Search Results For: buy to rent sector

Landlords own over half of new homes

Published On: October 28, 2014 at 11:25 am

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The buy-to-let market continues grow at a remarkable rate, according to new figures from leading mortgage lenders Paragon.

Changing dynamic

Research conducted by Paragon suggests that nearly 20% of homes in Britain are owned by private landlords. It is anticipated that buy-to-let investors will purchase a further million properties within the next five years, as the booming market shows no sign of slowing.

Approximately two million private landlords own and subsequently rent out around five million properties to tenants in the U.K. Official figures from the Government indicate that by the year 2032, over one in three properties will be owned by private landlords.[1]

18 Years of Buy-To-Let

Paragon report is entitled, ’18 years of Buy-to-Let,’ and draws upon information collated since 1996, the year where the investment opportunity came to the fore, with mortgages aimed at private landlords first accessible.

The report indicates that buy-to-let properties are now worth around a total of £1 trillion.[1] Buy-to-let investment accelerated between 2005-2007, with the housing boom leading a number of investors purchasing properties without even viewing them. However, the recession and subsequent banking crisis led to a drop in mortgages forcing young people to rent, thus increasing the number of renters.

Landlords own over half of new homes

Landlords own over half of new homes

Recent growth

Over the last few years, the buy-to-let market has swelled, with mortgage providers indicating an increase of over 20% per year. Landlord loans available are now in excess of 700.[1]

A spokesperson for Paragon embraced the findings of the report, saying, ‘ the creation of buy-to-let has very much been a force for good. It has helped to shape a private rented sector that is fit for purpose and provides choice, value and flexibility for tenants.’[2]

However, the figures have not been welcomed by some young aspiring homeowners, who feel priced out of the housing market. Generation Rent is a group campaigning for tenant and housing reform. Member Dan Wilson said on the report that, ‘This sort of data shows how the market isn’t operating properly and has become a vicious cycle. More people are attracted to buy-to-let which drives up property prices, in turn trapping more tenants into renting for longer. There are parts of the country now where there really is no prospect of home ownership for many people and it is difficult to see how that will change.’[2]

[1] http://www.landlordexpert.co.uk/2014/10/28/uk-landlords-own-over-half-of-the-new-homes-built-in-the-last-decade

[2] http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11179073/Buy-to-let-boom-one-in-five-homes-now-owned-by-landlords.html

 

 

 

One in Five to be a Private Tenant in just Two Years

Published On: October 23, 2014 at 4:57 pm

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The two million buy-to-let investors in Britain have almost doubled their property assets in ten years.

Private landlords now hold around one in five properties in the UK, and it is expected that they will purchase another million in the next five years, says new research.1

This figure highlights the shifting housing market in Britain, as less people own their homes, and more are renting.

One in Five to be a Private Tenant in just Two Years

One in Five to be a Private Tenant in just Two Years

The report, from mortgage lender Paragon, indicates that 18% of households are now renting from a private landlord. This figure is increasing, as investors continue to view property as a secure asset, providing income and profit.1

The Government’s statistics estimate that by 2032, over one in three properties will be owned by private landlords.1

The Government’s 18 Years of Buy-to-Let report focuses on information from the period since the beginning of buy-to-let. 1996 was the first year in which specific mortgages were available for private landlords.1

During this time, the amount of properties bought for this purpose has doubled and is now worth £1 trillion.1

The sector grew in the housing boom of 2005-07, when property investment clubs thrived, and thousands of landlords bought new build flats, without even seeing them first.

The expected crash never followed. The banking disaster created a lack of mortgages for the younger generation, who moved into the private rental sector. Dropping interest rates made mortgages cheaper, and this allowed amateur landlords to hold onto their properties, despite being in negative equity.

The past few years has seen a rise in the buy-to-let sector, with mortgage lending increasing at over 20% per year, and the amount of landlord loans available is now over 700.1

Paragon support the market, saying: “The creation of buy-to-let has very much been a force for good. It has helped to shape a private rented sector that is fit for purpose and provides choice, value and flexibility for tenants.”1

The younger generation, however, do not agree. Dan Wilson Craw is from Generation Rent, a lobby group for tenants and housing reform. He says: “This sort of data shows how the market isn’t operating properly and has become a vicious cycle.

“More people are attracted to buy-to-let which drives up property prices, in turn trapping more tenants into renting for longer.

“There are parts of the country now where there really is no prospect of home ownership for many people, and it is difficult to see how that will change.”1

1 http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11179073/Buy-to-let-boom-one-in-five-homes-now-owned-by-landlords.html

 

 

 

 

 

 

 

Government housing policies under fire

Published On: October 20, 2014 at 5:06 pm

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The inaugural Great Buy to Let Debate in Westminster saw landlords, agents and lenders all voice their concern and confusion over upcoming Government proposed schemes aimed at aiding the housing market. Many of these industry figures suggest that more thorough streamlining of the policies is needed before they become law. Others have described them as contradictory to what regulations already in place.

 

Lack of strategy

Speaking at the event, vice president of the Association of Residential Landlords Valerie Bannister, said that the Government had no clear vision of their housing strategy. Bannister argued that, ‘successive governments without a long-term housing strategy have got us into this situation we are now in, and the private rental sector is supposed to pick up the shortfall.’[1]

Lenders at the event gave their opinion that the Government’s primary schemes for improving the housing industry, such as NewBuy and Funding for Lending, will actually serve as hindrance.

 

Schizophrenic

John Heron, managing director of lender Paragon Mortgages, is one figure confused at the Government’s planned reforms. Heron said, ‘Politicians are tinkering around at the edges and seeking headlines.  They are being schizophrenic.  On the one hand, they are doing everything they can to drive lenders away from high-risk lending.  One the other hand, they are coming up with initiatives encouraging 95% on new-builds to first-time buyers.’[1]

Government housing policies under fire

Government housing policies under fire

 

Landlords are also confused by the Government policies. The Government suggests that landlords are to help with vulnerable tenants, however, landlords believe that outlines in new welfare reforms will actually make this more complicated.

With the introduction of Universal Credit, tenants in receipt of housing benefit will see their payments given directly to them in one lump sum. As a result of this, landlords are concerned that rental arrears will rise as they believe many tenants lack the budgeting skills in order to stay out of the red.

Landlords are also concerned that rent arrears may have a knock-on affect which may lead them to alter their insurance policies. It seems inevitable that landlords will have to increase their rent prices, which again will leave vulnerable tenants feeling the pinch.

[1] http://www.justlandlords.co.uk/news/Lenders-criticise-Government-housing-policies-1653.html

 

 

 

 

Progress in the Property Market will Benefit Landlords

Published On: October 9, 2014 at 4:40 pm

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Progress in the Property Market will Benefit Landlords

Around one million people are expected to move house due to an improving property market, it was recently announced.

The Ernst & Young ITEM Club have used the Treasury’s economic models to predict that the amount of housing transactions will increase by 7.5% this year. They have also referred to Chancellor Osborne’s plans to guarantee £130bn of mortgages leading to housing transactions rising by another 7.8% next year.

The chief economic advisor to the ITEM Club, Peter Spencer, has discussed the predictions. He says: “With export markets continuing to disappoint, the Chancellor has focused his firepower on the home front. And the timing couldn’t have been better. Real incomes are already starting to recover, mortgages are becoming more readily available, and homes are more affordable, as the house price-to-earnings ratio continues to fall. Although it’s not a long-term strategy, stimulating the housing market and the high street will keep GDP growth positive. Unbalanced growth is better than no growth.”

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The Government’s new Funding for Lending Scheme (FLS) will allegedly lead to more people being able to buy a property, as it will decrease costs of mortgages, according to the Club. They have also supported the controversial Help to Buy scheme.

Spencer explains: “We expect [the scheme] to boost the number of housing transactions, particularly at the lower end of the market where the deposit and low equity have been a major constraint.

“We should start to feel slightly better off this year, which will help to loosen the purse strings. Consumer spending added 0.7 percentage points to GDP in 2012, and the Chancellor’s budget will help ensure the tills continue to ring for some time yet. Consumers have been burnt by the experience of the recession, and are much more cautious with their finances. Households are likely to continue paying down debt rather than racking up huge credit card bills.”1

Progresses in the property market will benefit landlords, as there will be less pressure on the private rented sector.

Additionally, should the property market become steadier there is the chance of landlord insurance policies to become cheaper, as there would be less risk of tenants falling into rent arrears.

The next few months will uncover whether the ITEM Club’s forecasts are accurate, and whether the housing market will bounce back to pre-recession status.

1 http://www.justlandlords.co.uk/news/One-Million-People-to-Move-Home-this-Year-1698.html

 

 

 

UK Housing Shortage sees Sharp Rise in BTL Investors

Published On: September 24, 2014 at 5:03 pm

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Investors are snapping up a rising number of the UK’s lacking housing supply, causing a sharp increase in buy-to-let mortgage lending.

The Council of Mortgage Lenders (CML) have revealed that buy-to-let lending reached £2.4bn in July 2014, a rise of 26% over the year, and 9% higher than June.1

The high demand and lack of supply of properties is causing a rapid increase of house prices. This is enticing investors, who are trying to make good profits from property values and rental income.

The Office for National Statistics found that the average house price in the UK rose 10.2% in the year to June 2014, reaching £265,000. In London, they jumped 19.3%, to £499,000.1

Opponents to the buy-to-let market claim that it abuses the country’s housing crisis, making it harder for first time buyers to find suitable properties.

UK Housing Shortage sees Sharp Rise in BTL Investors

UK Housing Shortage sees Sharp Rise in BTL Investors

Defendants however, say that investors are supplying the demand of the private rental sector by creating more homes available for renting.

However, CML’s figures also revealed that there has been a rise in first time buyer lending.

July saw 30,200 first time buyer loans, 3% more than June, and 25% higher than the previous year. The value equated £4.6bn.1

The recovering economy, low interest rates, and schemes such as Help to Buy have aided firs time buyers, by making mortgages cheaper and easier.

Paul Smee, Director General of the CML, says: “The market has shown steady growth in house purchase and buy-to-let over the past few months with general improvements in economic factors across the UK allowing for more people to enter the property market.

“There have been many factors over the past year that could have caused disruption but the market has remained resilient and lenders have shown themselves adaptable to this change.”1

Officials would like to see tighter mortgage lending, as they are concerned that some borrowers are taking expensive mortgages.

The Financial Conduct Authority (FCA) has enforced stricter affordability tests on borrowers, and the Bank of England are restricting high loan-to-income mortgages.

1 http://www.landlordexpert.co.uk/2014/09/23/uk-housing-shortage-has-seen-a-sharp-rise-in-buy-to-let-investors/

 

 

 

 

Rise in House Prices Leaves People Priced Out

Published On: September 17, 2014 at 2:57 pm

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Rise in House Prices Leaves People Priced Out of a Stable Home

Every region of the UK has seen a rise in property prices this year, raising fears that generation rent will be trapped out of the housing market for longer.

The Office for National Statistics (ONS) has found that the average UK house price is now £272,000, an increase of 11% from £245,000. This demonstrates the widening gap between house prices in London and the rest of the UK. The huge price growth in July was at the fastest annual pace in seven years.1

Londoners will now face average prices of £514,000, which has grown by £15,000 in a month, and £76,000 in a year, says the ONS.1

The average first time home is 13.5% more expensive than it was 12 months ago, which is the largest annual rise since March 2005.1

Experts expect this will cause a generation of young people to abandon their hopes of buying a house, and living in rental accommodation, or with their parents, for longer.

Rise in House Prices Leaves People Priced Out

Rise in House Prices Leaves People Priced Out

Housing charity Shelter’s Chief Executive, Campbell Robb, says: “This shocking rise in house prices leaves people priced out of a stable home.

“The dream of their own home is slipping so far out of reach for young people and families across the country, the only choice they face is to become part od the clipped-wing generation, stuck living in their childhood bedrooms, or generation rent paying out dead money to landlords.”1

Average wages are £24,648 a year, and are only increasing at 1.7%.

A house in England costs £284,000, up from £255,000, with Scottish homes rising to £198,000 from £183,000. The average property in Wales is now £171,000, up from £160,000, and Northern Ireland’s homes are £139,000, from £132,000.1

Those trying to buy a house in London will also see rising stamp duty charges, as the tax rate increases from 3% to 4% for homes above £500,000.

The Council of Mortgage Lenders (CML) revealed recently that the number of mortgages given to first time buyers exceeded 30,000 in July, the first time this has happened in a one-month period since August 2007.1

However, first time buyers generally have to borrow record high figures to get into the market. The average new loan in this sector is £127,500, says the CML.1

The present low interest rate situation is helping keep borrowing costs down, however homeowners have been cautioned to consider how they will deal with higher payments when the Bank of England (BoE) base rate ultimately moves off its 0.5% low.

The Royal Institute of Chartered Surveyors (RICS) claimed that property sales are now generally taking up to a month longer to process than they were at the beginning of the year, which was attributed to increased lender caution.1

Despite this, property website Rightmove recently said that they are experiencing signs of strong activity returning to the housing sector.1

Housing minister, Brandon Lewis, explains: “This Government is committed to delivering long term economic stability and economic growth.

“The last administration oversaw a housing boom and bust, and we have been picking up the pieces. House building is now at its highest level since 2007 and continuing to grow, and 200,000 new affordable homes have been delivered across England since 2010.

“By tackling the deficit left by the last administration, we are helping keep down both interest rates and the number of repossessions, while improving the housing market remains a key part of our long term economic plan.”1

1 http://www.independent.co.uk/news/uk/politics/property-prices-in-all-regions-of-the-uk-grow-at-the-fastest-annual-pace-seen-in-seven-years-9736723.html