Search Results For: buy to rent sector

Sharp Decline in Buy-to-Let Investment Causes Rents to Rise

Published On: October 17, 2018 at 7:59 am

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A sharp decline in buy-to-let investment causes rents to rise

Landlords spent £12.1 billion on new buy-to-let investment during the first half (H1) of 2018, which is down by 30% on three years ago, according to a new report from Hamptons International.

The estate agent chain has recorded a £5.2 billion drop in the total value of new buy-to-let investment from H1 2015.

According to the data, the total value of residential properties bought by landlords in H1 2018 hit the lowest level since H1 2013, when investors spent £11.2 billion.

The total spent in H1 2018 is just over £9 billion less than the £21.6 billion spent by landlords in H1 2016, when additional property buyers rushed to beat the 3% Stamp Duty surcharge, which was introduced in April 2016.

Buy-to-let landlords purchased 64,260 properties in H1 this year, which is down by 31% on H1 2015, with the South East seeing the greatest decline, of 45%.

The average price of a property bought by a landlord in H1 was £174,580 – 4% less than last year and 7% less than in 2016. This is owed, in part, to the fact that more landlords are investing in cheaper homes further north of the country.

Aneisha Beveridge, the Head of Research at Hamptons International, comments: “The total value of homes purchased by landlords has fallen by over £5 billion in just three years. This is due to landlords buying fewer buy-to-lets and investors spending less on the homes they do buy.

“With two out of five London based landlords looking outside the capital to buy their investments in search of higher yields and lower Stamp Duty bills, the average price of a home bought as a buy-to-let has fallen by 7% since 2016.”

Hamptons International also found that a number of tenants have been hit by rent price rises over the past 12 months, as landlords respond to higher taxes and restrictions on the industry.

The Government’s decision to restrict mortgage interest tax relief to the basic rate of Income Tax and add a 3% surcharge on Stamp Duty for buy-to-let has led to a rise in the number of landlords exiting the sector, resulting in an inevitable decline in rental property supply.

An alarming drop in the number of properties to let has added to the widening supply-demand imbalance in the rental market, which is placing upward pressure on rent prices.

Hamptons found that the average rent in Great Britain increased by 1.6% over the year to September, to £980 per month.

Rents were up in every region of the country, led by gains in Wales, where the average rent rose by 3.9% year-on-year, followed by the East of England (2.8%) and the Midlands (2.4%).

Beveridge says: “Rental growth in Great Britain continues to gradually pick up. Rents rose in every region across Great Britain for the first time since January.

“London rents returned to growth for the first time in four months, fuelled by a pickup in inner London.”

Government to Make Improvements to Property Agent Sector

Published On: October 16, 2018 at 9:34 am

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Letting Agents could Benefit from Build to Rent

The Government has announced plans to make improvements to the property agent sector.

Heather Wheeler MP, the Minister for Housing and Homelessness, unveiled a new working group made up of experts from across the property industry. It will consider options to raise standards in the property agent sector, including the case for regulation and mandatory qualifications for all property agents, so that landlords, tenants, homebuyers and vendors can be confident that they are receiving a professional service and are being charged fairly.

The working group, chaired by Lord Best, will report its recommendations to Government by summer next year.

The group will consider the entire property agent sector to ensure that any new framework, including professional qualification requirements, a code of practice and a proposed independent regulator, is consistent across letting, management and estate agents.

Wheeler says: “For too long, many people have faced incurring fees and bad service from a number of property agents. People should have confidence when buying, selling or renting a home.

“Lord Best’s wealth of knowledge will provide a valuable insight and help us make necessary changes, to ensure consumers have confidence when buying, selling, letting or renting their home.”

She adds: “Lord Best will be joined by representatives of agents and consumers, as well as independent experts, with the group instructed to report back to Government in summer 2019.”

A recent report from Which? found that 85% of landlords who use an agent are satisfied with their service, while 67% of tenants are pleased with the way that their agent repairs and maintains their homes.

However, Lord Best points out that there have been calls for tighter, fairer regulations of the property agent sector from those representing landlords, tenants and even agents themselves.

He comments: “I am delighted to work with Government, industry and consumers to advise on how we can accomplish this in practice, and I look forward to our working group achieving real progress together.”

Members of the group, which has been designed to ensure that the entire sector is represented, and the needs of both businesses and consumers are considered, include: the Royal Institution of Chartered Surveyors; the National Landlords Association; Citizens Advice; ARLA Propertymark (the Association of Residential Letting Agents); and NAEA Propertymark (the National Association of Estate Agents).

The announcement follows similar Government plans to crack down on the leasehold sector.

Homeownership Up and Rents Down Following Landlord Tax Changes, Reports Generation Rent

Published On: October 16, 2018 at 8:08 am

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Homeownership levels are up, while rent prices have come down following the Government’s recent landlord tax changes, according to a new report from tenant lobby group Generation Rent.

Despite warnings from across the property sector that the curbs on buy-to-let landlords would lead to rent price hikes, due to a potential decline in housing supply, rents have in fact fallen in real terms.

The study shows that a decrease in the stock of private rental homes has no bearing on rent prices, and should not be seen as a barrier by policymakers to reforming the sector.

The 3% Stamp Duty surcharge for additional properties and the phased restriction of mortgage interest tax relief were announced by the then-Chancellor, George Osborne, in 2015, to give first time buyers the edge over landlords in the property market.

Since the Stamp Duty surcharge was introduced in April 2016, the private rental sector has shrunk, by 111,000 by the second quarter (Q2) of 2018, but warnings of crippling rent rises have been confounded.

Homeownership Up and Rents Down Following Landlord Tax Changes, Reports Generation Rent

Homeownership Up and Rents Down Following Landlord Tax Changes, Reports Generation Rent

In fact, real rents (adjusted for inflation) have dropped by an average of 2.8% in the same period. Generation Rent notes that there is, therefore, no evidence that a reduction in the supply of rental homes has pushed up rents.

This is unsurprising, it says, since homes moved out of the private rental sector tend to be matched by a family moving from renting to owning.

Consequently, the supply of rental homes and the demand for them move together, leaving the balance – and rents – unaffected.

If measures to improve tenant security caused more landlords to sell, Generation Rent believes that this would raise homeownership and improve the experience of tenants, while having no impact on the level of rent.

Generation Rent is part of the End Unfair Evictions coalition with ACORN, the London Renters Union and New Economics Foundation, calling for the abolition of Section 21 notices, which allow landlords to evict without giving tenants a reason.

To mitigate the hardship of unwanted home moves and encourage sales with sitting tenants, Generation Rent proposes that landlords be required to pay compensation to a tenant they evict on no-fault grounds.

The number of first time buyers per year has already grown by 21% since Osborne’s first announcement on landlord tax changes in July 2015, to 366,000 in the year to June 2018.

The landlord tax changes were one of two recent shocks to the size of the private rental sector that Generation Rent explored in its report; the other was the surge in demand for rental housing, after mortgage lending on low deposits evaporated in 2008. In this case, real rents also fell.

Growth in the private tenant population, as measured by the Labour Force Survey, rose from 182,000 per year between Q2 2005-Q2 2007, to 321,000 a year between Q2 2007-Q2 2010. In the three years from January 2008, rents dropped by 6.7% in real terms.

Dan Wilson Craw, the Director of Generation Rent, says: “Despite scaremongering by the property industry, renters have little to fear from a housing market that is no longer a playground for speculators. If homes leave the private rented sector, then so do the private renters, who are now able to become homeowners. The balance of supply and demand is unchanged and so are rents.

“Policymakers should therefore worry less about the impact of reforms on landlords’ investment decisions, and focus instead on introducing the kind of regulation the sector so badly needs.”

He insists: “Any efforts to boost homeownership must be matched by reforms that protect tenants whose landlord wants to sell. We need to put an end to landlords evicting without a reason and cushion the blow for tenants who are forced to move through no fault of their own. Requiring landlords to compensate tenants would achieve this while encouraging sales with sitting tenants.”

Nearly Half of Buy-to-Let Investors are Pension Pot Landlords

Published On: October 12, 2018 at 9:28 am

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Nearly half of buy-to-let investors in the UK are so-called pension pot landlords, according to the latest report from Your Move.

The estate agency network’s latest Landlord Survey defines pension pot landlords as those who are over the age of 45 and view their portfolio as a long-term retirement investment.

Over four in ten property owners in the buy-to-let sector class themselves as pension pot landlords, with almost a quarter (23%) of this group having been investors for 15 years or more.

Your Move surveyed 1,071 landlords to learn more about their portfolios, behaviours, and attitudes towards tenants, letting agents and the lettings sector.

Accidental landlords – those who were not planning on becoming landlords – were the second most common type of investor (29%), followed closely by professional landlords (20%).

The survey found that accidental landlords are most likely female and under the age of 45, who are often thrust into the market through inheritance or changes in their personal circumstances.

Professional landlords, on the other hand, tend to be male, over 45-years-old and consider being a landlord as a job or career.

The findings also show that pension pot landlords are more likely than the other groups to live close to their rental properties, with 41% living within 1.5 miles.

Furthermore, nearly three in ten (29%) pension pot landlords see their properties as a business, with over half (53%) investing in more than one property.

However, even though these landlords may be more investment minded, Your Move revealed that pension pot landlords are also more likely than the other groups to build a personal rapport with their tenants and want tenants who will protect their investment.

In fact, 18% said that they like to meet or talk to new tenants before signing a contract, which was the highest proportion of any group. More than half (53%) also felt that it was important that tenants view the property as their own home.

Martyn Alderton, the National Lettings Director of Your Move, comments on the findings: “Our research suggests that the private rental sector is still seen to offer significant opportunities, providing many landlords with a source of income and funding into retirement. It’s also clear that pension pot landlords are keen to build a personal rapport with tenants who will look after their investment.

“As an industry, it’s increasingly important that we continue to support these ties, providing long-term benefits to tenants looking for a property to call their home and also for landlords looking for ways to fund their retirement.”

The UK’s Top Buy-to-Let Hotspot has been Revealed

Published On: October 12, 2018 at 8:15 am

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Mortgage broker Private Finance has revealed which town or city takes the crown as the UK’s top buy-to-let hotspot in October…

New analysis by the broker has named Southend-on-Sea as the UK’s top buy-to-let hotspot, offering an average rental yield of 6.6% once mortgage costs are taken into account.

With an average annual rental income of £23,280, landlords in Southend-on-Sea enjoy a lucrative return for a relatively small upfront investment, with house prices in the area only slightly higher than the national average (£279,358, compared to £231,000).

While a seaside town takes the UK’s top buy-to-let hotspot, UK cities dominate the rest of the top ten. Nottingham came in in second place, while Edinburgh, Greater Manchester, Liverpool, and the London boroughs of Westminster, Tower Hamlets and Camden all enjoy some of the UK’s highest net yields. Home to significant populations of university students and young professionals, these urban locations have high tenant demand, which helps to bolster rent prices.

The UK’s top buy-to-let hotspot

Location Average house price Average monthly rent price Average rental yield
Southend-on-Sea £279,358 £1,940 6.6%
Nottingham £137,835 £928 6.4%
Westminster £970,990 £5,554 5.1%
Edinburgh £254,170 £1,410 4.9%
Greater Manchester £167,928 £911 4.8%
Liverpool £136,521 £725 4.6%
Tower Hamlets £473,327 £2,447 4.5%
Camden £810,708 £4,178 4.5%
Coventry £185,990 £952 4.4%
Southampton £212,155 £1,045 4.2%

Shaun Church, the Director of Private Finance, comments on the report: “Southend is a popular spot for renters, with all the benefits of living in a popular seaside town less than an hour’s commute from central London, and with good airport connections.

“With the high cost of renting pricing many out of the city, towns in a commutable distance from London that offer a more relaxed lifestyle at an affordable price are becoming increasingly popular among young professionals. Rental demand is likely to grow in these pockets outside of London, offering good opportunities for buy-to-let investors.”

House prices as influential as rental income 

The UK's Top Buy-to-Let Hotspot has been Revealed

The UK’s Top Buy-to-Let Hotspot has been Revealed

The analysis, which calculates rental yields in the 50 UK towns and cities with the highest proportion of private rental housing stock, highlights that house prices and mortgage costs can be just as influential as rental income when assessing the best locations to invest in.

While four out of ten areas with the highest rental yields also have some of the highest house prices (Westminster, Camden, Tower Hamlets and Southend-on-Sea), an equal number of areas with the lowest house prices also feature in the top ten list.

Liverpool, Nottingham, Greater Manchester and Coventry all feature in the top ten and benefit from some of the lowest house prices in the UK, suggesting that buy-to-let investors should not only consider potential rental income when assessing where to invest.

This is also encouraging news for hopeful investors with smaller sums to invest with, demonstrating that you don’t need to spend millions to secure a lucrative property investment.

Buy-to-let mortgage rates at near record lows

While landlords have been hit by a raft of tax changes, including higher rates of Stamp Duty and restricted mortgage interest tax relief, buy-to-let mortgage rates have been gradually falling, with lenders introducing lower rates in a bid to galvanise the market.

Bank of England data shows that the average buy-to-let mortgage rate in September (2.31%) was close to its most affordable level (2.27% in August 2018) since the statistics were first published in 2012. This helps to improve the profitability of buy-to-let investments across the UK.

Based on a 75% loan-to-value mortgage against the average UK house price, landlords’ typical interest-only repayments have dropped by 54% since 2012, from £733 per month to £334, meaning that those who have remortgaged onto today’s competitive rates could be set to enjoy an annual saving of £4,788 compared to six years ago.

Church continues: “While recent Stamp Duty changes in the sector may have dampened landlords’ appetite, our analysis shows buy-to-let still remains a viable and lucrative investment. Strong rental incomes, matched with declining mortgage costs, mean that landlords can still enjoy a level of return on their investment they’d be hard pressed to find elsewhere.

“When considering a buy-to-let investment, location is often the most important factor determining the yields investors enjoy. While investors may be wooed by the prospect of strong rental income, house prices can be just as influential in determining rental yield. Looking for areas with opportunities for house price growth can also provide landlords with the added benefit of a profit from the eventual sale of their property, in addition to a regular monthly rental income.”

He concludes: “Whether it’s through a limited company or a personal purchase, there are a number of ways to buy a buy-to-let property, all of which have varying financial implications, such as tax. There’s no one-size-fits-all approach to purchasing buy-to-let. Enlisting the advice of an independent mortgage broker will help ensure your investment is as profitable as possible.”

Liverpool is Ideal for BTL Investors Looking for ‘Lucrative Long-Term Rental Returns’

Published On: October 5, 2018 at 9:00 am

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Liverpool has once again been highlighted as an ideal destination for buy-to-let landlords seeking solid rental returns, this time by an experienced property investment specialist.

The city continues to see high demand from tenants for private rented accommodation, thanks in part to ‘Knowledge Quarter’, which has seen a huge influx of students and young business professionals choosing to relocate to the city due to the new and innovative opportunities available.

Mark Burns, managing director of property investment firm Hopwood House, said: “Not only does the city’s beautiful waterfront setting and impressive skyline attract major international interest, the city was also awarded the title of one of the best places in the UK to invest, making it the perfect opportunity for buy-to-let property investment.”

Burns points out that with unparalleled earnings to house price ratio, properties in this high-spirited and fast-paced city cost on average 4.8 times more than the typical annual salary.

“Nominated as the annual European Capital of Culture in 2008, Liverpool possesses all the attractive qualities of larger UK cities at a fraction of the price,” he added.

Property prices in Liverpool are relatively affordable compared with other major UK cities, and with an average house price growth of 5.9% last year, Burns sees Liverpool as “the ideal location for buy-to-let property investors looking for lucrative long-term rental returns”.

He continued: “Liverpool offers some of the most profitable rental yield returns in the country, with three Liverpool postcodes ranking in the top 10.
“The L7 area of Liverpool, located just outside the busy and energetic city centre, offers unrivalled yields of up to 11.79%. Areas elsewhere in Liverpool can offer rental yields anywhere between 11.52% and 9.36%.”

Plans for the Northern Powerhouse scheme, designed to rival London and the South East as the main driver of economic growth in the country, by pooling the strengths of the cities and towns of the north as one cohesive unit, are also expected to support the housing market in Liverpool as well as boost the wider economy in the city.

Burns went on: “Liverpool is set to benefit from 10,000 new properties and two million square-feet of office space due to the redevelopment proposals set out by the city council.

“The new office space available is expected to attract a substantial number of young business professionals to the area while the new properties available are a perfect opportunity for investors looking to enjoy long term rental returns.

“Liverpool is most certainly one of the most beneficial and profitable places for property investment at the moment, especially in the buy-to-let sector. Cheap house prices and attractive yields allow investors to enjoy long term lucrative returns whilst the growing population of young professionals and the number of properties available on the market make it a straightforward investment with fewer risks than investing in other larger UK cities.

“The Northern Powerhouse initiative and the city’s extensive transport networks make it both refined and accessible for both tourists and locals.

“Liverpool is set to continue growing and thriving in years to come, making it an ideal investment opportunity for investors looking to expand their property portfolio.”