Written By Em

Em Morley

North East Property Prices Rise 11.1% in a Year

Published On: May 8, 2015 at 4:21 pm

Tags: house prices North East,housing market,landlords in the North East,North East property market,rental property North East,rental yields

Property prices in the North East have increased by 11.1% in the past year, but monthly growth is steadying.

The KIS Housing NOW (North of Watford) report analyses the North East housing market. Research from the KIS Intelligence Service found that the average house price in this region was £137,411 in April 2014. It is currently £154,450, but this is £49 less than the previous month, a decline of 0.04%.

The part of the region experiencing the highest annual rise is South Shields, where prices are now £10,598 more than 12 months ago.

North Shields has also witnessed soaring price rises, of £10,179 over the same period.

North East property hotspots

Area	Price rise between April 2014-April 2015¹
South Shields	£10,598
North Shields	£10,179
Morpeth	£9,988
Tynemouth	£9,745
Newcastle	£7,927

Houses in Seaham have experienced £6,775 decreases to their value in the past year, and property prices in Blyth have increased by just £2.

However, prices in Blyth have risen fastest over the last four weeks, up 3%, followed by South Shields at 2.4%. Prices in South Shields have increased by 4.6% in the first quarter (Q1) of this year.

In Peterlee, prices dropped at above average rates of -1.8%, followed by Sunderland at -1.7% and North Shields at -1.4%.

Darlington was named April’s Best to Buy due to prices dropping 1.3%. Houses in the town are now 3% cheaper than at the beginning of 2015.

84.3% of homes in Darlington are privately owned, compared to the average of 76.8% in the North East. 38% of these houses are semi-detached and 31% terraced.

North East Property Prices Rise 11.1% in a Year

Couples without children occupy 36% of properties, with the average home housing 2.2 people. 17% of homes are privately rented and another 11% are rented from the local authority or social landlords.

32.8% of residents are aged 24-49-years-old, with more people aged 47 than any other age. 23 citizens are over 100-years-old.

Rental market

The average North East rental property costs £548 per month to let, which is £7.50 less a week than this time last month.

Rents are £12 less than this time last year, a 2.2% drop from £560 per month in April 2014.

Gateshead provides the best returns for landlords, with rental yields of 6.6%. However, this has dropped monthly by 0.1%. Other strong areas are Peterlee at 5.2%, Killingworth at 5.1% and Sunderland at 5%.

Average yields dropped to 4.3% despite rises in Blyth of 0.6% and Killingworth at 0.4%. Washington experienced a huge fall of 1.2%.

Killingworth was named April’s Best to Invest. Landlords can achieve almost identical yields to Newcastle, where properties are £36,965 more expensive.

41% of homes here at semi-detached, with 21% of properties occupied by couples with children, 18% without children and 14% by just one person.

KIS Group Founder and CEO Ajay Jagota comments on the findings: “It’s striking how much the North East property market has turned around in the past 12 months, even if growth is non-existent right now. Again we’re seeing the value of highly localised analysis like ours; South Shields homes are worth £11,000 more than this time last year, Blyth homes are worth £2 more.

“Across the region, prices have spent another four weeks vegetating, down this month by less than half of 0.1%. There’s next to no change from month-to-month at the moment, and it seems like the prices we have at the moment are the new normal, for the time being at least.

“That doesn’t mean that prices aren’t changing from area to area; in Blyth, they’re up 3% month-on-month, even if, as we’ve seen, they’ve got some ground to make up and in South Shields they’re up nearly 5% over the first quarter of 2015.”

Jagota continues: “Although yields for investors remain very competitive, rents appear to be falling in the region. Not only are they down £30 this month, they’re down 2.2% year-on-year. Areas like Newcastle and Gateshead have actually seen rents fall by over 1% this year alone.

“I have always had misgivings that rent caps are the right solution for renters, with a lot of the evidence suggesting they actually force rents up.

“Even if that proves not to be the case, these figures show that in the North East rent caps are completely unnecessary as over the course of the year they’ve actually gone down.

“When it comes to where landlords are going to get the best return on their investment in the region, Gateshead is still well ahead of the pack, even though it’s rental yield is a little below the 7% you can usually expect to make at the moment, around 6.6%. Look out for Peterlee though, where an average house costs well below £100,000 and which currently gives you a return of 5.2%.”¹

¹http://www.landlordexpert.co.uk/2015/05/07/north-east-house-prices-have-risen-by-11-1-in-the-last-year-but-are-all-but-unchanged-this-month/

House Prices, ‘rose by £100 per day,’ in April

Published On: May 8, 2015 at 4:13 pm

Author: Em Morley

Categories: Finance News

Tags: general election,house prices,property prices

New statistics indicate that house prices across the United Kingdom continue to escalate at a remarkable rate.

Data released from the Halifax showed that house prices rose at more than £100 per day during April, taking the average value of property in Britain to almost £200,000. This has led to more concern that young professionals and families are being further priced out of the property market.

Growth

Despite perceived market sluggishness, due to election uncertainty and more restrictive lending conditions, the report from the Halifax showed that annual growth rate had increased. The increase was to 8.5% in the twelve months up to April, from 8.1% in the year to March. As a result, average house prices rose from £193,328 to £196, 412 in just one month.[1]

Martin Ellis, housing economist at the Halifax, believes that, ‘housing demand is being supported by a number of factors including economic improvement, rising employment and low mortgage rates.’ According to Ellis, ‘this combination has kept house price growth steady in recent months with prices increasing by 2.2% to 2.6% on a quarterly basis and an annual rate of 8-9%.’[2]

Ellis warns however that, ‘at the same time, supply remains very tight with a general shortage of properties available for sale.’ [3]

House Prices, ‘rose by £100 per day,’ in April

Election results

With the Conservatives defying predictions and gaining an overall majority win in the general election, the market is expected to make further gains. Johnny Morris, head of residential research at Hamptons International, said that, ‘we should now see the other side of the pre-election slowdown in activity-the recovery.’ He continued by saying, ‘transactions typically end up 15pc above what you would expect in an average year for at least six months after the election. That potentially means a 30pc difference between activity numbers in the 6 months in the run up to the election versus the 6 months after.’[4}

Despite the result of the election only being announced a few hours ago, exit poll results gave some buyers the confidence to push through with substantial deals. Becky Fatemi, managing director of Rokstone Properties, said that, ‘the London property market has gone crazy and I haven’t slept last night. We have already had exchanges on over £26m worth of property, which I anticipate will rise to well over £30m by the close of the day. Today and tomorrow we will see a huge upward adjustment in London pre-election and post-election residential property prices.’ Fatemi believes that the election outcome, ‘is the one the property market wanted.’[5]

Concern

Whilst the property industry has widely welcomed the result, there remain grave concerns over the crippling lack of housing within the UK. Guy Grainger, chief executive of property group JLL, commented that, ‘there is a palphable sense of relief in the residential property market because there are no new taxes coming in, however we still need to address the issue of supply. Businesses have a real responsibility to articulate how we can supply more housing and must also help the debate on Europe to help people see it from a trade perspective as well as a community one.’[6]

[1]-6 http://www.telegraph.co.uk/finance/property/11591792/House-prices-in-Britain-climb-100-a-day-and-its-about-to-get-crazier.html

First Time Buyers Rushing to the Prime London Market

Published On: May 8, 2015 at 2:17 pm

Author: Em Morley

Categories: Landlord News

Tags: housing market,London property market,property market,rental market,renting in london

The number of first time buyers is almost even with the amount of investors in the prime London property market, found estate agent Marsh & Parsons.

Investors are still making the most home purchases in prime London, but the gap has closed in after first time buyers rushed into the market in the last three months.

Marsh & Parsons’ London Property Monitor found that around one in three (29%) of prime London property sales were made by investors in the three months to March 2015. This fell from 37% at the end of 2014.

In the same period, the number of first time buyer sales rose from only 21% in the last quarter (Q4) of 2014, to 28% in Q1 2015. This increase has boosted the total number of sales in the prime market funded by mortgages to 17% in the last three months.

First Time Buyers Rushing to the Prime London Market

In Q1 2015, demand for prime London homes grew by 20%. This has caused added competition for available properties on the market and increased the amount of registered buyers per home from ten in December 2014 to 12 in March 2015.

CEO of Marsh & Parsons, Peter Rollings, says: “First time buyers have been riding a wave of fortuitous circumstances recently, with almost unheard of mortgage rates, reduced up front Stamp Duty costs and support schemes like the Help to Buy Isa inflating confidence.

“Combined with a more accessible pace of property price growth so far in 2015, many more have been able to take the plunge into the property market. Prime London property has always been a bastion of investment, but it’s encouraging to see the drawbridge being lowered for everyday Londoners who live and work in this city.

“However there is, and has always been, some aspirational prime central areas that are out of grasp for new buyers, and will remain an investment stronghold. Addresses like Kensington and Chelsea resonate around the world, and will forever entice buyers looking for unparalleled capital returns.”

One-bedroom properties

Due to the high demand for starter homes, one-bedroom properties in prime London have experienced the largest increase in value in the last year, with the average price up 5% compared with the 1.7% annual growth in the whole market.

The price of the average one-bedroom home in London has increased by £75 a day in the last 12 months.

Likewise, buy-to-let investors favour one-bedroom properties, as rents on these homes have risen at the fastest rate of all house types. The average weekly rent on a one-bedroom property has increased 5.8% year-on-year in the cheaper parts of outer prime London. Young professionals are particularly keen on renting these homes.

Rollings adds: “With more and more young professionals climbing onto the property ladder, one-bedroom properties have outperformed the market across prime London.

“Historically, buyers rated property on the number of bedrooms and a check list of desirable features. But the speed at which the London property market has moved in recent years has shifted the goalposts.

“Today’s Londoners are far more likely to prioritise location, overall square footage and well-thought through living space, compromising on that second bedroom accordingly. For the same reason, savvy investors who find the right one-bedroom property have the golden ticket to rental returns.”¹

¹http://www.landlordexpert.co.uk/2015/05/07/first-time-buyers-flying-through-the-prime-london-property-market/

First Time Landlords are in Their 40s

Published On: May 8, 2015 at 11:46 am

Author: Em Morley

Categories: Landlord News

Tags: becoming a landlord,buy to let investors,first time buyer,investing in property,landlords

First Time Landlords are in Their 40s

The most common age to become a landlord is between 40-49-years-old, revealed research by Rentguard Insurance.

40% of those buying to let for the first time were in this age range. The second most common age is in the 50+ bracket at 24%, followed by those aged 30-39 at 19%.

The landlord insurance firm asked customers: How old were you when you first became a landlord? on their website.

Somewhat shockingly, 17% of respondents were just 20-29-years-old when they purchased an investment property.

Director of Rentguard Steve Jones says: “The results show that those in their 40s are thinking ahead and looking towards property as an investment for their money.

“With the recent relaxing of pension rules, we expect the 50+ bracket, and even those in their 60s, to be the biggest growing group over the next year or two.”¹

In a report conducted earlier this year, the Halifax found that the average age of a first time buyer purchasing an owner-occupier property was 30-years-old, up from 29 in 2011.

London was the region with the oldest first time buyer, at 32.

¹http://www.landlordexpert.co.uk/2015/05/07/first-time-uk-landlords-are-most-likely-to-be-people-in-their-40s-survey-reveals/

Rents Increase 15% Since May 2010

Published On: May 8, 2015 at 11:24 am

Author: Em Morley

Categories: Landlord News

Tags: landlord returns,rent arrears,rent growth,rent increases

Rents in England and Wales have risen by 15.2% since the last general election of May 2010, found Your Move and Reeds Rains.

This growth is faster than inflation, which was 11.6% in the same period. After the effects of inflation, rents increased by 3.6%. This is a 0.7% rise per year since the last Parliament.

The average rent in March 2015 was £768 per month, found the latest Buy-to-Let Index from Your Move and Reeds Rains.

Annual rent growth is now at the fastest pace for two years, with the average rent in England and Wales up 3.7% in the last year. Rents have not risen this quickly since the year to April 2013, when they increased 3.9% annually.

Between February and March 2015, rents grew by 0.3%. This fell from the 0.4% increase seen in January to February this year. It was also the second month in a row of rental growth after November, December and January saw rents fall, which is common in winter.

After rents rose this year, they are just £2 away from the record high recorded in October 2014, of £770 per month.

Director of estate agents Reeds Rains and Your Move, Adrian Gill, says: “Since 2010, the private rented sector has absorbed over a million extra households. With social housing in decline, alongside a parallel decay in the number of people owning their own home with a mortgage, private renting has stood in to fill the gap.

“With only small real terms rent rises, this has generally been a success, and tenants are now half as likely to fall behind on rent as at the peak of the financial crisis. However, this sector is carrying the weight of the housing crisis, and that will mean faster rent rises in future if supply doesn’t keep up.

Rents Increase 15% Since May 2010

“Without more homes every year to match a rising population, housing will inevitably become more expensive. And with one in five households now renting privately, this section of the population won’t be an exception to those fundamentals.

“Over the next five years, politicians of all stripes can’t just hope that this problem will go away. Britain needs more homes, and over the long term, investment by landlords will only provide places to live as quickly as those homes are given planning permission and completed.”

Regional rents

The highest annual growth was seen in the East of England, at 12%. The average rental property in this region is now much more expensive than in the South East.

London experienced the second largest rent rises, at 5% since March 2014. Yorkshire and Humberside was third at 3.3%.

Contrastingly, rents in the East Midlands are 0.2% lower than the previous year, and the South West has experienced no annual changes.

On a monthly basis, the East of England has also had the fastest rent increases, up 2.5% on February 2015. The North West is close behind at 2.3%, and Yorkshire and Humberside follows at 0.4%.

Rents in the East Midlands have fallen by 0.6% between February and March, and the North East and Wales witnessed rents 0.5% lower than a month previously.

Gill continues: “Generally the quickest rent rises have traced the most buoyant jobs markets, and this matches a very positive picture for the East of England. By similar logic, the East Midlands had previously seen very robust rent rises to rival London, but this has now tapered out. This could be a pause for breath or signal a deeper slowdown for the East Midlands’ previously powering local economy.

“Another stand-out area is the North West. Rents in this area are outperforming and on the ground we’ve seen this effect clustered particularly around the potent Manchester economy. It’s clear that the North West powerhouse, centred on Manchester, is fast becoming the London of the North, with a deepening premium compared to areas like the North East, North Wales, or much of Yorkshire.

“Each local market can also be split further, into the top and bottom sections of the market. This is most clear in the capital. At the upper reaches of the London market there is plenty of stock, but generally at lower rents, there is a massive stock shortage, as tenancy lengths have increased taking out of the churn in the market and reducing choice.”

Yields

The gross rental yield on the average rental property in England and Wales was 5% in March 2015, a steady figure compared to February. However, this is down by 0.1 percentage points since March 2014.

Considering the small rise in property price growth and fewer void periods, total annual returns on the typical rental property were 12.2% in the year to February, not taking costs such as mortgage repayments into account. A year ago, this figure was 10.8%.

Therefore, the average landlord in England and Wales has received a return of £21,078 in the past twelve months, before deductions such as maintenance costs. Breaking down this figure, landlords earned £8,259 from rental income and made £12,819 in capital gains.

If these trends continue, the next twelve months will see the average landlord making a total return of 14.5%, or £26,861. Of this amount, rent will earn them £9,216 and capital gains will make £17,645.

Gill comments: “Rising rents are supporting steady gross yields, in line with the long-run average of just over 5%. And rental yields should stay steady in the immediate future, as market rents grow vigorously while property prices rise at a similar rate. However, landlords are also benefitting from steady price rises, as the bonus of capital accumulation adds considerably to total returns.

“Tenants looking for the lowest possible rents depend on landlords investing in new properties to keep up with growing demand for places to let. Yet if and when those same tenants start looking for a home to buy, they often find themselves in competition with landlords to buy a home. Again, building more homes is the only way around that dilemma. But in the meantime, healthy investment and competition between landlords should help tenants avoid excessive rent rises.”

Tenants’ finances

In March 2015, 7.4% of rent was in arrears, down from 7.6% in February. This is also lower than the 7.8% of late rent a year ago.

In the longer term, rent arrears are improving significantly. At the last general election in May 2010, 10.7% of all rent due was in arrears, following the record high of 14.7% in February 2010.

Gill concludes: “While renting is becoming more expensive, it appears this is driven by an improving jobs market and above all by real progress in people’s wages.

“Tenants as a whole are managing to keep on top of rent today better than in previous years. The proportion of rent owed to landlords has halved since its peak at the start of 2010.

“That said, recovering from the financial crisis has taken half a decade, and it remains to be seen how quickly a better economic picture will make inroads into the remaining cases where tenants are falling behind on rent. But the long-term trend is clear and it’s going the right way.”¹

¹http://www.landlordexpert.co.uk/2015/04/27/uk-rents-rise-15-since-may-2010/

Remortgaging for BTL on the rise

Published On: May 8, 2015 at 10:13 am

Author: Em Morley

Categories: Finance News

Tags: Buy-to-Let,Buy-to-let remortgaging,mortgages

Recent figures have suggested that around two-thirds of Buy to Let loans are now for remortgaging-almost twice the rate of new purchases.

Statistics from the latest Mortgages for Business Complex Buy to Let Index suggest that during the first quarter of 2015, 66% of BTL loans were for remortgaging, with just 34% for fresh buys. [1]

With regards to houses in multiple occupation (HMO’s), remortgaging gained an even larger proportion, with 73% of all transactions. This trend was even greater for multi-unit freehold blocks (MUFB’s), with remortgaging accounting for 89% of mortgages in the first quarter of 2015. This was a remarkable rise from 42% in the last quarter of 2014. [2]

LTV Rise

Corresponding with the increase in remortgaging, loan to values (LTV’s) have also risen. The average LTV for a buy to let property now stands at 66%, as opposed to 63% during quarter 4 of 2014.[3]

For HMO’s, landlords have experienced rises in LTV to 70% in the last three months from 64% in quarter four of 2014. MUFB property LTV’s are up to an average of 67% from 64% during the same period.

Managing director of Mortgages for Business David Whittaker, commented that, ‘record low mortgage rates are driving wave upon wave of landlords to reassess their finances.’ Whittaker believes, ‘a great deal agreed last year may be uncompetitive by today’s standards, so this stampede is completely rational-it represents a charge by landlords to make the most of an unprecedented economic situation.’[4]

Remortgaging for BTL on the rise

Mr Whittaker went on to say that, ‘remortgaging is often done for the purpose of raising extra capital and this is clearly reflected in higher loan to value ratios. However, this is by no means an unwelcome trend-and could in turn open the door to more new purchases and investment by landlords.’ He also noted that, ‘rental yields are healthy and there is a gathering demand from an increasingly prosperous base of tenants,’ therefore the, ‘fundamentals of the rental market-and of landlords’ finances-are still extremely solid.’[5

Yields increase

Whittaker’s comment on rental yields being, ‘healthy’ is backed up by statistics, which show that gross returns have risen to 6.4%, slightly up from the 6.3% recorded during the final three months of 2014. Gross rental yields for HMO’s have also risen, now standing at 10.4%, from 9% in quarter four of 2014.[6]

In a concluding statement, Mr Whittaker said, ‘Landlords are reporting a buoyant rental market, driven in large part by a resurgent jobs market – and now even more encouraging signs on wages.

‘In turn, this will stimulate many landlords to invest further although one major hold-up in an otherwise sunny outlook is a long shadow of political uncertainty.’

‘This is only partly about specific policies. For example rent controls could be a well-intentioned but disastrous blow to the industry. However, more of an immediate worry is the far more general risk of a power vacuum after an election barely three weeks away, the associated effect on the financial markets – and ultimately on mortgage rates.

‘In the meantime, we are still seeing strong interest in the finance to support more complex buy to let investments. Right now, houses in multiple occupation are particularly popular with landlords searching for a better rental yield – but today’s record low mortgage rates are proving of enormous benefit to all types of landlord.’[7]

[1-7] http://www.landlordexpert.co.uk/2015/05/07/uk-landlords-remortgage-at-twice-the-rate-of-new-purchases-2/