Search Results For: buy to rent sector

The Buy-to-Let Sector Remains a Solid Investment Option, Broker Insists

Published On: November 21, 2018 at 9:01 am

Buy-to-Let Remains a solid investment option, Broker Insists

Despite the headlines, the buy-to-let sector remains a solid investment option, according to a specialist broker in the industry.

While the buy-to-let sector has undergone radical change over the last couple of years – with several tax and regulatory changes affecting many landlords, prompting some investors to leave the market – the reality is that property remains a “solid investment”, insists Andrew Turner, the Chief Executive of Commercial Trust.

Turner believes that it was inevitable that the tax changes, which could potentially suppress profitability of landlords’ portfolios in the short-term, would impact the perceived desirability of buy-to-let investment, but firmly believes that there are still plenty of opportunities for investors in the sector, thanks to demand for rental housing rising.

He explains his opinion: “The expectation was that this would be most keenly felt by those with fewer properties, because adjusting to the changes would be a more painful process for new investors or those with less experience.

“However, the simple fact is that buy-to-let remains a solid investment option, with strong potential for an attractive and profitable return on capital invested.”

He argues: “Investors should not be deterred from buy-to-let. Demand for rental housing is stronger than ever, the cost of debt remains relatively cheap, and the housing shortage is likely to continue. Even so, any investment decision requires care and expertise.

“Many headlines have focused on one and two property investors, who have left the market because they have found it difficult to adjust. The real story has really not been about buy-to-let becoming unattractive as an investment option.”

Recent data from UK Finance also suggests an evolution in buy-to-let, rather than a mass exodus of investors.

The Director of Mortgages at the organisation, Jackie Bennett, revealed this month that forecasts for 2018 buy-to-let purchase activity were likely to fall around £3 billion short of expectations.

She says: “This is undoubtedly the impact of various tax, regulatory and legislative changes that have happened to landlords in the buy-to-let sector.”

However, Bennett went on to add that buy-to-let remortgaging exceeded predictions for 2018, with lending likely to hit £27 billion, representing a £3 billion surplus on what was expected.

Turner comments on the UK Finance statement: “The market continues to grow and, in Q2 [the second quarter of] 2018, increased by 6% over 2017 levels. UK Finance statistics revealed that much of this growth was in remortgages, which grew by 15%, while purchases dipped by about 12%.

“In early August 2018, the Bank of England decided to increase rates by 0.25%. Although there has been limited market reaction so far, I expect to see market rates increase, because margins are wafer thin.”

He continues: “The Bank of England has said as much itself, with repeated messages that rates are anticipated to rise gradually over the long-term.

“Landlords have responded to this and there has been significant interest in fixed rates, useful to guard against rate rises. Investors are likely to continue to do this as their renewal dates come up and, therefore, I’m sure the remortgage market for buy-to-let will remain buoyant over the coming months.”

Nevertheless, UK Finance’s latest Mortgage Trends Update, covering the year to September, shows that buy-to-let lending has plummeted by over 18%.

Rent for Life: Which Direction is the UK Heading?

Published On: November 15, 2018 at 10:59 am

Author: Em Morley

Categories: Lettings News

Tags: homeowners,housing crisis,tenants

To rent or not to rent? That is the question. In years gone by, many young people only wanted to rent until they could buy their first home, and few thought of renting long-term. In other countries, such as Germany and France, there are a comparatively high number of rented accommodations, and long-term renters are not the exception – in Germany, in particular, people favour renting – over 40% of the country does!

In recent years, there has been a considerable increase in the number of rented accommodations in England, and people are now staying in the rental market for many years…

The changing English property market

57% of house owners in England are aged 65+ and only 22% are aged 16-34 years. Most property buyers fall into the 35-50 age group (48%), with a further 31% aged 50-65 years. For a variety of reasons, there has been a huge growth in the private rental sector in recent years – particularly in the younger age group. One of the key reasons for this is that young people find it incredibly difficult to save enough money for a deposit to get on the first rung of the property ladder.

Private renters are getting younger

There has been a large growth in the number of younger people wanting to rent privately. In 2011, this figure was 1.8m people aged 34 or under, which, in reality, meant an increase of 728,000 in rental households within a decade, and analysts are tracking a continued upward swing as we head towards 2019. Whilst the difficulty of affording to buy a property is one of the main reasons, many younger people choose to rent, as it gives them greater flexibility especially for job mobility and they can choose exactly where they live for convenience.

Rent for Life: Which Direction is the UK Heading?

In 2008, 37% of people in their 20s bought their first property, but, in 2017, this number had fallen to 27%. There are 5.6m people in this age group, and the fall in house purchase was sharpest in the middle-income group, where wages failed to match the required deposit and mortgage repayments.

The increase in private renters is nationwide

Although London has recorded the sharpest increase in the demand for private rentals, this increase has also been mirrored in towns where there is a good commuter network to the capital. Such towns as Slough, which has recorded a growth of 13%, Enfield, where the property market grew by 11.9% in 2017, Watford, 9.9%, and Milton Keynes, by just over 9%. Interestingly, in Tonbridge, Kent, rental prices are high and property is often rented as soon as it goes on the market. The main reason is that the railway station is within walking distance of much of the town, and the train to London Bridge takes just 44 minutes – and some, just 31 minutes.

There has been a 23% growth in the private rental sector across England, with the 2017 figures for the South East being second only to London, with Yorkshire and the Humber third, and the West Country in fourth place. Interestingly, in Wales, there was a growth of only 0.4% and Scotland, 0.1%.

Who is renting privately?

The types of households in the private rental sector have shifted in recent years. A decade ago, only 15% of families with dependent children were private renters, but this figure has risen to 27%. Couples with children account for another 21%, and the largest proportion are single occupant households, at 27%. Interestingly, ten years ago, only 16% of people in the 35-45 age group rented, but, today, that figure stands at 24%.

The bottom line is that, in the past ten years, the number of people in rented accommodation in England has risen from 10% of the population in 1996/7 to 20% last year. For the first time, families are looking to stay in rented accommodation long-term, as they find property prices are out of their reach and job uncertainties make rented accommodation more appealing.

Private renters are now coming from all socio-economic groups, too. 50% of foreign people migrating to England rent in the private sector for at least the first five years. Many private renters are favouring city centre locations, as they want to dispel with commuting costs, and current trends favour eco-friendly properties and ones that are unfurnished.

What about the horror stories about rented accommodation?

Many private renters make the positive choice to rent rather than try to buy, and a key reason for this is that the standard of rental properties has significantly improved and, also, most landlords maintain their properties well and care about their tenants. The Decent Homes Standard has done a good job of improving the quality of rental accommodation. In 2006, 47% of rented accommodation was deemed below standard, but, two years ago, in 2016, this figure had dropped to 26%.

Buy-to-rent possibilities

Property buying experts housebuyers4u.co.uk say that the buy-to-rent sector should have been flourishing, with a number of exciting new projects under development in the key cities, but many small landlords are selling up, as recent tax changes on second properties have meant that buy-to-let is not as lucrative as it once was. In reality, this means that, although England is becoming a nation of renters, demand is greater than supply, and market experts are predicting that rent prices are set to climb by 17% in the next five years.

The bottom line

If the trend of younger people opting to rent continues (whether that is because they choose too or not), then it’s clear the UK is heading towards a more rental-based property market.

Is this good or bad for the country? A case could be made for both, but as the old saying goes, only time will tell.

UK’s Top Rental Hotspots for Landlords Revealed by Shawbrook Bank

Published On: November 13, 2018 at 8:59 am

Author: Em Morley

Categories: Landlord News

Tags: property investment,rental yields

Up to a third of young people today could be renting into their retirement

New analysis of the buy-to-let market presents an opportunity for landlords, revealing exactly where the top rental hotspots are for 2018/19.

Shawbrook Bank’s latest UK Buy-to-Let Report, compiled by the Centre for Economics and Business Research (Cebr), shows that, despite a barrage of tax changes making it harder to make money on buy-to-let, there are still pockets of the market where investors can achieve an average rental yield of 5.4%.

Looking at house prices, Shawbrook Bank predicts that annual growth will be more subdued in the five years to 2023 than over the last few years. The report forecasts average house price growth for the years 2017-23 to be 4.5%, compared to an average of 7.0% for the high-growth years of 2014-16.

Stretched affordability ratios, years of weak wage growth and the prospect of further interest rate rises all weigh in on the outlook for house prices in the UK for the next few years.

House price growth has slowed in London particularly, with Brexit and the resulting uncertainty regarding the future of the financial services sector in the City of London looming over activity in the prime end of the market, alongside higher Stamp Duty rates.

The report expects price growth in the capital to continue to trail behind the rest of the country for the next two years, with new figures from estate agent Aston Chase already showing that the percentage of high end purchases from overseas buyers in London’s most expensive postcodes have dropped from 44% in 2016 to 35% last year.

With investment in London slowing, the attractiveness of other regions has improved. Shawbrook Bank found that the North West and the city of Manchester, in particular, are the top new rental hotspots, due to higher yields.

Lower house prices mean that it is easier to achieve high rental yields, while Manchester is attracting students and employees from across the country. The average UK house price is currently £228,000, which is 43% higher than the typical property value in the North West, at £159,000.

The North West leads the ranking, with an average rental yield of 5.4%, followed by Scotland, at 5.3%, and Yorkshire and the Humber, at 4.9%.

Emma Cox, the Sales Director for Commercial Mortgages, says: “Landlords have had a rough ride over the past few years, with multiple tax changes, but our research shows that it’s not all doom and gloom for potential investors in 2018. Lower rental yields in London, and affordability constraints for investors, has driven interest north, where borrowers are chasing the yield and heading to locations with lower average house prices.

“There are still interesting times ahead for savvy investors and good investment opportunities remain. However, when landlords invest far away from their home turf, they can run the risk of falling foul to local knowledge. Smarter local investors may be seeing an opportunity to divest themselves of their less desirable housing stock, so it’s important for buyers to do their research to make sure they understand the local supply and demand before investing.”

Rents Rising in Central London, as Tenants Bid Against Each Other

Published On: November 8, 2018 at 9:05 am

Author: Em Morley

Categories: Lettings News

Tags: London,rent prices

Rental demand shows slight decline in Q2

Rent prices are rising in central London, as tenants have to bid against each other, due to a sharp decline in housing supply, according to Knight Frank.

The property firm claims that supply in the private rental sector is on a sharp decline, owed to a jump in the number of buy-to-let landlords exiting the market, in response to the Government’s tax changes for investors.

Knight Frank’s latest Prime Lettings Index indicates that many prospective tenants are being squeezed from the centre of London and pushed into the suburbs, as landlords offload their expensive property investments in the capital.

Using data from Rightmove, the firm’s research arm found that the number of rental property listings in prime central London has fallen by 18% in the year to September, placing upward pressure on rent prices.

Knight Frank reveals that the average rent price rose by 1.2% in September, in response to declining levels of supply, which has been prompted by landlords seeking to sell their properties due to tax changes. The Chancellor announced further reforms in his recent Budget.

However, as supply continues to drop, the number of new prospective tenants registering in prime central London has been on an upward trajectory since the start of this year, suggesting that the pressure on rent prices will continue to hit.

With fewer rental properties available in prime central London, the amount of tenancies agreed per Knight Frank office in prime outer London increased by 16.7% in the 12 months to September.

But it’s not all bad news, as residential property outperformed other asset classes in 2018, despite total annual rental returns dropping in prime London markets.

Gold fell by 4.4% in the year to October, while the FTSE 100 dropped by 5.0% over the same period. Global stock markets have also decreased in recent weeks, over concerns about trade tensions.

Higher Standards of Accommodation are Making Renting more Enticing than Ever

Published On: November 1, 2018 at 9:01 am

Author: Em Morley

Categories: Tenant News

Tags: homebuyers,interior design

Higher standards of accommodation are making renting a property more enticing than ever, according to housing expert Kate Faulkner.

In a report on the growth of the private rental sector, commissioned by the TDS Charitable Foundation, Faulkner claims that higher standards of properties are driving demand from tenants.

This comes despite a new study, which found that buying a home is cheaper than renting one in every area of the UK.

Research from Santander Mortgages shows that owning a home in the UK costs an average of £2,268 per year less than renting one. Nevertheless, Faulkner believes that an increase in high quality rental accommodation is, to an extent, deterring many would-be homebuyers from purchasing property.

Higher Standards of Accommodation are Making Renting more Enticing than Ever

The private rental sector in England and Wales, which has more than doubled in size in the past 20 years, accounted for 20% of all housing stock in the latest English Housing Survey. While Faulkner accepts that this is partly due to higher demand, she insists that it is hard to ignore the improvements in the quality of rental accommodation.

She says: “To understand how the private rental sector has grown, we need to be able to see beyond headlines about house prices to know what’s really going on.

“The main contributing factors are – as is commonly understood – a lack of social housing provision, and house price growth outstripping wage increases for many, but that’s not the whole story.”

She continues: “If we look at a more local level, there are places where affordability has increased, but the number of first time buyers continues to decrease, suggesting house prices and demand aren’t the only forces at play.

“Over the same period that the private rental sector has gone through dramatic expansion, it’s also improved considerably. Standards of rented properties are now arguably higher than ever before. The increased quality of accommodation has reduced the need to buy.”

Faulkner points out that “good quality” rental housing is often much cheaper and more easily accessible than buying a property, especially in the short to medium-term.

She explains: “When high standards of accommodation are available, with the added bonus of flexibility, it can make an enticing proposition.

“There is also caution in some parts of the market, with potential buyers lacking confidence that house values will continue to rise.”

Faulkner goes on: “That fear, coupled with tougher restrictions on buy-to-let mortgages putting off landlords from entering or continuing in the market, could lead to situation in the private rental sector where demand is increasing and supply is decreasing.

“More research is required into the nuances of the UK’s housing market and stock to understand affordability, renting landscapes and, ultimately, to make more effective legislative decisions.”

We’re used to hearing terrible stories about the conditions of some rental properties across the UK, but do you agree with Faulkner’s claims that higher standards of accommodation are making renting more enticing than ever before?

With news that tenants will soon be given greater powers to sue their landlords over poor property conditions, renting could become even more appealing.

Selective Licensing could leave Areas with Rental Housing Shortfall, Solicitor Warns

Published On: October 31, 2018 at 9:55 am

Author: Em Morley

Categories: Lettings News

Tags: landlord law,licensing

A leading solicitor has warned that councils are driving private landlords out of areas where selective licensing schemes are in place, causing a shortfall in rental housing.

David Kirwan, of Kirwans law firm, has voiced his concerns after being contacted by landlords with properties affected by selective licensing schemes, who he says have been “utterly devastated” to find themselves hauled before the courts, simply for failing to apply for a licence.

Local authorities, such as Liverpool City Council, are inviting landlords who fail to register to attend a voluntary interview under caution; the precursor to a criminal prosecution in the magistrates’ court.

In worst-case scenarios, landlords could be handed a criminal record, an order to repay 12 months’ rent, or be banned from letting property in the future.

Even if councils choose to avoid the courts, civil penalty fines of up to £30,000 can be imposed.

There is now a real fear, Kirwin notes, that landlords providing good quality accommodation in areas affected by the schemes will sell up and invest elsewhere, rather than risk falling foul of the rules.

He explains further: “I am currently representing decent, professional people who have ventured into the world of buy-to-lets, only to find themselves facing a criminal record for failing to apply for a licence that, in other areas of the city, would not even be deemed necessary.

“We’re not talking about roguish, exploitative landlords here; rather, people who simply saw property as an investment that would see them through retirement.”

Selective Licensing could leave Areas with Rental Housing Shortfall, Solicitor Warns

He adds: “It is heart breaking to watch them going through completely unnecessary criminal proceedings, simply for failing to apply for a licence.”

Using selective licensing legislation introduced by part three of the Housing Act 2004 in areas affected by poor quality rental properties, irresponsible landlords and anti-social behaviour, local authorities are able to introduce penalties that go well beyond the mandatory Government landlord licensing rules.

Each scheme applies to a designated area for a period of five years and landlords have to apply for a licence for each home affected.

They are then awarded a licence to operate a property only after an assessment that must deem them a fit and proper person, as well as satisfy stipulations around the management and funding of the property, and health and safety considerations.

Councils across the country have embraced the legislation, with schemes introduced in parts of areas such as Liverpool, Hastings, London, Durham and Oldham.

The schemes, which opponents claim are a way of boosting council funds, have faced criticism for both the cost of licences, which usually cost hundreds of pounds, and for the fact that they may drive the very rogue landlords they are supposed to weed out further underground.

They have also proved confusing for landlords, who are often unaware that their properties even lie in a selective licensing area.

For those operating numerous properties across different areas, the situation can be more bewildering, as each council can create its own set of rules for each scheme.

Rogue landlords, ironically, may simply choose to avoid the licensed areas, moving their poor practices to places where such schemes are not currently in place.

In June, the Government announced a review of selective licensing and how well it is working, with the findings due to be published in spring 2019.

Kirwan continues: “While there may be many unethical landlords who absolutely need to be weeded out, they operate in an entirely different manner to the many decent men and women, some of whom are only just entering the rental sector, who simply want to provide good quality rental accommodation.

“For these people, who may be finding their way in the rental market, or are unaware that such schemes have even been introduced in their area, the idea that they could face prosecution with a conviction leading to limitless fines or outrageous penalty fines is nothing short of terrifying.”

He goes on: “Landlords are now telling me that, rather than face this sort of frightening action, they will either sell up, or choose not to invest in property in affected areas in the first place. This will then reduce the choice of accommodation on offer for those renting, leading to a lose-lose situation for all.

“My advice to all landlords would be to check with their local council as to whether their property requires a licence, and to seek legal advice immediately if they receive a letter from their local authority threatening fines or prosecution.”