or for the Bank’s ability to take all decisions necessary to keep the financial system and banks stable.

“It’s premature for us to make a judgement on the White Paper and the outcome of these negotiations. It’s also not clear which activities are going to be in scope,” Carney said.

The White Paper was a “first step” in a hugely important negotiation, he added.

Source: UK Reuters

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Luton is top location for buy-to-let

Luton has come out on top for capital value growth, transaction volumes, rental yields and rental price growth, LendInvest’s Buy-to-let Index has found.

Luton has finished top in the index for the third time in a row, Birmingham came fourth, ahead of Manhester at fifth, showing the Midlands cities as strong investment opportunities.

Regional capitals Cambridge and Bristol broke into the top 10 at sixth and eighth while South East rose from 79th in June 2017 to 33rd.

Ian Boden, sales director at LendInvest, said: “It’d be so easy to look at the underlying data that tells us transaction volumes are down and make dire predictions about the health and wealth of the rental market.

“Instead, what our Index proves once again is that looking at one metric in the housing market is never enough. One metric on its own can’t clearly define the performance of a city’s property market.

“Each of the very top performing buy-to-let locations this quarter is experiencing a slowdown in transactions – substantial falls in places, dips in others.”

Boden added: “But, the best places this quarter continue to outperform the competition well thanks to strong performances on other, equally important metrics like rental yield, capital gains and rental price growth.

“Data from the buy-to-let Index, UK Finance and our own experience as a mortgage lender strongly suggests that right now a ‘buy, hold and remortgage’ strategy is some investors’ preference while the market works through a possible slowdown.”

Source: Mortgage Introducer

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Sterling falls after May bows to Brexit pressure in parliament

The pound fell on Monday as a debate in Britain’s parliament exposed the level of dissatisfaction within British Prime Minister Theresa May’s governing Conservative Party over her plans for Brexit.

The pound fell to an intraday low of $1.3223 on news that May had bowed to pressure from Brexit supporters and accepted their changes to a customs bill that underpins Britain’s exit from the EU.

“The move in sterling is pretty contained at this point but this [accepting of amendments] is being viewed by the market as a step towards a leadership contest,” said Jordan Rochester, currencies strategist at Nomura.

Eurosceptics say May’s plan leaves Britain too close to the European Union and are trying to force her to change course, while pro-EU Conservative lawmakers say it leaves the country too distant from its biggest trading partner.

Sterling has struggled to capitalise in recent weeks on signs that the economy is improving because of mounting uncertainty over whether Britain can secure a trade deal with the EU before it leaves the bloc next March.

Markets expect the Bank of England to hike interest rates in August but the British currency has fallen 9 percent since April partly because of the wrangling within May’s party.

May is expected to survive Monday’s debate on a customs law but the debate risks undermining the government and increasing the chances of an early election which would hurt the pound.

“Political uncertainty helps to explain why the pound has not strengthened yet on the back of the government’s plans for a softer Brexit,” said analysts at MUFG.

At 1545 GMT the pound was down 0.1 percent versus the dollar at $1.3224 and down 0.3 percent against the euro at 88.52 pence..

Sterling finished last week down one percent against the dollar, its biggest weekly drop since late May.

President Donald Trump’s visit to the UK last week added to uncertainty about the Brexit talks and Britain’s trade relationship with the United States after the divorce. Trump criticised May’s handling of the Brexit talks.

May attempted to face down would-be eurosceptic rebels by warning on Sunday that if they sink her premiership then they risk squandering the victory of an EU exit that they have dreamed about for decades.

Meanwhile over the weekend, German business groups told members to prepare for a hard Brexit.

Long bets on sterling have been whittled down in recent days with overall net positions mildly bearish on the currency, positioning data shows.

Source: UK Reuters

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Glut of property hits UK housing market in July – Rightmove

Britain’s housing market saw a glut of new property offered for sale this month, keeping a lid on prices at a time when sales typically suffer from a seasonal lull, property website Rightmove said on Monday.

Real estate agents now have the highest amount of stock since September 2015, Rightmove said.

“While an increase in seller numbers is a welcome sign of more liquidity in a generally stock-starved market, it has unfortunately come at a quieter time of year,” Rightmove director Miles Shipside said.

The number of homes advertised by Rightmove, Britain’s largest property website, is 8.6 percent higher than the same month a year ago, but the number of sales is virtually unchanged from a year earlier, down 0.2 percent.

Average asking prices for new sellers are down 0.1 percent since June, typical for the time of year, Rightmove added.

But in a sign that previous sellers had priced their property too high, a third of stock being advertised had seen at least one price reduction, the highest proportion for the time of year since 2011.

Other industry data has shown British house price growth has slowed sharply since the June 2016 Brexit vote, though with marked regional variation.

The slowdown is most marked in London and neighbouring areas, where demand has been hit by higher tax on expensive property and reduced demand from foreign investors. In other parts of Britain, prices are still rising moderately.

Rightmove said sellers in areas of over-supply would need to compete harder on price, presentation and promotion of their property in order to attract buyers.

Source: UK Reuters

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Inflation bounce set to help BoE hawks’ claims

Economists expect data this week to show a June jump in inflation, in a development which would boost the hawks on the Bank of England ahead of a crucial decision on interest rates next month.

Consumer price index (CPI) inflation will rise from 2.4 per cent in April and May to 2.6 per cent in June, according to consensus forecasts. The latest data will be published by the Office for National Statistics on Wednesday, providing the Bank with one of the last major pieces of economic data ahead of its 2 August monetary policy committee (MPC) meeting.

A rise in inflation would add to the case put forward by multiple Bank of England economists for an interest rate hike in the near term. Governor Mark Carney, chief economist Andy Haldane and others on the MPC have made remarks recently hinting that they may vote to raise rates.

The MPC hawks argue that rising wage pressures from a tight labour market justify withdrawing stimulus.

However, the view that domestic inflationary pressure is increasing is highly contentious among economists, with recent rises in oil prices – which feed through to petrol prices –further muddying the waters.

A decision to raise rates would take place against a backdrop of relatively weak economic growth, as well as the potential for disruption from the Brexit process and the looming possibility of a global trade war.

Analysis by EY Item Club to be published today will predict GDP growth for the current year of only 1.4 per cent, the weakest since 2012, thanks to higher inflation, lower consumer spending, and a moderation in growth in the Eurozone economy.

Mark Gregory, EY’s chief economist, said: “Businesses should be prepared for a low growth economy over the next three years. Regardless of the outcome of the Brexit negotiations, the resulting adjustment is likely to act as a drag on the economy.”

Source: City A.M.

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Lenders in the UK think 10 year mortgage deals are set to become popular

10 year mortgage deals look set to become more popular among home movers and those remortgaging in the UK as two major lender announced new long term products.

The lenders, Lloyds Bank and the Halifax, believe that borrowers are looking for more certainty going forward and are looking beyond the typical two year products and increasingly beyond five years.

The new mortgage deals from Lloyds have with and without fee options. They come with a 0.20% discount for Club Lloyds customers, plus an additional 0.20% discount for these customers available until 19 August 2018.

Examples of the 10 year fixed rates include remortgages at 2.42% with 60% LTV and £995 fee, including 0.40% discount and 2.64% with 75% LTV and £995 fee including 0.40% discount.

For home movers the Lloyds products include a 2.64% deal with 60% LTV and £995 fee, including 0.40% discount and 2.84% at 75% LTV and £995 fee, including 0.40% discount.

‘We’re seeing customers looking for longer periods of certainty when it comes to mortgage payments. Our new 10 year fixed mortgages will help provide remortgage customers and home movers with greater certainty with budgeting over the longer term,’ said Andrew Mason, Lloyds Bank mortgage products director.

With the Halifax, which is part of the Lloyds Banking Group, the new fixes are available at 60% LTV and 75% LTV for loans between £25,000 and £1 million, including options with and without fees.

Home mover rates start at 2.44% at 60% LTV with a £995 fee and 2.59% with 75% LTV and £995 fee, while for remortgage customers the rates begin at 2.69% with 60% LTV with a £995 fee and 2.89% with 75% LTV with a £995 fee.

‘Many home owners are looking for certainty with their mortgage payments over the longer term to give more peace of mind when it comes to their monthly outgoings,’ said Andy Bickers, mortgages director at Halifax.

‘We are always coming up with new ways to meet the needs of mortgage customers and bolstering our existing range of two and five year fixed rate products with these new, competitively priced 10 year fixes,’ he explained.

He pointed out that customers can also benefit from £500 to spend on Halifax’s new Mortgage gift site if they apply for a qualifying mortgage by 12 August. Following the completion of their mortgage, customers will be given login details to access the site and choose from a range of 40,000 items, including household appliances, garden furniture and family days out.

Source: Property Wire