Marijana No Comments

Buy-to-let revealed! The most in-demand cities for renters today

It was once the destination of choice for buy-to-let investors, but London has fallen way out of favour with both would-be and existing landlords over the past year.

The electrifying property price growth of recent decades may have required some truly staggering wads of cash for people to build their property portfolios. However, the rate at which rents were also booming in the capital meant for many this was a price worth paying.

How things have changed since then. London is no longer considered hallowed ground by buy-to-let participants. Added to the problem of stagnating or even falling property prices in some boroughs, changes to stamp duty on second homes have also resulted in eye-watering payouts to the taxman compared with those of previous years.

Bristol’s best
There’s a treasure trove of evidence showing returns in other British cities now exceed those you can expect from investment in the capital. And new research from Bunk gives fresh ammunition for landlords to give London short shrift and buy elsewhere.

According to the lettings platform, which sought to discover the country’s most in-demand city based on which have the highest number of properties already let as a percentage of total listings, Bristol came top of the pile with a score of 50%. Newport and Nottingham followed in second and third place, respectively.

Top 10 Cities By Demand

Location / Rental demand

  • Bristol 50%
  • Newport 39%
  • Nottingham 36%
  • Plymouth 34%
  • Cambridge 34%
  • Portsmouth 32%
  • Bournemouth 30%
  • Oxford 29%
  • Manchester 26%
  • Glasgow 25%

Commenting on the data, Bunk co-founder Tom Woollard said: “We’re starting to see a real change in the rental market with a number of the more alternative cities coming to the forefront in terms of popularity,” with renters seeking out great places to live without the huge rents that come with so-called traditional cities.

London found itself languishing in the bottom 10 of Bunk’s report with a score of just 21%.

Bottom 10 Cities By Demand

Location / Rental demand

  • Aberdeen 8%
  • Newcastle 14%
  • Edinburgh 14%
  • Leeds 16%
  • Swansea 16%
  • Liverpool 18%
  • Cardiff 21%
  • Belfast 21%
  • London 21%
  • Sheffield 22%

Sticking with stocks

I have to confess, though, that this latest set of data isn’t enough to encourage me to get involved in the Bristol buy-to-let scene. No thanks. Given the mix of rising costs and increasing paperwork, not to mention the vast amounts of initial cash needed to buy property in the UK, I’d rather stick with stock investing.

And what a time to be an investor in equity markets right now. Dividends from the world bourses are hitting record high after record high. While signs of a slowdown in the global economy are predicted to dent many a company’s earnings in 2019, any such slowdown are unlikely to harm payout growth in the immediate future.

Take a look at the FTSE 100, for instance. The average forward dividend yield for the index sits at a chunky 4.3%, though this is not the only reason to grab a slice of some of Britain’s blue-chips. As I type, some of the index’s big hitters are trading on irresistibly-cheap valuations, something which is illustrated by the Footsie’s low forward P/E ratio of around 13 times.

My tip? Take advantage of the recent reversal in FTSE 100 share prices and go grab a big-dividend-paying bargain, or two.

By Royston Wild

Source: Yahoo Finance UK

Marijana No Comments

Buy-to-let market doom ‘overdone’

The buy-to-let market is in better shape than many might think, a lender has said.

John Goodall, chief executive of specialist buy-to-let lender Landbay, said recent industry commentary that states the market is on a downturn and that regulatory changes are forcing landlords to sell up was “a little overdone”.

Last week research from Arla Propertymark showed there had been a 25 per cent increase in the number of landlords selling up their property and those at the coalface said regulatory changes and a reduction in tax relief had stopped many viewing the buy-to-let market as a profit maker.

But Mr Goodall disagrees. Speaking to FTAdviser, he said: “There’s always been a churn in the market. Of course there are some people selling up property and getting out the market but that’s always been the case.

“At the moment, the highlight is on those selling rather than those buying. But those buying do still exist. Some small buy-to-let investors are getting out but it’s still only a small fraction.”

Mr Goodall cited UK Finance figures which showed that, in terms of outstanding stock, the buy-to-let market grew from £237bn to £243.9bn over the course of 2018 — an equivalent of 2.7 per cent.

Landlords have been subject to a number of regulatory changes in recent years, with the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016, which was closely followed by 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.

Mr Goodall said the changes are more likely to scare off smaller landlords with only a few properties, which would eventually lead to a more professional industry.

he said: “Small investors that hold property in their own name have seen the biggest changes in terms of tax and stricter regulations are likely to affect smaller landlords more.

“But this has raised standards in the market and means most portfolio owners now act like a small, formal business.

“For example, of course it’s a good thing that houses of multiple occupancy have stricter licensing rules but this could turn off smaller landlords.”

According to Mr Goodall, more business-like landlords entering the market was a good thing would eventually help tenants.

He added: “I think it’s far better for the tenants to think their landlord is committed to it and that they are not just in it for the short term.

“If someone’s doing it on the side and alongside a full time job, the service is going to be worse for the tenant and the tenant does not have as much security.”

Observers in the industry have commented that a reduction in landlords could increase the price of renting and hurt consumers.

Mr Goodall refutes this, saying the market was self-regulating and “if rents go up, that entices more landlords, so more competition and the market would work itself out”.

He also pointed out that the buy-to-let market does not represent the entire private rental sector — as many who buy property can do so without a mortgage or some may inherit property.

The UK’s stagnant housing market — annual house price growth remaining under 1 per cent and home-mover rates on the decline — is often put down to political uncertainty and consumers holding back on decisions until after Brexit.

Mr Goodall agreed with this analysis and suggested uncertainty was more likely to be the cause of any dip in the buy-to-let market.

He said: “Brexit uncertainty is a more pressing issue. People will not invest at the moment.

“Landlords should be getting into it with a five to 10 year plan, but people don’t want to make those kind of big changes with Brexit on the horizon. There’s a little bit of sitting on the sidelines.”

Rachel Lummis, adviser at XpressMortgages, also said she had yet to see any evidence of a sell off of buy-to-let stock from their landlords.

She said: “We are seeing more landlords purchase via a limited company now rather than in their personal names which is resulting in landlords with portfolios with a mix of ownership in their private name and ltd company.”

Ms Lummis added that the type of property landlords liked — typically a two bed flat — had shifted to more high yielding properties such as HMOs and student accommodation, while many were also looking further afield, out of London and Surrey..

By Imogen Tew

Source: FT Adviser

Marijana No Comments

Investors Selling Up Buy To Let Properties Before Fee Ban

Many buy to let property investors are selling up before the tenant fee ban comes into force according to the latest figures from Arla Propertymark.

The number selling up buy to let properties in April reached its highest level since May 2018, rising from an average of four landlords leaving the market per lettings agency branch in March to five in April.

However, this could lead to higher yields for those landlords holding fast and not selling up. The proportion of agents who reported that landlords had increased rents rose to 33 per cent last month, up from 30 per cent in March.

The number of tenants negotiating rent reductions fell in April, from 2.9 per cent in March, to 1.9 per cent last month – the lowest figure seen since May 2016.

Despite some landlords selling up, tenants had a greater number of rental properties to choose from in April than a year ago, at 202 instead of 179 per lettings branch.

This could imply that larger portfolio property investors are using the opportunity to increase their portfolios as other landlords leave the market.

Demand from prospective tenants fell slightly in April, with the number registered to look for properties declining from 67 in March to 64 last month.

Arla Propertymark chief executive David Cox commented: ‘As predicted, April’s findings have shown an upsurge in the number of landlords selling their buy to let properties. In just a few days’ time, on 1 June, the Tenant Fees Act will come into force in England. This, coupled with the proposed scrapping of Section 21, is forcing landlords to either increase rents or leave the market altogether.’

He continued: ‘As supply of rental accommodation falls further, tenants will only be faced with more competition for properties, pushing up rent prices on good-quality, well-managed properties and decreasing tenants’ ability to negotiate rent reductions. In order to remain profitable, landlords will increase rents to cover the additional fees they are now faced with and as a result, tenants will continue to feel the burn.’

Source: Residential Landlord

Marijana No Comments

Quickest Places To Sell Buy To Let Investment Property

When investing in buy to let investment property, it is worth knowing how quickly you can sell if you wish to.

New research from property sales company Sellhousefast has looked into how long it would take to sell property in 10 locations recently suggested by LendInvest as perfect for buy to let investment.

The locations, namely Stockport, Coventry, Wolverhampton, Birmingham, Peterborough, Colchester, Manchester, Canterbury, Luton and Enfield, were analysed using postcode data compiled by Thomas Sanderson to reveal where properties are likely to go fastest.

The fastest postcode to sell properties in was found to be Stockport, where properties sell an average of 104 days, with the fastest postcode being SK4 where properties are expected to stay on the market for no more than 60 days and are worth £280,768 on average.

Second place went to Coventry, where properties take 124 days to sell. The fastest-selling postcode in Coventry is CV6, where property sells within 76 days and typically costs £158,742.

The last podium place went to Wolverhampton, where on average it takes 138 days to sell a property, with the fastest postcode being WV8 taking just 92 days.

Managing director of Sellhousefast, Robby Du Toit, commented: ‘From our research, it’s plain to see sales in the north and central England, in particular, are very promising. Locations like Stockport, Coventry and Wolverhampton have the benefit of lower property prices (in comparison with the south) and fast-paced, growing markets; something investors should take advantage of; should they be able to.’

He continued: ‘However, it is also promising to note that no matter where you want to invest there is a location available where property sells quicker than most. It is so important therefore to make sure you do your research before you take on an investment property. Shop around, ask questions, compare prices – don’t just choose the most amenable, obvious property. When it comes to selling, this is not always what makes a success.’

Source: Residential Landlord

Marijana No Comments

Buy To Let Property Investors Back As Prices Fall

Buy to let property investors are returning to the market as falling prices make property investments viable according to independent estate agent, haart.

The agent found that the number of landlords registering for buy to let property has risen by 7.9 per cent on the month but has fallen by 21.8 per cent on the year across England and Wales.

In London, the number has risen by 11.8 per cent on the month but fell by 28.1 per cent on the year. The number of buy to let property sales has dropped by 2.6 per cent on the year across England and Wales and fell by 71 per cent in London. Average buy to let property sale prices are down 11.9 per cent across England and Wales annually, and by 12.4 per cent in London.

According to haart’s figures, house prices across England and Wales fell by 0.6 per cent on the month and by 5 per cent on the year with the average house price now sitting at £218,556.

New buyer registrations rose by 23.2 per cent on the month and by 7.8 per cent annually. The number of properties coming onto the market this month rose by 12.3 per cent and has risen by 1.9er cent on the year. In March, there were 12 buyers chasing every property across England and Wales.

CEO of independent estate agent, haart, Paul Smith, commented: ‘Three years on from George Osborne introducing the 3 per cent hike in stamp duty surcharges on second homes, landlords are beginning to come to terms with the additional costs and are cautiously entering the market again. Our branches across England and Wales saw a monthly uptick of 7.9 per cent in the number of landlords registering to buy, a figure which has been continuing to grow since the start of 2019.

Interestingly, sale prices to landlords are down by nearly 12 per cent on the year which may be spurring on this activity, these price decreases could be causing the available stock to fall within lower stamp duty thresholds, making the stamp duty levy a little easier to stomach. Despite this, landlords are not back in their hundreds, the number of registrations is still down 22 per cent on the year. Whilst some brave souls are re-entering the market, the hammering buy to let property investors received in terms of various tax changes is still fresh in many of their minds.’

He concluded: ‘Clearly investors are recognising the value that can still be found in buy to let property, especially in comparison to the overvalued and faltering stock market. Although the property market hinges on confidence, the FTSE 100, gold and cash are far more volatile to socioeconomic impact, so investors are increasingly returning to property where they deem their money safest, and where the yields are highest.’

Source: Residential Landlord

Marijana No Comments

The number of buy-to-let remortgage transactions will drop

Landlord action to mitigate higher tax costs will lead to a lower level of buy-to-let remortgage transactions going forward, Paragon’s PRS Trends Report for Q1 has predicted.

While landlords with an average of 12.8 properties and over 20 years’ experience in the private rented sector (PRS) remain engaged in the sector, they are now prioritising measures to bolster financial strength over portfolio expansion.

John Heron (pictured), director of mortgages at Paragon said: “The shift in focus from portfolio expansion to financial strength has driven a surge in buy-to-let remortgaging, with lower interest rates and longer initial fixed periods helping landlords reduce finance costs and lock in greater certainty.

“However, it also extends the product maturity cycle, guaranteeing a reduction in the scale of opportunity to refinance buy-to-let mortgage deals over the next few years.”

Landlords have scaled back their buying intentions, reduced their reliance on mortgage debt and improved affordability by spending less of their rental income on mortgage payments.

For example, the proportion of landlords looking to purchase property has fallen from between 15-20% before the announcement of tax and regulatory changes in 2015 to just 7-10% today.

Average portfolio gearing – which measures the proportion of debt finance relative to a portfolio’s overall value – has fallen from 40% in 2014 to 33% today, with landlords who have three or more properties borrowing 36% of their portfolio value on average.

Meanwhile mortgage costs as a proportion of rental income are down from 30% at the beginning of 2017 to 27%, also aided by landlords remortgaging onto lower interest rate and longer-term fixed mortgage deals.

By Michael Lloyd

Source: Mortgage Introducer

Marijana No Comments

Best Yielding UK Buy To Let Property Investment Postcodes

The best yielding buy to let property investments are the utopia every investor looks for, and research by sales and letting agent Benham and Reeves highlights the best spots.

Being a London agent, Benham and Reeves have obviously included the capital when searching for the best buy to let areas for rental returns, but the north can offer better yielding places.

Top on the list came Liverpool’s L7 postcode. With an average price of just £105,000, the area offers an average rental yield of 10.7 per cent.

This was closely followed by the neighbouring L6 postcode where yields are currently 10.4 per cent. Middlesbrough, Manchester, Bradford, Sunderland, Newcastle, Sheffield and Nottingham were also home to some of the highest yielding postcodes.

When it came to the capital, the agent found the highest yielding postcode to be the E6 postcode in East London, along with IG11, which covers Barking. Both locations offer a rental yield of 5 per cent.

East London dominated the top 10 highest returns for buy to let postcodes, with Romford postcodes RM8, RM9 and RM10 also amongst the best with rental yields of 4.9 per cent.

With E15 and EN3 also in the top ten highest yielding London postcodes, N18, which straddles the North Circular, is one of the only postcodes outside of East London to make the list with a rental yield of 4.8 per cent, while SE28 was the only postcode south of the river to appear.

Unsurprisingly, director of Benham and Reeves, Marc von Grundherr, concentrated on the capital, saying: ‘The DNA of the London rental market is so complex that it pays to consider where to invest on the most granular level possible when looking at the buy to let market.

‘Of course, London’s more prime postcodes are always a safe bet, attracting investment due to their prestigious image and positioning. While we may have seen some decline in price growth due to political uncertainty, they remain very much in demand from a rental point of view and so far, those with the budget to buy there, a return isn’t hard to come by.’

He concluded: “They also offer better capital growth than London’s peripherals and for those not completely dependent on yield but preferring to opt for more long-term growth, inner London is still the go-to place to invest in the capital’s buy to let market.’

Source: Residential Landlord

Marijana No Comments

Nearly 60% of landlords saw tax bills rise

Nearly six out of 10 landlords (58%) saw an increase in their 2017-18 tax bill, Paragon’s PRS Trends Report for Q1 2019 has found.

Landlords with three or more properties were more likely to report an increase in their 2017-18 tax bill than those with smaller portfolios, with an average annual increase in tax of £3,039 for those reporting a rise.

While over 60% of landlords confirmed that the change in their 2017-18 tax bill was as expected, one third (33%) said it was either a little or a lot more than expected.

John Heron, director of mortgages at Paragon said: “These figures provide early insight into how the tax changes impacted landlords in the first year of implementation.

“The January tax deadline was the first real data point for measuring change and it’s clear that landlords are continuing to adapt their approach as the transition progresses.

“The fact that almost one quarter of landlords intend to respond by selling property is bad news for tenants, impacting supply to the sector, driving rental inflation and ultimately making it more difficult for those that rely on the UK’s Private Rented Sector for a home.”

Almost half of landlords (49%) who reported a higher than expected increase said they would make changes to their portfolio as a result, with the most popular measures including selling property (24%), increasing rent (20%) and reducing borrowing (19%).

Mortgage interest tax relief for buy-to-let landlords is being phased out over a four-year period and replaced with a basic rate tax credit.

In the 2017-18 tax year, landlords could deduct 75% of mortgage interest costs from rent. This was reduced to 50% in 2018-19. It will fall to 25% in 2019-20 and then to zero.

By Michael Lloyd

Source: Mortgage Introducer

Marijana No Comments

Biggest choice in buy-to-let mortgages since 2007 for landlords

The number of buy-to-let mortgages has soared to 2,163, the highest since before the financial crisis hit in October 2007, according to research from Moneyfacts.co.uk.

In March 2017 the average two year fixed rate was 2.96 per cent and that has now gone up to 3.12 per cent following the Bank of England rate rise last year.

The average five year fixed rate in March 2017 was 3.77 per cent and but that has now fallen slightly to 3.61 per cent.

Darren Cook, finance expert at Moneyfacts.co.uk, said: “It is encouraging that buy to let landlords have more mortgage choice than they have had at any time in almost 12 years.

“Total product numbers have increased by 397 over the past year and by 706 over the past two years.

“Despite ongoing uncertainty in the property market, providers are not shying away from offering landlords a greater choice of products, although it is also evident from our research that heightened competition to try and attract buy-to-let business has not resulted in a fall in interest rates, as has recently happened in the residential mortgage sector.

“Indeed, the average two year fixed buy-to-let mortgage rate has increased by 0.20 per cent to 3.12 per cent since September 2018 and the average five year fixed rate has increased by 0.15 per cent over the same period.”

He argued that the recent increases to buy-to-let mortgages interest rates have been a result of mortgage providers attributing a little more to risk into their product rates due to uncertainty over future economic conditions.

Source: Simple Landlords Insurance

Marijana No Comments

Buy To Let Mortgage Choice Hits New High

The choice in buy to let mortgage products has hit the highest level seen since before the global financial crisis.

Figures released by Moneyfacts have shown that landlord choice when it comes to buy to let mortgage finance products has increased hugely over the past few years.

Total product numbers have increased by 397 over the past year and by 706 over the past two years to now give buy to let investors a total choice of 2,162 products today.

The choice in buy to let finance products has not been higher since October 2007, when 3,305 products were available.

Interest rates on buy to let mortgages have started to creep up however, despite the huge choice. The average two-year fixed buy to let rate has increased by 0.20 per cent to 3.12 per cent since September 2018 and the average five-year fixed rate has increased by 0.15 per cent over the same period.

Finance expert at Moneyfacts, Darren Cook, said: ‘It is encouraging that buy to let landlords have more mortgage choice than they have had at any time in almost 12 years.

‘Despite ongoing uncertainty in the property market, providers are not shying away from offering landlords a greater choice of products, although it is also evident from our research that heightened competition to try and attract buy to let business has not resulted in a fall in interest rates, as has recently happened in the residential mortgage sector.’

He continued: ‘As there appears to have been no sustained increases in interest SWAP rates since September 2018, a strong argument can be made that the recent increases to buy to let mortgages interest rates have been a result of buy to let mortgage providers attributing a little more to risk into their product rates due to uncertainty over future economic conditions.’

Source: Residential Landlord