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Ringley: Now is the time to invest in BTL properties

Rental housing is likely to prove more resilient during this downturn than other real estate sectors, and landlords should therefore use this opportunity to invest in buy-to-let (BTL) properties, according to residential property consultancy Ringley Group.

Mary-Anne Bowring (pictured), managing director at Ringley Group, as said that people are more likely to rent than buy during a recession, and rent is typically one of the last things people stop paying during financial hardship.

Bowring said: “There is a huge opportunity still for buy-to-let investors in the UK rental market, which is only predicted to grow in size.

“That’s why institutional investors such as pension funds and insurers are investing billions in building homes for rent, as they see an opportunity to secure income-producing investments that hold up well during a downturn.”

Once the current crisis passes, pre-lockdown trends, including the predicted rise in the number of renters, will also continue.

This is due to affordability, changes in lifestyle and the job market, fundamentals which will remain post-virus.

To stimulate housing market activity and help landlords invest in BTL properties, Ringley has called for the government to exempt landlords from the stamp duty surcharge on second homes.

Bowring said: “Government efforts to restart the housing market should reflect long term pre-existing trends and that includes the continued growth in private renting.

“If the government wants to kill two birds with one stone – boost activity in the housing market and provide much needed rental homes – it should exempt landlords from the second home stamp duty surcharge immediately.”

In response to the growing demand for rental properties, as well as the effects of the COVID-19 lockdown, Ringley recently brought forward the launch of its automated lettings platform, PlanetRent.

Bowring said: “Proptech is evolving lettings fast as tenants must be seen as customers and the expectation is a frictionless, fully loaded experience, including immediate service which automation allows.

“It is important that buy-to-let landlords learn from institutional landlords to not fall behind the latest trends.”

By Jessica Bird

Source: Mortgage Introducer

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85% of buy-to-let lenders still lending

Some 42 of the 49 buy-to-let lenders operating at the beginning of March are still lending despite the impact of coronavirus, analysis from Mortgages for Business shows.

Together Money and Vida Homeloans have both pulled out of the market, while HSBC is no longer accepting buy-to-let applications.

However Santander, Clydesdale, Precise Mortgages and Kent Reliance have now restarted lending, after initially taking a step back.

Shawbrook and Paragon meanwhile are using virtual valuations against standard properties up to 75% loan-to-value.

Steve Olejnik, managing director of Mortgages for Business said: “Lenders have cut down the sorts of landlords that they will lend to.

“They’re pulling product ranges, tighten lending criteria, and increasing margins. But different lenders are derisking against different kinds of landlord borrowers. So, while some lenders are no longer lending to first time landlords, there are still lenders who are.

“My advice to landlords looking to remortgage is act sooner, rather than later. You may have to answer a few more questions when you’re applying for a remortgage that you would have had to last month – but a broker will still be able to find you a deal.”

Saffron Building Society withdrew from the market before the outbreak in March, though the lender has indicated that it will return to the market later in the year.

Lenders that have stopped lending to landlords since include: HSBC; Foundation Home Loans; Together Money; Vida Home Loans; Platform Home Loans; State Bank of India; and Furness Building Society.

BY RYAN BEMBRIDGE

Source: Property Wire

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Best Current UK Property Investment Locations

New research claims to reveal the best current UK property investment locations for buy to let investors to enjoy the greatest returns.

The research, carried out by peer to peer lending platform Sourced Capital, shows that over the last five years, investment into the real estate, renting and business sector has increased by 48.4 per cent, one of the largest increases in the non-manufacturing industries behind just the ‘construction’ and ‘other service’ sectors in terms of performance.

Despite Brexit uncertainty hitting house price growth, coupled with changes to tax regulations and a hike in stamp duty thresholds for buy to let landlords, the UK property market has stood firm and remains one of the most consistent investment options available in today’s markets.

Nationally and Regionally

The nation offering the best current top-line yields is Scotland at 5.8 per cent, closely followed by Northern Ireland at 5.4 per cent, with England also coming in just above the UK average (4.1 per cent).

Regionally, the North East (4.9 per cent), Yorkshire and the Humber (4.5 per cent) and the North West (4.4 per cent) are home to the most favourable current rental yields.

The best buy to let spots in the UK

Scotland’s current buy to let pedigree is also clear on a local level, with 14 of the top 20 areas for current yields located north of the border. 

Glasgow ranks top at present with yields hitting 7.8 per cent on average, followed by West Dunbartonshire (7.2 per cent) and Inverclyde (7.1 per cent). 

Burnley ranks at number six and the best in England with the average rental yield currently at 6.6 per cent, followed by Belfast (6.4 per cent).

Other areas outside of Scotland to make the top 20 include Blackpool (5.9 per cent), Country Durham (5.8 per cent), Pende (5.8 per cent) and Hyndburn (5.8 per cent).

In London, Tower Hamlets is currently home to the highest yields at 4.7 per cent, followed by neighbouring Newham (4.6 per cent) and Barking and Dagenham (4.6 per cent). 

Founder and Managing Director of Sourced Capital, Stephen Moss, commented: ‘One positive that can be taken from months of stagnant house price growth brought on by Brexit uncertainty is that rental yields have seen a boost due to a fall in property values coupled with consistently high rental demand and rental prices as a result.

‘We’ve already seen a Boris inspired bounce late last year with early signs that the market has ‘bottomed out’ and is once again on the up already in 2020. As a result, we’ve also seen an early flurry of investor activity as they realise now is a great time to get a foot in the door and secure a good deal before prices do regain momentum and the returns available start to tighten.’

Source: Residential Landlord

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Buy To Let Rental Yields Highest In The North

Buy to let rental yields have been shown to be highest in the North of England, according to a new buy to let index launched by Fleet Mortgages.

The new index found that buy to let rental yields in the north rose the most in the final quarter of 2019, as demand from prospective tenants continued to heavily outstrip supply in the region.

Buy to let rental yields in the north of England reached an average of 9.1 per cent in the fourth quarter of 2019, up from 6.5 per cent in the fourth quarter of 2018.

Landlords in Greater London also saw their buy to let rental yields grow over the same period, enjoying a raise of 0.3 per cent, from 4.8 per cent to 5.1 per cent, while property investors in the South West saw their buy to let rental yields remain steady at 5.5 per cent.

Overall yield growth for England and Wales as a whole rose 0.7 per cent, from 5.4 per cent to 6.1 per cent, according to the index.

The only region where landlords suffered a fall in buy to let rental yields was the North West where they dropped by 0.1 per cent but continue to offer a healthy average return of 7.4 per cent.

Distribution director at Fleet Mortgages, Steve Cox, commented: ‘Clearly, the market has shifted over the past 18-24 months as landlords get to grips with the increased costs that come with private rental sector activity, in particular the phased-in changes to mortgage interest tax relief for individual landlords.

‘Landlords now tend to look differently at their properties, with many converting single-tenancy properties into multi-tenant ones in order to secure better yields.’

He concluded: ‘These higher yields are needed in order meet those growing tax liabilities, but to also offset the increased cost of acquiring tenants and regulation. Examples of these changes include more properties being converted into self-contained flats rather than keeping the property as a larger family home.’

Source: Residential Landlord

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Most attractive cities for BTL landlords revealed

London and Manchester has been named by landlords as the most attractive cities to invest in buy-to-let (BTL) properties in 2020 according to Simply Business.

The research shows that the two cities were where landlords expect the BTL market to be most robust this year, with both receiving over a third of votes when asked which city represents the best investment opportunity.

Liverpool and Birmingham followed closely behind as BTL hotspots, with both cities securing 10% of the vote amongst landlords when considering where their next investment in 2020 lies.

Bea Montoya, chief operating officer at Simply Business, said: “Buy-to-let landlords are crucial to the UK economy, contributing a combined £16.1bn through pre-tax spending.

“The sector also now houses 20% of British households and has a huge presence up and down the country, so it’s wholly encouraging that landlords view a broad spread of regions as attractive areas to invest this year.

“London usually comes out on top for being the most expensive city to invest in property in the UK, but falling house prices are making it an attractive place to invest once again.

“We know a quarter of landlords are planning to sell at least one property this year, largely due to government reform and tax changes, so it’s reassuring to see that landlords are still eyeing up investment opportunities up and down the country.”

By Jessica Nangle

Source: Mortgage Introducer

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How landlords are tackling the biting tax changes

Landlord clients are tackling the tax and regulatory changes hitting their pockets by taking advantage of low mortgage rates, using limited company structures, opting for higher yielding properties and branching further afield, brokers have said.

The buy-to-let market grew rapidly after the financial crisis but has since taken a beating as a number of tax and regulatory changes have made the private rental sector a less lucrative option.

In fact more than a third of landlords are planning to sell at least part of their portfolio in 2020 as the changes continue to bite in a system “weighted against them”.

Accumulate Capital polled 750 investors in December and found 37 per cent of landlords were planning to sell one or more of their properties, with 61 per cent of them blaming increasing regulations and taxes.

How the rules changed:

An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

The changes led many to predict the buy-to-let market would shrink in size leaving only ‘professional landlords’ able to make viable returns.

Of those keen to sell, 72 per cent thought the current tax and regulation measures were unfairly weight against them while 69 per cent said the costs of managing their portfolio had risen “considerably” over the past five years.

But brokers have said many of their landlord clients were sticking with the private rental sector and diversifying their portfolio or shaking up their own system to deal with changes.

David Hollingworth, associate director of communications at L&C Mortgages, said: “[The changes] will no doubt lead some to hold their position rather than add more properties, particularly the more amateur landlord whilst they review their approach.

“However, many are taking action in controlling their costs by taking advantage of low mortgage rates and the use of limited company lending to grow investments.”

Due to the tax shake up, limited company status is more attractive to landlords as changes would not affect them and they can offset mortgage interest against profits which are subject to corporation tax instead of income tax rates, which is cheaper.

Average mortgage rates have also been slashed over the past few years as lenders battle in a “race to the bottom” which has seen two-year fixed rates for buy-to-let properties fall below 1.3 per cent.

Mr Hollingworth added: “While some will be considering whether it might be the right time to sell certain properties in light of the tougher conditions, there’s little to suggest that landlords are offloading property in significant numbers.”

Rachel Lummis, mortgage and protection adviser at Xpress Mortgages, said although buy-to-let enquiries from new and smaller landlords had plummeted, the larger portfolios were still transacting.

She said: “Larger portfolio landlords are still transacting, just differently from a few years ago.

“Clients are remortgaging existing properties to not only secure decent long-term fixed rates but to also raise capital for further investment.”

Ms Lummis said the properties being added to portfolios had moved from standard flats and houses to more high-yielding houses of multiple occupancy or multi-unit blocks, as well as in locations around the country not previously considered.

Meanwhile Ruth Whitehead, director at Ruth Whitehead Associates, warned against the “relative flatlining” of property values over the next few years and urged anyone considering selling property to “think very carefully”.

She added: “In short, it’s something that needs more careful consideration than ever before and clients should only stay in this market for the long haul.”

By Imogen Tew

Source: FT Adviser

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Buy To Let Property Investors Planning To Exit Market

New research has suggested that over a quarter of UK buy to let property investors are planning to exit the private rental sector this year.

The survey of 800 landlords, carried out by landlord insurance provider Simply Business, revealed that with uncertain market conditions, fourth fifths (82 per cent) of landlords are not planning on buying any more properties in 2020. Just one tenth (13 per cent) said they would buy another property this year, while a third (35 per cent) also reported a decrease in their rental yield in 2019.

The top reasons buy to let property investors gave for wanting to sell are tax increases and government reform, such as shifting House in Multiple Occupation (HMO) licensing, which added new stipulations on the minimum size of rooms, as well as banning of admin fees. Well over a tenth cited these as their reasons.

Other reasons that buy to let property investors gave for planning to sell include rising rental costs (10 per cent), cashing in on their investment (9 per cent), economic instability (5 per cent) and slowing house price growth (4 per cent). This comes after a third (35 per cent) also reported a decrease in their rental yield in 2019, which adds to the desire to sell.

A fifth (20 per cent) reported a decrease of 0-5 per cent, just under one in 10 (9 per cent) reported a decrease of 5-10 per cent and 3 per cent of buy to let property investors reported a decrease of 10-15 per cent.

Looking ahead to this year, over a quarter (27 per cent) of landlords expect to see a further decrease in their rental yield in 2020. One in five (18 per cent) expect to see a decrease of 0-5 per cent, and a further 6 per cent of landlords expect to see a decrease of 5-10 per cent. Only 2 per cent of landlords expect to see a decrease of 10-15 per cent. However, over half (52 per cent) are still optimistic and expect their rental yield to increase in 2020.

Bea Montoya, Chief Operating Officer at Simply Business commented: ‘Landlords around the country are telling us that government reforms, tax increases, and rising rental costs are forcing them to put their investments up for sale. The tax increases imposed by the government are proving counter-productive for landlords, while ongoing political and economic uncertainty hasn’t been providing landlords with the confidence they need to stay in the market. But selling a buy to let is a big decision, especially if you’re selling more than one.

‘Any landlord looking to sell up should make sure they understand the complexities surrounding buy to let sales, particularly if the property is occupied. Any tenants should be made aware of plans to sell as early as possible and given reassurance their tenancy still stands. When it comes to selling, landlords need to understand any tax implications involved, such as capital gains tax. If the property is sold for more than it was paid for, there will be a capital gains tax liability.’

Source: Residential Landlord

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Buy-to-let industry relieved at election result

Figures within the buy-to-let mortgage industry breathed a sigh of relief when the Conservatives won the General Election.

Michael Lawlor, business principal at Mortgage Advice Bureau, said: “From a buy-to-let perspective a lot of clients I deal with were putting any future purchases on hold at risk of a Labour government.

“They were worried about rent caps and talk of right to buy plans and that resurfacing at some stage.”

Bob Young, chief executive at Fleet Mortgages, added: “In my view, the Conservative majority is good news for the country and our sector.

“This is a strong – in a numerical sense – government that understands business drives revenue for all its spending on behalf of us, the taxpayer.

“It’s my view that, under the Labour Party’s plans for the private rental sector, it would have ceased to exist as we have come to know it, strangled by rules formulated on the belief that it is somehow a bad thing and that all buy-to-let landlords are simply in it for the money at the expense of their tenants.

“A Labour minority government or it leading a coalition may well have resulted in investment from outside the UK into buy-to-let lending being pulled or at least seriously slowed while a complete understanding of the ‘new world’ was digested.

“We feel invigorated by the result and are looking forward to developing our offering and ensuring we continue to support buy-to-let advisers and their landlord clients.”

Richard Hayes, chief executive and co-founder at Mojo Mortgages was pleased about the Tories’ plans for the buy-to-let sector.

He said: “Finally, they’re planning to bring in a ‘Better Deal for Renters’.

“This will include abolishing ‘no fault’ evictions and introducing a lifetime deposit which moves with the tenant, rather than having to put down a new deposit for each property a tenant moves to.

“Again, if this promise is kept, it will be good news for renters who undoubtably want to purchase their own home.”

However Payam Azadi, director of Niche Advice, was worried the new Conservative government might tax landlords more to fund their spending plans.

He added: “Let’s not forget that all of the fundamental changes that have happened in the buy-to-let sector have been implemented under a Tory government.

“Although I think Labour’s plans would have had a huge impact on the buy-to-let market, I’m still nervous that buy-to-let landlords may be used as scapegoats as the government starts searching for ways to pay for all their promises.

“If landlords get taxed further there won’t be marches on ‘save the landlords’.

“I’m worried we can still be seen as easy targets.

“The buy-to-let sector does a valuable job of helping the property sector and that should be helped out and there should be more support for it and the attack on landlords should stop.”

Bea Montoya, chief operating officer at Simply Business, warned the government needs to entice landlords to stay in the private rented sector.

Montoya said: “Buy-to-let landlords contribute a combined £16.1bn to the economy through pre-tax spending, and it’s vital that Boris Johnson and his party recognise their importance to Britain.

“A lifetime deposit would bring about huge change, but with little detail published, it’s hard to see how this will work in practice, or the impact it could have on landlords.

“We know a quarter of landlords already plan to cash in next year due to government reform, tax hikes, and uncertainty in the market.

“The current tax increases imposed by the government are proving counterproductive, but with no promises to prevent those looking to sell from leaving, we could see half a million homes put up for sale next year alone.”

Richard Donnell, research director at Zoopla, said that the rental market has faced a raft of policy changes since 2016.

He said these have stalled new investment, resulting in static rental supply, which is a primary factor behind rental growth reaching a three-year high at 2%.

Donnell added: “Further reforms appear likely and it is important the impact on rental supply is managed in order to avoid an acceleration in rental growth – also known as runaway rents.”

Franz Doerr, chief executive and founder, flatfair, said: “It is crucial that the new Conservative government recognises the power of technology to transform renting and real estate more widely.

“The new government needs to support and work with innovative companies harnessing technology to make the wider real estate market more transparent and modern for all parties involved.”

By Michael Lloyd

Source: Mortgage Introducer

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Jon Hall: Government should boost new build and BTL sectors

The new government should boost the new build sector and support the buy-to-let market, Jon Hall, chief commercial officer and deputy chief executive at Masthaven, has claimed.

Hall (pictured) said he would like to see the next government put efforts into fixing the challenges the housing market is facing.

Hall added: “Key issues around affordability and supply must remain a central part of the next government’s strategy.

“The new government has a great opportunity to boost the new build sector and deliver the number of homes the country requires.

“Over recent years, the buy-to-let sector has been buffeted by regulatory and tax changes.

“We should be supporting landlords who offer vital housing stock to those who are saving to get on the property a ladder or who need the flexibility renting can provide.

“By softening the tax treatment of buy-to-let landlords, we would provide more confidence to buy-to-let investors and reduce costs that may be passed on to renters.”

Hall also said that the government needs to give more incentives for local authorities to release more land for self-build and development.

He added: “SME housebuilders play a key role in our housing sector, deploying innovative solutions like modular, self-build and so on to address the UK’s housing crisis, one affordable home at a time.

“Finance continues to be one of the major barriers to SME expansion in the new build sector.

“Specialist lenders can help bridge this funding gap for SME housebuilders.

“If we’re to get anywhere near building a million new homes by 2022, we will need lenders like Masthaven that can provide a range of innovative and accessible bridging and development finance loans.

“Product ranges are diversifying, and the lending market is becoming more specialised.

“Broker expertise is more crucial than ever to help consumers find their way through the financing process for their property ventures.

“I’d like the next government to deliver surety and stability to the market, restoring borrower confidence.

“We hope to see a strong and resilient housing market as we move into 2020.”

By Michael Lloyd

Source: Mortgage Introducer

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UK Buy To Let Property Rents Continue To Grow

UK buy to let property rents are continuing to grow, according to the latest HomeLet Rental Index figures for September.

Average buy to let property rents in the UK hit £967 per calendar month in September, up by 2.5 per cent the same time last year.

When London is excluded from the figures, average UK property rents reached £797 per calendar month, a rise of 2.2 per cent from last year.

All twelve regions monitored by the HomeLet Rental Index showed an increase in property rents in September when compared to the same month in 2018.

The region with the largest year-on-year increase in property rents was the North West, showing a 4.4 per cent rise between September 2018 and September 2019.

In fact, five out of the twelve regions monitored saw a rise in property rents of over 3 per cent. The North West, the East Midlands, the South West, Greater London and the North East.

The West Midlands, Wales, Scotland, and Yorkshire and Humberside all saw property rents rise by 2 per cent or more on an annual basis in September.

The worst performing regions were Northern Ireland at 1.4 per cent, the East of England at 1.3 per cent, and the South East which saw rents rise by just 0.2 per cent since September 2018.

However, when it comes to property prices things do not look so rosy. Nationwide’s House Price Index reported that house prices rose by just 0.2 per cent in September, down from 0.6 per cent in August and marking the 10th month in a row that the annual house price growth was recorded as under 1 per cent.

The trends reported within the HomeLet Rental Index are brand new tenancies, which were arranged in the most recent period, providing an in-depth insight into the lettings market. HomeLet references over 500,000 tenants every year.

Source: Residential Landlord