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Rent Price Rises Hit Record High For Buy To Let Investors

The number of buy to let property investors introducing rent price rises to their tenants hit a new record high in June.

More than half of letting and management agents (55 per cent) witnessing landlords making rent price rises. This is a 22 per cent increase from May which was a previous record high.

The latest ARLA Propertymark June Private Rented Sector (PRS) Report also showed that year-on-year the number of tenants experiencing rent price increases is up from 31 per cent in June 2017, and 35 per cent in June 2018.

The record level of rent price increases is thought to be mainly because of the introduction of the tenant fees ban forcing landlords to recover costs through higher rents.

Letting agents had an average of 199 properties under management per member branch in June, a decrease from 201 in May.

However, demand from prospective tenants increased marginally in June, with the number of house hunters registered per branch rising to 70 on average, compared to 69 in May.

Despite fears of a mass exodus by landlords in the private rental sector, the number of buy to let investors exiting the market remained at four per branch, the same figure seen in June 2018.

ARLA Propertymark Chief Executive, David Cox, commented: Unsurprisingly, rent costs hit a record high in June as tenants suffered the impact of the tenant fee ban. Ever since the Government proposed the ban, we warned that tenants would continue to pay the same amount, but the cost would be passed onto tenants through increased rents, rather than upfront costs.’

He continued: ‘In addition to the repercussions of the Tenant Fees Act, the proposed abolition of Section 21, coupled with the Mayor of London’s recent call for rent controls, will only cause the sector to shrink further. In turn this will increase pressure on the sector because it will discourage new landlords from investing in the market, causing rents to rise for tenants as less rental accommodation is available.’

Source: Residential Landlord

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Landlords holding back from further purchases over next 12 months

Fewer than a third of landlords would add to their buy-to-let portfolio over the next 12 months, research claims.

A survey of 5,000 landlords by letting agent Benham and Reeves, assessed sentiment in the property sector amid tax and regulatory changes.

The majority (83%) said they were unlikely to sell up this year, but just 28% said they would consider investing in a property in the next 12 months.

Half said they would consider expanding their portfolio within the next five years.

Two thirds of landlords said the proposed changes to Section 21 notices made them more cautious about investing in a further property, while opinion was divided over changes to mortgage interest relief  and whether the sector still provided a good investment as a result, with 49% believing it is and 51% no longer sure.

Despite this uncertainty, 73% considered property is still the best and least volatile long-term investment when compared to all other asset classes.

More than a third (37%) felt very confident that they will see an adequate return on their portfolio over the next ten years, with a further six per cent stating they were extremely confident and 51% not as confident.

Marc von Grundherr, director of London-based Benham and Reeves, said: “The Government has really gone to war with buy-to-let investors of late and a consistent string of detrimental changes to the sector through Stamp Duty increases, tax relief changes and a ban on tenant fees has had the desired impact of denting industry sentiment and dampening appetite for future investment due to a reduction in profitability

“However, for the institutional buy-to-let investor, this is but a mere blip on a much longer timeline, and the overwhelming overtones are that while Brexit poses a challenging obstacle for the immediate future, the market remains the investment option of choice with many confident on a return further down the line.

“This is a testament to the durability of buy-to-let bricks and mortar in the UK as, despite a Government-backed clampdown, it remains a lucrative business and one that continues to gain the backing of those that are on the frontline.”

By MARC SHOFFMAN

Source: Property Industry Eye

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Property still considered the best investment

Some 73% of buy-to-let investors consider property as still the best , least volatile long-term investment when compared to all other asset classes, letting and estate agent, Benham and Reeves has found.

In the wake of a number of government changes to the sector, 66% believe that the government would fail to implement any initiatives aimed to boost overseas investment in order to drive consumer demand.

Marc von Grundherr, director of Benham and Reeves, said: “The government has really gone to war with buy-to-let investors of late and a consistent string of detrimental changes to the sector through stamp duty increases, tax relief changes and a ban on tenant fees has had the desired impact of denting industry sentiment and dampening appetite for future investment due to a reduction in profitability.

“However, for the institutional buy-to-let investor, this is but a mere blip on a much longer timeline and the overwhelming overtones are that while Brexit poses a challenging obstacle for the immediate future, the market remains the investment option of choice with many confident on a return further down the line.

“This is a testament to the durability of buy-to-let bricks and mortar in the UK as, despite a government-backed clamp down, it remains a lucrative business and one that continues to gain the backing of those that are on the frontline.”

With Brexit continuing to dominate the headlines with no end in sight, it’s no surprise that 72% of investors have had their outlook on the property market altered since the vote, with 68% now less confident in the market itself.

With more changes to property and investment laws on the horizon, 80% of those asked could be forgiven with being unfamiliar with the latest changes to the buy-to-let market.

Although it has only just been implemented, the recent changes to Section 21 notices have also had an impact, with 66% of investors now more cautious about investing.

However, opinion is divided over changes to buy-to-let tax relief and whether the sector still provided a good investment as a result, with 49% believing it is and 51% no longer sure.

The current financial landscape has provided some assurance, with 60% confident that rates will remain low over the next five years and while 66% aren’t as confident in an adequate return over this time period, 22% remain very confident, with just 10% not at all confident.

However, with buy-to-let always requiring a long-term investment outlook, this increased to 37% of investors feeling very confident that they will see an adequate return over the next 10 years, with a further 6% stating they were extremely confident and 51% not as confident.

By Michael Lloyd

Source: Mortgage Introducer

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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

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Bittersweet profits for buy-to-let landlords

Buy-to-let investors in the UK have suffered a dismal few years. The government’s determination to make the sector less appealing to investors seems to have worked.

As we pointed out in last week’s issue, the number of landlords in the UK has fallen by 120,000 in the past three years, according to figures from estate agent Hamptons International. Nevertheless, these landlords are leaving the sector with fairly significant profits. The average landlord in England and Wales sold their buy-to-let property in 2018 for £79,770 more than they paid for it (before tax), having owned it for nearly ten years on average.

Last year, 85% of landlords sold their property for more than they paid for it, with 15% making a loss. As you might expect, those selling property in London made a profit almost three times the national average, selling for a £248,120 profit. However, landlords made more money in 2017, selling for a £83,430 profit, with London landlords making £272,120. It’s also important to take into account the potential opportunity cost of leaving the sector.

Until a few years ago, buy-to-let was a fairly reliable source of income and capital growth for many. The government was concerned that landlords were pushing up prices beyond the reach of first-time buyers. While its clampdown has cooled the buy-to-let frenzy, it’s a shame that the Help to Buy programme is having the same effect.

By: Sarah Moore

Source: Money Week

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Buy To Let Investors Contribute £16.1 Billion To Economy

Buy to let investors in the private rental property sector contribute a huge £16.1 billion to the UK economy.

Through their spending over the year, landlords in the UK contribute towards thousands of jobs from builders and tradesmen through to accountants and letting agents. This figure has nearly doubled from £8.5 billion a decade ago, following the long-term expansion of the rented sector and rising costs per property.

Property maintenance and servicing represents the largest running cost for landlords across the private rental sector (PRS), totalling £5.8 billion. The next largest outlay is for those landlords that use a letting or management agent and contribute a collective £5 billion.

Investors spend a total of £567 million on accountancy and legal fees, £341 million on administration and registration costs, contributing an additional £908 million of spending solely dependent on the PRS’ existence.

Landlords also contribute £2.3 billion on service charges and ground rents, £848 million on utilities, £791 million on insurance, and £618 million on other associated costs of running a property.

The average landlord now spends £3,571 per property in annual running costs, before tax or mortgage interest – equivalent to 32.9 per cent of rental income. These costs have risen by 5.6 per cent in the last two years without factoring in increasing taxes. Since the start of 2009, costs have jumped by 28 per cent, a rise of £771.

£1,086 is currently spent on maintenance, repairs and servicing, and £935 spent on letting agent fees per property. A typical landlord spends £426 per property each year in ground rents and service charges. Insurance typically costs £149, and legal and accountancy fees £107, while administrative and license fees add another £64 per year.

A further £528 is lost in void periods each year, a figure that has climbed in recent years as a result of higher rents, and a slightly longer gaps between tenancies.

Faced by rising costs, and higher tax bills following the recent changes to mortgage interest tax relief, landlords are now looking to cut the amount they contribute.

36 per cent of landlords, surveyed by BVA BDRC on behalf of Kent Reliance, are already reducing or planning to reduce their spending. Overall, a typical landlord reviewing their outlay would cut spending per property by around 6 per cent. If replicated across the PRS, this would reduce their total spending by nearly £1 billion each year, reducing the revenues of the industries that depend on the PRS.

Sales Director of OneSavings Bank, Adrian Moloney, commented: ‘The political discourse around the private rented sector has been one-sided to say the least. Overlooked is the significant economic contribution landlords make, supporting thousands of jobs through their spending and housing a large portion of the country’s workforce. Instead, landlords have faced punitive tax and regulatory changes, at a time when running costs are climbing.’

Source: Residential Landlord

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Buy-to-let landlord numbers are plummeting!

It hasn’t been an easy time for buy-to-let investors over the past two-and-a-half years. First came the European Union referendum of summer 2016, an event whose result led to fears of collapsing house prices amid a meltdown in the UK economy.

We may still be waiting for this slump to happen, and is something I believe won’t occur given the scale of the supply imbalance in the homes market. But one thing is sure. The breakneck property price boom of recent decades has ground to a painful halt and is showing no clear sign of returning in the near future.

Landlord are evacuating With the stunning house price growth of yesteryear now seemingly over, a trend that had created a great number of buy-to-let millionaires, there seems little reason to take the plunge right now. With tax relief for landlords also being tightened, costs rising, and the sheer quantities of paperwork for these property owners increasing, well it’s little wonder that the rental market is in sharp decline.

This phenomenon was underlined by recent data from estate agent haart released this week. This showed the number of landlords registering to buy property over the past year plunged 37.4% on a nationwide basis.

The widening of the supply shortage in the rentals market has pushed rents up all over the country, and particularly so in London where the agency advised the average has jumped 6% over the past 12 months to a fresh record of £1,924.

Rents to keep rising? Haart chief executive Paul Smith commented: “The lack of new homes to buy has, in turn, pushed up rental prices… as Londoners scramble for rental accommodation as an alternative to buying a home.”

Smith blamed the “misguided efforts” of government to reform the property market by hiking the tax liabilities of landlords, and tipped that the cost of renting will continue rising for tenants. “Until buy-to-let taxation is relaxed, we can expect rents to rise throughout 2019,” he added.

The punitive tax changes that have hit both proprietor and renter hard in the pocket are here to stay too. Government is desperate to be seen to be helping first-time buyers get onto the housing ladder by reducing the number of homes hoovered up by the buy-to-let sector, even if in reality this is resulting in higher near-term costs for those aspiring to own their first home.

If anything, the financial and practical headaches for landlords in particular are only likely to rise in the years ahead as demand for new homes steadily booms. This imbalance makes the housebuilders great places to invest in for the years ahead, in my opinion. I for one would much rather invest in the stock market right now than to take the plunge in the increasingly-challenging buy-to-let market.

Motley Fool UK 2019

Source: Investing

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Buy-to-let investors! Why London is a rental market that could still make you rich

The three words ‘London housing market’ have been enough to send a chill down the spines of many a property owner over the past 12 months or so.

We all know the stresses that Brexit, and its current (and future) consequences, have had on home values since the EU referendum. The stratospheric home price growth of yesteryear has seemingly been consigned to history, and in the case of the capital, has been replaced by stagnating, if not receding, prices.

Latest figures from Hometrack UK indicated that home prices in the capital had risen just 0.2% in January on an annual basis. And Foxtons warned just this week that a range of factors, including political ones, mean that low transaction levels were likely to persist “in the short-to-medium term.”

Capital gains for landlords

You can come out from behind the sofa, though, because things aren’t all bad. Well certainly not if you’re a prospective or existing landlord. According to Foxtons, “there is momentum in the lettings business” and the estate agency consequently saw revenues rise here in 2018.

Indeed, a recent report from ideal flatmate showed one sub-sector of the rental market that is performing particularly well: the market for tenants seeking single rooms.

According to the online property website, the average price of a room advertised on its boards sailed 13% higher in 2018, to £855 from £781 in the prior year, thanks to “a continued lack of suitable stock and a reduction in buy-to-let investors.” And prices have continued to rise in 2019, ideal flatmate said. The average price currently sits at a whopping £902, with the most expensive average in London sitting at £1,045 for a room in Westminster.

“We’re currently seeing the price of room rentals in London increase at a rate of at least one per cent a month on average,” co-founder of ideal flatmate Tom Gatzen said, who also attributed the jump to “a reduction in the number of landlords and letting agents with rooms to rent as a result of the stamp duty shake-up, changes to tax thresholds and the impending ban on letting fees.”

The Top 10 Most Expensive London Boroughs

Borough Average Room Rent (Per Month)
Westminster £1,045
Camden £999
Kensington and Chelsea £997
Hammersmith and Fulham £959
Islington £910
City of London £900
Hackney £898
Wandsworth £810
Tower Hamlets £809
Southwark £807

Source: ideal flatmate

Alive and kicking

Talk of the demise of the buy-to-let market is clearly overdone. The London market still provides plenty of scope for landlords to make huge returns.

And while home prices are currently under some pressure, this isn’t something that long-term proprietors need to worry over, in my opinion. The capital remains one of the world’s most popular cities for both native and foreign homebuyers and it always will, meaning that property values are bound to make a comeback.

Would I invest in the rentals market myself, though? No. The sea of tax changes in recent years means that buy-to-let isn’t the lucrative investment opportunity that it was just five years ago, whilst increasing regulation makes it a much more complicated endeavour. There are much better ways to make your money work for you, in my opinion, and for this reason I’m using my cash elsewhere (like investment in the stock market) to help me make my fortune.

Source: Yahoo Finance UK

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New Electrical Safety Rules For Buy To Let Property Sector

Buy to let investors renting properties out will soon face new electrical safety rules on all properties they rent out in the private rental sector, following a government announcement.

Minister for housing and homelessness Heather Wheeler MP announced this week that mandatory electrical safety inspections will have to be carried out by ‘competent and qualified’ inspectors, with landlords facing tough financial penalties if they don’t comply with the new electrical safety rules.

Government ministers are due to publish new guidance which sets out the minimum level of competence and qualifications necessary for those carrying out the electrical safety inspections to ensure let private rental properties are safe from any electrical faults.

The minister said that the new guidance will provide clear accountability at each stage of the electrical safety inspection process, making it clear what is required and whose responsibility it is to put it in to place, but without placing excessive cost and time burdens on private sector landlords.

She said: ‘Everyone has the right to feel safe and secure in their own home. While measures are already in place to crack down on the small minority of landlords who rent out unsafe properties, we need to do more to protect tenants.

‘These new measures will reduce the risk of faulty electrical equipment, giving people peace of mind and helping to keep them safe in their homes.

‘It will also provide clear guidance to landlords on who they should be hiring to carry out these important electrical safety checks.’

The new electrical safety rules are part of the government’s continuing efforts to drive up standards in the private rented sector. Gas safety checks have long been in place in the private buy to let sector, and carbon monoxide alarms are required by law wherever there are solid fuel appliances.

Source: Residential Landlord

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What buy-to-let landlords can expect in 2019

As 2019 gets underway, and economic conditions continue to be uncertain, it is important for buy-to-let investors to be on top of the market and its changes.

The past three years have seen the market face a host of new regulations and tax changes, and this year is set to be no different as buy-to-let landlords must brace themselves for further uncertainty. However, it’s not all bad news – some of the changes are set to have a positive impact on the market, and there are still plenty of landlords planning to increase their property portfolios over the coming 12 months.

Tax reforms have been unkind to the buy-to-let market, with landlords only able to claim 25% of their mortgage tax relief, when filing their taxes between April 2019 – 2020. This is down from 50% for the previous tax year. Not only will this increase tax bills, but it could also mean that some landlords who are currently paying basic rate tax find that they are pushed into a higher rate band.

The good news is that the slow market activity means lenders are offering rock-bottom mortgage rates to tempt landlords, following the Bank of England’s base rate decision last year. However, the low rates are unlikely to stay that way for long. Many mortgage lenders will continue to offer incentives, such as free valuations and cashback, to attract business from landlords.

From April, all lettings agents will be required to register with a Client Money Protection scheme (CMPS), which protects both landlord and tenant money. For example, deposits, rent or money for property maintenance – should the letting agent go into administration. Landlords can rest assured that even in an uncertain economic climate, their rental income will be protected.

The likely introduction of the Tenant Fees Bill will also offer greater peace of mind to tenants, although it could come at a detrimental cost to landlords. The bill will mean tenants will only be required to pay their deposit and rent when signing a new tenancy agreement. If letting agents increase charges in other areas to compensate for the loss of fees, and subsequently become too expensive for a landlord to use, they may have to pass the added costs onto tenants in the form of rent increases. Alternatively, more landlords may decide to self-manage their properties rather than go through an agent, however this may result in many landlords struggling to stay on top of ever-changing property rules and legislations.

Of course, depending on the outcome of Brexit, house prices in the UK could take a hit. Deterred by the uncertainty of the property market, an increasing number of individuals could be looking to rent property instead of buying, pushing up the demand for rental housing and the cost of rent. If you’re currently considering investing in buy-to-let property, it’s worth monitoring the property market, as house prices have the potential to drop significantly. However, you will need to be prepared to act quickly if you are hoping to invest in buy-to-let property, so getting your finances in order ahead of 29 March will make you are more attractive buyer. Alternatively, bridging loans and other alternative finance options can give landlords access to fast, flexible finance to secure property acquisitions in a competitive market.

2019 is set to be an uncertain time for landlords and staying on top of the new regulations can feel like a full-time job in itself. The UK Adviser offers support to landlords of all portfolio sizes, ensuring that you remain fully compliant amid the economic and political market changes.

Source: Mortgage Introducer