Posts with tag: residential housing

UK residential market to be strong throughout Brexit process

Published On: November 2, 2016 at 10:14 am

Author:

Categories: Property News

Tags: ,,,,

New analysis has revealed that the British housing market is expected to stay strong and active as the process to leave the EU completes.

Of course, turbulence is expected, but the latest forecast from real estate firm JLL suggests that there will still be moderate growth. It is thought that the residential market will pick up in earnest from 2020.

Brexit process

Article 50 is expected to be enacted by March 2017, with the country due to leave the European Union in 2019.

In a statement, the firm said: ‘Demand will be undermined in the short term by uncertainty and a more subdued economy while supply issues will exacerbate, lending support to prices. The perennial issue for the housing industry remains supply and we are pleased that there seems to be fresh impetus in this regard.’[1]

‘The big question, however, is whether policy initiatives target short term supply improvements, or look beyond the immediate horizon to create lasting, long term solutions,’ it continued.[1]

Forecasts

JLL predicts growth of 0.5% across Britain in 2017 and 1% in 2018. Growth is then expected to rise to 2% by 2019, 4% in 2020 and 5% in 2021. There are however, differences by region.

Scotland is forecasted to be flat during 2017, then record growth of 1% in 2018, 2% in 2019, 3% in 2020 and 4.5% in 2021. Wales is expected to see less growth, but catch up by 2020. Prices in the country are predicted to fall by 1% in 2017, rise by 0.5% in 2018, 3% by 2019, 5% in 2020 and 5% in 2021.

Neil Chegwidden, head of JLL residential research, believes the outlook for the property market is driven by the widespread positive attitude being adopted within Britain. He notes: ‘Much will depend on the trade agreements negotiated, but with greater certainty the economic outlook should brighten along with consumer and business confidence as we head in 2019.’[1]

‘We expect the UK housing market to be more subdued over the next two to three years. However, it will remain reasonably active with little chance of meaningful price corrections. Assuming Brexit negotiations are not too detrimental, we could see a rebound in London housing markets in 2020, before the rest of the country follows.’[1]

UK residential market to be strong throughout Brexit process

UK residential market to be strong throughout Brexit process

House building slowdown

Continuing, Mr Chegwidden said that house builder activity could drop from its current rate. ‘Although levels of new housing delivery were still woefully low prior to the referendum at least the direction of travel was positive and encouraging. This will now fall back again. We are predicting England starts to drop to 134,000 units next year.’[1]

‘In London, we expect the house building slowdown to be more marked. Not only is London’s economy more vulnerable to Brexit but the housing market is also more reliant on investors, both domestic and international, and is hence more susceptible to buyer confidence,’ he added.[1]

The report also shows that the forthcoming five year UK economic outlook is uncertain, with much depending on the nature and details of Britain’s exit from the EU. JLL said it assumes there will be a ‘hard Brexit’ with access to the single market disregarded.

However, the statement concludes by saying: ‘Despite this, the economic prognosis is not too detrimental for the UK. There is clearly downside risk to this quite benign outlook, if trade agreements and financial sector passporting rights are not favourable. However, this base assumption also implies that there is significant upside potential too, so the economy could prove more robust next year and could also expand faster thereafter.’[1]

[1] http://www.propertywire.com/news/europe/uk-housing-market-expected-strong-active-throughout-brexit-process/

 

Tips for would-be Buy-to-Let landlords

Published On: November 15, 2015 at 9:31 am

Author:

Categories: Landlord News

Tags: ,,

Deciding to invest in property is nowhere near as simple as choosing a home, a tenant and then watching the rental returns roll in.

20% of UK homes are now owned by private landlords, with 2 million people choosing to invest in residential housing. The possibility of a regular working income, subsidised by a substantial rental yield, is continuing to tempt more first-time landlords into the market. Rising interest rates and the improving economic climate are also making long-term investment in property a viable proposition.

However, achieving gains from property investment is not a foregone conclusion. Would-be landlords must be sure to carefully consider a number of factors in order to set-up the best possible chance of successful investment:

Affordability

Budgeting

The first consideration for potential landlords is to work out a reasonable budget. There is little point in approaching an estate agent or mortgage lender if a landlord cannot provide proof of finances and suitable planning.

A good start is for landlords to consider the current monthly cost of a mortgage. Savvy landlords should also consider how much any changes in interest rates, which are widely expected to rise during this year, would affect this initial forecast.

A sensible next step is to consider additional costs that will need to be paid. These include

  • tax on all rental income
  • necessary insurance
  • agent fees
  • compulsory inspection fees
  • remortgaging costs, in the event of a fixed-term mortgage
  • other maintenance costs

Maintenance costs

Of course, it is impossible for landlords to predict when features such as washing machines or boilers will stop working. However, landlords that put aside emergency funds for this kind of eventuality will be better prepared.

Additionally, landlords should be prepared to undertake small maintenance measures, such as giving the walls a lick of paint, and the end/beginning of all tenancy agreements.

Void Periods

The Association of Residential Letting Agencies suggests that typically, a privately rented property can lay vacant for 20 days per annum. This can be down to landlords simply being unable to find a suitable tenant. However, void periods are sometimes necessary in allowing landlords to undertake essential maintenance work. In both instances, landlords must make sure they have budgeted enough to cope without a rental income.

Tips for would-be Buy-to-Let landlords

Tips for would-be Buy-to-Let landlords

Problem tenants

Unfortunately, landlords may well have problem tenants to contend with. This could lead to a tenant refusing to pay rent for one or more months. Legal steps or simple deferment arrangements with a tenant both take time and incur costs, so landlords must make sure there are prepared to cope financially.

Many property investors are guilty of believing that rent will need to be up around 125% of mortgage payments in order to just break even. This is not the case and landlords should work out their own calculations for each individual property.

Location

When a suitable budget has been carefully worked out, the next major choice facing potential landlords is the location in which they are to invest. Landlords should be clear-minded in two main areas when it comes to a location-their ideal investment area and the practicalities of owning a property in this location.

When choosing an ideal area, would-be landlords must consider where rental property is high in demand. Furthermore, an area with lots of appeal for specific tenant groups should be considered. Location is key for a number of renters and potential owners should consider this when committing to a home.

Buy-to-let investors should already have an idea of what their target renter group will be and should choose the location of properties around this. For example, landlords looking to rent out to students should look at homes close to University buildings. However, homes close to public transport links and the commuter belt can appeal to all renters.

Practicality must also be considered when making a buy-to-let investment. Many landlords choose to maintain the property themselves, therefore a property close to home is a sensible choice. Moreover, purchasing a local property will give the landlord a better understanding of the potential tenants.

Type of Property

With a target renter group in mind, landlords will be better placed to narrow down the choice of property that they are to purchase. For example, if a landlord wishes to rent to a group of students, they will need to look at investing in at least a four-bed property to accommodate friendship groups. Similarly, if the landlord wishes to target young-professionals, they could look at smaller property, such as a one or two-bedroom flat, with good links to public transport.

Returns

At the forefront of all consideration over property should be the potential investment returns. Of course, properties of different types and in different locations will offer varying returns. It is imperative then that landlords work out the sums for every property that they are interested in. Would-be investors must subtract their monthly outgoings from their proposed rental income. This must then be factored into the costs of purchasing the property, such as mortgage payments.

Once this has been done, investors will be left with a gross rental yield, where they can compare yields across a number of potential properties.

Selling on

This may seem a strange thing to consider when purchasing a property, but landlords must also consider the eventually of selling-on their investment. A good history of rental could see landlords being able to easily sell-on their property. However, properties that have been on the market for a considerable amount of time could be a warning for investors that they too may face a tough-sell when coming to move on from their particular house.