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Landlords are ‘turning their backs on the capital’ in search of higher yields

Buy-to-let landlords are increasingly looking to move out of central London to more affordable suburbs where higher yielding property investments are available, according to the National Landlords Association (NLA).

The move follows a recent fall in rental demand in central London, which largely explains why just 5% of landlords who operate in the heart of the capital say they plan to purchase more properties in the next quarter, the lowest across all regions and down from 15% this time last year.

In contrast, the proportion of landlords operating in the North East who plan to buy in the next three months has almost doubled - up from 10% a year ago to 19%.

The proportion of landlords in Yorkshire looking to buy has also jumped significantly from 10% this time last year to 16% this quarter.

Carolyn Uphill, chairman of the NLA, said: “It looks like central London is simply becoming too expensive for most people, regardless of whether you want to buy, invest or rent.

“For many tenants the practical solution of moving out of the city to more affordable suburbs with good transport links is becoming increasingly appealing.

“In turn, it seems that landlords have been quick to respond, turning their backs on the capital and looking to other areas where the upfront cost of acquiring property is lower, and the potential yields to be had are higher.”

According to Rightmove, northern regions - places like Merseyside and Lancashire in the North West of England - offer some of the best rental returns. 

Bootle in Merseyside currently offers a yield of 9.3%, Birkenhead is 7.5% and in Lancashire Burnley’s yield is 7.2%, while Accrington is 7.1%, according to the property website.

“Investors looking for the strongest yields could consider investing in certain areas in the North West where both demand and yields are high,” said Sam Mitchell, Rightmove’s head of lettings.

Paul Smith, CEO of haart, is among those that believe more buy-to-let investors will ‘naturally gravitate north’ in 2017. 

“The buy-to-let market has been severely stung by the government’s war on landlords,” said Smith. “In some parts of the country, especially London, a buy-to-let property no longer makes the same return it once did.”

“Investors will naturally gravitate north where values are cheaper and yields are higher - you can pick up a portfolio of two-bed terrace properties in Doncaster for the same price as a one-bed flat in a new London development,” he added. 

Stuart Law, owner and founder of Assetz, agrees that the UK’s rental sector has experienced what he described as “a sea change” over the past year as “canny investors recognise that the north, not London, is where the best yields can be found”.

He commented: “I expect we'll see overall growth of rents of 4% in 2017 as landlords seek to cover the impact of the new mortgage interest tax and capitalise on some potential reduction in the size of the rental property market.”

“London investors have been hounded out by a combination of low yields and the curbs to mortgage interest tax relief, or ‘tenant tax’ as I call it. The lesson in 2017 that people must learn is that buy-to-let isn’t dead – it has just gone north,” Law added.


Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!



UK housing market activity slows for first time since July

The UK housing market ground to a virtual halt in December as price growth cooled and fewer homes changed hands, according to the latest RICS survey.

Residential property price growth slowed last month with the headline balance of surveyors reporting an increase falling to 24% from 29% in November.

“Although this suggests prices are still rising firmly, the latest figure does end a run of four successive months of higher house price balances,” RICS said.

The finding from the poll also found that the majority of RICS’ members expect a further slowdown in property price rises and new sales over the next three months as the formal Brexit process look set to get underway.

“While it remains to be seen if this is a temporary setback, 1% more chartered surveyors saw a fall rather than a rise in sales last month, and figures for predicted sales over the next three months across the UK also saw a noticeable slow down with only 4% more respondents anticipating an increase in sales during the coming three months down from 18% previously,” RICS said.

London was the only area to experience a drop in prices while the North West of England had the strongest price growth.

While price expectations for the next three months in the UK have softened for the second consecutive report, due to slower demand, RICS said respondents were more positive on the year as a whole.

In the next 12 months a net balance of 49% of respondents anticipate prices will increase in the UK, compared to 40% in the previous survey.

Simon Rubinsohn, chief economist at RICS, said the latest survey ”provides further evidence that both price and rent pressures are continuing to spread from the more highly valued to more modestly valued parts of the market for good or ill”.

But although activity flattened last month, Richard Sexton, director of e.surv, was keen to point out that this is typical around the festive period as many buyers wait to restart activity in the new year. However, even if demand has softened, the problem remains on the supply side.

He said. “New instructions remain sluggish and with annual house prices rising at an unsustainable rate, too many prospective new buyers are being priced out of the market.

“A new year means new opportunities for change. As we await the government’s Housing White Paper, hopefully further initiative and funding will be applied to help secure home ownership for many hard-working earners.”


Article courtesy of Property Investor Today | Sign up for Property Investor Today newsletter | Get this news on YOUR site!



Private sector rents rise in line with wages

Private rental price increases have accelerated modestly, in line with earnings across England, according to a new report from the National Audit Office.

But while the cost of renting in the private sector has largely followed changes in earnings, rents in the social sector have increased faster than wages, the figures show.

The exception to this is in London, where rents are rising much faster as a consequence of the supply-demand imbalance in the capital.

In its analysis on the state of the housing market yesterday, the Royal Institution of Chartered Surveyors warned that “rents are being squeezed higher due to demand consistently running ahead of supply”.

Commenting, RLA policy director, David Smith, said: “Today’s findings from the National Audit Office will surprise those who have falsely sought to argue that landlords are profiteering. The question must surely now be why the heavily subsidised social rented sector is seeing its rents increasing so much more than earnings.

“We cannot afford to be complacent. Forthcoming changes to mortgage interest relief, due to be rolled out from April will serve only to place upwards pressure on market rents, stifling the supply of homes to rent and reducing choice for tenants.

“In the end, those who will suffer will be tenants unable to save for a house of their own, and the many vulnerable people, such as the homeless, who rely so much on the sector to provide a home for them.”


Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!



Landlords are ‘turning their backs on the capital’ in search of higher yields

Buy-to-let landlords are increasingly looking to move out of central London to more affordable suburbs where higher yielding property investments are available, according to the National Landlords Association (NLA).

The move follows a recent fall in rental demand in central London, which largely explains why just 5% of landlords who operate in the heart of the capital say they plan to purchase more properties in the next quarter, the lowest across all regions and down from 15% this time last year.

In contrast, the proportion of landlords operating in the North East who plan to buy in the next three months has almost doubled - up from 10% a year ago to 19%.

The proportion of landlords in Yorkshire looking to buy has also jumped significantly from 10% this time last year to 16% this quarter.

Carolyn Uphill, chairman of the NLA, said: “It looks like central London is simply becoming too expensive for most people, regardless of whether you want to buy, invest or rent.

“For many tenants the practical solution of moving out of the city to more affordable suburbs with good transport links is becoming increasingly appealing.

“In turn, it seems that landlords have been quick to respond, turning their backs on the capital and looking to other areas where the upfront cost of acquiring property is lower, and the potential yields to be had are higher.”

According to Rightmove, northern regions - places like Merseyside and Lancashire in the North West of England - offer some of the best rental returns. 

Bootle in Merseyside currently offers a yield of 9.3%, Birkenhead is 7.5% and in Lancashire Burnley’s yield is 7.2%, while Accrington is 7.1%, according to the property website.

“Investors looking for the strongest yields could consider investing in certain areas in the North West where both demand and yields are high,” said Sam Mitchell, Rightmove’s head of lettings.

Paul Smith, CEO of haart, is among those that believe more buy-to-let investors will ‘naturally gravitate north’ in 2017. 

“The buy-to-let market has been severely stung by the government’s war on landlords,” said Smith. “In some parts of the country, especially London, a buy-to-let property no longer makes the same return it once did.”

“Investors will naturally gravitate north where values are cheaper and yields are higher - you can pick up a portfolio of two-bed terrace properties in Doncaster for the same price as a one-bed flat in a new London development,” he added. 

Stuart Law, owner and founder of Assetz, agrees that the UK’s rental sector has experienced what he described as “a sea change” over the past year as “canny investors recognise that the north, not London, is where the best yields can be found”.

He commented: “I expect we'll see overall growth of rents of 4% in 2017 as landlords seek to cover the impact of the new mortgage interest tax and capitalise on some potential reduction in the size of the rental property market.”

“London investors have been hounded out by a combination of low yields and the curbs to mortgage interest tax relief, or ‘tenant tax’ as I call it. The lesson in 2017 that people must learn is that buy-to-let isn’t dead – it has just gone north,” Law added.


Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!



House price growth shifting from London to regional cities

Residential property prices across 20 of the largest UK cities rose by an average of 7.2% in 2016, taking the 20 city average to £244,300, according to the latest Hometrack UK Cities Index.  

Overall property prices rose despite a marked slowdown in the level of growth recorded in large cities across the south of England, especially in London.

In the three months to December, home prices across the 20 big cities increased by 2.2%, following weak growth over Q3 of just 0.3% after the Brexit vote.

Despite the ongoing uncertainty ahead of Brexit negotiations, with the government ready to trigger Article 50 by the end of March, the steady rate of house price inflation continues to run more than three times faster than the growth in earnings, supported in part by record-low mortgage borrowing rates.

Six months ago, Bristol became the first city outside of the South East for more than six years to see house prices rise at a faster rate than London. But new research shows that six cities now rank higher than the capital in Hometrack’s house price growth rankings.

Over the past 12 months, home prices in Manchester rose by 8.9%, the highest rate of annual growth in the city since July 2005. In contrast, London recorded growth of 7.3% over 2016. This is the lowest annual rate for more than three years and highlights how the impetus for house price growth is shifting from the capital to regional cities.

Other cities to outperform the capital over the last 12 months include Oxford (8.1%), Portsmouth (8.0%), Southampton (7.9%) and Birmingham (7.5%).

Property prices in London are now on average 14.2 times earnings, which is a record high level of housing unaffordability and points towards a period of price re-adjustment over the coming years.

The only city to surpass the growth seen in Manchester was Bristol, where prices rose by 9.6% over the last 12 months, but the rate of growth is slowing.

Richard Donnell, insight director at Hometrack, said: “This latest UK city house price index reveals how the impetus for house price growth is shifting to more affordable cities where the recovery in house prices has been more muted in recent years. Price rises are gaining momentum in cities where low mortgage rates are yet to be fully priced into housing.

“In Manchester the underlying market conditions remain strong, with the supply of homes for sale only just managing to keep pace with demand. This is keeping the upward pressure on house prices.  A similar picture is emerging in other regional cities such as Birmingham and points to continued, above average price inflation in regional cities over the next 12 months.”

“2017 looks set to be a year when the north-south divide for house prices might finally start to narrow once again.”


Article courtesy of Property Investor Today | Sign up for Property Investor Today newsletter | Get this news on YOUR site!



Buy-to-let landlords are ‘turning their backs on the capital’ in search of higher yields

Buy-to-let landlords are increasingly looking to move out of central London to more affordable suburbs where higher yielding property investments are available, according to the National Landlords Association (NLA).

The move follows a recent fall in rental demand in central London, which largely explains why just 5% of landlords who operate in the capital say they plan to purchase more properties in the next quarter, the lowest across all regions and down from 15% this time last year.

In contrast, the proportion of landlords operating in the North East who plan to buy in the next three months has almost doubled - up from 10% a year ago to 19%.

The proportion of landlords in Yorkshire looking to buy has also jumped significantly from 10% this time last year to 16% this quarter.

Carolyn Uphill, chairman of the NLA, said: “It looks like central London is simply becoming too expensive for most people, regardless of whether you want to buy, invest or rent.

“For many tenants the practical solution of moving out of the city to more affordable suburbs with good transport links is becoming increasingly appealing.

“In turn, it seems that landlords have been quick to respond, turning their backs on the capital and looking to other areas where the upfront cost of acquiring property is lower, and the potential yields to be had are higher.”

According to Rightmove, northern regions - places like Merseyside and Lancashire in the North West of England - offer some of the best rental returns. 

Bootle in Merseyside currently offers a yield of 9.3%, Birkenhead is 7.5% and in Lancashire Burnley’s yield is 7.2%, while Accrington is 7.1%, according to the property website.

“Investors looking for the strongest yields could consider investing in certain areas in the North West where both demand and yields are high,” said Sam Mitchell, Rightmove’s head of lettings.

Paul Smith, CEO of haart, is among those that believe more buy-to-let investors will ‘naturally gravitate north’ in 2017. 

“The buy-to-let market has been severely stung by the government’s war on landlords,” said Smith. “In some parts of the country, especially London, a buy-to-let property no longer makes the same return it once did.”

“Investors will naturally gravitate north where values are cheaper and yields are higher - you can pick up a portfolio of two-bed terrace properties in Doncaster for the same price as a one-bed flat in a new London development,” he added. 

Stuart Law, owner and founder of Assetz, agrees that the UK’s rental sector has experienced what he described as “a sea change” over the past year as “canny investors recognise that the north, not London, is where the best yields can be found”.

He commented: “I expect we'll see overall growth of rents of 4% in 2017 as landlords seek to cover the impact of the new mortgage interest tax and capitalise on some potential reduction in the size of the rental property market.”

“London investors have been hounded out by a combination of low yields and the curbs to mortgage interest tax relief, or ‘tenant tax’ as I call it. The lesson in 2017 that people must learn is that buy-to-let isn’t dead – it has just gone north,” Law added.


Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!



UK housing market activity slows for first time since July - RICS

The UK housing market ground to a virtual halt in December as price growth cooled and fewer homes changed hands, according to the latest RICS survey.

Residential property price growth slowed last month with the headline balance of surveyors reporting an increase falling to 24% from 29% in November.

“Although this suggests prices are still rising firmly, the latest figure does end a run of four successive months of higher house price balances,” RICS said.

The finding from the poll also found that the majority of RICS’ members expect a further slowdown in property price rises and new sales over the next three months as the formal Brexit process look set to get underway.

“While it remains to be seen if this is a temporary setback, 1% more chartered surveyors saw a fall rather than a rise in sales last month, and figures for predicted sales over the next three months across the UK also saw a noticeable slow down with only 4% more respondents anticipating an increase in sales during the coming three months down from 18% previously,” RICS said.

London was the only area to experience a drop in prices while the North West of England had the strongest price growth.

While price expectations for the next three months in the UK have softened for the second consecutive report, due to slower demand, RICS said respondents were more positive on the year as a whole.

In the next 12 months a net balance of 49% of respondents anticipate prices will increase in the UK, compared to 40% in the previous survey.

Simon Rubinsohn, chief economist at RICS, said the latest survey ”provides further evidence that both price and rent pressures are continuing to spread from the more highly valued to more modestly valued parts of the market for good or ill”.

But although activity flattened last month, Richard Sexton, director of e.surv, was keen to point out that this is typical around the festive period as many buyers wait to restart activity in the new year. However, even if demand has softened, the problem remains on the supply side.

He said. “New instructions remain sluggish and with annual house prices rising at an unsustainable rate, too many prospective new buyers are being priced out of the market.

“A new year means new opportunities for change. As we await the government’s Housing White Paper, hopefully further initiative and funding will be applied to help secure home ownership for many hard-working earners.”


Article courtesy of Property Investor Today | Sign up for Property Investor Today newsletter | Get this news on YOUR site!



Private sector rents rise in line with wages

Private rental price increases have accelerated modestly, in line with earnings across England, according to a new report from the National Audit Office.

But while the cost of renting in the private sector has largely followed changes in earnings, rents in the social sector have increased faster than wages, the figures show.

The exception to this is in London, where rents are rising much faster as a consequence of the supply-demand imbalance in the capital.

In its analysis on the state of the housing market yesterday, the Royal Institution of Chartered Surveyors warned that “rents are being squeezed higher due to demand consistently running ahead of supply”.

Commenting, RLA policy director, David Smith, said: “Today’s findings from the National Audit Office will surprise those who have falsely sought to argue that landlords are profiteering. The question must surely now be why the heavily subsidised social rented sector is seeing its rents increasing so much more than earnings.

“We cannot afford to be complacent. Forthcoming changes to mortgage interest relief, due to be rolled out from April will serve only to place upwards pressure on market rents, stifling the supply of homes to rent and reducing choice for tenants.

“In the end, those who will suffer will be tenants unable to save for a house of their own, and the many vulnerable people, such as the homeless, who rely so much on the sector to provide a home for them.”


Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!



Property auction market in UK ended 2016 strongly, latest index shows

The property auction market in the UK finished 2016 strongly and set new records in the process, fresh figures provided by the Essential Information Group (EIG) show.

Overall the volume of lots offered in December was up over 12%, from 3,336 lots to 3,745 lots, whilst lots sold increased by 9%, from 2,591 to 2,830. This is the largest ever number of lots offered and sold during the month of December, beating the previous highs of 3,529 lots offered in December 2007 and 2,675 lots sold in December 2013.

Given the record number of auctions last month, it is perhaps unsurprising to see that there was a significant increase in the amount raised - up 5% to £537m, the largest amount realised in December since 2016.

“Having reported on a challenging few months towards the latter part of last year, it is pleasing to see that the industry enjoyed an extremely positive end to proceedings and set new records in the process,” said David Sandeman at EIG. 

National auction analysis

Residential lots offered increased by almost 12% in December, equating to 317 more lots being offered when compared with December 2015. The large gain in the number of residential instructions helped propel Q4 into a 1.4% gain in this regard, from 7,246 in Q4 15 to 7,351 in Q4 16, whilst annually the market saw growth of 4.2% equating to 1,136 more lots being offered compared with 2015.

The commercial sector saw a 15% rise in lots offered during December, up from 623 lots to 715 lots, whilst lots sold increased by almost 12% from 508 to 567 lots. The rolling quarter and annual figures for lots offered and lots sold saw single digit declines, but the sale rate remained constant and the all-important amount raised went up by 21%, 5% and 9% for the month, quarter and year respectively indicating a buoyant market and increased lot sizes.

Overall Statistics December 2016
Auctions Held in the UK 110
Total Lots Offered 3,745
Total Lots Sold 2,830
Percent Sold 75.6%
Total Realised £536,773,550
 

Article courtesy of Property Investor Today | Sign up for Property Investor Today newsletter | Get this news on YOUR site!



Strong start to the year for buy-to-let market

While many will agree that 2016 was not the best year for buy-to-let, as the government introduced a raft of anti-landlord policies, 2017 seems to be getting off to a promising start- at least in terms of demand from landlords looking to add to their property portfolios.

The latest mortgage lending figures show that there has been a surge in demand from landlords looking to make fresh property investments, with 21,000 buy-to-let loans issued in November, up 13% compared to the previous month, and this growing trend looks set to continue, according to Fleet Mortgages.

“Overall, the market has kicked off strongly at the start of 2017, and we’ve seen a considerable amount of demand and interest from advisers [on behalf of buy-to-let investors],” said Bob Young, chief executive of Fleet Mortgages.

Young continued: “We’ve seen over the course of the last 12 months the increase in demand for limited company products, particularly when it comes to new purchases, however many landlord borrowers continue to hold their existing properties in their individual names and it’s therefore important that we continue to offer competitive products in this space.”

To help meet growing demand from buy-to-let landlords, Fleet Mortgages has launched five products across its individual and limited company buy-to-let ranges.

Through limited companies the lender has launched an 80% loan-to-value (LTV) 2-year fix at 4.39% and two lifetime trackers at 4.2% to 75% LTV and 4% to 65% LTV. Products come with a 1.5% fee.

Its individual products include a 2-year fix at 3.79% to 80% LTV and a 4% 75% LTV tracker, both with a 1% fee.

Despite a pick-up in demand for buy-to-let properties, Young reports that there is growing frustration at the Bank of England’s Financial Policy Committee’s decision to introduce new tougher mortgage affordability tests.

“One thing we are aware of however is the increased frustration around many lenders’ rent to income calculations, their ever-changing criteria, plus major difficulties when it comes to finding products on sourcing systems and being able to compare like-for-like,” he added.

All Fleet’s new buy-to-let products come with a rental calculation rate of 125% at 5%.


Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!



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