Buy To Let Obstacles Fail to Deter Investors

There have been a lot of buy to let obstacles this year. Hikes in stamp duty, reductions in tax relief, tightening of mortgage lending criteria, and, of course, Brexit. And yet, landlords have pushed back, undeterred.

Investors Undeterred By Buy To Let Obstacles

Industry figures released last week show that, rather than being put off by these buy to let obstacles, landlords swept back into the market with gusto in September. Connells Survey & Valuation have released figures also showing a strong and successful September, with buy-to-let valuations rising 24% on August’s figures. Rightmove, too, have revealed a 30% jump in buy-to-let enquiries since May.

Another surprising statistic: in the nine months of 2016, to end of September, more has been lent to landlords than over the same period in 2015. Buy-to-let valuations over 2016 are 0.4% up on 2015.

New rental listings, according to analysis by Rightmove, in the third quarter, were 6% higher than in 2015. Anticipated drop-offs in investor activity affecting tenant choices proved to be unfounded.

From London to the North West

Even in the heady London property market, there was a year-on-year increase in rental listings of 15% over Q1-3 of 2016. As such, these high stock levels on the market led to a drop in asking rents in Q3, down 0.7% on Q2, staying below £2,000 a month. Of course, up in the North West where things are weathering the Brexit storm best, during the same period, rents went up 2%.

In the run up to the changes in stamp duty in April, there was an inevitable rush to close on property purchases in the first quarter of the year. As such, there was a significant drop-off come April, though this may well be down to many property purchases being hastened through before April’s changes hit.

Since then, things have really bounced back. One feature of the recovery seems to be a trend for investors knocking sellers down on asking prices to take into account those stamp duty charges.

Planning Pays Off

For those investors who have factored in those tax and policy changes to their financial planning, there are still strong returns on the cards in the property market. Especially when compared to the dismal performance of savings, bonds and equities, the long term ongoing shortage of social housing and a dearth of house building, is making property an increasingly attractive investment option.

Alistair Hargreaves, from John Charcol mortgage brokers, says:

“I can’t see Government rescinding the tax changes they’ve announced and I don’t see the Bank of England making it any easier for lenders. But that said, the flipside is that lenders are having to innovate to get business and there are still lots of competitive options available for landlords.”

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In addition, Mr. Charcol mentioned that despite tighter lending criteria, there are some innovative buy-to-let mortgage options available. Moreover, he recommended that in most cases landlords should consider longer term fixed rates or lifetime variables which remove some of the uncertainty for their finances.

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HMOs: Targeting Young Professionals in Shared Accommodation

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.

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Why The UK Rental Market Is Surging

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?

If you are a BTL investor and HAVE done your homework, you’ll know that the north is the place to be. If you haven’t, we recommend Manchester. The Northern Powerhouse city has an average rental yield of 6.2%.

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.

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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.

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Prospects for Property Investors After Bank of England Clampdown on Buy to Lets

Some recent changes are already hitting landlords hard, others will soon. Here we look at the available options in what for many buy to let investors are troubling times.

Continue reading “Prospects for Property Investors After Bank of England Clampdown on Buy to Lets”

Top Buy-to-Let Returns; Manchester does us proud!

Impressions aren’t everything. Investors are now beginning to look way beyond the wealthy, gold-plated streets of London and into more lucrative areas of the country.

The latest data on buy-to-let returns, from lender HSBC shows cities offering the greatest yields (rental income measured against property cost) include Southampton, Blackpool, Nottingham and Hull with many private landlords in these areas owning at least 1 in 4 properties.

Taking a moment of pride – Manchester falls into the top 5 cities offering the greatest yield with a return of 7.98%. That’s number TWO on the list!

So why are these cities more attractive to landlords you ask?

The answer; although London properties offer prosperous returns due to high rental income, the original investment near extinguishes the return. High house prices in the big city crush the yield and limit the return. Therefore, investments into the top yielding locations are much more appealing to landlords thanks to healthier returns and overall more durable investments.

So it certainly pays to do your research, and here at The House Crowd, we’ve done just that from our very first investment. Visit our Why Join? section for more information on the benefits of property investment with The House Crowd.

Information sourced from: http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/10859896/The-towns-that-offer-the-best-buy-to-let-returns.html

Slimmer yields for landlords in 2014? Not for our investors…

According to ARLA, the average yield across the country has fallen to around 5.5%. A journalist recently put this point to me and asked (somewhat sceptically) how we could offer much higher yields.

I responded that average returns are just that.  They represent what an average investor buying an average property in an average area could expect to achieve.

That statistic encompasses properties where yields are 1% and properties where they are 14% or more.  We research areas where the average yield is higher and then cherry-pick the best deals in that area to maximise yields.

The criticism is akin to saying “Usain Bolt claims to be able to run 100m is 9.69 seconds but how can that be when our research shows the average time to complete 100m is 14.8 seconds.”

In short, we are not your average investment company.

Having said that, we are susceptible to market conditions as is everyone and as house prices increase at a higher rate than rents, it is inevitable that yields will decrease.

So, does that mean we will not be able to offer our clients such attractive returns?

No.

It simply means we have to adapt. We are experienced in many areas of property investment, are extremely flexible and already have plans in place to ensure that we can still offer you very attractive returns whatever the market conditions.

The new areas we are moving into and the new business model we are launching next month will enable us to continue to deliver well above average returns.

Happy 18th birthday Buy to Let mortgages…

…and thank you for our present – a predicted 11% profit for the next decade according to a recent report.

The findings from the report published in an article by The Guardian identified that with average annual returns of 16.3% (£13,000 profit) on each investment of £1,000 since buy-to-let mortgages were launched in1996, landlords have earned more than they would have done with every other type of investment. These are clearly superb returns.

The report has been timed to coincide with the new affordability rules requiring lenders to carry out detailed checks on potential mortgagee spending and ability to pay if interest rates go up, but buy-to-let investors will be exempt from these rules.

Landlords take one in seven mortgages, and since 1996, lenders have granted 1.5m mortgages worth £174bn to buy-to-let investors. You can read the full article here: http://www.theguardian.com/business/2014/apr/26/returns-for-buy-to-let-landlords-dwarf-other-investments

Buy to Let Property Boost in Manchester

Could the bright lights of London finally be fading, as tenants search to avoid the high premiums of renting in the capital and instead look to Manchester, a city close to our hearts?

The buy-to-let market in Manchester has become increasingly popular over the last 12 months, with a 1.7% increase in rents making it a great area for investment. And it’s no wonder the city is becoming a big draw, with its dynamic centre offering great culture, a rich architectural legacy, excellent transport links, lovely canals and home to the brand new BBC… the list is endless!

If the Manchester market is looking enticing to you, and you have aspirations of becoming a savvy investor but don’t have the capital to stump up for a 25% deposit or you’re struggling to find a buy-tolet mortgage product, then fear not, with The House Crowd, you can still get a piece of the action.

Here at The House Crowd, we take the hassle out of property investment and more importantly the burden of being a landlord, by finding great investment properties, in areas of good rental demand that produce high property investment net yields.  We then add value through refurbishing empty and run down properties, and then sell them on, leaving you to reap the rewards.

The House Crowd is a brand new concept in property investment which allows people to invest small amounts via crowdfunding (for more information on the process, visit www.http://thehousecrowd.com/thehousecrowd//how-it-works/). We are committed to breathing life into empty, rundown properties whilst giving investors great returns on their investments (for more information about us, visit www.http://thehousecrowd.com/thehousecrowd//about/our-manifesto/). If you’ve read enough and want to invest now, visit www.http://thehousecrowd.com/thehousecrowd//invest-in-property/).

90% Of Landlords Are Unhappy With The Banks

9 out of 10 landlords are dissatisfied with the banks and the buy to let mortgage market according to a survey by the National Landlord’s Association.

No surprise really, but here’s what the survey reported:

89% would like to see greater competition and more lenders in the market and greater competition.

74% reported they believe that buy-to-let lenders should be more innovative.
(Mmm, not sure about that – look what happened the last time banks ‘got creative’).

Over 50% of property investors do not believe that access to buy-to-let mortgages is becoming easier despite the official line from the banks.

60% stated they were unable to obtain mortgages as the lenders would not consider borrowers in their particular circumstances.

Our advice to property investors – forget the banks and join The House Crowd instead. Using our crowdfunding model, you could make  25% a year on your money with no need for borrowing or worrying about increased interest rates and making mortgage payments. Simples!