Why landlords should be confident about the future of buy to let – Moloney

Why landlords should be confident about the future of buy to let – Moloney

 

Although there were tentative signs of a recovery this time last year, we were a long, long way away from where we were before Covid-19 hit. Two in three investors still believed their rental business would be negatively impacted the pandemic, it got as high as eight in 10 at the end of Q1 2020, and a fifth of landlords were experiencing an increase in voids.

However, just over a year on, it looks as though the recovery is now in full swing, with the impact of the pandemic less than initially feared. Not only that, landlord confidence levels are at the highest they’ve been in five years and tenant demand is soaring.

According to the latest research by BVA BDRC, just half of landlords say their letting business has been negatively affected, considerably lower than the 81 per cent who feared this would be the case in Q1 of 2020.

The research also shows that landlord confidence in rental yields has reached 57 per cent, a 20 per cent increase year-on-year and the highest level since 2016. It’s a similar story across all other key indicators, including landlords’ own letting businesses, capital gains, the UK financial market and the UK private rental sector, as well, with confidence at the highest levels since 2017.

Meanwhile, the proportion of landlords reporting an increase in tenant demand is at an all-time high. Almost six in 10 landlords have seen demand rise in the past three months, with nearly a third saying demand has increased significantly.

And the demand is not just confined to one area – all regions have seen a rise, with only those landlords in Central London not seeing a significant increase.

 

Specialist lenders vital to recovery

To help keep this recovery going, and ensure landlords can access the BTL mortgages they need – especially if they’re struggling to find products on the high street – it’s vital they know there are lenders out there who can help.

Borrowers who have less than perfect credit profiles or are self-employed workers, for example, might benefit from the expertise provided by specialist lenders who offer a manual underwriting approach. These type of lenders are perfectly placed to support more challenging cases as they have the ability to assess each case on its individual merits and can provide solutions based on a customer’s individual circumstances.

Although it’s impossible to predict what’s around the corner, hopefully we’ve now weathered the worst of the Covid-19 storm. With renewed confidence, and with the support of the right lender behind them, landlords have every reason to be confident about the future of their buy-to-let businesses.

Trend of buyers and tenants leaving cities is reversing – Castle Trust

Trend of buyers and tenants leaving cities is reversing – Castle Trust

 

Speaking on Specialist Lending Solutions TV in partnership with Castle Trust Bank, Oliver said this was affecting the types of properties and locations investors wanted to buy. 

He said: “Diversification in the market has actually driven more people post-pandemic to pull out of the city centres. We’re seeing that trend going the other way now.” 

He said because of this, landlords were taking advantage of investment opportunities where they could and focusing on refurbishments or conversions. 

Richard Merrett, head of strategic development at Simplybiz Mortgages, agreed, adding: “During lockdown everyone was itching to get out of cities for space. 

“But I think as we see a gradual return to normality, in particular people getting back into offices, flexible working will have an impact.”

Anthony Rose, director of LDNfinance, said he was also coming across clients who were staying in hotels one or two nights a week as expectations of how many days they needed to be in the office had adjusted. 

He said people changing jobs during the pandemic to companies with different working practices would also push the demand back to city living over the coming year. 

Watch the video below [7.46] featuring Shekina Tuahene, commercial editor of Mortgage Solutions and Specialist Lending Solutions, Robert Oliver, director of sales at Castle Trust Bank, Anthony Rose, director of LDNfinance, Kris Corns, operations director at Crystal Specialist Finance and Richard Merrett, head of strategic development at Simplybiz Mortgages. 

 

Tenant demand leaps to four-year high – Paragon

Tenant demand leaps to four-year high – Paragon

 

Nearly a third of landlords reported rising tenant demand during the three months to the end of September, the highest level since the third quarter of 2016.

The survey of more than 700 landlords also found one in 10 landlords reporting significant growth.

However, a clear regional divide in tenant demand appeared, with the strongest increases in the North West and South West, where almost half of landlords saw growth, followed by the East Midlands.

The weakest demand was seen in central London, with just 16 per cent of landlords seeing growth in the last three months.

Outer London was slightly stronger, with a quarter of landlords recording rising demand.

Paragon Bank managing director of mortgages Richard Rowntree said: “The record levels of tenant demand we saw being reported by the likes of Rightmove and Zoopla when the housing market reopened in May has started to feed through to landlords as tenants reassess where and how they want to live.

“Central London is clearly seeing the impact of Airbnb style landlords moving property into long-term lettings, as well as a desire for larger properties.

“Outside of London, demand is buoyant from the East of England, where 27 per cent of landlords are reporting growth in demand, to the North East and South West, where nearly half of respondents are telling us they are seeing positive growth.”

He added: “We expect this to continue for the foreseeable future and there’s a number of factors we’re seeing at play.

For example, there’s been growth in homeowners taking advantage of strong prices and selling to move into rented, people are looking to secure a new home ahead of entering a potential second lockdown, while students left it late to secure property for the new academic year.”

 

Tenant demand hits record highs – ARLA  

Tenant demand hits record highs – ARLA  

 

There were 101 tenants registered per branch on average last month, with 208 properties available.

Rent increases were back to pre-Covid levels, with almost half of tenants experiencing a rise in August, ARLA’s data showed.

Year-on-year, this is 16 per cent lower than in August 2019, when the figure stood at 64 per cent.

At the same time, the average tenancy length was at an all-time high with tenants typically staying in their properties for 21 months.

Angela Davey, president of ARLA Propertymark, said: “Our latest figures reveal the rental market still isn’t showing any signs of slowing down.

“We continue to see record breaking levels of rental stock and demand from tenants, painting a positive picture for the future of the private rented sector.

“With Covid-19 lockdown restrictions starting to increase again as we head towards the colder months, it’s more important than ever for landlords to communicate well with their tenants, and that tenants continue to pay their rent to ensure the market remains strong over the next period.”

Tenant demand hits all-time low as gross rental income falls – TMW

Tenant demand hits all-time low as gross rental income falls – TMW

 

The Gross Rental Income analysis based on a survey by BVA BDRC showed that the average income landlords earn per year dropped by £1,000 to £60,000 coinciding with the decline in demand.

However, although tenant demand and overall gross income dropped, the average income per property rose from £7,992 in Q1 to £8,571 during the period, as landlords reduced their portfolio sizes.

This was also despite fewer landlords reporting they had increased rents over the last year; 21 per cent said this was the case compared to 27 per cent in the first quarter.

The accompanying Tenant Demand Report for Q2, recorded a net score of –11 as the number of landlords citing a slight or significant decline in interest from tenants outstripped those reporting a slight or significant increase.

This is the lowest index score for tenant demand since 2012 and a further drop from the score of –8 reported in Q1.

 

Rental changes

The proportion of landlords intending to raise their rents over the next six months also dropped as this stood at 13 per cent, down from 15 per cent six months ago. 

However, the majority of landlords said they would not make any changes to this as 61 per cent said the rent they charge would remain the same for the next six months. 

Increases in rent overall appear to have fallen as only eight per cent of landlords said rent had gone up in the areas they owned properties in. This was compared to the 20 per cent who said the same in Q1.

 

Landlord and property characteristics 

Homes in multiple occupancy (HMOs) provided landlords with the highest yields at 6.9 per cent during the second quarter.

This was followed by bungalows at six per cent then semi-detached houses at 5.9 per cent. Multi-unit blocks (MUBs) provided rental yields of 5.8 per cent while individual flats provided 5.7 per cent. 

When it came to employment status, self-employed landlords generated the highest gross rental income at an average of £105,000 a year.

Landlords who were self-employed in other professions saw an average income of £54,000 and the full-time employed received an average rental income of £48,000. 

Those who work part-time received the lowest average rental incomes at £37,000 a year. 

Borrowing landlords also continued to generate the most profit, the report showed.

Landlords with buy-to-let mortgages earned more than those who owned their portfolio outright, bringing in £75,000 compared to £40,000. 

 

Nine in ten landlords profitable with tenant demand rising – BM Solutions

Nine in ten landlords profitable with tenant demand rising – BM Solutions

 

Almost nine in ten landlords have made profits from their lettings activity, reporting an increase of 2% in Q3 2018 from the previous three months.

The research found that active landlords have not experienced any increased financial difficulty this quarter, with the overall landlord profitability index reaching an historic high of +85.

However, landlords are feeling less confident year-on-year when it comes to the prospect of capital gains and the UK financial markets. Landlord confidence in their own letting business remains 7% above the historic low of 36% recorded in Q2 2017.

Head of BM Solutions, Phil Rickards, said that for those speculating about the future of buy to let, the figures supporting tenant demand should help to dispel this myth.

He added: “Considering the much talked about shortage of housing supply, it is vital that we continue to support a healthy private rented sector (PRS) and with tenant demand scores improving or remaining stable across all UK regions, it is clear that the PRS still has a very important part to play.”

 

Rental yields

The average rental yield dropped this quarter from 6.2% to 5.9%. This follows the 0.4% rise recorded in Q2, when average rental yields were at their highest point since Q4 2014.

Landlords operating in the North West and Wales are currently generating the highest yields at 6.7% and 6.3% respectively. Rental yields are the lowest in Central London, standing at 5.3%, and Scotland at 4.7%.

Meanwhile, tenant demand has increased to the highest level recorded since Q2 2017, but there are regional variations.

The proportion of landlords reporting a drop in tenant demand is now at its lowest point since the end of 2016, falling 8% from last quarter. Central London has seen a 9% rise in the proportion reporting increasing demand for rental properties, and a 14% fall in the number of landlords who feel that demand has decreased in the last three months.

 

Rent and mortgage interest increases

A third of landlords raised rents over the past 12 months, representing a slight increase from Q2 2018.

There has also been an increase in the proportion planning to increase rents in the next six months, reaching 27% from 24%, while there has been a fall of only 4% in landlords planning to reduce rents.

More landlords are also seeing rents rising in the areas where they let properties, with an increase of 9% from Q2.

Four fifths of landlords expect their mortgage provider to increase their mortgage interest rate due to recent base rate rises.

London rents increase for first time in 15 months

London rents increase for first time in 15 months

The lender said there are signs that demand for rental accommodation could again be rising in the Capital, and that this puts further pressure on the government to follow through on its pledge to release an extra £2bn of government cash for local authorities to build more affordable housing.

However, the rise in London was marginal – with rents up 0.01% in September to £1,876, compared with August. Rents are still 0.80% lower in London year-on-year.

In the UK as a whole, the average rent is up 0.73% on last September at £1,196, 0.10% higher than in August. Scotland has seen the biggest increase: 2.01% year-on-year and up 0.42% in the last month to £733. It was followed by Wales, which has seen an annual rental increase of 1.31%.

 

Crossrail 2

Landbay also said rental increases along the proposed Crossrail 2 route were premature as a leaked business case from TFL suggested the scheme could be delayed by a decade.

The index showed a significant uplift in tenant demand in the four and a half years since the route was announced that pushed up rents in 13 of the 15 affected local authorities, and by 21.5% around north terminus Broxbourne.

Overall in the four and a half years since the announcement was made, 13 of the 15 affected local authorities have seen notable rent rises, most notably in the North and West extremities of the line, namely: Broxbourne (21.5%), Enfield (13.8%), Haringey (11.4%) and Spelthorne (10.5%). (See image below.)

However, since 2016 rents have once again begun to fall. Only Enfield saw rents grow (0.4%) in the past year, although by September rents had fallen there too. Meanwhile Broxbourne (-1.75%), Richmond (-1.13%), and Spelthorne (-2.16%) are all showing signs of dwindling tenant demand.

John Goodall (pictured), chief executive and founder of Landbay, said: “News that the line may now be delayed by a decade is nothing short of a hammer blow to all those that have had the foresight to plan that far ahead.

“What’s needed by tenants, landlords, buyers, business, and builders is a clear commitment from the government that the project will be delivered in 2033 as expected. Not only to help people and businesses plan their lives ahead, but also to allow adequate time for local authorities to plug housing shortfalls before demand spirals out of control.”

Goodall added that the government’s £2bn social housing pledge is an encouraging sign but could and should be linked to the UK’s infrastructure plan.

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Landlords raise rents prompted by tighter rental supply

Landlords raise rents prompted by tighter rental supply

The ARLA Propertymark report said the number of letting agents confirming landlords hiking rent costs for tenants rose to 35% in August – the highest level since July 2015, when 37% flagged an increase.

The figure has risen dramatically since last August, when 27% of agents witnessed rental increases.

Only 2% of tenants successfully negotiated a rent reduction.

Meanwhile, the number of properties managed per member branch decreased marginally in August, to 189 – down from 192 in July. However, this is higher than August 2016 when the figure was 183.

Demand from prospective new tenants increased to 72 in August, from 70 in July.

In August, the number of landlords selling their buy-to-let properties remained the same as May, June and July this year, with an average of three for sale per branch.

David Cox, ARLA Propertymark chief executive, said: “This month’s findings paint another bleak picture for tenants. In November last year, only 16% of agents saw landlords increasing rent costs, but that figure now stands at 35% – which is likely to continue rising.

“Landlords have had a rough ride at the hands of policy changes at Government level, and it’s becoming clear that these additional costs are now being passed onto tenants.”

Housing supply bottleneck pushes up rents

Housing supply bottleneck pushes up rents

Rents increased in nine of ten regions surveyed and the average now stands at £874 – up 3.1% in the last 12 months.

The strongest performance came in Wales, where prices have grown by 4.3% in the last 12 months to hit an average of £595. The South East, East of England and North West also saw growth of more than 3% in the last year.

The only region to experience a dip was the South West, where rents fell 2.2% to £667 per month on average.

Richard Waind, Your Move director, said the government’s Stamp Duty and additional tax changes have hit landlords hard.

“The outcome has been a decline in the number of rental properties on the market and this has had the effect of pushing up prices for tenants.”

However, this seems to have been countered by a drop in tenant demand post Brexit. With tenant numbers starting to rise again, Your Move said it is possible that more rent rises could come in the near future.

In London, prices have grown 1.2% in the last 12 months to reach an average of £1,283. However, this headline figure masks big differences depending on the location of the property.

“Tenants in London face a different issue as rapidly rising travel costs are increasing the overall cost of living in the suburbs, despite rents generally being cheaper than central areas,” said Waind.

Despite rents increasing, most landlords saw their yield levels remain flat between June and July. Wales was the only area surveyed to see the average return decrease month-on-month, slipping from 4.8% to 4.7%.

On a yearly basis, however, each of the regions surveyed recorded lower yields than 12 months ago. Between July 2016 and July 2017, the average yield across England and Wales dropped from 4.9% to its current level.

“The Private Rental Sector, however, could still be seen as an attractive opportunity for investors, with the North East and North West in particular seeing strong growth,” said Waind.

“Although buy-to-let investors are preparing for the new PRA changes coming into effect in September, it’s clear that there are still people who believe that, property remains a viable investment option.”

Landlords expect to sell properties and increase rents

Landlords expect to sell properties and increase rents

The figures came from quarterly research of almost 3,000 landlords conducted by the Residential Landlords Association (RLA).

It prompted the RLA to warn of a perfect storm hitting tenants in the rental sector with the number of properties available set to fall while increasing demand drives rent increases.

Its Welfare Reform and Universal Credit: The Impact on the Private Rented Sector report found that in the last three months, 33% of landlords had experienced an increase in tenant demand, driving future rent increases.

Over the last year the RLA research found that 43% of landlords had increased rents and that 47% planned to increase them in the year ahead.

The organisation said the government needed to reappraise the way landlords were taxed to encourage more to increase the size of their portfolios and increase the availability of properties for tenants.

RLA chairman Alan Ward said: “As demand continues to increase for homes to rent, punitive tax changes are discouraging investment by the majority of good landlords who want to provide accommodation.

“While efforts by the government to support institutional investment in the sector are welcome, this will remain a drop in the ocean.”

He added: “To meet demand, we need pro-growth taxation that actively supports and encourages the majority of landlords who are individuals providing good housing, to invest in the new homes to rent we so desperately need.”