Posts with tag: buy to let market

Buy-to-let boom could lead to risks

Published On: September 25, 2015 at 12:46 pm

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The Bank of England has warned that the booming buy-to-let market in Britain could be a threat to the wider financial stability.

A report from the Bank’s Financial Stability Committee has concluded that buy-to-let mortgage lending had the potential to cause a housing boom and bust.

Lending

In the sector, lending has risen by 40% since the beginning of 2008. The Financial Stability Committee stopped short of calling for any intervention by the government or calling for any regulations to slow this process.

‘The FPC is alert to the rapid growth of the market and potential developments in underwriting standards,’ the committee said. ‘As the market continues to grow, particularly if driven by loosening of underwriting standards, the sector could pose risks to broader financial stability, both through credit risk to banks and the amplification of movements in the housing market,’ said the committee.[1]

Growing

A 40% increase in the outstanding stock of buy-to-let mortgage lending since the beginning of 2008 is in comparison to a rise of just 2% in owner-occupier mortgage lending. In terms of overall mortgage lending, the share of buy-to-let rose to 16% from 12% in 2008.[1]

Buy-to-let landlords are much more likely to sell up should there be a significant drop in property prices, according to the bank. In addition, it feels that a similar effect could occur if prices were to rise sharply.

‘Any increase in buy-to-let activity in an upswing could add further pressure to house prices. This could prompt owner-occupier buyers to take on even larger loans, thereby increasing overall risks to financial stability,’ the FPC stated.[1]

Buy-to-let boom could lead to risks

Buy-to-let boom could lead to risks

Changes

Reductions to the amount of tax relief that can be claimed in mortgage interest payments by buy-to-let landlords were announced by the Chancellor in this year’s summer budget.

As a result, the amount that landlords will be able to claim will be capped at the basic rate of tax, currently standing at 20%. This change will be phased in over four years from April 2017.

At present, the FPC said that no intervention was required in the Help to Buy scheme, which sees the Government secure part of a low-deposit home loan, as it poses no risk to stability.

[1] http://www.bbc.co.uk/news/business-34356801?ocid=socialflow_twitter

 

 

Buy-to-let investment to rise further

Published On: September 15, 2015 at 10:44 am

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New research from Nottingham Building Society has indicated that 19% of buy-to-let landlords plan to purchase more properties to add to their existing portfolio.

Experts are predicting a further boom for the market, which is already thought to be worth in excess of £188.3bn.

Future growth

Further data from the report shows that an extra 4% of homeowners plan to become buy-to-let landlords for the first time in the coming year. Almost a third of these are believed to be over the age of 55.

The Nottingham’s research in conjunction with mortgage brokers shows that 70% believe the introduction of Pensions Freedoms earlier this year will lead to extended demand for buy-to-let mortgages.

26% of brokers suggest that over the next 12 months, demand for buy-to-let mortgages will rise sharply, with 41% predicting a slight increase. Just 2% think demand for these products will dip

Demand

Ian Gibbons, Nottingham Mortgage Services Senior Mortgage Broking Manager, commented that, ‘the nations love affair with property is as strong as ever and this is reflected in the growing demand for buy to let properties. Our research suggests that this is also being fuelled by the recent changes to how people can use their pension money. Clearly some want to use this money to buy property to rent out.’[1]

Buy-to-let investment to rise further

Buy-to-let investment to rise further

‘When considering a buy-to-let mortgage it is important to seek professional Whole of Market (WOM) advice as some lenders may offer products with higher LTVs than the average, lower application fees, some lenders don’t restrict lending based on the number of properties in your existing portfolio and some don’t restrict first time buyer or first time landlord investors,’ Gibbons continued.[1]

Concluding, Mr Gibbons said that,’ a professional WOM adviser will be able to navigate the extensive range of lenders and products to find the right solution for you, based on your requirements.’[1]

[1] http://www.propertyreporter.co.uk/landlords/btl-boom-for-first-time-landlords.html#.VffUKSPwnFY.twitter

 

 

10% of over 50’s landlords make no profit

Published On: September 9, 2015 at 4:00 pm

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Data from an investigation from Saga Landlord Insurance indicates that 10% of buy-to-let owners over the age of 50 make no profit from their investment.

Although many have gained substantial financial returns from entering the market, a further quarter said they found it tougher than they expected.

Optimism

The poll of 10,141 over 50’s showed that almost 10% are now making the most of the opportunities presented by the buy-to-let market, with reasons for optimism for potential landlords.[1]

Of those landlords surveyed, an average of £700 profit per month from letting a property was recorded. However, one in ten said that they were either just breaking even or running at a loss.[1]

A third of respondents were thought to have entered the market during the past five years and 24% said that they have found being a landlord tougher than they originally thought. 10% said that the buy-to-let business was easier than expected. This could be down to the fact that just 45% of people questioned said that they had purchased a property with the specific intention of renting it out. 14% said that they had inherited the property, with 7% saying that had purchased it for a child or other relative to live in.[1]

Becoming a buy-to-let landlord comes with some daily concerns. The top reasons why landlords worry were found to be renting the property to bad tenants (36%) and managing the property in older years (19%). Another survey from Saga showed that 32% of landlords had experienced issues with tenants not paying rent, 27% had problems with property damage and 11% going as far as taking legal action against their property inhabitants.[1]

10% of over 50's landlords make no profit

10% of over 50’s landlords make no profit

Challenges

Sue Green, Head of Landlord and Home Insurance, Saga commented that, ‘Buy-to-let is an increasingly popular investment for the over 50s, particularly in the current financial climate but clearly it is not without challenges. The recently announced cuts to tax relief for buy-to-let landlords, for example are a new factor that people will have to take into account when deciding whether to start letting a property.’[1]

‘Our research shows that, while landlords are largely positive about their decision, they are also likely to face practical and financial hurdles. This is why we have developed a guide that provides practical advice to landlords, helping to address the most commonly raised concerns and giving them peace of mind so they can focus on enjoying their retirement,’ Green added.[1]

[1] http://www.propertyreporter.co.uk/landlords/10-of-landlords-aged-over-50-make-no-profit.html

 

HMO’s outperform BTL investment in North West

Published On: August 18, 2015 at 4:53 pm

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New research into the North West housing market has shown that HMOs are outperforming single occupancy buy-to-let investments.

A survey conducted by The Mistoria Group suggests that this is leading to further investment in student HMOs in the region.

Young gains

Analysis comparing HMOs rented out to young professionals against standard single occupancy buy-to-let properties, equities, commercial property and cash, shows that HMOs were by far the best performer during the last four years.

Data from the Mistoria report shows HMO’s rented to young professionals and students returned 122% in equity between 2010014. This was in comparison to 77% for a standard buy-to-let property, with a 75% LTV mortgage.[1]

Since 2010, there has been a growing number of investors obtaining HMOs in the North West area. Investment in these types of property has risen by 89% over the previous four years. A £1,000 investment in HMO’s in 2010 would have risen by £2,220 by 2014. For a BTL property, this would have only reached £1,770.[1]

In addition, the average gross rental yields between 2010-2014 for HMO’s in the North West were 14%, in comparison to 9% for a standard buy-to-let property.[1]

Returns

‘HMO’s in the North West provide excellent returns and are clearly outperforming BTL investments,’ stated Mish Liyanage, Managing Director of the Mistoria Group. ‘We have experienced a sharp increase in demand from investors looking to acquire HMO’s for professionals and students.’[1]

HMO's outperform BTL investment in North West

HMO’s outperform BTL investment in North West

Liyanage said that an investor can currently, ‘buy a four bed HMO in a good location for students and professionals, fully refurbished and furnished and tenanted for the coming year, for less than £150,000 in the North West based on 2015 prices.’ She believes that, ‘Investing in student HMO accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year.  Typical rents are significantly higher for student properties, than a comparable buy-to-let property in the same city.’[1]

Concluding, Liyanage said, ‘A key driver for the rise in demand for HMO student property is partly down to the huge growth in student numbers over the last few years. According to UCAS, the domestic student population is continuing to expand, with an expected all-time high of 500,000 applications this year.’[1]

[1] http://www.propertyreporter.co.uk/property/north-west-hmos-outperform-btl-investments.html

 

Flat fees to become norm in online letting industry

Published On: August 17, 2015 at 11:51 am

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A number of online letting and sales agents are offering flat fees to their customers. Now, the head of a leading online agent has suggested that these type of fees will soon become the norm.

Rob Ellice, head of easyProperty, who recently announced an expansion into the sales market, said in an interview that he believes the agency model will evolve, possibly within the next six months.

Rethink

‘As online agents become the new norm, we could see many of our competitors offer our flat fees to keep their customers, and a radical rethink from high street agents on their commission rates,’ commented Ellice. He feels that agents will, ‘shift towards a customised experience,’ with technological innovations, ‘creating the impetus for more transparent and efficient ways of letting and selling a property, enabling customers to tailor their approach and take control of the process.’[1]

Flat fees to become norm in online letting industry

Flat fees to become norm in online letting industry

Undoubtedly, the market will change in the long term, with greater technological advances changing its face in the next decade, Ellice noted. He went on to suggest that innovations in the way people view and sell a property will also change. Concluding, Ellice said he is convinced that any agent looking to enter the current market will not consider a high-street office as a priority. Instead, he feels that most are now looking to set up online as a first move.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2015/8/flat-fees-will-be-industry-norm-says-online-lettings-chief

 

 

June a good month for BTL market

Published On: August 11, 2015 at 3:17 pm

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Latest figures from the Council of Mortgage Lenders suggest that June was a good month for mortgage activity, with positive news for buy-to-let.

Rises

Data from the report shows that first-time buyers saw a significant month-on-month activity increase in comparison to May, but little movement year-on-year. Home mover lending was also up by month and also slightly by year.

Significant movement was recorded by home-owner remortgage activity, which increased by a third both month-on-month and year-on-year.

As for buy-to-let, a steady growth was evident over the year and over the month, with buy-to-let remortgage activity the prime driver. Buy-to-let lending for house purchase has seen a stronger performance than home-owner loans, which is in part due to buy-to-let lending dipping more than home-owner loans during the economic downturn. Buy-to-let lending accounted for 17% of gross lending during June.[1]

June a good month for BTL market

June a good month for BTL market

Deals

Paul Smee, director general of the CML said. ‘notable this month is the uptick in remortgage activity among home-owners, perhaps reflecting an increased desire to lock into competitively-priced mortgage deals in advance of any rise in rates. It is likely that people are now beginning to feel a rate rise is a realistic prospect and not just a distant theoretical possibility.’[1]

‘After a slower than expected start to the year, lending now appears to be picking up as we expected and in line with our recently revised forecasts, ‘Smee added.[1]

[1] http://www.propertyreporter.co.uk/property/cml-june-sees-a-strong-month-for-buy-to-let.html