Posts with tag: buy to let market

Is it Time to Leave the Buy-to-Let Market for Good?

Published On: September 20, 2017 at 9:38 am

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This year has seen record numbers of landlords selling their rental properties in response to regulatory changes and economic uncertainty post-Brexit. But is it time to leave the buy-to-let market for good?

Is it Time to Leave the Buy-to-Let Market for Good?

Is it Time to Leave the Buy-to-Let Market for Good?

A recent survey by the Residential Landlords Association (RLA) shows that this trend is set to continue, with 22% of landlords planning to sell at least one of their rental properties over the next 12 months, while less than a fifth said that they are planning to purchase additional buy-to-let properties.

Many landlords have exited the buy-to-let market for good following the Chancellor’s new taxation rules, which have seen investors charged an additional 3% in Stamp Duty since April last year and a reduction in tax relief on finance costs from April this year.

So, should more landlords be selling up and investing their money in other asset classes? Or should they sit tight and ride out the storm?

According to Peter Armistead, the Managing Director of Armistead Property, landlords should not sell their properties unless they can get a better return elsewhere.

He explains: “It is widely recognised that buy-to-let property is a medium to long-term investment. If we take a long-term view, it is easy to see how property performs so well compared with other asset classes.

“Over the last 35 years, for which accurate house price index information is available, house prices have increased 11% per year on average. The longer landlords can hold onto property, the better.”

He continues: “Investors that acquire property in the best buy-to-let hotspots in the UK can enjoy yields of between 8-12%, excellent capital growth and steady rental income. However, if landlords are experiencing poor leads or they think that the long-term potential of an area is not very good, then it’s best to sell.

“But, before landlords put their property on the market, it is worth investigating if you can remortgage, raise the rent, repurpose the property into a House in Multiple Occupation (HMO) to boost yields, or renovate/refurbish it to attract different tenants. There are plenty of mortgage brokers that can provide refinancing for property portfolios, which may be much more attractive than selling up.”

He adds: “The best time of year to sell buy-to-let property is March-June and September-November. Ideally, landlords should sell when they don’t actually need to i.e. you aren’t being forced into a quick messy sale. It’s best to give the property a makeover with a lick of paint, new carpets and maybe a new kitchen to maximise the selling price.”

Are you planning to leave the buy-to-let market for good?

Could property investment soon become financially unviable?

Published On: June 27, 2017 at 8:40 am

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A leading industry peer has moved to voice his concerns surrounding the future of the buy-to-let market, following recent announcements and legislation changes.

Last week’s Queen’s Speech were dominated by a number of Brexit bills, but also included the Tenant’s Fees Bill, which proposes banning landlords and letting agents from charging fees to tenants.

Difficulties

This proposal was initially announced last November as part of the Autumn Statement. Despite the details remaining unclear, the move is designed to put the cost of all letting agent fees onto landlords. In turn, an industry peer has expressed concern that this will make it extremely difficult for a number of buy-to-let landlords to make any considerable money moving forwards.

Simon Gerrard, managing director of Martyn Gerrard, called the ban announcement a, ‘headline grabbing knee-jerk reaction,’ from the new Government.

Gerrard observed: ‘This decision has been made with little consideration for the housing industry and my concern is that, moving forward, investing in property will cease to be a financially viable option for the many.’[1]

Could property investment soon become financially unviable?

Could property investment soon become financially unviable?

Rent Rises

Many experts believe the proposed changes in legislation could leave landlords with little choice but to increase rents, as agents pass existing tenants fees onto investors.

ARLA has also moved to suggest that up to 4,000 jobs in the letting sector could be at risk as a result of the alterations.

David Cox, Chief Executive of ARLA, noted: ‘A ban on letting agent fees will cost the sector jobs, make buy-to-let investment even less attractive, and ultimately result in the costs being passed on to tenants.’[1]

‘It’s unlikely the government had enough time to analyse all of the responses from the consultation, as it only closed on the 2nd June. It appears they had already made their decision and therefore the consultation was no more than a ‘tick box’ exercise and they haven’t appropriately taken the industry’s views into account,’ he added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/6/investing-in-property-could-soon-cease-to-be-financially-viable

 

Buy-to-let investors set to look North

Published On: May 24, 2017 at 8:59 am

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Fresh research from the Legal & General Mortgage Club has revealed that a number of brokers believe that the North of England will become a hotspot for landlords over the course of the next year.

Those brokers attending the Legal & General Mortgage Club’s recent buy-to-let forum event were quizzed on the development of the buy-to-let market. This followed the series of legislation changes that came into force in the last twelve months.

Streamlining

As a consequence of the legislation changes, 69% of brokers feel that landlords will look to streamline their portfolios. Many will look to sell properties with lower yields, while 45% feel that buy-to-let investors will turn their attention to university towns and student accommodation.

Jeremy Duncombe, Director at the Legal & General Mortgage Club, observed: ‘Over the past 12 months, the buy-to-let market has experienced a myriad of legislative changes. Today’s research from Legal & General Mortgage Club’s inaugural buy-to-let forum shows one of the impacts of these developments, with developers looking North for value. Landlords are resourceful and this demonstrates the resilience of the market, despite many changes.’[1]

Buy-to-let investors set to look North

Buy-to-let investors set to look North

‘The last year has been a particularly challenging year for buy-to-let. The Stamp Duty hike, coupled with the changes to tax and the PRA legislation affecting landlords with four or more properties, has undoubtedly impacted the purchase market in particular. However, it is reassuring to see that confidence in this essential tenure remains as landlords respond and adapt to this new landscape,’ he added.[1]

This report marries up with a separate one from Barclays released yesterday, which again highlights northern locations as the most popular for investors moving forwards.

[1] http://www.propertyreporter.co.uk/landlords/the-north-predicted-to-become-a-btl-hotspot.html

Buy-to-let investors targeting smaller, cheaper properties

Published On: April 12, 2017 at 9:19 am

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A new report from Mortgages for Business has analysed buy-to-let purchase activity during the first three months of the year.Data from the investigation suggests that investors are purchasing smaller and less expensive properties.

The lender says that average loan amount and security values fell for all property types, with figures for ‘vanilla’ properties well down on those seen over the last year.

Purchasing

In addition, the opening quarter of the year saw a shift in the buy-to-let market, from remortgaging to purchasing.

This was particularly strong amongst more complex property types, such as HMOs, multi-unit freehold blocks and semi-commercial property.

David Whittaker, CEO of Mortgages for Business, noted: ‘These figures represent a departure from the established norms, which have been mostly defined by the remortgage market. This time, however, we see new and unusual purchase activity from landlords, presumably because changes to income tax relief have prompted them to re-examine their strategies.’[1]

Buy-to-let investors targeting smaller, cheaper properties

Buy-to-let investors targeting smaller, cheaper properties

Over the opening three months of the year, purchases made up 41% of mortgage transactions involving vanilla buy-to-lets-around 3% above the trend. Whittaker observes that this, ‘is likely evidence of an ongoing process of landlords selling their portfolios to newly created limited companies.’[1]

The lender says that despite incorporation not be particularly cost effective for all investors, transactions such as this can reduce the tax burden on buy-to-let landlords. They often serve to offset the initial expense and could negate higher costs for tenants moving forwards.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2017/4/buy-to-let-investors-target-smaller-cheaper-properties

 

Is the Government, ‘wiping out the buy-to-let economy?’

Published On: March 9, 2017 at 10:08 am

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The Chancellor’s failure to add any further or amend any existing tax reforms will only serve to have far-reaching consequences for the buy-to-let market, according to one industry peer.

Plans to remove landlords of mortgage interest tax relief will have a ‘detrimental impact’ on households throughout the country, according to David Hannah, principal consultant of Cornerstone Tax.

Tax Relief

From April, landlords, will begin to lose the right to deduct their entire mortgage interest costs at the rate they pay income tax, which is currently up to 45%. When the changes are fully implemented by 2020, the maximum will be 20%.

Mr Hannah has criticised the move, claiming it will only result in higher rents for tenants across the UK.

In response to yesterday’s Budget, Hannah said: ‘With real estate representing 21% of the UK economy, it is a mystery as to why the Government persists in hindering a crucial sector, by creating an unnecessary burden on tenants, landlords and homeowners.’[1]

He describes the changes to mortgage interest tax relief and the 3% additional Stamp Duty as a ‘double-blow effect wiping out the buy-to-let economy.’ He feels that this, ‘doesn’t chime with the current socio-economic needs of the UK.’[1]

Is the Government, 'wiping out the buy-to-let economy?'

Is the Government, ‘wiping out the buy-to-let economy?’

Demand

Continuing, Mr Hannah observed: ‘The demand for rental accommodation is set to rise by one million households in the next five years-a combination of restricted access to mortgage finance, unaffordability created through eye-watering SDLT rates and a shift in labour market trends towards a more mobile workforce.’[1]

‘Yet the government continues to breakdown the very sector that has absorbed change and provided homes for those who simply either cannot afford or do not wish to commit to homeownership. With the sector currently in its fourth consecutive quarter of decline, paired with a fall in homeownership rates, we are fast approaching a new type of housing crisis.’[1]

Obsession

Moving forwards, Mr Hannah wants to see the Government stop, ‘their obsession with homeownership’ and to, ‘think carefully’ about what the country needs.

He wants to see, ‘an accessible, flexible and affordable housing supply’ and feels, ‘the private rental sector, where buy-to-let landlords are a major contributor, provides just that.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/3/the-government-is-wiping-out-the-buy-to-let-economy

Buy-to-let activity down by 26% year-on-year

Published On: January 17, 2017 at 9:59 am

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The latest research from Connells Survey & Valuation suggests that the buy-to-let sector is struggling.

Data from the report indicates valuations were down by 26% over the course of the last year, following a year full of significant legislative alterations.

Rises

Despite the slowdown seen in the buy-to-let sector, overall housing market activity during December 2016 was up by 8% on December 2015. What’s more, activity was 40% up from December 2014.

John Bagshaw, corporate services director of Connells Survey & Valuation, observed: ‘Looking back over the year, the market has regained a great deal of its strength with consumers’ confidence on the mend.’[1]

‘Rates are low and employment is high-that’s a great recipe for a healthy housing market. And the buy-to-let market’s loss has been owner-occupiers gain as those looking to get on the ladder or trade-up have been left facing less competition for the properties they want to buy,’ he added.[1]

Selling

Valuations for those selling property rose by 25% between December 2015 and December 2016. During the same period, valuation activity for those looking to remortgage rose by 19%.

Continuing, Bagshaw said: ‘The housing market has been recovering since September and had a great December. Compared to 2015 it looks good. Compared to December 2014 it looks exceptional. First-time buyers and people selling property have regained much of the confidence they lost in the wake of the Brexit vote.’[1]

Buy-to-let activity down by 26% year-on-year

Buy-to-let activity down by 26% year-on-year

‘With interest rates still at record lows, many buyers are taking the opportunity to buy property that would have been regarded as a bargain at that price just of a couple of years ago.’[1]

According to the report, the number of property sellers was up by 32% over the course of the year. In addition, remortgage activity was up by 68% as consumers have taken advantage of some very cheap mortgage deals.

Concluding, Mr Bagshaw noted: ‘Looking back over the year, the market has regained a great deal of its strength with consumers’ confidence on the mend. Rates are low and employment is high –that’s a great recipe for a healthy housing market.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/1/buy-to-let-markets-loss-has-been-owner-occupiers-gain