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Scottish Rents Rising On Buy To Let Property Investments

Scottish rents grew by 0.9 per cent over the course of 2018 according to the latest Your Move Scotland Rental Tracker.

Average Scottish rents now stand at £576 per calendar month (seasonally adjusted). On a non-seasonally adjusted basis the average Scottish rent was £584 per calendar month.

The stand out performers for Scottish rent growth were the Glasgow and Clyde area and the Highlands and Islands region.

Rental growth in Glasgow and Clyde surged in 2018 by 12.7 per cent over the year, putting the area slightly ahead of the Highlands and Islands at a growth rate of 12.1 per cent.

Growth in the Highlands and Islands region, and Inverness particularly, was seen top be driven by the University of Highlands and Islands and Raigmore Hospital creating demand from students, doctors and nurses relocating to the area.

Scottish rents in the remaining three regions did not fare as well in 2018.

Edinburgh and Lothian saw rents increase by 4 per cent over the past year, to reach an average of £691.

The East of Scotland saw rents fall by 1.2 per cent in 2018, to reach the lowest average Scottish rent of £532. Southern Scotland fared even worse, with a drop of 3.4 per cent to an average rent of £535.

However, on a monthly basis the East of Scotland showed more promise with 0.4 per cent month-on-month growth from November, bettered only by Edinburgh and the Lothians at 0.5 per cent, while Glasgow and Clyde came in third at 0.3 per cent.

Rental yields on investment remained fairly strong for Scottish landlords, with the average yield on a rental property standing at 4.6 per cent.

This represents only a small annual drop from the 4.8 per cent enjoyed a year ago and remains higher than the average south of the border in England and Wales which stood at 4.3 per cent in December.

All in all, Scottish rents seem to have remained strong in 2018.

Source: Residential Landlord

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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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Rental Tracker Reports Buy To Let Rents Up

The latest Your move England and Wales Rental Tracker for December has shown eight regions post annual rental increases.

Despite the Christmas period often registering a slowdown as tenants are reluctant to move over the festive season, the rental tracker showed that 2018 bucked the usual trend with rental prices rising on both a monthly and annual basis.

Across all of England and Wales rental prices rose by an average of 1.8 per cent throughout the last year, finishing up at an average of £865 per calendar month (seasonally adjusted).

The strongest annual rent inflation was seen in the South West according to the rental tracker, while on a monthly basis in December the West Midlands posted the strongest performance.

Annual growth in the South West was measured at 4.1 per cent to reach an average monthly rental of £702 per calendar month. Three regions still have higher average rents than the South West, though average rents dropped in two of those regions.

The East of England has an average rent of £881 per calendar month, but this represents an annual fall of 1.4 per cent compared to December 2017.

The South East of England saw rates continue to rise by 1.2 per cent according to the rental tracker, to just short of the £900 mark at an average of £897.

There was good news for buy to let property investors when it came to yields, with the rental tracker finding each of the ten regions recording the same average yields as in the previous month of November.

Average rental yields across England and Wales also remained the same at 4.3 per cent.

The North East and North West regions continue to offer the best rental yields for landlords, with yields of 5 per cent and 4.8 per cent respectively.

National Lettings Director at Your Move, Martyn Alderton, commented: ‘While the rental market tends to wind down as we reach the end of the year, there were still some positive advancements this year, with prices rising in all but two regions.’

He continued: ‘While landlords in most areas saw their yields squeezed in 2018, there was good news as returns held firm between November and December.’

Source: Residential Landlord

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London buy-to-let sales down 5.8%

The south east of England has overtaken London as the region with the most buy-to-let purchases in a calendar year for the first time, with the north west almost edging the capital into third place.

Specialist buy-to-let mortgage broker Commercial Trust said the south east accounted for 16.5 per cent of purchases in 2018, up 1.7 per cent on the previous year.

London, which has traditionally held the top spot, saw purchases falling 5.8 per cent year-on-year to 12.9 per cent of the total in 2018, and took second place.

Andrew Turner, chief executive at Commercial Trust, said the figures backed up the consensus that investors were currently looking outside London and noted the continued growth in the south east, which is prime commuter-belt for the capital.

Mr Turner said: “With a multitude of transport and infrastructure projects underway in and around London, it will be interesting to see if this trend continues.”

The capital only narrowly held on to second place, as purchases picked up in the north west, too.

This region accounted for the biggest growth at 4.7 per cent, meaning it was home to 12.5 per cent of buy-to-let purchases.

Year-on-year, the north east also made big regional gains, with proportional growth of 3.22 per cent, the second highest increase.

Mr Turner said: “North west and north east are proving to be increasingly popular, typically offering cheaper house prices and better rental yields.”

Overall, Commercial Trust saw a 24 per cent year-on-year increase in the volume of buy-to-let purchases to the end of 2018, despite changes to the application process by many lenders following Prudential Regulation Authority rules introduced in 2017.

Mr Turner said: “These figures are encouraging for two reasons: they demonstrate that many investors still have confidence in buy-to-let and are continuing to invest in rental property.”

At 55 per cent, remortgages represented the biggest portion of applications, according to the broker.

“Remortgaging continues to be a leading trend and undoubtedly investors have been keen to take advantage of low interest rates,” said Mr Tuner.

“2018 also saw the anniversary of two-year deals, taken out in the surge that came ahead of the additional stamp duty surcharge, introduced in April 2016.

“As those two-year anniversaries approached, many landlords were looking to remortgage, before their mortgage payments reverted to the lender’s standard variable rate.”

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.

The Intermediary Mortgage Lenders Association (Imla) said this week it believes this year’s tax return will be the first time many landlords will see the effects of these policies on their earnings.

Source: FT Adviser

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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

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Landlords to feel effects of buy-to-let changes

The private rental sector may be approaching a “watershed” moment as landlords begin to feel the effects of recent tax changes reflected in their tax bills for the first time this month, a trade association has warned.

The Intermediary Mortgage Lenders Association (Imla) warned the introduction of various tax and regulatory changes since 2015 would begin to have an effect on property availability and tenant choice in the rental sector.

The body expects policies to contribute to higher rents for tenants, which would in turn make it harder for those who are trying to save for deposits to buy their own homes.

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.

Imla believes this year’s tax return will be the first time many landlords will see the effects of these policies on their earnings.

Kate Davies, executive director of Imla, said: “These measures continue to erode the buy-to-let sector, and in turn the whole private rental sector.

“In fact, we may be approaching a watershed, as landlords will only be starting to feel the adverse effects of income tax changes when these are reflected in their tax bills for the first time this month.”

Ms Davies suggested a recent period of subdued rental price increases may be disguising the true effect of these changes on the rental market.

She said a report published by IMLA in early 2018 had shown the “continued erosion” in buy-to-let, with net investment in rental property “collapsing” by 80 per cent over the course of two years.

She added: “It is no coincidence that, despite a growing contribution from build to rent, 2017 brought an abrupt reversal to 16 years of uninterrupted growth in the stock of private rental dwellings.”

Ms Davies said: “Buy-to-let landlords represent a key element of the private rental sector, providing homes for a very wide spectrum of households and including many benefit claimants who would in the past have had access to social housing.

“We consider it vital that no additional measures should be introduced which could risk further eroding the health of the private rental sector or the well-being of those who rely upon it.”

David Hollingworth, associate director of communications at London & Country Mortgages, said: “The raft of change to the buy-to-let market, which includes stamp duty and tighter criteria as well as the reduction in tax relief on mortgage interest, was always going to hit the market hard.”

Some landlords will have already factored the tax changes into their calculations but some may still face a nasty shock when they submit their returns, said Mr Hollingworth.

He added: “Demand for rental property is likely to remain strong and whilst there was a feeling that the buy-to-let market may have been growing too rapidly there’s equally a risk if it contracts too far.

“If supply dries up then rents will inevitably rise, especially with tighter lending criteria in play. Nonetheless where there’s demand there will still be investors and many established landlords are likely to retain an interest in adding to portfolios where the numbers stack up.”

Source: FT Adviser

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Don’t blame Brexit for the collapse of buy-to-let

You can blame Brexit for an awful lot of things. The slowing UK economy. The slump in sterling. The relative underperformance of UK stocks and shares. Current political rancour and mistrust. The fact that British politicians are ignoring a host of other pressing problems, from knife crime to the productivity puzzle.

What you cannot honestly blame Brexit for is the collapse of buy-to-let. It will have played a small part in knocking sentiment, but the real damage has come from another quarter. Although, once again, politicians have their fingers all over this one.

Tax attack
Buy-to-let was doomed from the moment Chancellor George Osborne was persuaded that amateur landlords were squeezing first-time buyers off the property ladder, and something had to be done about it. Personally, I have always had some sympathy with that point of view. While I was tempted by buy-to-let, I could also see it was unfair that young home-buyers were being outbid by older investors who had no intention of living in the property themselves.

Instead, they wanted to rent it back to those same first-time buyers, effectively profiting at their expense. Having said that, I never bought into the idea of “greedy landlords”. As in every sector, there’s good and bad. In a well-balanced housing market, there’s a place for both, it’s just high prices and supply shortages made the competition unfair.

Crackdown
The Treasury then unleashed an astonishingly vicious tax attack on buy-to-let, slapping on a 3% stamp duty surcharge, reducing wear and tear allowances, and gradually phasing out higher rate tax relief. That effectively taxed landlords on turnover rather than profits.

Worse, this punished smaller investors, while those who were large enough to set up limited companies escaped the worst. People looking to buy one or two properties to top up their retirement income found their sums no longer added up. Brexit be blowed, blame the Treasury.

London falling
Yes, Brexit has hit the wider London property market, with prices down 0.7% in the last year. But the Treasury inflicted most of the damage by slapping extra taxes on foreign buyers (although again, I have some sympathy with its motivations). High prices and low yields were also to blame.

I reckon it’s still possible to make money out of buy-to-let, especially if you can take advantage of current uncertainty and pick up a bargain property. However, I think that the effort involved continues to outweigh the potential rewards.

Why bother?
As I’ve written before, buy-to-let investors have the effort of finding and buying a property, doing it up, finding tenants, collecting rent, complying with all sorts of obligations and, well, I won’t go on. Why go to all that bother? If you invest in stocks and shares, you don’t have to.

Better still, if you use your tax-free ISA allowance you can ignore the Treasury because all your income and capital gains are free of tax. You also have a buying opportunity today as volatility returns. Blame the global bear market for that, not Brexit. Blame who you like, but take advantage of it.

Source: Yahoo Finance UK

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November sees rise in number of first-time buyers

Mortgage lending ticked upwards in November 2018 with first-time buyers showing stronger growth than home movers but buy-to-let purchase continues to fall, figures from UK Finance show.

There were 36,200 new first-time buyer mortgages in November, which is 5.8% more than in the same month a year earlier. They took out £6 billion in the month – a rise of 9.1% year-on-year.

The number of new home mover mortgages was also 36,200, but this was just 1.1% more than in the same month a year earlier.  New lending totalled £7.8 billion – 4% more year-on-year.

The average first-time buyer is 30 and has a gross household income of £42,000 compared to the average home mover who is 39 with a gross household income of £55,000.

There were 39,600 new homeowner remortgages completed in the month, some 1.3% more than in the same month a year earlier.  The £6.8 billion of remortgaging was the same year-on-year.

Buy-to-let

A total of 6,100 new buy-to-let home purchase mortgages were completed in November, some 9% fewer than in the same month a year earlier.  By value this was £0.8 billion of lending, down 11.1% year-on-year.

Buy-to-let remortgaging fared better with 15,000 completions in the month, 9.5% more than in the November 2017.  By value this was £2.4 billion of lending, representing an annual increase of 9.1%.

Comment

Jackie Bennett, director of mortgages at UK Finance, said: “A mixture of competitive deals and schemes including Help to Buy saw even more first-time buyers get a foot on the housing ladder during November.

“Meanwhile, homeowner remortgaging activity has steadied, after reaching its highest level in a decade the previous month as a large number of fixed-rate deals came to an end.

“In the buy-to-let market new home purchases remain subdued, while remortgaging continues to grow as landlords lock into attractive rates.”

Source: Mortgage Finance Gazette

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Buy To Let Investment Mortgage Rates Stay Low

Despite buy to let investors having to cope with more changes, at least buy to let investment mortgage rates remain at historically low levels.

Minimum three-year tenancies, deposit caps, and even possible rent controls have been proposed which could cause landlords further upheaval, while changes to mortgage interest tax relief will continue to be phased in this year.

However, with buy to let investment mortgage rates at such low levels, property investors are able to fix their mortgage rate for five years at below 2 per cent.

Five-year fixed investment mortgage rates in particular have grown in popularity since the Bank of England brought in stricter rental income rules for two-year fixes.

The lowest rate deal on the market is at 1.99 per cent from Nationwide’s buy to let investment mortgage arm, The Mortgage Works.

However, rates have risen slightly according to Moneyfacts’ Rachel Springall. She said: ‘In just one month, the average two-year fixed buy to let mortgage has risen from 3.06 per cent to 3.11 per cent today and the average five-year fixed buy to let mortgage has risen from 3.54 per cent to 3.56 per cent today.

‘While it’s inevitable for rates to rise after last year’s base rate decision, raising rates from what was once record lows, it is worth keeping in mind that three years ago the average rates were 3.25 per cent and 4.15 per cent respectively.’

The cheapest two-year fix on the market at the moment is 1.40 per cent at 60 per cent loan-to-value with a £1,745 arrangement fee from Sainsbury’s Bank – just 0.01 per cent more expensive than the cheapest residential mortgage.

Also on offer is a 1.49 per cent deal at 65 per cent LTV with a £2,275 fee from The Mortgage Works.

The Mortgage Works also has the aforementioned five-year fix at 1.99 per cent with a fee of £2,275 at 50 per cent LTV, while Skipton has a 60 per cent LTV deal at 2.09 per cent with a fee of £1,995.

For landlords who want to fix their buy to let investment mortgage rate for longer, The Mortgage Works is also offering a 10-year fix at 65 per cent LTV at 2.74 per cent with a £1,745 fee.

Further good news for landlords is that some lenders are starting to ease their affordability criteria.

Tipton and Coseley Building Society has reduced its interest cover ratio to 125 per cent for basic rate tax payers and 130 per cent for higher rate tax payers.

This means that landlords’ projected rental income will now have to cover a minimum 125 per cent of the mortgage payments, rather than 145 per cent.

It is not all bad news in 2019 for buy to let landlords it seems.

Source: Residential Landlord

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Poor Living Conditions Cost Buy To Let Landlord £12.5k

Failing to improve the poor living conditions at his buy to let rental property has cost a landlord more than £12,500 in fines and costs after his prosecution.

The buy to let landlord based in Bedford, Mr Balwinder Singh Chandi, owns a property in Bedford Road, Marston Moretaine, a small village near Bedford.

Following a visit by council officers to the buy to let rental property, he was served with an Improvement Notice by Central Bedfordshire Council as a result of the poor living conditions found at the rental property.

However, the landlord did not make the necessary improvements within the timescale laid down by the council, and as a result of his failure to rectify the poor living conditions Central Bedfordshire Council decided to take the matter the matter further, resulting in a court date.

The council took the case to Luton Magistrates Court on 18 December 2018, where Mr Balwinder Singh Chandi pleaded guilty and received a fine of £10,000.

In addition to the large fine for failing to improve the poor living conditions at the HMO rental property, the landlord was forced to pay a victim surcharge of £170 and also ordered to pay costs of £2,356.33 – Therefore required to pay a total of £12,526.33.

Speaking after the court case, Cllr Carole Hegley, Executive Member for Adults, Social Care and Housing Operations at Central Bedfordshire Council, said: ‘Landlords of Houses in Multiple Occupation must apply for a licence, which is in place to ensure that tenants are safe.’

She continued: ‘Despite us requesting that improvements be made, the landlord carried on and has paid the price.”

Landlords who fail to apply for a licence for Houses in Multiple Occupation (HMOs) will be committing an offence which may result in a prosecution, criminal conviction and a large fine.

Source: Residential Landlord