The latest Hometrack UK Cities Index has shown that the annual rate of house price growth in twenty of the UK’s largest cities slowed to 8.2% in August 2016. In July, growth had been at 9.5%. The average house price in the UK, as a result, was £239,400. Prices are still rising, but just not as fast at the moment.
Why Is the UK Housing Market Slowing?
People are finding it increasingly difficult to buy a home whilst the UK housing market continues to inflate quicker than earnings, particularly in the south, where many potential buyers are finding themselves completely priced out of the market. This fact is what is probably most of the reason for the slowdown in house price growth over the last couple of months.
There’s also the factor of the shock outcome of the EU Referendum, which gave lots of potential buyers reason to pause for thought. And, of course, is also in part due to the recent interest rate cut by the Bank of England.
So What’s the Good News?
Nonetheless, these disruptions to the UK housing market don’t seem to have had a lasting effect, and we’re seeing the market begin to settle down again now. This is good news that suggests an underlying strength within the residential UK housing market, which will hopefully see us optimistically into the long term.
What Does this Mean for Investors in the UK Property Market?
There is still a massive imbalance between supply and demand of properties on the market. This goes some way to explaining the continuing growth of the rental sector, and why property investors are increasingly leaning towards buy-to-let investment, including HMOs, as their investment of choice.
If residential property as an investment is still on your radar, however, then it’s still a good time to buy. There are signs that house prices are going to continue to rise, and getting in whilst there’s a chance you can afford to could pay in the longer term.
For investors in the property market wishing to take the sensible route of diversifying their portfolio, record low interest rates make the potentially higher returns of equity crowdfunding and P2P lending for Real Estate an appetising option.
So choose your weapon… all signs point to a continually promising future for the UK property market.
Specialist commercial lender, Shawbrook Bank, has released a report highlighting HMO Investment Growth as a result of the increasing popularity of shared accommodation.
Young professionals, as you may already be aware, are focusing more on the rental sector. Of course, this is partially down to high house prices. However, the report notes that this demographic are sticking to the rental sector, and shared accommodation in particular, due to the capacity for higher levels of disposable income.
A further survey undertaken by Spareroom.co.uk, which studied 10,000 tenants living in shared accommodation, found over 70% of participants to be under the age of 30, with over 50% identifying as ‘single’.
The combined factors of high house prices and desirability of higher disposable income is compounded by the importance of social life to this group. The Millennial generation is one where friends and fun are key to life satisfaction. It’s no wonder then that living with a group of friends is the accommodation choice for young professionals and recent graduates.
HMO Investment Growth Fuels Landlord Interest
From the property investor’s point of view, HMOs, therefore, are becoming an increasingly popular choice of investment. Compared to other buy-to-let investments, HMOs yield an average of 10% per annum. This compares favourably compared with the 6-7% rental yield to be expected from standard buy-to-lets and blocks of flats on a single freehold title.
With HMO Investment Growth fast coming under the radar of landlords, competition is stiff. As such, investors seeking to cash in on these high rental yields are increasingly finding ways to set their property apart from the rest.
Higher spec HMO properties are springing up, particularly in the popular urban centres favoured by shared accommodation-loving young professionals. Included wifi, flat screen TVs in communal areas of the property, high quality fixtures and fittings, and other features perceived as appealing to their desired tenants, are outlays investors are prepared to make in order to reel in those 10% yields.
Shawbrook’s report concludes with these words:
“Demand for this asset class is on a consistent upward trend… with the supply/demand challenges across the UK housing landscape, and the resulting importance of the Private Rented Sector, HMO property is and will remain an essential and affordable source”.
That being said, local authorities are quickly catching on. Licensing schemes for HMOs are being considered and implemented in some areas, which will limit the number of such properties available in particular districts. As such, anyone considering HMO investment will need to look into this before deciding on their purchase.
A recent report has revealed that property in the UK is swinging more towards the rental market. As many commentators have mentioned, there has been a significant reduction in home ownership in the past number of years and many expect that this trend will continue.
The summer slowdown has seen properties with four bedrooms or more are struggling to sell, and as a result have remained on the market for an average of 74 days, according to data from RightMove.
Property analysts are speculating whether the property market will gain strength again during the Autumn and also get a clearer picture of the market and hopefully shake off that post-referendum hangover.
The Bank of England’s recent interest rate cut should give buyers some confidence with cheap-to-borrow money.
Although a lot of uncertainty still looms following June’s Brexit vote, the question remains:
Why is the UK is switching to a property rental market?
Firstly, this is linked to the surge of investors who were rushing to complete buy-to-let deals before stamp duty was hiked by 3% in April.
The demand for rented properties in the UK has increased by 10% due to Brexit uncertainties. Recently, the Royal Institution of Chartered Surveyors (RICs) reported the number of properties on the market was at a record low.
Another factor that should be taken into consideration is employment mobility. For example, if we look at millennials and their lifestyles, they are known for being constantly on the move, and renting a space is more practical to them than saving for a deposit.
In addition, they are very sociable. Figures from Statista highlight the importance of socialising to millennials. Their research shows that 51% stated that socialising was where their remaining disposable income was most likely to be spent. Therefore, the likes of build to rent properties are appealing as they provide communal areas for their residents, hoping that they will stay in their rented accommodation for some time. They are one demographic in particular that are currently reshaping the UK housing market.
From millennials, now turning our attention to investors. Long term investors are willing to pay just that little bit more compared with the likes of first time buyers who are looking at settling into their first home.
These are the type of investors who may have a number of buy to let properties in their portfolio and realise that as their financial liabilities reduce they will actually be able to increase rental income (providing they have done their homework properly and invested in areas that pay out suitable yields).
Whether the recent increase in buy to let related taxes, which were set by the former chancellor, will have an impact in the short to medium term still remains to be seen. If rental yields bring in enough money to cover all liabilities, and leave a wee bit extra in their bank accounts, the question is would BTL investors really pull out of this market?
Investors can benefit from significant demand from the city famous for its two Premier League clubs and music scene, as well its big student population. Average property prices in Manchester stand at £135,000.
As we’ve previously mentioned, there are numerous factors as to why the UK property market trend has now switched from home ownership to rental.
The Brexit vote has caused some concern and confusion for now, and until the Brexit mist clears we will see fewer people committing to long-term property purchases. The likes of millennials are also changing the housing model and with lucrative investments across both sides of The Pennines, the rental market switch in the UK looks very buoyant indeed.
Following the EU referendum vote in late June, there has been a lot of uncertainty in the industry from homeowners, landlords, and housebuilders, all questioning what the future holds for the property market.
Examples such as a £40,000 price reduction in average prices in the capital have set alarm bells ringing.
However, in spite of these uncertainties, some good news is that the regional property market is looking up.
A lot has happened this year, not only with the result to leave Europe, but also in terms of legislation. We’ve seen changes to stamp duty on buy-to-let purchases, as well as changes to rules on multiple occupancy, both of which had an impact on local property markets.
The ramifications of George Osborne’s legislation, as expected, was a significant drop in the number of investors registering to purchase buy-to-let properties.
Moreover, whilst general applicant/buyer registration and property viewings also declined slightly, the number of offers being made were actually up, and sales were also on the up.
Turning our attention to our local area, predicted house price growth in Manchester for 2016-20 stands at 24.6% and rental income for the period is expected to rise by 22.8% (stats taken from MEN)
Firstly, because of the shortage of homes across the length and breadth of the UK, there is little alternative to continuing to invest in residential developments. Doing so will keep the residential property market strong.
In addition, Manchester has been identified as the top city for rental yields. According to LendInvest’s research, the average rental yield in Manchester reached 6.8% between 2010 and 2016.
Research from HSBC, conducted last year, showed that the northern city offered the best yields, with 26% of the population here living within the private rented sector.
Despite the uncertainty of the Brexit vote, the ramifications of leaving the EU could create opportunities for investors, particularly those who are experienced with property investing. Potential property buyers might be put off by the softening of recent house prices, but at the end of the day, they still need somewhere to live, which is great news if you’re a landlord. If property prices do cool – it’s fair to say that investing in property will be very tempting.
So to sum it up, property still holds value post Brexit. Bricks and mortar remain one of the stronger investment choices, as volatility in the stock market means that tangible assets at this moment in time are essential for any investor’s portfolio.
As quite a few commentators have mentioned, a lot of the media focus has been on the ramifications of Brexit vote in London and the South East. However, we strongly believe that the north is a strong alternative with entry prices significantly lower compared with the capital, as well a great place to obtain yields from the likes of student rented accommodation.
Until recently, the only builders of rental homes for low income tenants were the council, and social landlords.
Previously, those who found themselves ineligible for social housing were reliant on private landlords: low-level buy-to-let investors with accumulated property portfolios, and those simply renting out their former homes. What’s more, for those forced into private rentals with ‘amateur’ landlords, there has long been a real problem of the landlords simply failing to maintain the property, leading to unacceptable living standards for the poorest in the community.
But now, private investors are seeking to bring movement, and higher quality accommodation, to rentals for those at the bottom end of the ladder.
Not For Sale
On a small suburban estate in Salford, private investors have constructed red brick family homes, very much in keeping with thousands that families in the UK buy each year. The only difference with these ones is that they are not for sale. The investors behind them are keeping these houses for the long term.
Taking their example from the thriving rental markets in both the US and Germany, investors are now taking action on the potential of buy-to-let developments as a large scale source of steady income.
A Growing Rental Market
Considering the state of the market at present, these investors seem to have tuned into a space where demand is high. Families, as we know, are finding it increasingly difficult to buy homes in the current climate of rising house prices and a dearth of wage increases.
With mortgages less accessible, and house prices laughably out of reach for many (they’ve risen 7% a year since 1980), the number of owner occupiers in the UK has dropped from 71% in 2003 to just 63% at present.
Whilst critics are warning that renters will remain poorer in the long run, without the asset of a property of their own, this is, nonetheless, an opportunity that has benefits for both parties. Investors are recognising the potential for good rental yields, whilst families in need of decent rental accommodation get their wish.
They may not do better in the long run, without that property asset behind them, but renters living for the ‘now’ find themselves with more disposable income than their owner-occupier peers. With better options open to them, renters will surely enjoy better quality of life, and with that disposable income, benefits to the wider local economy may also be noticeable.
One of the principal investor companies currently operating in this area is Sigma Capital, who have an impressive range of backers behind them. The creation of large, rental estates, where monthly rent also covers tenants’ utility bills and some maintenance (such as a grass cut twice a month), is part of a move to professionalise the rental business.
Countryside Properties works with Sigma as a listed housebuilder, and has so far created over 600 homes of this type, with a further 550 expected for 2017. They are targeting northern cities, such as Salford on the outskirts of the city of Manchester, where local authorities are keen to open doors to new house builds on the large banks of land they own.
The majority of these homes by Sigma are set alongside other houses by Countryside Properties that are available for sale, with all being built to the same design. So there is no distinguishing between the blocks of sale versus rental properties.
Along with all the other benefits of this little housing revolution, another plus is that these new builds will relieve pressure on council house waiting lists. Oldham, for example, currently has over 11,000 people on its list, and only 3,300 of these are eligible for public housing.
But these new developments signal a light at the end of the tunnel. The number of properties emerging (from planning to completion) has more than doubled in the last six months. According to British Property Federation figures, from 21,400 to 57,000. About 30,000 are in London.
Sigma has announced plans to construct a whopping 10,000 rented homes over the next five years, which will leave them with a £1bn portfolio.
It’s not just Sigma leading the market, however. Quintain, a London based developer, has plans for 7,000 rental homes in one single development near Wembley Arena.
Stonegate Developments in Newcastle are building 162 apartments for this purpose, whilst Placefirst, another developer, is in the process of refurbing hundreds of dilapidated homes.
Then, of course, there’s us.
When we started out, back in 2012, it was with the traditional buy to let model, from which we have evolved. We are now proud to be champions of the use of crowdfunding monies to create badly needed new homes, whilst providing excellent returns for investors.
On the investor side, too, we are levelling the playing field, allowing those for whom the idea of a property investment portfolio was once out of reach, to enter the game. Our consistent, predictable returns through simple, transparent investments are suitable for all levels of investor.
Currently, we have over 100 properties being built over 7 developments in the North West, with about 180 more on the cards as we negotiate deals on buying the land. It is a philosophy of creating a more egalitarian property market, where investors can get excellent rates of return, whatever the level at which they operate, whilst tenants in buy-to-let properties get an outstanding home that they can afford.
The work of The House Crowd represents part of the same matrix of philanthropic capitalism behind the work of developers like Sigma and others mentioned in this post. We are working to similar aims: a better future property market for everyone involved. And, particularly for us, with the aim of seeing our beloved Manchester, and its surrounding areas, reach its considerable potential.
Manchester has come of age, and can now proudly boast the title of Capital of the North. It is a city rich in modern cultural vibrance as much as historical heritage; a magnet for the creative, forward-thinking minds of the future. Manchester is a bona fide example of a 21st century city, on course to continue with the exciting growth we’ve seen there in recent years. As such, the Manchester property market is an absolute hotbed of money-making potential.
Another reason to invest in Manchester in particular? By 2050, it is estimated that a staggering half of all households will live in cities. Homes are set to become smaller and smarter, whilst cities – of course – offer the facilities, entertainment and lifestyle options that are simply not available in the suburbs.
So, with all that as an introduction, let’s get stuck into looking deeper about why investing in property in Manchester could be the ideal investment decision.
Regeneration and Investment
There are so many regeneration projects either in progress or on the horizon in central Manchester at present, it’s hard to know where to begin. But we’ll do our best.
Located within a strategically valuable gateway location in south western Manchester city centre, the Cornbrook Hub is situated close to the A56 Bridgewater Way, with good access to Pomona Island (part of the development site), the Bridgewater Canal, and with the Cornbrook Metrolink station central to the site. This Metrolink station is key to the city’s public transport network, and therefore vital to the success of this development area.
Right now, despite its great location, Cornbrook is an underutilised part of the city, occupied by open storage yards and scrap metal merchants. It’s these that are detracting from the massive potential of the area, and making it incompatible with recently regenerated St George’s Island, and new proposals for Pomona Island. In short, there is a huge amount that this area of the city could offer. You can see the full regeneration proposal here.
Nonetheless, all signs point to a strong future for the area, and it’s likely to be a prime location to consider for early investment opportunities. Watch Cornbook closely.
Set within close proximity to the city’s retail hub, near to the Salford city border, the Medieval Quarter is a culturally and historically rich area of the city. Home to both Chetham’s School of Music and Manchester Cathedral, as well as the National Football Museum, new developments within the area are promising.
Not only is the destination itself prime territory, it’s also an ideal route to the main business sector and retail core of the city. Proposed new developments will expand on the green space and tree coverage in the area, and seek to drive the Medieval Quarter’s attractiveness to potential new residents. Find out more about the Medieval Quarter proposals here.
East Manchester, specifically the areas of Ancoats, New Islington, Beswick, Miles Platting, Openshaw, Clayton, Newton Heath and Gorton, has undergone substantial redevelopment in recent years.
It was the part of Manchester most severely affected by the industrial decline of the 1970s, in which over half the area’s manufacturing jobs were lost. House values subsequently plummeted. As a result, the area spent a long time in a state of impoverishment.
Things, however, are now on the up. Huge investment in the creation of family neighbourhoods – involving the construction of over 5,000 new homes, and the improvement of over 6,700 – is now paying off. Three new shopping centres, two new health centres and seven children’s centres have appeared, as well as 1,300 local companies supported by business advisors, and nearly 200,000 square metres of prime commercial floor space has been built.
In the Ancoats area, design-led apartment blocks have been integrated into well thought-out and sustainable neighbourhoods. Though most have been snapped up already, construction is still going on, so it’s worth registering an interest, particularly if the words ‘edgy’ and ‘progressive’ appeal to you.
Similarly, New Islington is worth a mention. Located within Ancoats, Urban Splash (the renowned Manchester property developers) have been behind the creation of this brand new community. They brought in avant garde architect Will Alsop to design the housing stock, which is aimed at families (there’s a lovely, fresh ‘free’ primary school here), both rental and owner-occupier.
As a result, East Manchester is now quickly becoming an area renowned for its business prowess. It shows promise in becoming a significant employment location, with successful companies choosing to locate themselves in the new and thriving area.
90 rental apartments in the Ordsall 11-storey tower block (200 metres from Salford Central station), a mix of cafes, bars and restaurants, outdoor events space and a new public square, form just part of the development.
A further 100 apartments have already been built on the site of the former Vimto factory, and 372 flats within a 15 storey ‘Manhattan-style’ block on Woden Street are in progress. 580 apartments, boutique studios and townhouses are proposed for the £75m Adelphi Wharf scheme. 36 townhouses with rooftop gardens have received planning permission overlooking the river.
All in, over 1,000 new homes, along with hotels, shops, leisure facilities and restaurants are expected in New Bailey. This is estimated to bring 11,000 jobs to the area.
Just as with most aspects of Manchester right now, the city has ambitious plans for the future of its transport networks. There’s a long term vision in place (see video below), but they’re working in five year increments to keep improvements moving constantly into the future.
Greater Manchester’s Transport strategy is focused on devolution of powers and funding from central Government, pushing for greater local determination of policies, funding and delivery. In short, it has big ideas, and wants to be in control of making them happen. That explains why their plans reach forward as far as 2040.
We also investigated the Annual Survey of Hours and Earnings, and found that the median weekly wage for residents of the city of Manchester was £392 in 2015, just shy of the median for the north west as a whole (£401). The median figure for the whole of England in 2015 was £430.
Some more data for you to chew on:
The 2011 census showed Manchester to be the fastest-growing city in the UK, in terms of population
Greater Manchester is home to more multi-millionaires than anywhere outside London, with the highest levels attributed within the City of Manchester itself
Manchester rates 7th in the 2016 mid-year Quality of Life index for Northern Europe, behind Edinburgh (1st), Copenhagen (2nd), Reykjavik (3rd), Helsinki (4th), Stockholm (5th, and Tallinn (6th). London, by comparison, is 12th. It is also ranked 6th in the UK
Manchester is rated second most globally influential city in the UK after London
Research at the University of Manchester is ranked the third most powerful in the UK, behind Cambridge and Oxford
Along with London, Manchester featured in the top 30 cities in the world for investment. Of the top 30, Manchester was 12th for the highest proportion of urban economy derived from financial and business services
We think we’ve made it fairly clear how highly sought-after the City of Manchester is as a residential area. But let’s look a little deeper into what an investment in Manchester property could mean.
The 2011 census tells us that, at that time, 37.8% of households were owner-occupied, and 28.4% were privately rented. Subsequent data suggests that the rental figure has ballooned considerably since 2011, whilst owner-occupancies have decreased. Council and social housing made for 13.5% and 18.1% respectively. Just over 30% resided in terraced properties, though this figure has since decreased.
Data from the Office for National Statistics shows Manchester to have the greatest percentage point increase in proportion of flats sold between Q4 of 1995 to Q2 of 2015. Flats sold in the city have risen from 10.1% in 1995 to 35.6% of all property sales in 2015. This equates to a 25.6% increase.
Looking at the number of properties on the market at present, compared to 2015, we can see that there has been a significant drop-off. There are 27% fewer properties of all types on the market in July 2016 than there were this time last year. Nonetheless, in keeping with the data from the Office for National Statistics, the highest proportion continue to be flats, with 1471 up for sale in July 2016. This equates to 19% fewer than last year.
Of course, where there are fewer properties on the market, demand is high on those that are for sale. From our information, in the period May to July 2016, it seems terraced houses, and one bedroom properties, take the least amount of time to sell. Interestingly, however, when we look at value, it’s the £400,000 to £500,000 bracket that is snatched up quickest.
The Rental Market
When we look at July 2016’s data on the rental market in Manchester, we see that the most popular properties for rent are in the two bedroom category. They fly off the market within an average of 51 days, and there are nearly 2000 on the market at time of writing. Tenant occupancy rates in Manchester are at over 97%.
Why so popular? Well, there are a number of factors at play making rental the primary accommodation option for residents in Manchester. Firstly, the lack of lending for mortgages, and a decline in social housing. Then there is the shifting employment landscape and continuing immigration. Divorce rates are higher than ever, and (completely unrelatedly, of course) people are delaying marriage for longer. Finally, there’s the rise in student numbers.
Demand for high quality, purpose-built student accommodation is higher than ever. Students, it seems, aren’t happy to fester in mould-encrusted digs anymore. We won’t mention anything about millennial entitlement issues here. But the result is that Manchester is providing property that meets the demands of the city’s valuable student population, and with over 80,000 students arriving every year, this is a lucrative market.
What’s more, a large number of students enjoy Manchester so much that they stay on after they’ve graduated, moving up to a house share or city centre apartment as they make the transition from study into the workplace.
In the city centre, in the rental market in particular, the highest demand can be found in those smart, European style open plan apartments and converted warehouses. Even more so, high quality micro-living apartments, and those boasting new techie smart home features. These are the sort of properties young professionals rising up through the economic ranks are after, and the city centre is where they want to make their home.
To Conclude: Should I Invest in Manchester?
Of course, we can’t tell you to invest anywhere. We cannot make assurances, and markets can always drop as much as they can grow. Having said that, however, all signs point to a glittering future for Manchester city centre.
Regeneration is reaching deep into every crevice of Manchester, with billions being invested in the continued growth of this city. Great minds are seeing the sheer potential Manchester has to offer, and for those savvy enough to jump on the right opportunities as they come up, there is a sense of the property market here being ripe for the picking.
Hi guys and welcome to our first property news blog of the month, as usual we will be given you a snap shot of the latest goings-on in the domestic market. This week we look at the Manchester property market and how it is still strong after the Brexit vote to ending our round-up and focusing on landlords setting up companies in order to save tax. Slightly behind with what’s going on in the property world? If so, catch up with our last property news blog update.
Manchester Property Market Still Strong Despite Brexit
New development plans in the city are not overheating despite recent news of apartment developments that have been given the green light.
New schemes approved in the last few days include Salford council’s approval for a 35-storey tower and a 17-storey tower at New Bailey Street developed by Trinity Riverside Holdings and a 68-storey tower at Owen Street proposed by Renaker. The landmark development will provide 1,508 apartments and penthouses in four blocks of 39, 46, 52 and 66 storeys. (MEN, July 2016)
Natwest’s Heath Thomas mentioned in MEN that consumer confidence will affect demand for mortgages, but the fundamentals in the city’s residential market are remain sound because there is a structural shortage of homes across the length and breadth of the country.
Addleshaw Goddard’s, Marnix Elsenaaralso added his views in the MEN saying Manchester has all of the ingredients it needs to take forward housing delivery, however, it will need to fight with the central government to be able to deliver the right housing products that cater for the city specifically.
He stressed that it is important to ensure central government policies don’t kill off this growing sector.
Due to the recent drop in the pound, many Chinese property investors have started to look at the U.K. market for potential bargains.
The number of so-called leads from Chinese home-seekers for U.K. properties recently doubled according to Juwai.com, a real-estate website based in Shanghai that allows Chinese buyers to browse residential and commercial properties around the world. Leads indicate that a buyer was interested enough in a property to contact a real-estate agent or developer. (WSJ,June 2016)
Manchester in particular has seen a wealth of Chinese buyers and investors. For example, a recent development at Salford Quays, called the Dock Office, just half the apartments were sold to locals. A quarter went to Chinese nationals.
They are not just buying and investing they are also involved in the construction process.
The Beijing Engineering Construction Group is investing £800m in Manchester’s Airport City, which will include a hub for other Chinese firms to set up. President Xi Jinping saw the site in person when he visited last year. (BBC, April 2016)
Now that Manchester has direct flights to both Beijing and Hong Kong also makes it even more easy for potential investors to visit the city and seek long-term opportunities.
Rental Prices Increased in June
Rents kept increasing in the three months to June, but there are signs that the growth in the rental market slowed in the first half of 2016 as compared to last year. (City A.M., July 2016)
According to HomeLet, The average renter in the capital now pays £1,575 per month, up 3.9 per cent on last year. For the rest of the country, renters pay an average £773 per month, which is 3.5 per cent higher than last year.
Barbon Insurance Group’s chief executive Martin Totty shared his views in City A.M. stating : The impact of the EU referendum vote will now play out over the months ahead: if as expected, the result acts as a restraint on the supply of new housing, the gap between demand and supply in the private rental sector will remain marked; all the more so if more people decide to rent while waiting to see what happens to house prices.”
How Much Will Your House Be worth in 2030?
The average price of a home in England will be more than £450,000 in 2030, according to research from estate agents eMoov.
Their calculations were based on the 84 per cent increase in house prices during 2000 and 2015 and applied it to the next 15 years.
The map (below) illustrates just how dangerous this current artificial inflation of the market could be in the long run (as eMoov’s Russell Quirk mentions in the Daily Mail), it’s not just London (where typical values of £1.9million could climb to £3.4million in some parts), the issue will spread all over the country.
Landlords Expected To Set Up Companies To Save Tax
Landlords are increasingly expected to exploit a loophole in the law that allows them to avoid the Chancellor George Osborne’s hefty, punitive tax raid on rental properties, according to a leading mortgage expert. (Landlord Today, July 2016)
Foundation Home Loans‘ commercial director Simon Bayleytold the FT that he predicts to see over 75% of mortgaged buy-to-let acquisitions going through a limited liability company (LLC) structure in the next 12 year or so.
In addition, Mr. Bayley believes that many landlords may consider transferring their existing properties to a LLC.
He goes onto mention that if landlords are using income from a current rental they may require help calculating if the capital outlay is affordable for them, even if the long term benefits suggest to explore the LLC route (also mentioned in Landlord Today).
Mortgage Concepts Associates director Mike Richards agrees with Bayley’s insights, his view is that gradually most lenders who are in the sector will offer this (the 75% or more projection) and premium lenders that are charged for limited company mortgages of around 0.5% will ultimately vanish.
Moreover, he reckons that you will still get a percentage of people who will mistrust the limited company route, but in reality, this is really the only way to go for the future of the buy-to-let market in the UK.
What Are Your Thoughts?
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Situated 7 miles south east of Manchester City Centre, Stockport has had a bit of a chequered history in terms of its desirability as a place to live. However, things are on the up for this former mill town, with earnest redevelopment plans current in full swing across the town. It’s a busy time, particularly with Manchester’s increasing popularity as the industrial and social epicentre of the North West.
It’s no surprise, really, that Stockport is so determined to stake its claim on the map in light of Manchester’s continuing success, particularly with young professionals, and millennial creatives flocking to the city to work, study, and live the vibrant urban life that Manchester has to offer. It would be nothing less than foolish for Stockport not to be seizing this golden opportunity for fresh blood. And let’s just say, Stockport has been quick off the mark.
The potential impact that the substantial changes and improvements will have on the area should not be underestimated, and – in our opinion – endorses potential growth afforded to the area.
Regeneration and Investment
One of Stockport’s main benefits is that it is ideally situated for commuters travelling into the city to work, with just over 10% doing so at present. With so much going on to develop Stockport itself, we’d be surprised if many weren’t abandoning the city in favour of Stockport town before long.
The council is hard at work creating a town that will attract more residents seeking a place outside the main city, and also on creating an inspiring working atmosphere within Stockport itself. £1bn is being invested by Stockport Council and its partners, into a wide range of projects, both in leisure and retail, and in the commercial sector.
Commercial and Industrial
By the end of 2016, one of the North West’s newest business hubs, the Stockport Exchange, will be completed in Stockport town centre. Set within stunning landscaped public grounds, right beside the mainline railway station, the Exchange will offer 370,000 sq ft of serious prime office space, a 1,000 space car park, and a 115 bedroom hotel. This is just one part of the major commercial development being undertaken in the town.
The new Aurora Stockport industrial estate, just outside the centre of town, has also had £11 million poured into it, in order to transform the 18 acre site into 145,000 square foot of industrial space. It’s estimated that Aurora alone will create hundreds of new jobs in the local area.
Leisure and Retail
The town centre alone is receiving £900 million in investment over the next five years, to include street improvements and ‘Portas’ retail improvements. This, however, appears to be just the tip of the iceberg.
Redrock Stockport, next to Merseyway Shopping Centre, is a £45 million development set to be completed in late 2017, and will include a 10 screen cinema, new public squares and over 38,000 sq.ft. of retail and restaurant space, including an ‘Urban Realm’ with entertainment areas, bars and cafes. Research estimates that the development’s total retail market potential on completion will be around £469 million.
The historical Market Place and Underbanks area of Stockport town centre has also received a hefty investment of £7 million, with the view of creating a hub for independent retailers, restaurants and bars, and workspace for the creative industries.
A large, design-sensitive project is underway to replace existing 1950s social housing with hundreds of newly-built two and three bedroom town houses, which will incorporate the refurbishment of historic properties and buildings within the Lower Hillgate conservation area.
New Housing and Transport Plans
The Council aren’t pulling any punches when it comes to housing and transport. £73 million of investment into town centre access and circulation, and £42 million for a transport interchange prove Stockport isn’t messing around making sure all the new residents and businesses they desire can get around the town with ease.
More residential development is taking place beside the Town Hall in Piccadilly Square. In place of the HR Owen Lamborghini former showroom, the construction of a luxury residential apartment development is in progress.
1,100 new houses are set to be built over the next few years, including new ‘urban villages’ in Covent Garden and Hopes Carr areas of the town. Over 270 new homes will also be springing up in nearby Brinnington.
Oh, and let’s not forget that Manchester International Airport, about 8 miles away, is closer to Stockport than it is to Manchester. The airport, too, is undergoing a £1bn transformation and growth program. Another reason why Stockport is a good call for property: its proximity to the airport makes it a popular housing location for airport workers – especially when the Metrolink is completed.
Just to be clear: investing early in property in Stockport while these regeneration plans are in progress is likely to prove to be a smart move, as major regeneration works like these into the infrastructure and the creation of many new jobs (such as those at Airport City) typically lead to above average increases in property prices.
Culture, Facilities and Education
Apart from being situated in the town’s business district, next to Stockport Courts and the Town Hall, close to Archer House is Stockport College Campus. The town’s main hospital, Stepping Hill, is only approximately 1.8 miles south of the town centre, and many of its staff will choose to live in the town centre close to its amenities and attractions.
Stockport town centre is not without its culture, either! The town is home to the National Hat Museum, and the Staircase House Museum, a beautifully restored 15th century townhouse in the historic Market Place. There’s also the Air Raid Shelters Museum, a WWII museum set deep in the sandstone caves under the town.
The Plaza in Mersey Square has regular live theatre, comedy, dance and music performances, while the Stockport War Memorial Art Gallery as four separate galleries hosting regular exhibitions.
Demographics and Work
According to data gathered by the Stockport Metropolitan Borough Council, in 2016 the total population is 286,800. 62% of these are of working age. Of this figure, 81.5% are ‘economically active’ (i.e. they work) – this is up 2.2% on 2015’s figures, and compares favourably with the UK average of 74.6%.
The Council’s latest figures tell us that 41.4% of the Stockport population are educated to at least NVQ Level 4, and that in 2016, the highest proportion of Stockport’s working population are in Professional roles.
Full time workers who are resident in Stockport were found to be earning a gross median weekly income of £520.10. This is slightly above the UK median of £518.00, though the workplaces situated in Stockport itself pay slightly under the UK median of £518.00, at £495.30.
The Business District of Stockport is one of the largest employment areas of the town, concentrated to the south of the main shopping and retail area around Merseyway. Within the Business District, there are numerous employers occupying large office premises, including insurance companies, banks, local government departments, and the local authority.
To summarise: employment opportunities in the region are consistently healthy, which is why Greater Manchester has more UK millionaires than anywhere else outside of London.
Before we move on to details on property sales and rentals in Stockport, a quick note on marital status. It’s common sense that the marital status of a town’s residents has an impact on the sort of properties on the market, to an extent that parallels income factors. So, just for interest, here are some figures, gathered from the 2011 census:
Stockport Property Market
Stockport is a highly sought-after residential region of Greater Manchester, located on the southern Manchester/north Cheshire border. The town boasts an above-average home ownership rate, as well as strong demand for property and accommodation. As a result, property prices here are higher than average for the area.
The areas of Woodford, Bramhall and Hazel Grove rank among some of the wealthiest in the UK. What’s more, beyond the urban sprawl and close vibrant Manchester city centre, you’ll find miles of beautiful open countryside, from the Pennines to the Cheshire Plain.
Using the most recent data to hand, we can see that the quickest sales in Stockport at present are in the £100,000 to £200,000 bracket, which is little surprise considering that the average house price in Stockport (according to March 2015 data) were around £156,421. Of course, this is likely to have increased over the last year, as the general UK property market has continued to swell during this period.
Nonetheless, this information doesn’t tell us much about what buyers are getting for that price. If, however, we then look at similar data by type of property, as opposed to value, it becomes clear that the quickest movers are in the Detached and Semi-Detached categories, with three beds taking the shortest time to sell.
This is all very well, but if you’re looking to invest in rental property in Stockport, you’re going to want to see a different graph. Well, here you go:
The figures aren’t particularly out of the ordinary, with the highest volume of properties on the market being two bed and taking the shortest period to rent. The rental amount you can expect from Stockport at present is about £100 less than the UK average (excluding London), but within the general ballpark average of the north west. But post-regeneration? This could increase considerably.
To Conclude: Is Stockport Worth Your Investment?
There’s no short answer to this, because any location can see growth or price drops due to factors outside the foreseeable. So, as always, we’re not making any assurances.
However, there are some truly promising signs afoot in Stockport. The regeneration projects into which the town has pooled an optimistic £1bn are sure to bring a lot of interest to the town. Already, large corporate firms are beginning to pay attention.
Just in case you needed a few more examples, commercial lettings company Orbit has invested heavily on its portfolio in the town, modernising its office spaces, offering flexible office space packages, updating technology and broadband connectivity, and even introducing a reward scheme for its customers.
In addition, independent brewers, Robinsons, has invested £12 million in updating its portfolio of pubs, as well as opening a new visitors’ centre and restaurant, and software company CDL has expanded into a shiny new office in the centre of town, creating 50 local jobs.
With so much money pouring into Stockport, now may just be the best time that there has ever been to invest in this long-overlooked northern town.
Home.co.ukreports that the number of homes for sale in Manchester has fallen by 70% since 2008.
In January 2008, there were a total of 13,334 homes on the Manchester property market, and yet latest figures from June 2016 are just 3,960. Two bedroom properties, in particular, have decreased 75% from 5,522 to 1,363.
The figures in Manchester echo the national drop in supply, with a 51% fall in properties on the market in England and Wales over the last eight years, down from 855,585 in April 2008 to 415,038 in April 2016.
So what does this mean for investors?
Well, for those looking to scoop a property investment in Manchester, it’s best news for the buy-to-let sector. As the city continues to demonstrate a shortage of supply, its popularity for property investment is steadily increasing.
The biggest demand amongst consumers is for rental accommodation in Manchester, so rental yields for buy-to-let investors are likely to be pretty fruitful. Just to solidify this, HSBC identified Manchester as the city in the UK offering the highest rental yields in 2015.
Select Property Group comments: “Manchester is a stronger portfolio asset than London,” and emphasises the growing demand for, particularly, two bed properties. Investors, therefore, need to be hot on picking up any appropriate stock for rental whenever it becomes available.
Doug Sheppard, of Home.co.uk has stated, “Without doubt, the growth of the private rented sector has played a significant part in the supply crisis, as the average home changes hands less frequently than before. Moreover, buy-to-let remains a very popular investment choice in the current economic climate.”
To summarise: you may find it tough to pick up a property investment in Manchester, but if you do, buy-to-let is likely to give you high rental yields, particularly in two bedroom properties.
Are Brits obsessed with owning property? The answer, according tonew data from Eurostat, implies not. The data shows that 64.8% of Brits live in a property they own, compared to an average of 70.1% across the EU. Whilst Danes and Germans are much more inclined towards private rental, just 17.1% of Brits do. To explain the rest of the pie: those who don’t own or rent privately in the UK live in social and council housing.
Considering that house prices have gone up 47,000% over the last 90 years, against a rise of 5,413% in living costs, the financial attractions of buy-to-let (along with the failures of the pensions industry) are obvious. But are things about to change?
Is the buy-to-let industry on its last legs?
Mortgage eligibility changes, combined with action on stamp duty and tax relief, have had quite an impact. Higher rate taxpayers are seeing their returns drop by up to 40%, whilst basic rate landlords suffer a 10% fall in aggregate returns.
Nonetheless, there is optimism. Tony Mudd, of St James’s Place, is confident that “investors’ love of property will survive this”. He added that reasonable returns of 4 to 5% can still be gained, and those buying without a mortgage won’t be affected by restrictions on interest tax deduction.
Even if buy-to-let is waning in attractiveness, residential property is still good news. There’s no sign as yet that enough houses are to be built to meet the UK’s growing demand, so capital values are likely to keep on rising. What’s more, the rise of property tech companies developing new ways of gaining exposure for buy-to-let properties may well take care of some of the issues of this type of investment.
Enter Property Crowdfunding!
Property crowdfunding, for example, is part of this new wave of property technology. Crowdfunding represents another option for investors wishing to take a stake in the rental sector, and to balance off against the risk posed by any investment in property, the crowdfunding avenue does offer some attractive potential benefits.
Firstly, you cut out the hassle of managing a property yourself. No need to deal with tenants, maintenance or any other issues related to being a landlord. Exposure, too, could be significantly cheaper, and there may also be some relative tax benefits.
Whilst the 3% stamp duty surcharge remains, the returns are classed as dividends, which allows you to put them under the new £5,000 annual tax-free dividend allowance. And because the investment is structured within a separate company, you won’t miss out on the lower capital gains tax rates.
The House Crowd, of course, is a key player in the property crowdfunding revolution, even if we do say so ourselves! We are, therefore, more than aware of the benefits on offer by investing in property with us. But you should always remember that where there is investment, there is risk, particularly in the weird waters of the property market. That’s why you have to make it clear to us that you understand those risks completely before we let you invest your money. We love the fact, however, that we’re offering an alternative route, especially at a time when the government seem so determined to crack down on the buy-to-let industry.
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