Search Results For: buy to rent sector

BTL landlords well set to deal with interest rate rise

Published On: January 7, 2016 at 11:55 am

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Buy-to-let landlords in Britain are sure to be pleased with the results of a new survey by YouGov, which suggests that they are well placed to cope with expected higher borrowing costs in the coming year.

In addition, the study found UK landlords are financially resilient, with 75% of those questioned believing they would have no problems paying their mortgage, should a 1.5% rise in the bank rate materialise.

Planning

Over 60% of respondents said that their rental income would stay above their mortgage payments if a rise was to occur, with 40% stating that they already had enough cash saved to cover increased borrowing charges.

The Council of Mortgage Lenders (CML) said that it expects buy-to-let purchases to dip in 2016, but with buy-to-let remortgaging remaining robust.

Data collated by the CML from lenders accounting f or 90% of new lending suggests that the typical stressed mortgage rate being used by the industry has risen by 50 basis points to between 5.6% and 5.7%.

Bob Pannell, chief economist at the CML, believes that landlords have a list of range of strategies for coping with increased mortgage costs. He says that these include the positive cash flow provided by rental payments and access to stored contingency funds.

Dampening

Mr Pannell also pointed out that the number of upcoming tax measures announced in recent months are likely to have a dampening effect on the sector’s future growth prospects.

‘The reduction of tax reliefs available to private landlords from 2017/18 onwards, announced by the chancellor in the summer 2015 Budget, will adversely affect the future cash flows for affected landlords,’ Pannell noted.[1]

He went on to say that, ‘landlords should be able to mitigate the direct financial impact in a number of ways,’ before claiming that, ‘the YouGov research corroborates our view that the overall impact will be to lift rents higher and to narrow the availability of homes in the private rented sector.’[1]

‘The direct effects appear modest, but are likely to be reinforced by the stamp duty changes, announced in the chancellor’s autumn statement. The rapid succession of recent tax changes also risks having a significant indirect effect on investor sentiment, altering the direction of travel for buy to let lending and the further expansion of the private rented sector,’ he continued.[1]

BTL landlords well set to deal with interest rate rise

BTL landlords well set to deal with interest rate rise

Future

Statistics from the CML’s latest market forecasts suggest that house purchase activity from buy-to-let landlords will slip in 2016-17. With the significant lags in Government housing initiatives moving to improve further housing supply, questions are being asked about the future of rental accommodation.

‘In this context, macro-prudential intervention, if or when it is applied to buy-to-let lending, carries a significant risk of unintended consequences for the wider housing market. We will continue to work closely with the Bank of England, to reinforce its understanding of the sector and to ensure very careful calibration of any forthcoming measures,’ Pannell concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-buy-let-landlords-2016010611398.html

 

 

 

Government launches consultation on BTL regulations

Published On: December 31, 2015 at 11:47 am

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The Government has today launched its promised consultation on the jurisdictions that the Bank of England’s Financial Policy Committee should be allowed to implicate over the buy to let market.

This has been implemented in order to ascertain information on how the operation of the nations buy-to-let mortgage market could represent a risk to financial stability.

Targeted

Aimed primarily at individuals, institutions and associated bodies that could potentially be affected by the FPC’s powers of direction, the Government said it also would appreciate the views of other parties with an interest in housing market policies.

After the consultation has taken place, the Government has pledged to continue to examine the responses and utilise them accordingly to devise their instrument to place powers in legislation.

The Government believes that the Bank of England should have more powers to restrain the buy-to-let market if required. This could include directing regulators to permit lenders to put limits on their buy-to-let output.

In addition, the amount that buy-to-let investors could borrow or LTV could be altered and the Bank could also change the required ratio of perceived rental income to mortgage interest payments.

At present, lenders are not currently supportive of more controls for the market and warn that it does not necessarily need more regulations.

Changes

There have been calls for upcoming changes to the market, such as the 3% stamp duty charge from April, to take effect before any additional regulations are made. The Council of Mortgage Lenders director general Paul Smee said, ‘we understand the rationale for putting the macro prudential tools at the Bank of England’s disposal, but also recognise that this does not necessarily mean they will be used. In our view, buy to let does not constitute a market that currently requires further macro prudential intervention, especially as the effect of several recent tax changes is yet to be fully felt and evaluated.’[1]

‘We urge policymakers to be mindful of the risk of unintended consequences that could adversely affect the private rented sector, alongside their focus on ensuring that the buy-to-let market does not pose a threat to financial stability, ‘ he added.[1]

Government launches consultation on BTL regulations

Government launches consultation on BTL regulations

Confusion

Peter Williams, director of the Intermediary Mortgage Lenders Association, said that the industry could be confused by what the Government is trying to implement.

Williams said, ‘in the Autumn the Chancellor, in giving evidence to the Treasury Select Committee, appeared to state unequivocally that the power to place limits on place limits on buy to let mortgage lending was to be granted without the previously advertised consultation having taken place as to whether new powers were justified at all.’[1]

‘Recently the Governor of the Bank of England also appeared to suggest that he was preparing to exercise such powers,’ he continued. ‘Now the consultation on what those powers might be has finally materialised, there is much that should be discussed and challenged.’[1]

‘The points advanced in support of further regulation do not appear to be well supported by evidence. At the same time there is considerable work required on the part of lenders and trade bodies to bring together a detailed response, and we should be reassured that this will not be a waste of time if the consultation is simply to rubber stamp a decision already made behind the scenes,’ he concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-buy-let-regulation-2015123111379.html

 

 

Property Professionals Believe Osborne’s Plans Won’t Work

Published On: December 18, 2015 at 12:06 pm

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Categories: Property News

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The majority of property professionals believe that Chancellor George Osborne’s plans for the housing market, as announced in the Autumn Statement, won’t work, with 57% stating that they will have a negative effect on the industry.

Property Professionals Believe Osborne's Plans Won't Work

Property Professionals Believe Osborne’s Plans Won’t Work

Experts believe that consequences could be: lack of confidence in the market; unachievable house building targets; and limiting the supply of rental property.

These findings are the result of a survey of 570 property professionals by specialist recruiter Deverell Smith.

Even most of the 21% that believe the measures will have an overall positive impact on the sector think that to create an affordable market means that other areas will take a hit.

Just under two thirds (66%) of respondents do not believe that the house building targets are achievable, while 58% think the extra 3% Stamp Duty charge for buy-to-let investors and second home buyers will restrict the supply of rental homes.

The biggest concern for the majority of experts is the long-term effect on private, smaller landlords and whether they will be forced out of the market, leading to more institutional landlords that offer higher prices to tenants.

Many professionals feel that the tax increase will have a positive effect on existing landlords, as a limited supply will increase rents. However, this will not benefit the many private renters in the country.

The firm’s Andrew Deverell-Smith comments: “With property playing such a vital role in our economic growth and the welfare of our society, it is understandable that it is a big focus in George Osborne’s latest plans.

“These opinions are from leading property industry experts who know and understand the market, and this highlights that there is a gap between expert industry estimations and Government strategy.”

He continues: “There are so many facets to the industry that a change in one area will always impact another. There is clearly no silver bullet.

“As a property recruiter, we know first hand not only of the shortage in construction workers, but the project managers, planning and surveyors required to deliver these ambitious housing programmes.”1

1 http://www.propertyindustryeye.com/osbornes-plans-for-housing-wont-work-say-almost-6-in-10-property-professionals/

LSL calls for Treasury to stop targeting landlords

Published On: December 18, 2015 at 11:56 am

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Categories: Landlord News

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Property firm LSL became the latest high-profile organisation to call for the Treasury to stop targeting buy-to-let landlords. Instead, the firm thinks that the Government should be searching for other alternatives to the housing crisis.

The calls came off the back of a new report suggesting that average rents have fallen below the £800 mark in England and Wales.

Decline

Data from the report conducted by Reeds Rains and Your Move indicate that average rents currently stand at £799 per month, down by 1.2% month-on-month.

Despite this monthly fall, rents have actually risen by 4% year-on-year, with more rises predicted for early in 2016.

‘Landlords have become fashionable targets for the Government and Bank of England,’ believes Adrian Gill, director of both LSL firms. He feels that the plans for a 3% stamp duty tax hike announced in the Autumn Statement represent, ‘overdue attention for the sector that provides homes for more than one in five Britons.’[1]

Gill feels that, ‘negative campaigns and unconstructive policies-designed to attack landlords rather than support tenants-will not make rents lower or provide more homes.’ He says that, ‘the effect will be quite the opposite, forcing rents upwards.’[1]

LSL calls for Treasury to stop targeting landlords

LSL calls for Treasury to stop targeting landlords

Worsening finances

In addition, LSL reports that yields for landlords have dipped, with tenants’ finances also worsening, in turn leading to more arrears. ‘For new entrants, or landlords looking to invest in additional properties to let, market conditions could be a little harder to navigate than six months ago,’ said Gill.

‘Choosing the right property in the right area is even more important when looking for the best rental yield on new investments. Partly this is down to enormous competition in the property purchase market-homes are being sold rapidly, whether to landlords or owner occupiers,’ he continued.[1]

Rental hikes

Concluding, Mr Gill said that, ‘it is a property sellers market. Similarly as yields continue to feel the pressure of rising prices, other factors will need to adjust in turn. That means higher rents.’[1]

‘Most likely this will push rents higher still – and indicates an earlier spring for rent rises in 2016. Combined with the latest attacks on landlords from the Government, this could propel demand even higher for every single home that landlords do have to offer. A continued shortage of properties to let is the challenge to overcome – and the Government needs to think pragmatically about this conundrum rather than looking for political targets.’[1]

[1] http://www.propertyindustryeye.com/lay-off-private-landlords-lsl-firms-tell-chancellor/

 

NAEA and ARLA’s Housing Market Predictions and How to Overcome the Crisis

Published On: December 17, 2015 at 9:36 am

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The National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA) have joined together to set out their housing market predictions for the next ten years and suggestions for overcoming the current crisis.

The organisations report that house prices and rent prices will soar over the next decade, while buying a property will become further out of reach for many.

NAEA and ARLA's Housing Market Predictions and How to Overcome the Crisis

NAEA and ARLA’s Housing Market Predictions and How to Overcome the Crisis

The NAEA and ARLA predict that homeownership will decline by 7% by 2025, while the number of people living in rental accommodation will increase by 9%.

ARLA believes that rents will rise by over a quarter, while the NAEA expects house prices to surge by 50%.

The sister bodies state that a “drastic and immediate” overhaul is needed to fix the current housing crisis.

The report, compiled with the Centre for Economics and Business Research, suggests what can be done to repair the broken market.

The average house price in the UK is currently about £280,000, with the Housing 2025 report forecasting that it will rise to £419,000 over the next ten years.

In London, prices are expected to almost double in the next decade, from an average of £515,000 at present to £931,000.

Rent prices are predicted to grow by 27% from the current average of £134 per week to £171 in 2025.

Again, those in the capital will face higher rises, paying an extra 34% in rent per week by 2025, from £234 to £314.

The study states that the current level of homeownership amongst the working population of around 62% will drop to 55%, while those living in rental housing will rise from 20% to almost 29% in the next ten years.

David Cox, Managing Director of ARLA, says: “Buying and renting a home is a giant step, and is out of reach for many. Rent costs are already growing at a rate that people are struggling to keep up with and they’re due to become even less sustainable over the next decade.”

Mark Hayward, Managing Director of the NAEA, also comments: “House prices are only going to go one way and unfortunately, that is up. For so many already priced out of the market, this is news aspiring house buyers will not want to hear.”

The organisations are calling for a number of measures to be introduced. These include:

  • Building on some parts of the greenbelt.
  • Mandatory licensing of landlords and letting agents.
  • Encouraging institutional investment in the private rental sector.
  • Encouraging more construction workers from outside the EU to work in Britain.
  • A Stamp Duty exemption for pensioners looking to downsize.

The managing directors say: “The housing crisis Britain is facing is deep-rooted, and if it is to be solved will require finance, suitable land, time, new skills and most importantly, the appropriate national regulation of the key stakeholders, not least the estate agents and letting agents that form our membership. We are calling for change, and it needs to happen soon.”1 

1 http://www.propertyindustryeye.com/do-something-about-it-naea-and-arla-say-housing-market-is-broken/

Landlord concern over short-term prospects grows

Published On: December 16, 2015 at 11:07 am

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Categories: Landlord News

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The buy-to-let sector continues to grow, with tenant demand remaining consistently strong.

However, a new survey has indicated that some landlords are concerned about their short-term prospects.

High demand, low confidence

BM Solutions’ buy to let quarterly index indicates that 41% of landlords reported an increase in tenant demand during the last quarter, but that confidence has fallen dramatically.

Tenant demand was highest in the East of England, with 52% of landlords reporting a rise in tenant demand over the last three months. The largest quarterly increase was recorded in the East Midlands, where demand was up by 12%.

At the lower end of the scale, the South West and North East saw the greatest drop in landlords noting increased demand over the last quarter.

By region, tenant demand altered in the last three months as followed:

Property location Tenant demand in Q2 2015 (Net increase) Tenant demand in Q3 2015 (Net increase) Quarterly change (% point change)
East of England 48% 52% 4%
London (Outer) 40% 48% 8%
South East 41% 47% 6%
East Midlands 35% 47% 12%
London Central*** 35% 45% 10%
Yorks & Humber 35% 39% 4%
West Midlands 37% 38% 1%
Wales 36% 38% 2%
South West 45% 37% -8%
North West 27% 34% 7%
Scotland 30% 33% 3%
North East 39% 31% -8%

[1]

Outlook

The report revealed that confidence in the UK’s financial market has dipped, with 25% confident about the outlook for the next quarter, as opposed to 37% in quarter two of this year. Landlords also reported a fall in confidence in the private rental sector as a whole, with 34% saying they were positive about the sector, as opposed to 59% in Q2 of 2015.

61% of landlords said that they intend to live off the rental income generated by their portfolio when they eventually retire. A further 36% said they would make a decision based on market trends at the time.

Landlord concern over short-term prospects grows

Landlord concern over short-term prospects grows

Void periods recorded also increased during the last quarter, with 35% of landlords experiencing this in Q3, as opposed to 29% in the previous two quarters. In addition, the average rental yield achieved dropped to its lowest level for five years, falling to 5.6%.

By region, landlords in Yorkshire and the Humber and Wales saw the highest rental yield of 6.1%. Those letting in Scotland and Outer London saw the lowest, with 5.1% and 4.8% respectively.

Average rental yields per region were over the last quarter were:

Property location %
Yorkshire & the Humber 6.1
Wales 6.1
North West 5.9
East Midlands 5.8
West Midlands 5.7
North East 5.6
East of England 5.6
South West 5.5
South East (excl. London) 5.4
London (central) 5.2
Scotland 5.1
London (outer) 4.8

[1]

Spotlight

Phil Rickards, Head of BM Solutions noted, ‘there has clearly been a spotlight shining on the Buy-to-Let market and Private Rental Sector for most of 2015. Landlord confidence in the outlooks for the private rental sector as a whole and landlord’s own lettings businesses have seen statistically significant declines when benchmarked against Q3 2014.’[1]

‘However, the market is still holding up and at the same time four in 10 landlords report demand has increased in the areas where they hold properties during the last quarter and yields remain strong. There’s no doubting 2016 looks like a challenging year ahead however I take comfort in the fact there’s still a need for a strong private rental sector along with good quality housing to support demand,’ he concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/landlord-confidence-dr0ps.html