Buy To Let: investors buying smaller homes with larger yields

By Graham Norwood

Landlords continue to look for cheaper, higher-performing properties according to the results of an index produced by Mortgages for Business.

An analysis of mortgages arranged by the company in the second quarter of this year shows that all types of buy to let properties purchased during the quarter had much lower values than the overall long-term average.

These lower-value properties provide better return on the landlord’s investment, with both HMO and multi-unit purchases achieving average yields of over 10 per cent.


By comparison, these properties achieved yields of just 8.7 per cent and 7.9 per cent respectively when remortgage transactions - applying to already-purchased units - were included.

“Landlords have been selective with their purchases this quarter, choosing properties that maximise income with minimal investment. This strategy is likely to remain common as it allows landlords to maintain profitability while HMRC phases in restrictions on income tax relief for landlords” says Steve Olejnik, Mortgages for Business chief operating officer.

One consequence of this selectivity is that landlords have had to scale back their rate of expansion from last quarter.

The past three months saw a drop in the proportion of buy to let purchase transactions compared to Q1, returning to the preponderance of remortgages that has become common in recent years.

Loan to values remained stable across the quarter, except for a modest four per cent drop among multi-unit properties.

https://www.lettingagenttoday.co.uk/breaking-news/2017/7/buy-to-let-investors-buying-smaller-homes-with-larger-yields

Rented sector in Scotland has sound outlook despite political uncertainty in UK

The private rental sector in Scotland will continue to offer sound investment opportunities despite current political uncertainties and recent industry legislation, it is suggested.

Prices remain competitive in Scotland compared to the rest of the UK and the rental sector in continues to show signs of growth at a time of low interest rates and volatile stock markets, according to the latest report from property consultancy Galbraith.

Bob Cherry, head of lettings and partner at Galbraith, believes the rental market is still an attractive investment alternative with yield levels remaining strong at around 4% to 5%.

The latest Registers of Scotland monthly house price statistics publication shows that the average price of residential property in Scotland rose by 2.6% in April 2017 compared to last year.

Cherry said that this increase could spell good news for landlords seeking capital appreciation on their investment. With rents remaining high Galbraith believe now is an optimum time for buy to let investors to consider the Scottish private rental market.

Galbraith has experienced an 11% increase in tenant demand for rental property in the first quarter of 2017 compared to the same quarter in 2016. The firm has also brought 28% more properties to the rental market throughout the last three months compared to the previous quarter.

The number of applicants registering to let a property was up 79% from January to March this year in comparison to the previous three months and the firm also witnessed a surge in viewings from interested tenants, with agents conducting twice as many rental viewings over the same period.

The figures also show that the firm-wide average rental achieved was £658 per calendar month, some 15% higher than the national average.

‘Both UK and foreign investors are looking at property opportunities outside of the over inflated property markets of London as well as other prosperous cities south of the border, and Scotland is an attractive option due to the affordability aspect combined with the level of demand from across all rental segments including families, professionals and retiree couples,’ said Cherry.

‘Landlords have been impacted by a range of legislative changes over the past couple of years, not least the introduction of a 3% tax on buy to let properties and the new tenancy act passed last year,’ he explained.

‘However, rents are continuing to perform well with improvements in tenant finances meaning fewer incidences of late or non-payment of rent therefore we have experienced a 50% drop in rent arrears over the past 12 months,’ he added.

‘Market conditions including landlord supply and tenant demand, determine rental prices and this must be carefully considered but with property prices in Scotland currently on the up, I believe the buy to let property market is proving a viable investment option for those looking to invest in bricks and mortar, as well as offering exciting potential for landlords wishing to grow their portfolio,’ he concluded.

http://www.propertywire.com/news/uk/rented-sector-scotland-sound-outlook-despite-political-uncertainty-uk/

Dropping UK house prices won't dent our confidence in buy-to-let

By Kate Hughes
As property prices drop for the first time in years, why are we still in love with property?

The property game. The stock market may far outstrip the performance of bricks and mortar, but we don't seem to notice. Getty

They have weathered tax hits and economic turmoil but this week, finally, the resilient UK property market cracked. If only slightly.

Prices nationwide fell by 0.2% in the last three months according to the leading measure of values the Halifax House Price Index – the first time it has dipped since the end of 2012.

It means property price growth over 12 months remains stagnant at 3.8%, says Halifax housing economist Martin Ellis.

 “Housing demand appears to have been curbed in recent months due to the deterioration in housing affordability,” he believes, caused by a sustained period of rapid house price growth during 2014-16.

“Signs of a decline in the pace of job creation, and the beginnings of a squeeze on households’ finances as a result of increasing inflation, may also be constraining the demand for homes.”

That said, rock bottom mortgage rates and the ongoing property shortage are expected to continue to prop up the market, and our love affair with all things bricks and mortar shows no sign of waning.

“Mortgage lenders continue to offer rock-bottom rates with HSBC’s lowest ever five-year fix at 1.69 per cent, which was launched last week, proof of that,” Jonathan Harris, director of mortgage broker Anderson Harris, says.

“The issue for buyers is affordability and bridging the huge gulf between incomes and house prices. There is changing sentiment; the best in class properties are shifting but we are seeing a number of down valuations from surveyors as caution starts to become more prevalent.

“Vendors are beginning to appreciate that their homes aren’t worth as much as they thought so we are seeing price drops in some areas. This is ultimately better for everyone as people who need to sell will be able to and those who want to buy will also be able to, resulting in a higher number of transactions and better fluidity in the market.”

“We are quite encouraged that the annual level is still above where it was this time last year, bearing in mind the huge increase in demand ahead of the introduction of the 3 per cent stamp duty surcharge last April,” Jeremy Leaf, north London estate agent and a former RICS residential chairman, adds.

'Looking forward, we are finding the market to be relatively balanced between supply and demand and still expect those people who recognise current market conditions to take advantage.

The market does seem to be finding a new, slightly lower, level and we are certainly seeing no signs of a more substantial fall.'

That’s despite the Government’s best efforts to take the property power from landlords accused of driving prices and, ultimately, social inequality, by inflicting a series of tax increases and allowance cuts on them.

Indeed, Brits are three times more likely to invest in property than in the stock market. But in doing so have missed out on far greater returns, according to Fidelity International.

“When asked ‘property or portfolio?’, UK adults overwhelmingly chose to invest in buy-to-let property, despite a raft of additional tax hikes for landlords and the fact that the UK’s blue chip index, the FTSE 100 rose by 19.7% in the last year compared with just 3.5% for UK house prices,” says Maike Currie, investment director for personal investing at Fidelity International.

“Investing in property has historically been dubbed as a ‘safe as houses’ option but in recent years the UK stock market has far outpaced the buoyant property market.

"While past performance is no guarantee of the future, [this week’s] data showing house prices have fallen causes concern that the property market is being pressurised by stretched house prices compared to our earnings.

“Other factors likely to weigh on the property market include rising inflation and stagnant wage growth. If inflation sees the Bank of England push up its base rate, the psychological impact on the property market could be significant.”

In the meantime, the latest data suggest those attempts to prevent property investment fuelling social inequality are failing.

The total value of residential house purchases in the UK reached £261bn in 2016, according to new figures from the Intermediary Mortgage Lenders Association (IMLA).

Around £152bn was provided by mortgage finance – up by £6.8bn in a year - and £109bn was made up of cash funds including the proceeds of existing property sales – up by almost £20bn over the same period.

The growing influence of cash in the house purchase market has, it warns, potentially negative implications for aspiring homeowners and home-movers who cannot stump up enough funds to add to a mortgage which their salary can support in order to afford a property purchase.


Peter Williams, Executive Director of IMLA, says: “Rising house prices and stagnant incomes mean that access to wealth as well as mortgage finance will increasingly separate the ‘haves’ from the ‘have nots’ in the property market if the importance of cash continues to grow.”

http://www.independent.co.uk/money/spend-save/uk-house-prices-drop-buy-to-let-housing-market-tax-economy-house-price-index-a7727381.html

Tory-backing agent predicts fee ban may be in Conservative manifesto

By Graham Norwood

A prominent campaigning letting and sales agent predicts that the Conservatives are likely to put their proposed ban on letting agency fees as a manifesto commitment.

Ajay Jagota - founder of the KIS agency and a campaigner against deposits paid to agents - is also the new chairman of the South Shields Conservative Association.

He says the industry should not kid itself that if a Conservative government is re-elected in the June 8 General Election with a bigger majority that policies unpopular with agents, such as the ban on fees levied on tenants in England, would disappear.

“If anything I’d expect to see that in the Conservative manifesto” he warns.

The government has already announced that it is scrapping workshops for letting agents to discuss the ban - although the formal consultation on the proposal goes on until June 2.


Letting agents who had enrolled for the workshops (the first of which was to be held on April 28 in London) have received an email letter saying:

“As we are now in a pre-election period, we sincerely regret to announce that we are unable to continue with the workshops scheduled between April 28 and May 11 to support the consultation on banning letting agent fees paid by tenants.

“The consultation will remain open until 2 June and we continue to welcome your thoughts in this forum.

“Subject to the new government and the consultation responses, additional workshops discussing the letting agent fee ban may be held later in the year. We will email you with details of any such workshops and the DCLG.gov website will be used to advise of further updates.

“If you would like to contact the Letting Agents team for further information, you can do so by emailing lettingagentsteam@communities.gsi.gov.uk.

“We thank you for your interest in the workshops. Your thoughts on the ban on letting agents’ fees to tenants remain just as important and we do hope that you will continue to engage with the Department through the consultation or via email.

“Our sincere apologies for any inconvenience caused.”

https://www.lettingagenttoday.co.uk/breaking-news/2017/4/tory-supporting-agent-says-fee-ban-may-be-in-conservative-manifesto

UK housing market sees a ‘reverse ripple’

                      https://www.propertyinvestortoday.co.uk/upload/VictorianHouses-400x310.jpg

Historically, UK property prices have demonstrated a distinct spatial pattern over time, rising initially in a cyclical upswing in prime central London, then wider London and the south east, before spreading out nationwide. This is known as the ripple effect, and a glance at the property market suggests that history is repeating itself, according to haart estate agents.

As many areas struggled to recover from the 2008 global financial crisis, the north-south divide returned to plague the British housing market, as London, which has long operated in its own microclimate, recovered strongly from the downturn, with house price growth in recent years outpacing the national average by some margin, adding to wide regional differences between the capital and the rest of the country.

But house price growth in London, widely considered to be the boiler room of the residential property market, is no longer roaring as buyers find properties increasingly unaffordable, face stricter mortgage affordability checks and higher taxes.

“Typically resilient, London was the quickest to recover following in the 2008 recession. However, the multitude of blows that have befallen its property market over the last couple of months are obviously proving too much to bear,” said Paul Smith, CEO of haart.

In contrast to the slowdown in the capital, the estate agency reports that the market is seeing a ‘reverse ripple’ effect, as a revival in activity in England’s regions begins to filter through into outer London areas.

Smith continued: “The evidence from our branches is that areas around 100 miles from the capital are where the market is reviving, and this is spreading towards the South East and London – a complete reversal of the traditional ‘London first’ pattern we’ve grown used to.

“This could be a historic realignment of our property market away from central London, or a purely post-Brexit ‘flash in the pan’ phenomenon. What is clear is that since June, Britain’s property market has been turned on its head and London, for a change, is beginning to rely on the rest of the country for life-support.” 

https://www.propertyinvestortoday.co.uk/breaking-news/2016/10/uk-housing-market-sees-a-reverse-ripple