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Buy To Let Property Investors Enjoying The Cambridge Effect

The residential property market in Cambridgeshire is performing well, impacted by the ‘global brand’ of Cambridge and the diversity of its market trends.

Research by property consultants Bidwells has found that Cambridge and the surrounding county has seen its residential property market rise three times quicker than the UK national average.

In the next 20 years, population growth in the Cambridge area is expected to be 24.5 per cent, placing pressures on demand on the city. Additional factors contributing to the success of the rental market are Brexit, high performing schools, improved transport links and the significant increase in housing throughout Cambridgeshire.

Rental costs have increased by approximately 3 per cent in the last 12 months with an average rent of just over £1250pcm in Cambridge. The strength of migration into Cambridge provides one of the key drivers of the residential lettings market.

One of the main reasons of this influx is due to the expansion of the Biomedical Campus where the total jobs on site at present are circa 12,300 with 7,500 to be created for the coming year, providing a total of 19,800 employees eventually on site.

It is not only the current influx of AstraZeneca employees that is significant but also other large companies and institutions such as Cambridge University, ARM and Addenbrookes Hospital, that have under-pinned the lettings market for many years now and will continue to do so in future. More recently companies such as Amazon, Microsoft Research and Apple to name a few, have joined the expanding technological highway of silicone fen.

Brexit, and the general uncertainty towards house values has meant that many people are opting to rent, boosting demand in the private rental sector.

Secondly, the number of high performing schools and colleges with a world leading university continues to attract many people wishing to live and work in Cambridge. Vitally, 64 per cent of residents in the area said that living within walking distance to a school was very important to them.

The confirmation of a Cambridge South Train Station opening next year highlights that Cambridge is an ideal location for London commuters too.

Source: Residential Landlord

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68% of brokers think Base Rate had no impact on their businesses

More than two thirds (68%) believe that the two Bank of England Base Rate increases seen since November 2017 had no impact on their business, United Trust Bank’s broker sentiment survey has found.

The Base Rate currently stands at 0.75% following an increase from 0.50% on 2 of August this year.  The rate was increased from 0.25% to 0.50% on the 2nd of November 2017.

Some 16% of brokers felt the two increases had had a positive impact on their businesses as opposed to 16% who felt they had had a negative impact.

Harley Kagan, group managing director – United Trust Bank, said: “It is encouraging to see that for a majority of brokers the two Base Rate increases have had little to no impact on their businesses over the last 12 months.

“I believe the same is broadly true from a lender perspective although expectations of higher mortgage rates to come may have been a contributing factor to a general cooling of activity in the residential property market.

“Developers and housebuilders need to be mindful of future demand and pressure on pricing when planning future projects and that, coupled with Brexit uncertainty, is causing some to take their foot off the gas with new starts.

“The Base Rate has been less than 1.0% for the best part of 10 years. Originally a measure to stave off the worst effects of the financial crisis, for many, and especially the latest generation of consumers and borrowers, ultra-low interest rates are now the norm.”

Kagan added: “As such it doesn’t take much of an increase to inject some nervousness into the market, especially for first-time buyers.

“However, a return to the interest rates seen before the credit crunch seems unlikely. Whilst a 5% Base Rate appeared reasonable in 2008, the PRA recently challenged the resilience of banks and other lenders using a 4% Base Rate for stress testing, an indication perhaps of what they believe would be an extraordinary interest rate for the current economic environment.

“Hopefully, once the nature of our future relationship with the EU is clearer and uncertainty in the economy is replaced with stability, buyers will be back in even greater numbers and housebuilders will be more encouraged to get on with tackling the UK’s inherent housing shortage.”

However, when asked what impact the increases have had on the UK’s residential property market over the last 12 months, 27% believed the effect had been negative.

Nearly half (46%) expected one more increase of 0.25% between now and the end of 2019, taking the Base Rate to 1.0%, while 12% expected the rate to fall.

Source: Mortgage Introducer

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Property market ‘struggling for momentum’

The residential property market is “struggling for momentum” as new buyer interest falls and sales expectations turn negative across the UK, according to the Royal Institution of Chartered Surveyors.

The September 2018 Rics UK Residential Market Survey found a slight fall in new buyer demand and a deterioration in new sales instructions across the market, as the net balance reading slipped to -11 per cent from -9 per cent in the previous month.

The results suggested a renewed fall in new buyer enquiries due to affordability constraints, lack of stock, economic uncertainty and interest rate rises hampering activity.

The survey questioned chartered surveyors operating in the residential and lettings markets and found average stock levels on estate agent’s books was close to record low levels.

Rics reported sales expectations over the next 12 months had turned negative across the UK and found the time taken to complete an average sale had increased to 19 weeks.

House price growth was unchanged at 2 per cent in September and has fluctuated between 2 and 3 per cent for the past year.

The survey found a subdued sales outlook in areas such as London and the south east had placed downward pressure on house prices, while figures continued to rise in the West Midlands, Northern Ireland and Scotland with a positive expectation of rising prices in the coming 12 months.

Jeremy Leaf, former Rics residential chairman and north London estate agent, said the market had not seen the “autumn bounce-back” expected after such a quiet summer.

He said: “It is interesting that activity remains fairly flat nationally, which means London is still in negative territory, turning the old north/south property divide on its head.

“It is particularly disappointing that sellers seem reluctant to make their properties available in sufficient numbers, which would have improved choice and get the market moving in the period running up to Christmas.”

Mr Leaf said his customers are still citing Brexit uncertainty as a factor in a “needs-driven market”.

Craig McKinlay, new business director at Kensington Mortgages, said the figures showed the UK housing market was suffering from a bottleneck effect.

He said: “When we look at the big picture, a lack of supply coming onto market is slowing down the housing chain – discouraging homeowners from downsizing and in turn, preventing suitable properties being freed up for first time buyers or second steppers.

“With the Autumn Budget a few weeks away, it would be great to see the government offer incentives for older homeowners to downsize, for example an exemption from stamp duty.

“There has been a lot of focus on first-time buyers, quite rightly; but unless the government can make it financially worthwhile for current homeowners to move, then the bottleneck will only continue to be squeezed.”

Source: FT Adviser

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Why British residential property remains a good bet in 2018

British residential property has long been viewed as a very strong asset class for investment. While there have been ups and downs along the way, such as the price crash in the early 90s, it has generally offered excellent long-term returns.

The market’s reputation has taken something of a knock recently, however, which has been driven by Brexit-related uncertainty and a slight cooling in price growth. This is a temporary blip and is unlikely to dampen the market in the long-run. Rather than be deterred, I firmly believe that investors should embrace some of the excellent opportunities this market presents.

The Brexit vote in June 2016 is the starting point for this slight faltering of faith in the residential market. In the run up to the referendum vote, both house prices and foreign investment in the UK were at record highs. However, a somewhat surprise result  signified a break with the status quo and ushered in economic uncertainty, and this soon led to concerns about whether price growth could be sustained.

UK inflation: where’s it heading in the long term?

However, these anticipated shockwaves failed to materialize. House prices have continued to rise ever since the referendum, illustrating that demand for residential property remains high and providing investors with strong capital returns. Rental yields across much of the country have also continued to perform well, with ever greater numbers of tenants looking to the private rented sector to meet their needs.

For some investors, the vote has actually opened up new opportunities. The devaluation of Sterling against currencies like the Euro, Dollar, and Renminbi has meant that UK assets offer better value than they did before the vote. This provides overseas investors with excellent value for money, and has also kept important capital flowing into the country’s property market – ensuring that developers can successfully finance the projects that increase the UK’s housing stock.  Similarly, a sustained low Bank Rate has also kept investors’ mortgage costs down.

While Brexit might not have been the doomsday event for the property that some expected, there are also concerns in several quarters that the market has run out of steam. There has been some evidence that the London market has cooled off slightly in recent months – particularly at the upper-end, which has been heavily affected by the changes to stamp duty on second homes. However, other parts of the country also offer world class property investment opportunities. Manchester, Liverpool and Leeds continue to provide strong returns, and our recent Global Real Estate Outlook found that Birmingham is set to become a global property investment hotspot. This is due to a combination of low prices, high yields, and a rapidly growing local economy. The UK residential property market therefore continues to offer investors with a variety of different portfolio sizes, risk appetites and capital availabilities a diverse range of different propositions.

Which way will property prices go in 2018?

While the additional stamp duty levy on second properties and recent changes to landlords’ tax relief remain in place, the political environment towards property investment is less highly-charged than it was pre-Brexit. The recent Autumn Statement, for example, was notable for the absence of significant policies directed at landlords. While punitive pre-Brexit policies remain in place, policymakers’ attentions now appear to be more focused on improving first-time buyers’ prospects and increasing housebuilding than cracking down on investment portfolios.

Looking forward, there are a few risks facing the UK’s residential sector, but many of these look increasingly unlikely to come to fruition. While economic turbulence resulting from the UK and EU failing to agree upon a divorce bill could have derailed the economy, it now appears that a reasonable deal that works for both parties in in sight. This will encourage stability in the market. Furthermore, the imbalance between supply and demand in the property market will support both a baseline of rental yields and house prices. With the UK’s population continuing to grow, this trend is unlikely to be reversed anytime soon.

Although the economic outlook often changes in the short-term, the reality is that the UK will continue to be a great long-term destination for residential property investment for some time.

Source: Money Observer