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Buy To Let A Strong Investment For Most

The majority of buy to let investors still see buy to let as a good strong investment, with 56 per cent looking to keep or buy more rental properties.

The majority of landlords still see the sector as offering a good money making opportunity. However, there is concern that it will decline in the future with 44 per cent looking to sell. For those who are looking to leave the sector, 24 per cent are blaming falling yields. 23 per cent are concerned about tax changes and 19 per cent blame a decline in house prices.

60 per cent of landlords feel that property management had become a burden, likely because of growing regulation in the sector. 61 per cent of buy to let investors undervalued the costs that were involved.

However, some of those who are planning to sell their portfolio will remain involved in property, with 27 per cent planning to invest the money into their main property compared to a third who are thinking of re-investing in another asset class.

A significant regional divide was noted in terms of the best performing areas. Analysis from Octopus Choice revealed that typical rental properties in London cost landlords over £1,250 per annum for the first five years. While there are still hotspots such as Tower Hamlets, Barnet and Hackney, three quarters of landlords in the capital think buy to let investment will be less worthwhile in five years.

In Scotland and the East Midlands returns were more plentiful. Scottish landlords saw average annual returns of 8.8 per cent on their investment over an eight-year period, while those in the East Midlands return 8.2 per cent, making buy to let still a strong investment.

Head of Octopus Choice, Sam Handfield-Jones, said: ‘Brits still have an incessant love affair with bricks and mortar – but the hassle and cost of buy to let is a source of growing frustration, and some landlords may find that their once reliable day-to-day income is becoming harder and harder to come by. But this isn’t the case across all parts of the market, with money still to be made from the right property in the right region.’

Source: Residential Landlord

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Thousands Of Buy To Let Property Investments Sold

Almost 4,000 buy to let properties per month are being sold by property investors as part of the first recorded fall in the number of rental properties in 18 years.

New official figures from the Ministry of Housing report found that around 3,800 buy to let homes are being sold by landlords each month. This is due to changes in mortgage interest tax relief, which continue to have a negative effect on the buy to let market.

Landlords’ profits have been negatively affected by a plethora of tax and regulatory changes over the last few years. These changes range from the removal of the ‘wear and tear’ allowance for rental properties and the implementation of the 3 per cent Stamp Duty surcharge.

Chief executive of letting agent trade body ARLA Propertymark, David Cox, said: ‘The barrage of legislative changes landlords have faced over the past few years has meant the buy to let market is becoming increasingly unattractive to investors. Landlords are either hiking rents for tenants or choosing to exit the market altogether to avoid facing the increased costs incurred.’

The vast numbers of landlords leaving the buy to let market has lead to a chronic shortage of properties available to rent in certain parts of the country. The disparity is felt particularly acutely in London where rental demand is high.

CEO of Shojin Property Partners, Jatin Ondhia, commented: ‘As a result of the government’s increase in stamp duty, it is now much more costly to acquire a buy to let property. A £250,000 investment property will incur stamp duty of £10,000 compared to £2,500 for an owner occupier. Many landlords have seen their profits eroded by the increased burden of taxation and regulation. They are also facing poor buy to let yields especially in London for example, where they are between just 2-3 per cent, while nationwide the average yields are between 6-8 per cent.’

Source: Residential Landlord

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Supply of rental property continues to fall

Despite rising demand, housing levels in Britain’s private rented sector are dwindling, highlighting the need for more investment in purpose-built rental property for the country’s growing number of tenants.

Summary:

  • Up to 4,000 traditional buy-to-let rental properties are being sold each month by private landlords
  • New taxes introduced to curb buy-to-let investment are forcing more second property owners to sell due to rising costs
  • At a time when more people are renting their homes, it is imperative that greater levels of investment is put into the purpose-built rental sector

The gap between supply and demand levels of UK rental property continues to widen.

Close to 4,000 traditional buy-to-let rental properties are being sold in the UK each month, according to the latest report from the Ministry of Housing. In total, supply fell by 46,000 properties in 2017, the first recorded decline in rental homes in the country for 18 years.

The reduction in the availability of buy-to-let homes, often older properties on the outskirts of city centres originally intended for owner-occupiers, comes at a time when private landlords are being faced with increasing costs. Two years ago, a series of new tax measures, including a 3% rise in stamp duty on buy-to-let purchases, came into effect, decreasing profit levels.

As a result, it’s prompted many landlords to leave the market. Recent figures from UK Finance highlight a 19% fall in new mortgages approved for buy-to-let homes in the UK.

These findings back up those published earlier in August 2018 from the Royal Institute of Chartered Surveyors, who believe that this falling supply at a time when the demand for rental accommodation continues to rise will drive rental prices up 15% by 2023.

Increased taxation aims to shift the focus away from the outdated buy-to-let sector and grow investment in the purpose-built rental sector. These homes, located in prime city centre locations with the best facilities, are the properties that modern tenants will pay premiums to access.

Source: Select Property

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Warnings emerge of a ‘rental drought’ as lettings listings drop amid landlord exodus

An exodus of landlords from the buy-to-let market has caused a 12% drop in rental property listings over the past 12 months, Home.co.uk claims.

The property search engine currently says there are 228,033 houses, flats and rooms to rent across England and Wales.

It warns that buy-to-let taxes and Right to Rent rules have deterred landlords, with London the hardest hit.

Home.co.uk’s data shows there has been a 20% fall in rental supply in the capital, especially in richer areas where rents have in turn soared.

This was led by Westminster, where listings have slid by 447 to 2,673 over the past 12 months, pushing the average monthly rent up 24% to £5,292.

Kensington & Chelsea has 427 fewer listings at 1,584 and has seen rents rise by 14.7% over the past year to £5,502.

Doug Shephard, director at Home.co.uk, described the situation as a “rental drought”.

He said: “The current situation is particularly dire for tenants, who are set to continue to face increasing competition for good-quality properties and rising rents.

“Government red tape and higher taxation in the lettings market has triggered forced sales by landlords. Moreover, this additional supply is now negatively impacting on capital values.

“Vendor landlords have done their maths and they know that if they continue to let the property, even with a rent hike, they will be losing money overall. Conclusion: time to sell.

“The problem is, though, that the private rented sector constitutes 20% of the housing stock, the majority of which is owned by landlords with small portfolios. A recipe for disaster? Maybe.

“Negative sentiment in this sector is certainly sufficient to turn confidence in the wider property market to the downside, thereby creating misery for all, especially those wishing to rent.”

Source: Property Industry Eye

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Six million UK rental properties demanded by 2025

GBP 21 billion worth of purpose-built rental property was bought in 2017 alone, as a rising number of Britons are moving into the country’s rental market.

Summary:

  • The scale of demand in the UK’s rental sector has been revealed, with six million people expected to be wanting to live in rental accommodation by 2025
  • 20.5% of households in the UK are expected to be renting by 2022
  • Over 100,000 purpose-built rental properties are estimated to be in the pipeline, as buyers invest heavily into the sector

Is the UK’s rental market able to keep pace with rising demand levels?

As more Britons choose to rent their homes, new research from Hamptons International suggests that, by 2025, six million people will be demanding to access rental property.

From difficulties getting onto the property ladder, to changing generational attitudes towards renting, the rental sector continues to serve as the primary housing market for an increasing number of people in the UK.

The research also forecasts that, by 2022, 20.5% of all British households will be renting, up from 19.4% in 2018.

While Hamptons explored a number of theories as to how homes come onto the rental market, it did highlight the growth of the ‘Build to Rent’ market; purpose-built rental properties from developers funded by private and institutional investors.

As more Britons actively choose to rent their homes, there’s been an increased focus on ensuring that higher quality rental homes are delivered, while there’s also been renewed importance on raising management standards to better support the UK’s growing number of tenants.

The report commented: “Build to Rent only accounts for a small part of the market today, but we estimate there are more than 100,000 units in the pipeline and more to come.”

Analysis shows that the sector is anchored by significant amounts of wealth, with 65% of investor purchases in the sector in 2017 made with cash, totalling GBP 21 billion worth of property sold.

Source: Select Property