Posts with tag: landlords

Rise in ltd companies marks change in landlord trends

Published On: July 6, 2016 at 10:49 am

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Lending to buy-to-let landlords looking to borrow via limited companies was up markedly in the first six months of the year, according to a new report.

The results of the H1 2016 Limited Company Buy-to-Let Index also suggests that the number of products available to limited company borrowers also went up.

Stamp Duty impact

Data from the report shows that the number of buy-to-let mortgage applications completed by limited companies rose to 30% of the total number of buy-to-let completions in H1 2016. This was an increase from the 21% seen in the final half of 2015.

Many landlords moved to incorporate their business, to avoid paying the additional 3% stamp duty surcharge on their investment. In response, the number of lenders offering specific products to limited company borrowers stood at 14, up from 12 last year.

In total, lenders offering limited company products now stands at 42% of the total sector, up from 30% in the first half of 2015.

Stabilised

Mr David Whittaker, managing director of Mortgages for Business, noted, ‘both applications and completions for limited company borrowers appear to have stabilised at around one third of all buy to let business. However this masks a dramatic change in the investment pattern for new purchases where the proportion investing through limited companies has risen from less than 20% by number (25% by value) in the first half of 2015 to over 50% in 2016, with second quarter applications by limited companies running at over 60% of total applications related to purchases of buy-to-let properties. This increasing proportion will also drive an increase in the proportion of completions in the next quarter.’[1]

‘There has only been a slight uplift in the proportion of remortgaging activity that relates to limited company borrowers, due to historical investment patterns. It would, however, appear that some landlords who already own property personally are sitting on their hands somewhat and holding back from remortgaging, probably waiting to see how the economy pans out post-referendum. With the Chancellor announcing his intentions to lower corporation tax to 15% following the Brexit result, we may even witness more landlords financing buy to let property via corporate vehicles. Clearly, the trend for limited company buy to let represents a real step change in behaviour as landlords adapt their investment strategies to mitigate the increased costs brought about by recent changes in the tax regime,’ Whittaker continued.[1]

Rise in ltd companies marks change in landlord trends

Rise in ltd companies marks change in landlord trends

Rises

During March of this year, the number of completed limited company buy-to-let applications increased by more than three times, due to investors rushing to beat the Stamp Duty deadline.

Whittaker concluded by saying, ‘Last year I had thought that limited company pricing might come down a bit as some lenders, including our own lending brand Keystone Property Finance, chose to absorb the increased costs and offer the same rates to landlords borrowing both personally and via the limited company route. The fact that this has not happened may encourage more lenders to enter the space.’[1]

[1] http://www.propertyreporter.co.uk/landlords/growth-of-limited-company-btl-marks-change-in-landlord-behaviour.html

Could the North offer best post-Brexit yields?

Published On: July 6, 2016 at 8:59 am

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A new report has indicated that following the historic Brexit vote in the EU referendum, buy-to-let investors should look to invest in Northern locations, rather than the capital.

Research conducted by Assetz Property suggests that landlords could receive greater returns by investing in the property market in the North of England.

Rental yields

Buy-to-let landlords purchasing through Assetz Property can achieve yields of 8.5% in Leeds through their investment properties. Gross yields in London currently stand at only 3.5%.

Disposable income levels in Leeds are also way above those seen in the capital. The typical London salary is currently £40,087, meaning renters are left with an average of just £6,607 of disposable income. This is before features such as bills, food and travel expenses have been sorted out.

In Yorkshire however, despite the average yearly salary standing at over £10,000 less than in London, typical rent is just £11,244 per year.

Could the North offer best post-Brexit yields?

Could the North offer best post-Brexit yields?

Reliable returns

Stuart Law, CEO at Assetz Property, notes, ‘with house prices in London set to drop and interest rates due to fall on savings following Mark Carney’s strong indication of an imminent base rate drop, investors should concentrate on yields and the monthly return on their investment. The potential relocation of thousands or tens of thousands of highly paid city workers to Paris, Frankfurt or Dublin who might have once lived or rented in London can only have a negative effect on the City, while the market in Leeds is likely to be far more stable.’[1]

‘Not only is it a fantastic draw for investors, as properties are, on average, more than £400,000 cheaper here than in London, but it is an ideal location for residents looking to get more for their money and achieve a higher standard of living than they could have in London for a lot less money,’ he add

[1] http://www.propertyreporter.co.uk/landlords/should-investors-shun-london-for-the-north.html

 

 

Rise in ‘gifted’ deposits before Stamp Duty deadline

Published On: July 5, 2016 at 11:51 am

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A number of buy-to-let investors were ‘gifted’ financial assistance in order to secure funds for a deposit to beat the Stamp Duty deadline, according to a new report.

Research conducted by My Home Move found that the number of investment properties purchased using a ‘gifted’ deposit rose by 5% in the first quarter of this year. Many investors were found to have turned to the bank of Mum and Dad in order to secure these deposits.

Gifted deposit increases

My Home Move based its analysis on a survey of over 20,000 transactions in a two-year period.

Talking about the results of the investigation, Doug Crawford, CEO of the firm, said, ‘when we talk about the Bank of Mum and Dad, people usually think of first-time buyers who are struggling to afford their first home. However in this instance we’re surprised that investors sought to utilise every avenue possible to secure their next property before the 1st April deadline. Asking for help through a gifted deposit in effect helping to bring forward their purchase date, will have saved them thousands of pounds in additional Stamp Duty charges.’[1]

Investors were found to have used their gifted deposits more prominently in both the East and West Midlands. A rise in investment of 6% and 12% respectively was recorded in these areas. However, investment in London and the South East fell by 4% year-on-year.

Rise in 'gifted' deposits before Stamp Duty deadline

Rise in ‘gifted’ deposits before Stamp Duty deadline

Interesting Investment

Crawford continued by noting, ‘it is interesting that these investors, those who have had the deposit gifted, have made the decision to buy in areas outside of the Capital-suggesting that they either wanted to make their money go further by buying in less expensive locations, or there just wasn’t the stock available to buy in London.’[1]

‘And when we looked further into the data, we also discovered that these investors chose to purchase flats and maisonettes over houses, indicating that they were looking for properties they could easily rent out as opposed to second-homes-making them the buy-to-let landlords with a hotline to the bank of Mum and Dad.’[1]

[1] http://www.propertyreporter.co.uk/property/spike-in-gifted-deposits-as-investors-aimed-to-avoid-sdlt-hike.html

Landlords warned over purchasing deposit hikes

Published On: July 4, 2016 at 11:01 am

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Concerning new claims from crowdfunding platform Property Partner suggest that tighter lending criteria from the Bank of England could have a severe impact on deposits required from buy-to-let landlords.

The platform indicates that would-be investors in over two-thirds of the UK’s major towns and cities could be forced to put down deposits of at least 40%.

Rising ratios

Property Partner has forecasted that interest coverage ratios of 145% could well be enforced. Ahead of the Bank of England’s Financial Stability Report, some providers are imposing stricter rules. These include Barclays and Nationwide, who have already set their interest coverage ratios to 145%.

Should other lenders follow their lead, purchasing a buy-to-let investment with a mortgage in over two-thirds of towns and cities will be impossible without a 40% deposit.

Worcester came out on top of the list with highest financial barriers to entry, should Interest Coverage Ratio be set at 145%. This increase would see landlords permitted to put down a deposit of 61% for a typical property. In monetary terms, this equates to £115,000.

Landlords in the commuter belt, in locations such as Chelmsford, Bedford and Reading, would also face much stricter lending restrictions.

Landlords warned over purchasing deposit hikes

Landlords warned over purchasing deposit hikes

Buy-to-let blow

Dan Gandesha, CEO of property crowdfunding platform Property Partner, observed, ‘buy-to-let landlords have had it tough of late with successive assaults on their potential income. The stricter lending rules expected to be introduced by the Bank of England follow April’s Stamp Duty surcharge of 3% for buyers of second homes and buy-to-lets. And from April 2017, the gradual withdrawal of mortgage interest tax relief will put further restraints on landlords’ profits.’[1]

‘This lending squeeze will only increase the financial barriers to entry to the market, restricting access to only cash buyers or those with hefty deposits and potentially forcing some existing landlords to sell up. Highly-leveraged landlords seeking to remortgage could face a nasty shock, if their bank tells them they no longer qualify for the same loan to value mortgage,’ he added.[1]

[1] http://www.propertyreporter.co.uk/landlords/landlords-face-being-locked-out-by-post-brexit-rule-changes.html

 

UK house prices up in June despite Brexit uncertainty

Published On: June 30, 2016 at 9:00 am

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Categories: Property News

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Residential property values in Britain increased marginally during June, despite perceived uncertainty in the lead up to the EU referendum vote.

New figures from Nationwide’s monthly house price index has shown that house prices increased by 5.1% during June, in comparison to the same period last year. This also shows an improvement on the 4.7% year-on-year growth as seen during May.

Increases

Month-on-month, prices increased marginally by 0.2%. This was the same rate as recorded in May, but greater than the 0% consensus prediction.

Robert Gardner, Nationwide’s chief economist, said, ‘it has become difficult to gauge the underlying pace of demand in recent months, due to the surge in house purchase activity in March ahead of the introduction of stamp duty on second homes on 1 April.’[1]

‘It will therefore be difficult to assess how much of the likely fall back in transactions in the quarter ahead is because buyers brought forward purchases to avoid additional Stamp Duty liabilities and how much is due to increased economic uncertainty following the referendum result. Gauging the likely impact on house prices will be even more difficult,’ he continued.[1]

UK house prices up in June despite Brexit uncertainty

UK house prices up in June despite Brexit uncertainty

Pessimistic future?

The majority of housing market analysts have expressed their caution over the future of the sector, following the Brexit result. They believe that the market could slump during the next few months, but could also provide buy-to-let investors with significant discounts.

Ian Thomas, co-founder and director of LendInvest. Observed the result, ‘could result in the housing market cooling and resetting in areas where house price growth has locked out first-time buyers and others that want to purchase property.’[1]

Mr Thomas also feels that despite the shock result, the fundamentals of the UK housing market will not change substantially.

He noted that, ‘people still need homes to live in, whether we are in the EU or not and the fact is that demand for housing massively outstrips supply.’[1]

[1] https://www.propertyinvestortoday.co.uk/breaking-news/2016/6/uk-house-price-growth-picks-up-despite-brexit

Calls for Government to rethink Renters Rights Bill

Published On: June 29, 2016 at 11:50 am

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The Association of Independent Inventory Clerks has called on the Government to continue to let letting agents charge tenants for inventory checks.

According to the industry body, these fees will then be transferred to landlords, who will in turn incorporate them into tenants’ rents.

Inventory fees

Just this month, the Renters’ Rights Bill was given an unopposed second reading in the House of Lords. The Bill includes measures to ban letting agents from charging tenants registration, admin, reference check, renewal and exit fees.

Given the unopposed reading, the Bill is thought to have a very strong chance of success. It is running alongside a petition challenging agent fees being charged to tenants, which has more than 250,000 signatures.

Patricia Barber, Chair of the Association of Independent Inventory Clerks, said, ‘here at the AIIC, we’re strongly opposed to the banning of inventory fees charged to tenants by letting agents. We envisage that if banned these charges would continue to be charged to tenants through the unspecified and unclear means of a higher rent.’[1]

Calls for Government to rethink Renters Rights Bill

Calls for Government to rethink Renters Rights Bill

Concerns

Barber is concerned that being unable to charge tenants a fee could encourage some agents bypass inventories completely.

She notes that, ‘a detailed inventory helps landlords, agents and tenants to determine exactly how the property’s condition has changed over the course of the tenancy, what can be deemed fair wear and tear and what needs to be replaced and therefore deducted from the tenant’s deposit.’[1]

‘We totally understand that some fees charged to tenants are too high and complicated, but we believe that if fair and worthwhile feels like inventory checks are made clear to the tenant then there should be no problem in them being charged,’ Barber continued.[1]

Concluding, Barber acknowledges that, ‘the vast majority of letting agents are transparent in the fees they charge to tenants. Banning fees altogether and particularly inventory check fees is certainly not the answer and could contribute to more deposit disputes and property damage further down the line.’[1]

It must be noted that the Renters Rights Bill remains a long way from becoming law. There is still the House of Commons to negotiate, before receiving Royal Assent.

[1] http://www.propertyreporter.co.uk/landlords/government-urged-to-re-evaluate-renters-rights-bill.html