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Rents rise 1% in most regions in April, says index

Rents in England have continued to increase in April as the market remains buoyant, according to the latest Goodlord Rental Index.

The average cost of rent for a property in England rose from £1,006 to £1,012 in April, an increase of 0.5%.

The index found that all regions saw an increase in prices of up to 1%, with the exception of Northern regions.

The North East saw a larger increase in the cost of rent, with prices up by 2.34%. The North West, however, was the only region to see a drop in the average, with a 1.6% decrease.

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Goodlord’s index also showed that there was another rise in tenant incomes, with the month setting a new record for take-home pay.

As prices continue to creep up, so do salaries, according to Goodlord, reflecting the pressure on employers in a competitive labour market.

In April, the average annual salary of a tenant living in England rose from £29,549 to £30,044, a 1.7% rise, representing another index record.

Renters in London are earning the most, taking home on average £44,920.38, compared to the North West who are the lowest earners, taking home an average of £24,403.69.

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On a yearly basis, renters are now earning 16% more than they did at the same time in 2021.

However, voids rose slightly during the months, as the pace of deals cooled in some regions. The average void period for the country in April increased by three days, up from 16 days to 19.

The biggest shift was seen in the North West, where a rise of 37% was recorded. This was followed by Greater London, which saw voids increase from 11 days to 14, a 27% rise. The index showed that London still has the lowest void periods in the country.

Goodlord chief operating officer Tom Mundy says: “The rental market continues to move apace. Rents are at the top end of what we’d expect for this time of year, but tenant salaries are keeping pace with this rise and continue to break records. And whilst voids have lengthened compared to March, all the signs point to a very buoyant market with a high demand for available housing stock.”

By Becky Bellamy

Source: Mortgage Finance Gazette

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How to invest in buy-to-let: the in-demand cities unlocked with a budget of £100,000

Soaring rents have enticed property investors back to the buy-to-let market to take advantage of the demand.

Asking rents outside London were up 11pc year-on-year in the first three months of 2022, according to property website Rightmove. In the capital, they jumped by 14.3pc – the largest annual increase recorded in any region since its records began.

A dire shortage of homes to let means rental bidding wars are commonplace and a record number of landlords are achieving over asking price.

Buyers must still contend with rising house prices, but a budget of £100,000 is enough to invest in some of the most in-demand cities in the UK.

We previously looked at where landlords could invest with budgets of £25,000 and £50,000, which largely ranged across Wales and the north east of England.

In the three locations below, an initial investment of £100,000 is enough to buy a property with the potential to earn more than £10,000 each year, according to research by estate agency Hamptons.

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Bristol

Bristol ranked as the best city for landlords to invest in for 2022, according to Aldermore bank.

More than a quarter of the South West city’s population lives in rental accommodation, and a shortage of properties to let has pushed rents skyward. The average rental yield is 6.5pc.

A £100,000 budget would cover a 25pc deposit and stamp duty on the average flat and terraced house in the city– costing £70,180 and £96,870 respectively – with cash to spare.

A flat in Bristol brings in roughly £11,092 of rental income a year, once mortgage payments and a 10pc provision for maintenance costs have been deducted, according to Hamptons. Annual income rises to more than £14,826 for a terraced house, among the highest for this type of property in the country.

An initial lump sum of £100,000 would be enough to cover the deposit on a semi-detached house in the city, at an average of £96,550, but stamp duty would push the total investment to £117,450. Landlords who can stretch their budget to this size could expect annual rental income after expenses of £17,681.

Manchester

Manchester has enjoyed a similar post-pandemic rental boom to Bristol. Tenants have flooded back to the city and snapped up any available lets, with new-build flats proving particularly popular, according to Rhiannon Durston, of agency Reside.

She said: “The city has become increasingly popular with investors as a result. Landlords are targeting lots of different price points, ranging from those looking to invest their savings in just one property, to those buying multiple.”

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The average rental yield in the city is 6.4pc, and a typical flat costs £175,380. Landlords will need to make an initial investment of £50,120 to cover the deposit and tax bill, and can expect profit after expenses of £7,885 a year.

Investing in terraced houses and semi-detached homes in the city is also possible with a £100,000 budget. An initial stake of £55,520 for a terraced home and £74,390 for a semi are needed to cover the deposit and tax bill on each of these property types.

Landlords can make profits after expenses of £8,694 from a terraced house and £11,496 from a semi-detached house, according to Hamptons.

Ms Durston added: “Many of the new build sites are now sold out. One-bedroom rentals fly out and three-bedroom homes are very popular too, but there are few of these available on the market.

“Splitting bills three ways between tenants makes the let more affordable, which is why they are in such high demand.”

Winchester

Higher property prices in the sought-after hotspot of Winchester limits landlords with a £100,000 budget to investing only in flats. They require £68,550 to cover the average deposit and stamp duty.

Buyer appetite for houses with gardens has surged since the pandemic, meaning landlords will be up against stiff competition for bigger properties. The average terraced house in the area requires an initial investment of £115,080.

However, investors who can afford to tap into the Winchester market will benefit from strong tenant demand.

Bill Jarvis, of estate agency Winkworth, said: “Landlords are now in a position to choose who they let their property to because demand is so high, whereas they couldn’t before.

“We frequently see tenants offering on a property without even viewing it.”

The average rental income from a flat in Winchester is £10,332 a year, after costs, according to Hamptons. If landlords can stretch their budget to a terraced or semi-detached house, annual rental income rises to £16,535 and £19,509 respectively.

“A lot of tenants are willing to pay guide price and above to secure a property, but especially so if they have pets,” added Mr Jarvis.

“There is a real lack of landlords who are willing to allow animals in their rentals, so tenants are offering higher bids to persuade them otherwise, sometimes to the tune of hundreds of pounds extra each month.”

By Rachel Mortimer

Source: Telegraph

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Landlord purchases in Q1 2022, highest in six years – Hamptons

Investors purchased 13.9% of homes sold across Great Britain in the first quarter of 2022, up from 12% recorded during the same period of last year.

This was revealed in the latest Hamptons Lettings Index, which also found that this year’s figure marked the highest proportion recorded in the first quarter of any year since 2016, when investors rushed to beat the 3% stamp duty surcharge on second homes.

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Overall, investors bought 42,980 homes across Great Britain during the first three months of this year, equating to £8.5 billion worth of property, which is nearly twice the £4.6 billion recorded during the pre-pandemic first quarter of 2019.

The increase in buy-to-let purchases may help reverse the decline of the private rented sector which shrunk from a peak of 5.3 million homes in 2017 to five million in 2021. However, the increase may not be enough to cover the lack of supply, according to Aneisha Beveridge, head of research at Hamptons.

“While we expect investors to continue purchasing at around the same rate over the course of 2022, it’s unlikely to be enough to make up for the full loss of rental homes during the last five years,” Beveridge said.

A lack of stock has also meant that investors are increasingly having to pay over the asking price. According to Hamptons, for the first time since it began recording data, the average investor is paying over 100% of the asking price for a buy-to-let in England and Wales.

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Meanwhile, the average cost of a new let in Great Britain rose to £1,115 pcm last month, up 9.1% from its 2021 low of £1,022 pcm in March last year.

“A lack of rental homes is one of the reasons why rents have been rising at such pace over the last year. March set a new record for rental growth as rents bounced back from 2021 lockdown lows last March,” Beveridge said.

“But as these new buy-to-let purchases begin to feed into the lettings market over the coming months, we expect to see rental growth cool, particularly as the cost-of-living crisis weighs on affordability too,” she added.

By Rommel Lontayao

Source: Mortgage Introducer

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Boom in the buy-to-let property market

Demand is growing for buy-to-let properties across the north and north-east as investors seek to capitalise on good rental returns and the rising property market.

Local estate agent Galbraith has reported a boom in the buy-to-let market with a typical two-bedroom apartment in Inverness expected to sell for £165,000 with a prospective landlord achieving rent of between £750 to £775 per month.

Marsaili Macleod, a lettings adviser with Galbraith, says there are two key reasons why there has been a shift in the market.

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Strong demand from tenants

“In recent years investors have been more interested in the holiday lets sector as these were often considered a more profitable option than residential lets,” said Marsaili.

“Now we are talking to more landlords who are interested in the core residential lets market for two reasons.

“Firstly, strong demand from tenants and lack of supply means that rental prices are rising and the landlord can pick and choose from waiting tenants.

“Secondly the value of the property itself will rise over the term of ownership because property prices have risen considerably in Scotland over the past two years.

“Many of our clients are planning ahead and investing in a buy-to-let property which will achieve good capital growth and fulfil their financial objectives while offering security.”

Lenders are currently offering capital and interest mortgages, or interest-only mortgages, for buy-to-let properties with monthly repayments lower than the likely monthly rental fee.

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According to Marsaili, this offers the potential to achieve a return each month even taking into account that a purchase of this kind is subject to the Land and Buildings Transaction Tax at 4 per cent on second homes.

And with the cost of borrowing remaining low, Marsaili also believes that this is playing a part in the market change as people are using it as an opportunity to invest in their future.

Low borrowing costs

“Although interest rates are rising, the cost of borrowing remains historically low,” said Marsaili.

“The potential returns in the buy-to-let sector are good, coupled with the likely significant rise in value of the property itself over the term of ownership.

“Clients are considering whether to buy a property which can be let now to a tenant and in five or 10 years’ time potentially made available to their children as a first home or for when they go to university.

“Having evaluated the returns from the holiday lets sector and the potential returns from residential tenancies, clients are choosing the residential lets market.”

Galbraith currently lets over 1,000 homes to residential tenants for clients across Scotland and the north of England.

By Rosemary Lowne

Source: The Press and Journal

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Property rents rise as Scotland catches up with England & Wales

Scottish property rents have continued to rise at a higher rate than the rest of Britain after years of low increases according to analysis of the latest data from property firm DJ Alexander Ltd, part of the Lomond Group which is the largest lettings and estate agency in Scotland.

The latest data up to February 2022 shows that the annual increase in rents was 2.6% compared with 2.1% in England and 1.4% in Wales. The Scottish annual rate has been higher than England and Wales each month since July 2021. However, over the long term since 2015, rents in England and Wales have risen at a higher rate than Scotland.

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David Alexander, the chief executive officer of DJ Alexander Scotland, commented:

“The current increases in rents across Scotland reflects growing demand but is also a sign that the market is correcting itself. This data shows that Scotland’s rent increases have consistently been lower than England and Wales since 2015 and the current increases are simply a sign of Scotland catching up.

“It also needs to be remembered that a 2.6% annual increase in rents is still quite low given that inflation is now running at around 6 to 7% which means that this increase is actually a reduction in real terms.

“The Scottish government’s own data reveals that two-bedroom private rented sector (PRS) rents over the last eleven years have risen at a rate similar to inflation (25.1% rent increase compared to inflation of 24.3% over the same period).

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“Too often the focus on rent rises produces a headline figure rather than one which is adjusted for inflation. This is like saying a pint of beer should be the same price in 2022 as it was in 2010. Everybody knows that is ridiculous but when it comes to the private rented sector many people seem to ignore the fact that rents, like all goods and services, must rise each year by at least inflation.

“I do believe that rents will increase much more in the coming year due to skyrocketing inflation and the cost-of-living crisis. Hardest hit will be those properties which are let on an all-inclusive basis including bills as the soaring cost of utilities will be a particularly strong driver of rising prices.

“Landlords, investors, and agents should all take care in explaining the reasons for rent increases whilst tenants, their representative organisations, and politicians must also take a realistic approach. Rental prices must rise to keep up with inflation and that such increases are entirely necessary to cover greater costs.”

Source: Property Industry Eye

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Landlords confident for buy-to-let market outlook

Two-thirds (67%) of landlords are confident about the buy-to-let market outlook in 2022, according to Stephanie Charman, head of strategic relationships at Sesame Bankhall Group.

The figures were revealed within Shawbrook’s recent Changing Face of Buy-to-Let Report, which also found that 34% of landlords are planning to purchase another property this year.

Turning to the percentage of landlord clients considering opening limited companies for their buy-to-let properties, almost a third of broker respondents (29%) said that more than 75% of their portfolio clients were debating the move.

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That was according to a poll conducted by intermediary-only specialist buy-to-let lender CHL Mortgages during a Lender Spotlight webinar session, held in conjunction with Knowledge Bank.

Charman said that the rise in the number of landlords planning to buy this year is encouraging and has been backed-up by anecdotal feedback from lenders.

She went on to explain that lenders have reported seeing an increase in purchase activity within the buy-to-let sector, especially from landlords diversifying and purchasing HMOs and semi-commercial units.

“Our own forecasts point to a buy-to-let market of around £44 billion in 2022. This is slightly down on last year, with fewer new purchases without the stamp duty incentives,” she added.

Even when recent interest rate increases are factored in, rising rents, alongside competitive product pricing, are providing attractive yields, according to Charman.

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Despite these rising rents, a survey conducted by the Social Market Foundation (SMF) shows that 81% of renters said they are happy with their current property, and 85% said they are satisfied with their landlord.

In addition, the survey found that only half of renters expect to leave the private rented sector in the next 15 years, and 13% would be satisfied with long-term renting.

Looking to the average age of tenants, the data shows that, by 2035, more than half of private renting households are likely to include someone aged 45 or older. The Social Market Foundation also believes that couples and families will make up a rising proportion of renters.

“Given the challenges facing prospective first-time buyers in stepping on to the property ladder, the private rental sector continues to play a vital role in fulfilling the UK’s housing needs,” said Charman.

Charman went on to say that other significant buy-to-let drivers include the continued impact of the new Minimum Energy Efficiency Standards.

All buy-to-let properties must now be E rated, with consultations taking place to raise this benchmark to a C rating for new buy-to-let tenancies in 2025 and existing tenancies by 2028.

Within the consultation document from late 2020, it was suggested that the minimum EPC rating should be raised to a band C for all new tenancies by 2025, and all existing tenancies by 2028.

According to Charman, market speculation has suggested these timescales could be pushed out further.

“However, one thing is clear, change is coming and the buy-to-let market will look very different in the future,” said Charman.

When the new rules are implemented, many landlords will have additional upgrade costs to deal with – Charman estimates that for improving EPC ratings, the costs will range from £5,900 to £10,400 per buy-to-let property.

According to Shawbrook Bank’s report, 17% of landlords have already made efforts to improve the energy efficiency of their property, rising to 22% of portfolio landlords.

Of the landlords that had undertaken a refurbishment, 22% had replaced the boiler and heating system in their property, a further 23% had replaced the windows, and 18% had installed new white goods.

Charman believes the speculation around the change in requirements could lead to some divestment and consolidation, particularly among landlords with older, less energy efficient housing stock.

As a result, she said the expectation is that landlords will bolster their portfolio with new build properties.

“With so much change on the horizon, it is vital for advisers and landlords to keep up to date with the latest buy-to-let developments,” Charman added.

By Jake Carter

Source: Mortgage Introducer

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Most tenants happy with property and landlord: Paragon

Tired cliches” about renting have been disproven according to Paragon Bank, after commissioning research which showed the majority of tenants are happy with their experience.

Carried out by the Social Market Foundation (SMF), a survey of 1,300 tenants found over 80% were happy with their property and landlord.

Conversely, the greatest source of dissatisfaction among this population was the status of being a renter with 34% of respondents attesting to this.

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The report – entitled ‘Where next for the private rented sector?’ – also unveiled tenants’ ambitions.

Only half of respondents expect to leave the private rented sector in the next 15 years, suggesting many intend to remain renting for longer.

Specifically, 13% of respondents admitted they would be happy renting for the long-term.

This could mean a demographic shift among renters with average ages rising.

By 2035, SMF expects over half of private renting households to include someone aged 45 or older. Couples and families will also make up a rising proportion of renters.

Paragon Bank managing director of mortgages Richard Rowntree says these findings demonstrate how many views about renting are “outdated” or “tired clichés”.

“In our experience, the vast majority of landlords seek to provide a good quality home and enjoy a healthy relationship with their tenants; the significant investment in private rented property by landlords has helped drive up standards over the past 15 years and today homes in the sector are generally newer, larger and more energy efficient than ever before,” says Rowntree.

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“People from all walks of life now call the private rented sector home and we must strive to create a sector that meets everybody’s needs.”

The SMF includes several recommendations to the government.

These are to increase the stability of tenancy agreements (after 69% respondents supported 24 months as the minimum contract length), giving renters more control over their homes, increase accountability of landlords and improve the standards of private rented properties.

SMF economist, and one of the report’s authors, Aveek Bhattacharya says: “In contrast to the horror stories that get wide circulation, the majority of renters are satisfied with their living conditions and have decent relationships with their landlords.

“It is absolutely right that the government should seek to help the minority with poor standard accommodation and unprofessional landlords. At the same time, it needs to think harder about what it can offer the typical renter – who is largely happy with their circumstances today, but has doubts about whether they want to keep renting long-term.”

Source: Mortgage Finance Gazette

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Buy-to-let landlords targeting smaller UK cities and towns

Landlords buying in urban areas are increasingly shifting their purchasing activities to smaller, secondary towns and cities, data analysis from Paragon Bank’s own lending records has revealed.

“Landlord demand for city and town centre property was strong in 2021, with Paragon’s analysis showing completions for house purchases increasing by 100% compared to the previous year,” Richard Rowntree, director of mortgages at Paragon Bank, said.

The strongest increases were seen in locations outside of the UK’s major city centres, according to Rowntree.

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“The strongest growth was not necessarily in the UK’s major cities. Aside from London and Manchester, the top 10 growth locations were in secondary cities or large towns. The likes of Milton Keynes, Luton, Bristol, Northampton and Nottingham experienced strong double or triple-digit growth in completions during the year,” he said.

Milton Keynes experienced a 667% increase in completions in 2021 compared to the previous year. This was followed by Bristol with a 300% increase, Manchester (300%), and Luton (258%).

Other urban locations in the top 10 included Plymouth (183%), Stoke (157%), Northampton (133%), Cardiff (70%) and Nottingham (64%).

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Paragon said landlords have been reacting to changing tenant demand, and that is to retain urban living but in smaller towns and cities.

“There appears to be one of, or a combination of, three factors that each of these locations share. They are in commutable distance to a major city, they mostly have vibrant universities, and they have healthy local economies,” Rowntree said.

In London, Paragon’s figures show a 95% increase in buy-to-let completions in the capital during 2021, with landlords concentrating acquisitions in Zones 2 and 3 as they balanced the requirement for yield, availability of property, and tenant demand.

By Rommel Lontayao

Source: Mortgage Introducer

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Buy-to-let affordability hits record high

Buy-to-let properties have become more affordable to landlords as the average maximum loan size reached its highest level on record last month.

According to a report published by Mortgage Broker Tools (MBT), the average maximum loan in January was £421,053, a £20,000 increase in just a month.

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The figure also represents a 13% increase when compared to the average from January last year. MBT launched its buy-to-let affordability index in August 2020.

“The latest MBT Affordability Index shows that the average maximum loan size available to buy-to-let investors is now larger than ever before. However, the spread between the average maximum and minimum loan sizes available to landlords has also never been wider,” Tanya Toumadj, chief executive officer at MBT, said.

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“For investor clients who want to maximise their leverage, it’s vital that brokers are able to easily identify those lenders that will offer larger loan sizes based on their individual circumstances.”

By Rommel Lontayao

Source: Mortgage Introducer

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Buy-to-let loan sizes jump £20k in one month

Buy-to-let loan sizes jumped by 13 per cent last month, meaning the average maximum loan available to prospective and existing landlords is now £421,053.

In December, this figure stood at £401,053, pointing to a £20,000 increase. This means loans for landlords are at their highest level since August 2020, according to research published by adviser platform Mortgage Broker Tools today (February 28).

The buy-to-let sector remained buoyant last year, despite some reports of landlords exiting their portfolios. Purchase activity reached £18bn, up 83 per cent on 2020, according to UK Finance.

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But while the average maximum loan size available to buy-to-let investors is approaching a two-year high, the spread between the average maximum and minimum loan sizes available to landlords has also “never been wider”, according to Tanya Toumadj, chief executive at Mortgage Broker Tools.

“For investor clients who want to maximise their leverage, it’s vital that brokers are able to easily identify those lenders that will offer larger loan sizes based on their individual circumstances,” she explained.

Legal & General Mortgage Club data also published today found searches for landlords with gifted equity grew by 82 per cent last month. This suggests that those in the buy-to-let market may be benefitting from financial support from family members to boost their borrowing power as the loan sizes available to them continue to increase.

Richard Merret, head of strategic development at mortgage club SimplyBiz, told FTAdviser the pandemic has shown people “the robustness of houses as an asset”.

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In 2021, the price of a typical UK home grew to £254,822, up nearly £24,000 over the year.

Merret also said an interest in holiday letting has increased, due to the tax benefits and the “ease” of arranging it via an app. “Airbnb has made being a holiday-let landlord more accessible,” said Merrett.

A series of regulatory changes to the buy-to-let sector has, however, made it harder to enter the market. So advisers can better understand these regulatory changes – which include a 3 per cent stamp duty surcharge, more stringent affordability tests and reforms to mortgage relief – SimplyBiz has launched a series of virtual academies.

Meanwhile, some investors are now looking to make gains off cryptocurrency rather than off a housing portfolio.

One investor told FTAdviser in December that with property producing average gains anywhere between 5 and 10 per cent a year, he was drawn to the minimum advised return of around 30 per cent to be made from cryptocurrency in just three to six months on less money.

By Ruby Hinchliffe

Source: FT Adviser

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