Our Review of 2018
There’s been more to 2018 than Brexit, from the feel-good factor of May’s royal wedding to the budget announcements designed to increase the supply of new homes. Read on for our review of the year’s highlights for buyers, sellers, renters, landlords and investors:
Image courtesy of richardharriscoaching.com
Growth in the number of ‘portfolio landlords’
So-called ‘portfolio landlords’ continue to expand their portfolios, while landlords with fewer properties are choosing not to invest in another property.
Lender Kent Reliance’s most recent Buy-to-let Britain report finds that portfolio landlords – those with ten or more properties – invested in one new property in the last three months. This compares with landlords with fewer properties, who were less likely to invest in a new property over the last three months.
This research reveals that landlords with larger portfolios have, in recent months, been more likely to continue to invest in the buy-to-let sector.
Andy Golding, spokesperson for Kent Reliance, said: “A fundamental shift in the landlord population is now underway, as buy-to-let moves from being a popular past-time for hundreds of thousands of British amateur landlords, to the preserve of committed long-term investors with experience and expertise”.
However, fewer landlords have a positive outlook now than they have in recent years, with 41% currently feeling positive about what the future has in store for their property investments.
2017 was a tricky year for landlords, following the government’s decision to add a 3% stamp duty surcharge to the purchase of second homes, which was introduced the previous year. In addition, the phasing out of tax relief for residential landlords has encouraged landlords to move their properties into limited companies, as doing so means the tax relief changes do not affect them.
Meanwhile, during 2017, there was a 45% increase in the number of buy-to-let applications for properties through a limited company when compared to 2016.
To read the original commentary, please visit – https://assetgrove.co.uk/growth-in-the-number-of-portfolio-landlords/
Decline in buy-to-let lending as changes bite
Tougher mortgage lending laws have led to a decrease in the number of landlords taking out buy-to-let mortgages, new data reveals.
UK Finance data shows that lending levels in November of last year dropped by 3.6% when compared with the same month the previous year.
Head of Mortgages at UK Finance, Paul Smee, said: “Declines in buy-to-let lending reflect the changing regulatory and fiscal environment for landlord businesses, where some landlords might be inclined to reappraise the viability of their portfolios.”
However, despite a slowing down of mortgages being granted to buy-to-let borrowers, the number of mortgages granted to movers, first-time buyers and those remortgaging their property actually increased in November.
Tax changes affecting the buy-to-let market have played a role in the drop in the number of landlords taking out mortgages, but earlier this month, the National Landlords Association (NLA) revealed that 20% of its members intend to sell off part of their portfolio in the year ahead.
The NLA said that this figure of 20% represents a 10-year high.
Landlords are encouraged to seek professional advice to help them maximise the potential of their property investments.
To read the original commentary, please visit – https://assetgrove.co.uk/decline-in-buy-to-let-lending-as-changes-bite/
Majority of landlords ‘confident’ despite prospect of mortgage interest rate rises
A new trend report reveals that 51% of well-established landlords remain optimistic despite the potential for mortgage interest rate rises.
A report, from Paragon, also revealed that 30% of landlords considered demand for rental properties to be strong, reinforcing the need to keep up supply.
The buy-to-let sector showed signs of stability, another positive trend, with average void periods remaining around the 2.7 weeks mark.
Though tenant demand continues, an increased number of landlords – 23% – say they may sell some of their property portfolio in 2018.
However, fewer landlords are borrowing, and some landlords are finding it harder to obtain mortgages due to the stricter lending laws introduced in September 2017.
Managing Director for Mortgages at Paragon, John Heron, said: “In response to fiscal changes over the last two years, landlords are clearly less willing to take higher loan to value mortgages and borrow more, whilst regulatory changes, though welcomed by lenders, have constrained the market in its ability to offer higher LTV mortgages”.
“Despite much noise to the contrary, and whilst some landlords have responded to a turbulent market by selling property, we’ve seen no material evidence of a mass sell-off by landlords. What we continue to see is strong performance of property portfolios, with a long term upward trend in values and a stable outlook in portfolio size and returns”, Heron continued.
Though landlords continue to negotiate many regulatory and tax changes, this report paints a more positive picture of how landlords are negotiating those changes.
To read the original commentary, please visit – https://assetgrove.co.uk/majority-of-landlords-confident-despite-prospect-of-mortgage-interest-rate-rises/
NLA steps in as government consults on longer tenancies
The National Landlords Association (NLA) is calling on the government to make sure any legislation it introduces for longer tenancies reflects the full diversity of the private rented sector.
Various industry bodies, including the NLA, met recently with Junior Housing Minister Heather Wheeler to discuss the government’s plans on, among other points, a consultation on how to encourage landlords to offer longer tenancies.
Launching a consultation on how to incentivise landlords in this regard was first raised by Chancellor Philip Hammond in last year’s Autumn Budget. Though the Chancellor’s announcement met with a positive response from the property sector, the NLA and other industry bodies are keen to make sure any new legislation the government introduces supports the diverse needs of those in the private rented sector.
The NLA’s aim is for the government to not simplify the issue, but to take into consideration the needs of all tenants and, for that matter, landlords.
Richard Lambert, CEO at the NLA, said: “We urge the minister and her colleagues to work with the NLA and others to ensure that any intervention made is necessary, proportionate and maintains a fair regulatory regime within which landlords can continue to run their business.”
Longer tenancies should bring greater stability and security for tenants, many of who are choosing to – or having to – rent for longer.
To read the original article, please visit – https://assetgrove.co.uk/nla-steps-in-as-government-consults-on-longer-tenancies/
Consultation launched into tougher electrical safety standards
New standards relating to electrical safety in the private rented sector are being consulted on by the government in a bid to improve safety for tenants.
There are also plans for electrical safety checks to be carried out on all rented properties once every five years.
The Private Rented Sector Electrical Safety Working Group has put forward their recommendations for how to improve safety. A consultation has now been launched to examine these recommendations for improving electrical standards in the private rented sector.
The consultation, which runs until 16th April 2018, will also look at how to enforce such proposals, and what the penalties will be for non-compliance.
Housing Minister, Heather Wheeler, said: “Everyone deserves a safe place to live. While measures are already in place to crack down on the minority of landlords who rent out unsafe properties we need to do more to protect tenants.”
Wheeler continued: “That’s why we introduced powers to enable stronger electrical safety standards to be brought in along with tough penalties for those who don’t comply.”
The government is calling on interested parties to get involved in the consultation, offering their views on the proposals which have been put forward. The government, however, is stressing the need to be fair to landlords while protecting the rights and safety of tenants.
To read the original commentary, please visit – https://assetgrove.co.uk/consultation-launched-into-tougher-electrical-safety-standards/
Interest in buy-to-let property to boost retirement income on the wane
There is a decrease in the number of people planning to invest in buy-to-let property to boost their retirement income, despite most people recognising the potential of property investment.
According to Retirement Advantage, 62% of people are unlikely to consider buying a property to let out as a means of boosting retirement income, while only 35% are likely to consider it.
These results are telling and paint a different picture from last year. This might be to do with the recent introduction of tax and regulation changes which affect owners of buy-to-let properties.
In the over 55s category, 87% now say that they won’t consider investing in a buy-to-let property to boost retirement income, while 10% say they would consider such a move.
This comes despite the fact the majority of those asked still regard property as a good investment and can see the long-term benefits.
Alice Watson, Head of Product at Retirement Advantage, said: “There are still nearly a million landlords over 55 and for those landlords there are innovative new mortgage options available to increase ways to boost income from investment properties”.
Property investment remains a good option as a means of generating income during retirement, especially as pensions and other asset classes are still considered less stable and more prone to fluctuation.
To read the original commentary, please visit – https://assetgrove.co.uk/interest-in-buy-to-let-property-to-boost-retirement-income/
Optimism among landlords remains
65% of landlords are positive about what the year has in store for them and their property investments, despite the additional challenges brought on by changes affecting the buy-to-let market.
Tenant demand remains strong in London, and this is fueling landlords with confidence, and keeping investor demand strong.
According to Shawbrook Bank, 39% of landlords aim to invest further this year.
Managing Director at Shawbrook Bank, Karen Bennett, said: “Property continues to offer an excellent underlying investment vehicle for professional landlords with the right investment strategy”.
Bennett continued: “While the investment case for buy to let remains strong, there are particular challenges ahead for portfolio landlords and the additional impact of the PRA changes.”
More is being demanded of landlords, not just in terms of the energy performance of their properties and Right to Rent checks, but in the tax and mortgage relief changes.
However, property continues to prove itself to be a good investment asset to landlords, especially those who have a strong strategy in place to weather changes. Though challenges for landlords remain, tenant demand has not weakened, and there are opportunities for those who want to invest in buy-to-let property.
To read the original commentary, please visit – https://assetgrove.co.uk/optimism-among-landlords-remains/
Number of buy-to-let investors has increased, HMRC data reveals
Despite predictions that potential investors would be deterred from investing in buy-to-let and landlords would sell up and exit the market, research shows the number of buy-to-let investors in the UK has increased over the last tax year.
According to data from HMRC, the number of buy-to-let investors increased to 2.5 million in the tax year 2017/18, which is an increase of 5% on the 2016/17 tax year.
The data shows that, regardless of multiple tax and regulation changes affecting the buy-to-let sector, landlords and investors have not been deterred.
There is also a reported rise in the number of properties each landlord owns, with this rising five years in a row.
Property remains a preferred form of investment, with the stock market often viewed as volatile and unstable. Continuing low interest rates have also contributed to a preference for property.
However, there is a growing need for lenders to meet the diverse requirements of borrowers, and for greater flexibility in the buy-to-let mortgage market.
Landlords in London and elsewhere in the UK are now subject to more regulation and taxation, but for landlords who seek advice and take a strategic, pragmatic approach, buy-to-let can still prove a good investment.
To read the original commentary, please visit – https://assetgrove.co.uk/buy-to-let-investors-increased-hmrc-data-reveals/
Cost more important than location for most renters
Almost eight out of ten renters consider cost to be more important than location when it comes to finding a rental property, new data reveals.
According to a survey carried out by Dlighted, cost was more important for 9% more of respondents than location, indicating that cost is the most important factor for many renters.
The survey also showed that 23% of renters value parking, while 32% would like to be able to keep pets. A garden or outdoor space was also important to many respondents.
A spokesperson for Dlighted, Ajay Jagota, said: “It’s always been claimed that location, location, location is the key to buy-to-let success, but these days it’s more accurate to say cost, cost, cost.”
In addition to this survey, data released by the UKALA shows that 42% of landlords in London have experienced void periods in the last quarter.
One of the reasons landlords have experienced void periods is due to tenants not being able to pay the rent.
Landlords who experience void periods always want to make sure they have a guaranteed rent scheme in place or find new tenants as soon as possible.
At Assetgrove, we offer a guaranteed rent scheme to landlords which gives you a fixed monthly rent for up to five years. And this applies even if the property is empty due to voids.
To read the original commentary, please visit – https://assetgrove.co.uk/cost-more-important-than-location-for-most-renters/
Rent arrears experienced by approximately 50% of landlords
Almost 50% of landlords have experienced tenants falling into rent arrears, new research reveals.
Landlords have also reported having to cover the cost of repairs at the end of a tenancy, with 26% of tenants breaking things in the property and then refusing to foot the bill for necessary repairs.
The issues which many landlords face has resulted in 37% of landlords claiming their greatest concern to be poor tenants.
Though tenant deposits are intended to cover the cost of repairs at the end of a tenancy, if cost of repair work exceeds the deposit amount, a landlord is unfairly left out of pocket.
The majority of landlords – 60% – own just one buy-to-let property and use this investment to supplement their income. However, there are fears that landlords with smaller portfolios may be more inclined to sell their buy-to-let in response to a raft of tax and legislation changes.
But landlords looking for security and a regular rental income can arrange for guaranteed rent to cover their property investment for up to five years. Guaranteed rent ‘guarantees’ landlords no loss of income, even if they experience a void period.
To read the original commentary, please visit – https://assetgrove.co.uk/rent-arrears-experienced-landlords/
RLA renews calls to scrap Right to Rent checks
The Residential Landlords Association (RLA) is renewing calls for the Right to Rent scheme to be scrapped in the same week when the scheme is being challenged in court.
Right to Rent checks, which aim to establish whether a tenant has the legal right to rent property in England, place the responsibility of finding out about a tenant’s immigration status squarely on the shoulders of the landlord.
However, the scheme has proved contentious since it was first introduced in February 2016, with claims that it engenders discrimination and makes it harder for those who aren’t in possession of a British passport to rent property in England, despite having the legal right to do so.
Director of Policy for the RLA, David Smith, said: “In reality the Right to Rent is creating a hostile environment for those who need, and are legally entitled to, housing in the UK but cannot easily prove it.”
Smith continued: “The Windrush scandal has shown that even trained immigration officers can make serious mistakes. This highlights how inappropriate it is to demand that untrained landlords become enforcers of government immigration policy.”
Research carried out by the RLA reveals that 42% of landlords are now less likely to rent to a tenant who doesn’t have a British passport out of fear of being caught out by the Right to Rent scheme.
The RLA also asserts that the scheme is making it more difficult for tenants who cannot easily prove their right to rent to find a home, whether that be in London or elsewhere in England.
To read the original commentary, please visit – https://assetgrove.co.uk/rla-renews-calls-scrap-right-to-rent-checks/
Families require least property management time, NLA research shows
Renting to families and energy efficient properties generally take up less property management time for landlords than renting to tenants on benefits, a survey has found.
The survey carried out by the National Landlords Association (NLA) also revealed how much time landlords spend on all aspects of property management and maintenance.
The research showed that landlords who rent to families spend, on average, eight hours per week on property management. This compares with landlords who let to tenants who claim benefits or executive lets, who spend around 12 hours per week on property management.
Landlords who rent to tenants who claim benefits typically spend more time on property management as they tend to be a greater turnover of tenants, while welfare cuts and the introduction of Universal Credit has made it more difficult for some tenants to keep up with rental payments.
Perhaps not surprisingly, landlords with more energy efficient properties spend less time on property management.
Richard Lambert, NLA’s Chief Executive Officer, said: “‘This data reinforces the fact that families make good, reliable, and long-term tenants, but some landlords can be put off by the perceived risk of more damage or wear and tear to the property or its contents”.
Lambert continued: “However, if you’re properly maintaining the property then tenants will be more likely to stay for longer anyway, particularly families who typically seek more stability. This is just one more argument for establishing a proper maintenance schedule in the first place”.
To read the original commentary, please visit – https://assetgrove.co.uk/families-require-least-property-management-time/
Rents rise in London in the year to June 2018
Rents in London have increased in the year to June 2018, new data reveals.
According to figures from Landbay’s Rental Index, rents rose by 0.10% between June 2017 and June 2018.
Since December 2016, rents have fallen in London, but June this year saw familiar trends take a sudden turn.
However, while rents have risen slightly in the capital, rental growth is slowing across the rest of the UK.
Of the data, Chief Executive of Landbay, John Goodall, said: “the overall trend has been a slowing of rents across the UK in the first half of this year.”
“However, much of this has been London weighing down heavily on otherwise resilient growth across the UK. Now that London rents have bounced back to growth this could all be about to change.”
Landlords have had to face multiple changes to the buy-to-let market in recent years, including the changes to tax relief, which continues to be phased in. It’s predicted that many landlords, especially those in London, may need to increase rents to cover their costs.
The average monthly rent in London now stands at £1,884, which compares with an average monthly rent of £764 across the rest of the UK.
To read the original commentary, please visit – https://assetgrove.co.uk/rent-rises-in-london-in-the-year-to-june-2018/
19% of portfolio landlords say they will remain a landlord ‘indefinitely’, new research reveals.
According to specialist mortgage lender, Foundation Home Loans, one fifth of landlords are prepared to remain in the buy-to-let market in the long-term despite fears of landlords leaving the market.
Successive tax and regulation changes affecting the private rented sector have led to concerns of a potential ‘mass exodus’ of landlords.
However, only 6% of landlords asked said they plan to leave the sector within the next few years.
The research from Foundation Home Loans shows that investment in the buy-to-let sector remains a preference for many investors, regardless of any changes which may impact the amount of income they receive from their property or portfolio of properties.
Marketing Director at Foundation Home Loans, Jeff Knight, said: “There have been ripples of concern that a mass exodus of landlords is expected, and certainly the changes introduced are a handful to deal with if not addressed in the right way.”
Knight continued: “With so much interest in investing in the long-term, it is therefore imperative that newer landlords are sufficiently supported to avoid any knee-jerk exits. This is particularly the case for portfolio landlords as diversification is key to maintaining cashflow.”
To read the original commentary, please visit – https://assetgrove.co.uk/one-in-five-landlords-to-remain-in-buy-to-let-in-the-long-term/
£2 billion investment to build more affordable and social homes
New affordable and social homes are planned following the Prime Minister’s announcement that £2 billion will be given to housing associations.
A total of eight housing associations have already received an injection of funding, which should go towards the delivery of some 15,000 new affordable homes.
In the announcement, made at the National Housing Federation Summit, Prime Minister Theresa May said: “Under the scheme, associations will be able to apply for funding stretching as far ahead as 2028/2029, the first time any Government has offered housing associations such long term certainty”.
The provision of genuinely affordable housing across the country, but especially in London, is greatly needed.
The Prime Minister continued by saying the funding injection will give housing associations what they need to be build social and affordable homes where they are needed most.
The £2 billion initiative should at least give housing associations greater stability and certainty in knowing they can access funding to deliver the homes required.
The aim is for housing associations to take a greater role in the development of new homes, making sure homes are being built to high standards and where they are needed.
To read the original commentary, please visit – https://assetgrove.co.uk/more-affordable-social-homes/
Government plans to scrap limit on council borrowing for social housing
Prime Minister Theresa May recently announced Government plans to remove the cap on how much local authorities can borrow to build housing, paving the way for a rise in social housing projects.
At the Conservative Party Conference in Birmingham on 3th October, the Prime Minister revealed that it will soon be easier for councils to invest in social housing, allowing them to meet local needs.
At present there is a limit on the amount councils can borrow in relation to the Housing Revenue Account to build new homes. Now, the Government plans to scrap that limit.
In her speech, the Prime Minister said: “Solving the housing crisis is the biggest domestic policy challenge of our generation. It doesn’t make sense to stop councils from playing their part in solving it.”
The Prime Minister made the statements in reference to ‘solving the housing crisis’, and her announcement was met with general praise across the industry.
Chief Executive, Federation of Master Builders, Brian Berry, said: “This is the most exciting, and potentially transformative, announcement on council housing for many years.”
“Indeed, the only times the UK has built sufficient numbers of homes overall is when we’ve had a thriving council house building programme.”
Once implemented, local authorities will have more freedom to lead the way in building more homes.
To read the original commentary, please visit – https://assetgrove.co.uk/government-plans-to-scrap-limit-on-council-borrowing-for-social-housing/
Buy-to-let properties still a solid investment
With demand for homes to rent continuing to grow, a buy-to-let property is still a sound investment, according to industry insiders quoted in Landlord Today.
Buy-to-let investors have seen radical changes over recent years. A gradual reduction in mortgage tax relief and a stamp duty surcharge have resulted in press reports of landlords leaving the sector in droves.
However, Andrew Turner, chief executive at specialist buy-to-let mortgage broker Commercial Trust believes the impact has not been as great as anticipated. While some buy-to-let landlords have left the sector, many still believe that homes to rent are a good investment, according to Turner.
He said: “The simple fact is that buy-to-let remains a solid investment option, with strong potential for an attractive and profitable return on capital invested.
“Investors should not be deterred from buy-to-let. Demand for rental housing is stronger than ever, the cost of debt remains relatively cheap and the housing shortage is likely to continue. Even so, any investment decision requires care and expertise.”
Recent figures from banking trade association, UK Finance revealed a fall in forecasted buy-to-let activity in 2018, to £3 billion below expectations.
Jackie Bennett, director of mortgages at UK Finance said: “This is undoubtedly the impact of various tax, regulatory and legislative changes that have happened to landlords in the buy-to-let sector.” However, buy-to-let re-mortgaging exceeded forecasts for 2018, growing by around 15% at the same time as new mortgages fell by 12%.
Says Andrew Turner: “In early August 2018, the Bank of England decided to increase rates by 0.25%. Although there has been limited market reaction so far, I expect to see market rates increase, because margins are wafer thin.
“Landlords have responded to this and there has been significant interest in fixed rates, useful to guard against rate rises. Investors are likely to continue to do this as their renewal dates come up and, therefore, I’m sure the re-mortgage market for buy-to-let will remain buoyant over the coming months.”
Meanwhile, the message to buy-to-let borrowers, is to shop around when a fixed-rate mortgage deal ends. Analysis by another broker, Private Finance, reveals that borrowers on a standard variable rate loan could save £4,000 in mortgage interest over two years by switching to a fixed deal.
To read the original commentary, please visit – https://assetgrove.co.uk/buy-to-let-properties-still-a-solid-investment/