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Buy-to-let mortgages reach their 25th birthday

The private rented sector has almost doubled in size since the first buy-to-let mortgage launched 25 years ago this Friday.

In 1996, the Association of Residential Landlords (ARLA) worked with a small group of lenders including Paragon and NatWest to develop a mortgage product specifically tailored to landlords.

Buy-to-let was devised to encourage new investment into a private rented sector (PRS) that had been in long-term decline.

The recession of the early 1990s exposed a lack of options for those for whom home ownership was out of reach, but who couldn’t qualify for diminished social housing provision.

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The PRS had fallen from over 70% of homes post World War I to less than 10% by the late 1980s, fuelled by the growth of social housing, successive policies to encourage home-ownership and a legal landscape that afforded little legal protection to landlords.

The only way a landlord could finance a property portfolio before BTL mortgages were launched was through commercial mortgage terms.

Often offered a low loan-to-value and with high rates, these didn’t always make the most attractive option for investors.

As a result, it is thought that some landlords used standard residential mortgages but in cases where the tenants weren’t declared, the terms of the mortgage would have been breached.

That was until the launch of the first specialist buy-to-let mortgage in 1996.

At the time, John Major was prime minister, Princess Diana and Prince Charles divorced and mad cow disease was causing panic.

That same year the Spice Girls’ debut single, Wannabe, was released and England hosted the European Football Championships, cheered on by fans singing David Baddiel and Frank Skinner’s Three Lions (Football’s Coming Home).

The private rented sector (PRS) has almost doubled in size, expanding from 2.4 million households in 1996 to 4.4 million in England today.

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Now the PRS accounts for 19% of UK households, which is more than the social housing sector, which accounts for 17% of households.

The portion of homes in the sector classed as “decent” under government standards has consistently increased, rising from 53.2% in 2006 to 76.7% last year.

There has been a 272% increase in PRS homes with an energy rating of C or above since 2009 to 1.8 million today.

Paragon managing director for mortgages Richard Rowntree says: “Since being launched as a mortgage product specifically designed for landlords 25 years ago, buy-to-let finance has helped to transform the PRS.

“It is now a vital component of the UK’s housing provision, with renting no longer a last resort.

“The PRS is a tenure of choice as well as need and this is supported by the diversity of those who actively choose rented homes, benefitting from the flexibility they provide.”

Former Arla Propertymark president Robert Jordan says: “We at Arla realised that the housing market was at a low ebb; houses weren’t selling, which meant a lot of people were letting their homes to move to a new property.

“When the housing market picked up those properties sold and there was a need for more rented properties to fill the gap for tenants, but we couldn’t see where we would find more homes to let.

“It became clear that the mortgage options weren’t suitable, so together we designed a product, buy-to-let, that would enable more investors to purchase an investment property and let it under the new Housing Act 1988 regulations.

“Paragon and NatWest were the first two mortgage lenders we approached. Today, private landlords house approximately five million households across the UK at no cost to the exchequer.”

By Leah Milner

Source: Mortgage Strategy

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How to show landlords that buy-to-let is still a good investment

Predictions on the future of buy-to-let vary greatly. Some say that the buy-to-let sector is thriving and will continue to grow and expand in line with increasing tenant demand. Others say that the weight of legislation and the associated costs are driving landlords out of the market. So what does this all mean for the future of the industry and how can you encourage your landlords to continue to invest?

Buy-to-let landlords coming and going

First, let’s take a look at the stats. The Nottingham Building Society estimated that 20% of buy-to-let landlords intend to sell all or some of their portfolio over the next two years. This nearly balances with the 16 percent that aim to buy more properties over the same period – but not quite. Research by University of York’s Centre for Housing Policy points to one explanation: ‘baby boomer’ landlords ageing out of the market and not being replaced by younger landlords at the same rate.

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To stem the flow of landlords leaving and to help potential new landlords see the benefits of the sector, your agency needs to show the importance of its role in supporting landlords throughout their journey. The building society’s research showed that 52 percent of landlords intending to sell up blamed this on increased regulation in a recent survey. This leaves an opening for you to help potential landlords recognise the importance of choosing the right agency to help them stay compliant or to show why your current landlords would benefit from your fully managed option.

Buy-to-let limited companies

The end of tax relief on buy-to-let mortgages is another reason cited for 24 percent of landlords planning to leave the industry. However, the question of tax is also driving a new positive trend in the market, with more buy-to-let landlords forming limited companies.

When registered as a company, landlords can grow their portfolios more quickly as they can offset the interest on their mortgage against the profits they make. They also benefit from corporation tax rates which are lower than income tax ones. Hamptons Countrywide found that 41,700 buy-to-let limited companies were formed in 2020 – an increase of 23% on 2019 and a record number, which could help give your landlords more confidence in this route for investment.

Buy-to-let mortgage choice expanding

The increased demand from tenants has also had a positive impact on the number of buy-to-let mortgage products available. Moneyfacts highlighted 2,709 mortgages available in July 2021 – and this influx of new choice means that average rates have started to fall to lower than in July 2019. Which? notes that some of your landlords coming to the end of two-year fixes may even be able to remortgage at a cheaper rate.

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The Paragon Bank echoes this positive sentiment, with buy-to-let mortgage lending up by a third between 1 October to 30 June against the same period in 2020, up to £911.4 million – and applications are still going strong despite the phasing out of the stamp duty holiday.

Investment opportunities in energy efficient homes

As the government continues to advance its plans to increase the minimum energy efficiency standards for private rented properties to EPC Band C on new tenancies by 2028, landlords are understandably concerned about the costs involved with implementing the necessary changes to their properties, projected to be up to £7,646 per property according to the the Office of National Statistics.

However, there are opportunities out there for your landlords looking to invest. Eighty-two percent of landlords, investors and brokers in a recent survey said that they’d prioritise “environmental friendliness and energy efficiency” when buying properties. This taps into increased tenant support for sustainable solutions, and could also have a cost benefit for your landlord; green mortgages could offer your buy-to-let investors lower interest rates if they were to invest in energy efficient properties.

For those with properties already, you could advise your landlords on some low cost ways to improve their properties’ energy efficiency, including using low energy lighting, estimated to cost £38 on average, insulating hot water cylinders at around £23, and draught-proofing windows at £100.

The best places for buy-to-let investment

Trends in the number of buy-to-let landlords in the market should also take into account those areas where investors are seeing the most success. Research by Intus Lettings shows that void periods have dropped for buy-to-let landlords, with a growing number of properties with near complete year-round occupancy in some regions – a quarter of the landlords in the east of England said that their properties were empty for less than a month over a one year period, for example. This reflects Goodlord’s Rental Index data which show that in July 2021 voids on average across England were at their lowest level since August 2019 – so, all in all, a positive outlook.

Some areas of the UK offer higher yields for landlords – and if you’re an agent that’s lucky enough to operate in those areas, you have a strong argument for helping to encourage landlords to join the market. Recent figures show that the North East of England offers the best buy-to-let yields. If you’re advising potential landlords on where to invest, that could be a good place to start.

Source: Property Industry Eye

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The Best Areas in London for Buy-to-Let Yields This Year

Buy to Let – Since the onset of COVID-19, investors have turned away from many of the asset classes whose presumed security and capacity for long-term value creation were once thought unimpeachable. With international lockdowns accelerating existing trends towards flexible working practices and e-commerce, investors have seen billions wiped off the value of commercial property assets.

However, while commercial property has suffered, the value of residential assets has fared well during the pandemic. Thanks to the extended stamp duty holiday, the sales market is buoyant and price growth has exceeded expectations, while a surprisingly robust lettings market benefited from permission to continue operating during later lockdowns and a flurry of activity as renters seek out housing that more closely aligns with their post-COVID priorities.

At Home Made, we have analysed data from thousands of property listings across London to create an up-to-date guide on buy-to-let rental yields for investors in the capital. Here are the top 10 postcodes in London offering investors the best rental yields for 1, 2, and 3-bedroom properties.

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1-bedroom properties

  1. IG11 (Barking, Upney) – 6.12 per cent
  2. N9 (Lower Edmonton) – 5.89 per cent
  3. TW13 (Feltham, Twickenham) – 5.65 per cent
  4. EN8 (Cheshunt, Waltham Cross) – 5.57 per cent
  5. IG1 (Ilford) – 5.56 per cent
  6. EN3 (Enfield) – 5.50 per cent
  7. RM6 (Chadwell Heath, Goodmayes, Marks Gate, Little Heath) – 5.46 per cent
  8. RM1 (Romford) – 5.43 per cent
  9. RM7 (Romford, Dagenham, Hornchurch) – 5.39 per cent
  10. IG2 (Gants Hill, Newbury Park, Aldborough Hatch) – 5.35 per cent

2-bedroom properties

  1. UB1 (Southall) – 5.93 per cent
  2. IG11 (Barking, Upney) – 5.64 per cent
  3. EN3 (Enfield) – 5.52 per cent
  4. RM6 (Chadwell Heath, Goodmayes, Marks Gate, Little Heath) – 5.48 per cent
  5. N9 (Lower Edmonton) – 5.42 per cent
  6. TW5 (Hounslow) – 5.39 per cent
  7. N18 (Upper Edmonton) – 5.39 per cent
  8. IG1 (Ilford) – 5.37 per cent
  9. IG3 (Ilford, Cransbrook, Loxford) – 5.35 per cent
  10. RM1 (Romford) – 5.33 per cent

3-bedroom properties

  1. RM8 (Dagenham, Beacontree) – 5.13 per cent
  2. RM9 (Dagenham, Beacontree) – 5.01 per cent
  3. RM10 (Dagenham, Beacontree) – 4.90 per cent
  4. IG11 (Barking, Upney) – 4.80 per cent
  5. EN3 (Enfield) – 4.76 per cent
  6. RM3 (Harold Wood, Harold Hill) – 4.64 per cent
  7. N9 (Lower Edmonton) – 4.61 per cent
  8. CR0 (Croydon) – 4.56 per cent
  9. N18 (Upper Edmonton) – 4.54 per cent
  10. CR7 (Thornton Heath) – 4.54 per cent

Overall

  1. IG11 (Barking, Upney) – 5.13 per cent
  2. RM10 (Dagenham, Becontree) – 4.97 per cent
  3. RM9 (Dagenham, Becontree, Castle Green) – 4.94 per cent
  4. RM8 (Dagenham, Becontree, Becontree Heath, Chadwell Heath) – 4.91 per cent
  5. SE28 (Thamesmead, Greenwich, Bexley) – 4.88 per cent
  6. E13 (Plaistow, West Ham) – 4.59 per cent
  7. RM3 (Harold Wood, Harold Hill, Noak Hill, Harold Park) – 4.54 per cent
  8. N9 (Lower Edmonton) – 4.44 per cent
  9. E6 (East Ham, Beckton, Barking) – 4.40 per cent
  10. RM6 (Chadwell Heath, Marks Gate, Little Heath, Goodmayes) – 4.35 per cent

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What does the data show and why?

As the data indicates, the most attractive investment prospects right now are mainly clustered in London’s outermost Eastern boroughs: Barking and Dagenham, Redbridge, and Havering. A review of our previous yields analysis (published in late 2019) suggests that there has been a sustained eastwards shift in the location of postcodes offering the best potential ROI for buy-to-let landlords.

There are several likely reasons why this is the case, with trends established both before and during the pandemic responsible for the continuing eastwards shift.

Improvements to transport infrastructure

As was the case in our original 2019 analysis, improvements to London’s transport infrastructure mean that residents in high-yield areas can commute into the major economic hubs of the city centre with relative ease. The forthcoming Elizabeth line will drastically improve transport connections between many of this year’s best performing locations to the rest of the TfL network, with stations opening in Ilford, Goodmayes, Chadwell Heath, and Romford. We know that rental prices react more quickly than sales values to infrastructural improvements, so investors should expect to see an even greater spike in rental yield value in these East London suburbs.

The impact of urban redevelopment

Urban redevelopment schemes that introduce thousands of units of high-specification housing and modern amenities tend to change the profile of tenants, making them more attractive to working professionals on higher incomes. This increases the value of nearby property, leading to a sustained rise in rental yields over the medium term as rental price growth outpaces the growth in sales prices.

East London’s outer boroughs are currently further behind in their redevelopment journey than many of the more central neighbourhoods that have already been transformed by various urban renewal projects (e.g Stratford, Royal Docks). Ambitious redevelopment plans underway in the East, particularly in Havering, are set to have a similar impact, and investors should expect to see consistent growth in rental yields along with significant appreciation in the sales value of any property.

Consumer and renter behaviour

Tenant migration patterns have been altered significantly by COVID-19. Since the onset of the pandemic, the widespread adoption of flexible working practices has meant that renters have had more freedom to move across the city without as much concern for the impact on their daily commute. When we analysed enquiry data for rental properties in TfL travel zones 4, 5, and 6, we found that 40 per cent of the renters enquiring on properties in these areas were currently based in zones 1, 2, and 3, suggesting a significant spike in the number of tenants moving towards London’s suburbs. Similarly, 64 per cent of the renters logged in our database in 2020 were moving to a completely new area of the city, with an average travel time of 44 minutes between their previous property and prospective new home.

As well as having the flexibility to stray further away from the workplace, tenant priorities have changed drastically following our collective experiences of successive lockdowns. The so-called ‘race for space’ is well documented, with many tenants moving to the suburbs or leaving the city altogether in search of larger properties with more access to green space and better suited to pet ownership – features which are now a higher priority for many than proximity to the workplace.

Many have also moved further away from the centre to reduce costs during a period of sustained economic upheaval. For many of London’s working professionals, it no longer makes financial sense to pay a premium for expensive central property when there is no need to maintain a daily physical presence in the workplace. Properties in high-yield areas are able to satisfy both the post-COVID lifestyle priorities and affordability criteria of London’s renters.

Overall, the residential lettings market has proven remarkably adaptable when faced with unprecedented economic and social circumstances, along with various existing trends that disrupt the way people rent and let property. As a result, buy to let rental yields in outer zones have remained high, and even increased in the last 18 months, as renters expanded their search radius to include the new areas that they would now consider living in.

BY PETE CARVILL

Source: Property Wire

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A third of landlords have expanded buy-to-let portfolios

Buy to Let – The ‘opportunity to buy at a discount’ is driving many landlords to increase their portfolio a new survey has revealed.

In a study of more than 300 landlords, 34% said they had either recently purchased another buy-to-let property (BTL) or intended to buy one within the next nine months.

While the most common reason for their additional purchase was the opportunity to buy at a discount, other key factors included long‑term investment (35%), stamp duty savings (34%) and diversification by either location (26%) or property type (23%).

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The survey also revealed how 43% of landlords surveyed said that they had temporarily lowered rents during the pandemic to help tenants, with 22% saying they had refinanced their mortgages since the arrival of coronavirus.

Paul Fryers said: “Understanding the purchasing motivations behind professional landlords is an essential factor for Zephyr and our mortgage broker clients.

“It’s equally important to recognise and appreciate some of the challenges landlords have been facing during the past year and how they will affect their current and future applications.

“During the pandemic we saw a significant rise in the use of limited companies to buy and manage property portfolios, and it seems a significant proportion of landlords have made the most of the opportunities provided by the buoyant market conditions we have experienced over the past six months.”

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The survey also revealed only 7% of landlords had taken a mortgage holiday and 13% had sold a property during the pandemic.

Those landlords who did not purchase additional buy-to-let properties over the last year cited ‘declining rental yields’ (51%) and ‘concern about economic stability’ (42%) as their main reasons.

Matt Trevett added: “Although the buy-to-let market has remained more buoyant than some predicted, the last year has not been without its challenges for many tenants and landlords.

“The survey suggests a large proportion of landlords have been acting to support their tenants, with a significant proportion saying they had temporarily lowered rents during the pandemic.

“A recent survey also showed that the pandemic has triggered movement from cities to towns and the countryside, so landlords seeking to rebalance their portfolios may look to make purchases that reflect that trend.”

Source: Mortgage Finance Gazette

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Third of landlords either bought or buying new buy-to-let properties

More than a third (34%) of landlords have recently purchased another buy-to-let property (BTL) or intend to buy one within the next nine months, a survey by The Deposit Protection Service (The DPS) and Zephyr Homeloans has found.

Results from the poll of 300-plus landlords suggest that the ‘opportunity to buy at a discount’ is the most commonly cited reason among those who have recently bought or soon intend to buy additional rental property.

Other key factors including long-term investment (35%), stamp duty savings (34%) and diversification by either location (26%) or property type (23%).

Paul Fryers, managing director at Zephyr Homeloans, said: “Understanding the purchasing motivations behind professional landlords is an essential factor for Zephyr and our mortgage broker clients.

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“It’s equally important to recognise and appreciate some of the challenges landlords have been facing during the past year and how they will affect their current and future applications.

“During the pandemic we saw a significant rise in the use of limited companies to buy and manage property portfolios, and it seems a significant proportion of landlords have made the most of the opportunities provided by the buoyant market conditions we have experienced over the past six months.”

Some 43% of landlords surveyed said that they had temporarily lowered rents during the pandemic to help tenants, with 22% saying they had refinanced their mortgages since the arrival of coronavirus.

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Matt Trevett, managing director at The DPS, added: “Although the buy-to-let market has remained more buoyant than some predicted, the last year has not been without its challenges for many tenants and landlords.

“The survey suggests a large proportion of landlords have been acting to support their tenants, with a significant proportion saying they had temporarily lowered rents during the pandemic.

“A recent survey from The DPS also showed that the pandemic has triggered movement from cities to towns and the countryside, so landlords seeking to rebalance their portfolios may look to make purchases that reflect that trend.”

Source: Mortgage Introducer

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Govt’s proposals on renting reforms expected to improve BTL reputation

Government proposals on renting reforms could improve the buy-to-let sector’s reputation, brokers have said, although a warning has been sounded on their effect on the investment appeal for landlords.

In yesterday’s Queen’s Speech (May 11) the government said it would ‘enhance’ the rights of those who rent, in addition to helping more people own their own home.

Measures proposed by the government in its policy paper included bringing forward reforms this year to drive improvements in rented accommodation standards, well targeted enforcement that drives out criminal landlords, and exploring the merits of a landlord register.

The government also said the reform package was expected to require all private landlords to sign up to a redress scheme for tenants.

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Ben Beadle said the government’s proposals amounted to some of the biggest changes in the private rented sector in 30 years.

Beadle added: “We welcome the government’s ambitions to drive out bad landlords from the sector without penalising those who do the right thing. We want to root out all those who bring the sector into disrepute.”

Bob Young likewise said “proportionate and fair” measures would benefit both tenants and ‘good’ landlords.

Young said: “For decades now a small minority of landlords have effectively got away with properties that are not suitable for habitation and as a buy-to-let lender we’ve seen some appalling examples of this.

“This minority is damaging the reputation of the vast majority of landlords who look after their properties and are responsive to their tenants’ requests.”

In its policy paper the government also said it would publish its consultation response on abolishing ‘no fault’ evictions and strengthening repossession grounds for landlords when they have valid cause.

Paul Brett commented: “There is an absolute need for landlords to be able to retake possession of their properties when circumstances dictate that they need to, but tying this with changes to drive up standards is the right thing to do.

“This will support responsible landlords, which in turn will enable them to help more tenants.”

In 2019 the then-government announced proposals to prevent private landlords from evicting tenants at short notice and without good reason before launching a consultation.

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Under section 21 of the Housing Act, private landlords can repossess their properties from assured shorthold tenants without having to establish fault on the part of the tenant.

Angus Stewart said: “Landlords have been bracing themselves for the Renters Reform Bill for some time now, so we welcome the fact we now have a way forward.”

Stewart added: “Landlords need to know they can take back properties when they have a legitimate reason for doing so and tenants need to be able to plan their futures.

“We should not forget mortgage lenders who will be looking for reassurance as to their rights as creditors. Getting the balance right will be crucial and as ever the devil will be in the detail.”

But Bulent Kandemir said the renters’ reforms come after private landlords have been “hit very hard” in the past few years, such as with restrictions to income tax relief.

Kandemir added: “I would question whether these landlords have the appetite to keep doing this going forward, as the profitability of owning a property to let is arguably no longer there.”

By Chloe Cheung

Source: FT Adviser

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Broker optimism on BTL at seven-year high

The number of brokers expecting more buy-to-let business over the next 12 months is at its highest level since 2014, according to a survey by Paragon Bank.

In a February/March survey of 195 intermediaries, half said they were anticipating higher levels of buy-to-let mortgage business over the coming year, up from 41 per cent in Q4 2020.

The number of brokers who already saw strong demand for buy-to-let mortgages also rose, to 47 per cent in the first quarter of this year, up from 44 per cent in Q4 2020.

Meanwhile, the number of intermediaries who reported weak buy-to-let mortgage demand was at its lowest since before the start of the pandemic, at 12 per cent.

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Richard Rowntree, managing director of mortgages at Paragon Bank, said: “It’s fantastic to see that such high levels of optimism have been recorded following the challenges of the past year or so and that this is being driven by strong levels of demand.

“The extension of the stamp duty holiday is certainly a driver of that, but it is underpinned by longer-term demand for rental property.”

Carl Shave, director at Just Mortgage Brokers, commented: “With 2020 being a subdued year for buy-to-let investment due to the economic climate from the pandemic, it is pleasing to see the optimism from brokers and the positive reports of an uptake in demand. Indeed this is being reflected in the increase in enquiries for our advisers.

“The stamp duty holiday extension will at present add a little fuel to the fire as investors look to take advantage of the potential savings this can provide. It will therefore be interesting to see what impact this has on the market when it expires and the resulting longer term outlook.”

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Paragon’s findings come after analysis by Hamptons found the number of properties sold by landlords last year slowed to a seven-year low, despite the first annual rise in profits on sales in more than five years.

Earlier research from Foundation Home Loans before the stamp duty holiday was extended also suggested the end of the tax break would not prevent landlords from adding to their portfolios.

Hiten Ganatra, managing director at Visionary Finance, said his firm was seeing an increased appetite from professional landlords looking to grow their portfolio, with returns being realised from BTL investments “far superior than to leave money in the banks”.

Ganatra said: “Landlords are happy to generate yields of 5 to 7 per cent, which invariably gives them an even great return on investment than holding cash.

“We are also seeing more and more landlords moving into the HMO [houses in multiple occupation] space which is helping to enhance yields to 8 per cent-plus.”

On the supply side, meanwhile, data from Moneyfacts has shown that product availability in the buy-to-let market continued to improve for a fifth consecutive month in March.

By Chloe Cheung

Source: FT Adviser

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The buy-to-let boom is far from over, research has revealed

A year ago there were warnings that the buy-to-let market was looking increasingly bleak and that landlords were deterred from entering the sector, or quitting it altogether as a result of tax changes.

But despite scaremongering that there will be a ‘mass exodus’ of landlords, new data suggests that buy-to-let landlords are taking a far more pragmatic approach.

New data from Hamptons shows that last year 131,900 properties were sold by landlords in Great Britain, the smallest sell-off since 2013, when 105,830 properties were sold.

The research also reveals that the average landlord who sold up last year in England and Wales sold their buy-to-let for £82,450 or 42% more than they paid for it, having owned the property for 9.1 years on average.

The average landlord gross gain increased by £3,390 or 4% to £82,000 compared to 2019 – £79,060 – marking the first annual rise in more than five years.

Landlords in London made the biggest gains. The average London landlord sold their buy-to-let for £302,200 or 71% more than they originally paid for it, having owned the property for 9.8 years on average.

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Last year reversed the fall in a London landlord’s gross profit.  Despite the increase, typically landlords who sold in the capital last year made a smaller gross profit than those who sold in 2016 when they made an average gain of £364,960. 2016 marked the high point for landlord profit when many investors, having bought at the bottom of the market following the 2008 financial crash, decided to sell up.

The top 10 local authorities where landlords made the biggest gains were all in London.

Kensington and Chelsea topped the list. Last year the average Kensington & Chelsea landlord sold their buy-to-let for £784,980 more than they paid for it 10.6 years earlier.  The gain they made was 9.5 times greater than the average in England & Wales.  Camden, City of Westminster and Hammersmith & Fulham ranked second and third on the list, with the average landlord gain exceeding £500,000.

Landlords in the North East continued to make the smallest gains. The average landlord who sold up in the North East made £11,310 or 16% capital gain having owned for 8.0 years. Some 36% of investors in the region sold their buy-to-let at a loss, compared to just 12% in England & Wales overall.

This means that 37% of investors who sold in the North East last year would have paid capital gains tax (CGT) due to the sum being covered by their £12,300 annual allowance.  Across England & Wales, 77% of landlords would have paid CGT on their profit.  London landlords, who made the biggest gains, are most likely to have a tax bill to pay with 91% of investors making a gross gain surpassing the annual CGT allowance.  Investors can offset costs such as stamp duty and renovation expenses from their capital gains tax bill.

The North East also had the highest share of landlords selling up.  Last year 24% of homes sold in the region were sold by a landlord.  This equates to around 9,730 homes.

Meanwhile, 17% or 15,540 homes sold in London were previously rented, down from 19% or 18,920 homes in 2020.

Some 9% of rental homes sold in Great Britain last year had been owned by a limited company landlord.  Last year,12,400 buy-to-let companies were dissolved. While the average buy-to-let company had operated for 6.2 years, 75% operated for less than five years.

Rental growth

In March, the average rent on a newly let home stood 4.4% higher across Great Britain than at the same time last year.  Regions outside London continued to see the highest rates of rental growth with rents increasing by 6.8% annually, the third consecutive month that annual rental growth outside the capital exceeded 5%. And apart from London, last month every English region recorded rental growth of at least 4%.

Rental growth in London continues to follow a different path, with rents falling 2.1%.  This marked the second month in a row that rents have fallen after turning positive between October 2020 and January 2021.  Once again, the fall has been led by Inner London where rents dropped 17.1%, the 13th consecutive month that rents have decreased.  While in Outer London, rents were 2.6% higher than at the same time last year, with tenants in Zones 3-6 viewing 48% more homes than in March 2020.

Aneisha Beveridge, head of research at Hamptons, said: “Last year, the number of homes sold by landlords reached a seven-year low.  A pause in the housing market during the first Covid-induced lockdown, which suppressed overall transactions, combined with an eviction ban throughout the remainder of 2020, limited the opportunity for landlords to sell up.

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“Landlord sales have been relatively high over the last few years due to tax and regulatory changes that have reduced the profitability for some investors.  But given tax relief on mortgage interest will be fully phased out from the 20/21 tax year, it seems as though most landlords who would be hit hardest by these changes have already left the sector.

“Over the last few years, the average capital gain made by a landlord has been shrinking.  But despite the pandemic, stronger house price growth seems to have reversed this trend.  Landlords who have been in the game for the longest period of time have reaped the largest rewards.  The average landlord who owned their buy-to-let for more than 15 years made more than three times more than a landlord who had owned their property for less than five years.  Many of whom would have renovated and invested further in their property to add value.”

“Despite the gradual easing of lockdown, the London vs rest of the country rental growth divide remains entrenched.  Outside the capital would-be tenants are scrabbling over stock before it hits the portals, while in Central London landlords are chasing tenants just as relentlessly.  There are however signs of a return to Zone 1, with viewings up 64% year-on-year in March.  But record high stock levels mean rents are unlikely to start recovering to pre-pandemic levels until later in the year.”

Average landlord seller gain by region

RegionAverage Landlord GainYoY Change £Average % gainAverage length of ownership (years)
London£                      302,200 £         3,76071%9.8
South East£                      102,200-£         5,38045%9.2
East of England£                        90,590-£         2,63048%8.9
South West£                        68,250 £         2,16040%8.6
West Midlands£                        50,240 £         5,22042%9.0
East Midlands£                        44,560 £         2,96041%9.1
Wales£                        37,120 £         1,17038%9.6
North West£                        34,780 £            17036%9.0
Yorkshire & the Humber£                        30,800 £            94034%9.6
North East£                        11,310-£         3,50016%8.0
England & Wales£                        82,450 £         3,39042%9.1
Source: Hamptons & Land Registry

Top 10 local authorities where landlords made the biggest gains

Local AuthorityRegionAverage landlord gainAverage length of ownership (years)
KENSINGTON AND CHELSEALondon£784,98010.6
CAMDENLondon£735,2309.8
CITY OF WESTMINSTERLondon£627,04010.2
HAMMERSMITH AND FULHAMLondon£506,8009.5
ISLINGTONLondon£473,86010.2
HACKNEYLondon£392,69010.2
WANDSWORTHLondon£365,2209.4
BRENTLondon£355,2609.6
HARINGEYLondon£354,09010.2
HOUNSLOWLondon£347,79010.9
Source: Hamptons & Land Registry

Annual rental growth

Mar-20Mar-21YoY
Greater London£1,699£1,663-2.1%
     Inner London£2,570£2,131-17.1%
     Outer London£1,534£1,5742.6%
East of England£967£1,0215.5%
South East£1,050£1,1327.8%
South West£832£9089.1%
Midlands£694£7325.4%
North£644£6886.8%
Wales£654£7006.9%
Scotland£673£6963.5%
Great Britain£982£1,0264.4%
Great Britain (Excluding London)£832£8896.8%
Source: Hamptons

By MARC DA SILVA

Source: Property Industry Eye

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Buy-to-let product choice reaches one-year high, the analysis has revealed

Product choice in the buy-to-let market is broadening but rates are also on the rise, the latest analysis from Moneyfacts.co.uk has revealed.

Figures released today show availability of products is at a one-year high, having risen for the fifth consecutive month to reach 2,333.

Moneyfacts said the sector had recovered to 81% of pre-pandemic levels (compared to 68% recovery in the residential sector) and now offered the highest number of products seen since last March, providing landlords with a greater level of choice.

Yet, at the same time, the average two-year fixed rate was 0.28% higher year-on-year – at 3.05% was the highest recorded since June 2019 (also 3.05%).

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The five-year equivalent at 3.41% increased 0.17% compared to a year ago and was currently the highest since September of 2019, when it reached 3.44%.

Month-on-month, the only borrowing tiers where rates had fallen since February were at 60% loan-to-value (LTV).

Moneyfacts also revealed how the proportion of the fixed rate buy-to-let sector which was offering fee-free deals or incentives – such as free valuations or free legal fees – had also reduced year-on-year.

This, Moneyfacts, said, indicated landlords may have to search a little harder for deals with the right incentive package for them.

Meanwhile, the proportion of the market where cashback was available has risen to 25% – a 4% improvement on last year.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “There is no doubt that the impact of the pandemic has been polarising, with the buy-to-let sector not escaping from this trend.

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“There may therefore be landlords whose focus will be on cutting costs and increasing margins where possible, perhaps by refinancing their existing buy-to-let mortgages.

“Equally, there may be some who are now in the fortunate position of being able to consider investing in a rental property for the first time.”

Williams also explained how the only LTV tier where average fixed rates did not increase this month was at 60% LTV, where both the two and five-year average fixed rates fell by 0.38% and 0.27% respectively.

She added: “It is important to note though that these are averages, and therefore while representative of the market as a whole, there are some very competitively priced products available, with some – depending on LTV and criteria – available at below 2%.

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“Therefore, those who are hoping to refinance or take on a new deal would do well to shop around.”

Buy-to-let mortgage market analysis (Source: Moneyfacts)
Mar-20Feb-21Mar-21
BTL product count – fixed and variable rates2,8972,1002,333
BTL two-year fixed – all LTVs2.77%2.97%3.05%
BTL two-year fixed – 80% LTV3.56%3.97%4.14%
BTL two-year fixed – 60% LTV1.89%2.52%2.14%
BTL five-year fixed – all LTVs3.24%3.32%3.41%
BTL five-year fixed – 80% LTV3.98%4.11%4.29%
BTL five-year fixed – 60% LTV2.31%2.79%2.52%
Buy-to-let fixed mortgage market analysis (Source: Moneyfacts)
Mar-20Feb-21Mar-21
Deals with no product fee475 (19%)254 (14%)301 (15%)
Deals with free/refunded legal fees840 (34%)614 (34%)614 (30%)
Deals with a free/refunded valuation1352 (55%)774 (43%)789 (39%)
Deals with cashback531 (21%)307 (17%)503 (25%)
Data shown is as at first working day of month, unless otherwise stated. The % shown is the proportion of deals out of the fixed mortgage market. Source: Moneyfacts.co.uk

Source: Mortgage Finance Gazette

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Paragon Bank launches 80% LTV BTL range for energy efficient properties

Paragon Bank has launched a range of 80% LTV buy-to-let mortgages, including a market-leading rate for Houses in Multiple Occupation (HMO), specifically for properties with an energy performance rating of A to C.

The new range aims to encourage landlords to invest in energy efficient properties and increase the proportion of A-C rated properties in the private rented sector (PRS).

The number of properties in the PRS with an energy rating of between A-C has increased by 272% over the past decade to 1.8 million, but approximately six out of 10 homes in the sector are still at grades D or below.

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The five-year fixed rates start from 3.99% for purchase and remortgage and include free valuations, no product fees and £350 cashback. They are available for portfolio landlords on single self-contained properties and HMO.

Richard Rowntree, managing director of Mortgages at Paragon Bank, said: “Landlords have made great strides in adding more energy efficient homes to the PRS – or upgrading properties to C or above standard – over the past decade. However, more needs to be done as the Government moves towards its net zero carbon target by 2050 and landlords have a key role to play in that.

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“Our new range of products at 80% LTV for homes with an energy rating of C or above will be an incentive for landlords to add energy efficient homes to the sector, benefitting tenants through lower energy bills and the environment through reduced consumption.”

Under Government proposals, homes in the PRS will need a minimum EPC rating of C for new tenancies by 2025 and all homes in the sector will require this rating by 2028.

Richard Rowntree concluded: “If landlords are to improve the energy efficiency of PRS stock, they need the finance to enable them to do so. Making sure there are attractive options to add new stock, whilst recognising the efforts to upgrade existing properties, is an important element of this.”

Source: Property Wire

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