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Supply of rental properties halves in three years as landlords sell-up – Propertymark

The number of properties available to rent through letting agents in the month of March halved between 2019 and 2022.
Propertymark said its survey of 443 agents, working at 4,000 branches across all four UK nations, was a clear indication of the rate at which the private rented market had been shrinking.

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During the period, 94 per cent of landlords who removed their property from the rental market did so to sell it; over half of the rental properties sold in March this year alone did not return to the private rented market.

Nathan Emerson, chief executive at Propertymark, said its research presented a worrying picture for private renters who face chasing fewer properties at elevated rents.

He said the number of properties available to rent had been diminishing with a large portion of landlords choosing to sell their properties.

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“A lack of property is the root cause for rent increases and rising figures on social housing lists.”

Government urged to adopt middle ground
Emerson said more needed to be done to support the private rented sector.

He added: “We know from our qualitative research that the most common reasons for landlords to choose to sell their properties and no longer provide homes are around risk, finances and viability.”

“Landlords and letting agents have been the subject of extreme legislation changes as the UK Government tries to improve the sector. However, without a middle ground, these changes are actually proving detrimental to those they are supposed to protect.”

“Sadly we do not see this improving as the sector braces itself for more changes within the anticipated Renters’ Reform Bill and upcoming energy efficiency targets.”

Rhys Schofield, managing director at Peak Mortgages and Protection, said the rental market was brutal for tenants and landlords.

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He said: “If we think sale prices are rocketing, rents are going up even faster due to such acute supply issues. With the impending changes over the next few years around minimum EPC ratings for rental properties, there is a ticking time bomb of 3.5m properties not at those new minimum standards, which will only make supply shorter without targeted government support.

“The end goal of getting to net zero is absolutely the right thing to do but as with most things with the current government, the detail and support in how to get there without causing a great degree of difficulty for those concerned is lacking.”

By Samantha Downes

Source: Mortgage Solutions

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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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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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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 sector has increased by £239bn since 2017

New research conducted by the property lending experts, Octane Capital, claims that over the last five years the buy-to-let sector has increased by around £239 billion.

By analysing the level of privately rented stock across all UK regions the lending experts were able to obtain the worth of the buy-to-let sector. This was then compared to values during 2017 to uncover changes over the past five years.

Current buy to let market value

The findings show that based on current market values within the UK rental sector, the current value of the UK’s buy-to-let stock is £1.7 trillion.

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The capital of England makes up 19% of the UK buy-to-let properties as this has the highest total worth of the UK buy-to-let sector. It is estimated that around 1 million private rented homes are in London and these are worth more than £500 billion.

The second most valuable buy-to-let market is in the South East of England as the buy-to-let market has a value of £247 billion. This is then followed by the East of England which has a value of £168 billion, the South West is valued at £156 billion, and the North West is valued around £110 billion.

The property lending experts estimate that the UK’s buy-to-let market has increased by 16.8%. This means it has climbed by £239 billion since 2017.

Buy to let market uplift

The figures show that London had the largest uplift in buy-to-let market value as it jumped by £57 billion. The South West increased by £34 billion and the East of England jumped £27 billion.

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While the level of privately rented homes has remained low across the UK over the last five years, the total value of the buy-to-let sector has risen sharply because of house price growth.

Chief executive officer of Octane Capital, Jonathan Samuels, concludes: “The government has tried its hardest to dampen investment into the private rental sector in recent years, with a string of legislative changes around tax relief, stamp duty and tenant fees reducing the profitability of buy-to-let investments.”

“The pandemic has also proved problematic for some landlords who have suffered lengthy void periods due to factors such as the tenant eviction ban and a reduction in rental demand across our major cities, in particular.”

“Despite all of this, the sector has stood tall and continues to provide the vital rental market backbone that so many are reliant on.”

“At the same time, the nation’s landlords have benefited from a considerable level of capital appreciation on their buy-to-let investment and the value of the sector as a whole has increased substantially.”

“Let’s just hope that whisperings of a higher rate of capital gains tax remain just that, as any further increase could spur a reduction in available stock, causing the total value of the market to decline in the process.”

By Yasmin Watson

Source: Introducer Today

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2022 set to be a strong year for BTL

It is hard to make predictions for the coming year without considering the impact of the pandemic. With vaccination levels increasing and hope that new COVID variants are less aggressive, light is appearing at the end of the tunnel as we hopefully transition back to normality. Looking back, the past year has been one of the most turbulent for the buy-to-let market with the pandemic causing some landlords and renters to struggle financially.

Despite the challenges, the buy-to-let sector has been incredibly resilient in 2021 and looks set to achieve around £41bn of loans in 2021.

The market is predicted to be relatively stable with IMLA forecasting £40bn of loans in 2022, and one of the key drivers will be the expected increase in rental yields.

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Rent looks set to rise

When considering the direction of rental prices in 2022, it is useful to look at the recent trends. According to Zoopla, a combination of high demand and landlords exiting the buy-to-let sector pushed rental price growth to a 13-year high during Q3 2021.

Zoopla also reported that rental growth across the UK reached 4.6% between July and September, with particularly strong markets in the South West, Wales, and the East Midlands.

But the more difficult question to answer, is which direction will rents take in 2022? Zoopla’s rental market forecasts have predicted average rental prices across the country could rise by another 4.5%, and growth in London is forecast to reach 3.5%, exceeding pre-pandemic levels. It also has predicted rents could rise above earnings in areas of the country where it’s currently cheaper to rent.

These rises in rents are fuelled primarily by an imbalance in supply and demand, with far more people looking for rental properties than there are places to accommodate them.

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Energy efficiency

Outside of rent prices, three letters will likely dominate landlords’ thoughts in 2022. No, not VAR, we are of course referring to EPC.

The government’s plans to increase minimum energy efficiency standards has certainly impacted some landlords plans for the future.

The signs have all been pointing in one direction for some time, as since April 2020 it’s been illegal for landlords to let properties with an EPC rating of F or G, unless they have an exemption.

These measures will be ramped up in the coming years. From 2025, the minimum standard will be increased to C for new tenancies and this will be extended to existing tenancies from 2028.

Government estimates suggest that over three million rental properties currently have an EPC rating of D or below. As a result, many landlords will need to start begin the process of improving their energy efficiency ratings in 2022.

Tied to this push for more environmentally friendly housing is the trend for green mortgages, which is almost certainly set to continue in 2022.

Refurb-to-let

With house prices rising at unprecedented levels, some of those looking to invest in a buy-to-let are being priced out of the market.

Therefore, some landlords who are either handy themselves, or have a team of tradespeople on speed-dial are looking for more affordable properties that need some refurbishment. Whether this is a new bathroom, modernising a kitchen or even converting a property into a House in Multiple Occupancy (HMO).

For more ambitious landlords, the high-street may present some opportunities. As we are transitioning away from the traditional shopping experience with more and more people choosing to shop online, there will be commercial spaces that could be converted into residential properties.

Specialist sectors set to grow

This brings us on nicely to another area of interest for 2022, specialist properties. Despite doubts at the start of 2021 about the viability of HMOs due to concerns around the coronavirus, HMOs have been popular throughout the year.

The motivating factors behind renters choosing HMOs will still be highly relevant in 2022, with the social and financial benefits still applicable.

From the landlords’ perspective, HMOs offer increased yields with slightly less risk attached as if one tenant leaves, others will still be paying rent.

Alongside HMOs, holiday lets have been increasing in popularity as well, partly in response to the staycation boom. With international travel looking set to be restricted again in 2022, this trend should continue and more landlords may jump on this bandwagon.

5-year fixes coming to maturity

In 2017 new underwriting standards were introduced by the Prudential Regulation Authority and this resulted in a spike in borrowers opting for longer term products.

As 2022 marks five years since the new standards were introduced, a notable number of these longer-term mortgages may mature in the next 12 months, presenting a great opportunity for lenders and brokers.

There is hope on the horizon for an end to the pandemic and the restrictions it imposed. This wave of optimism extends to the buy-to-let sector, as rents are expected to rise, there are new opportunities for specialist properties and remortgages, therefore 2022 looks to be another strong year for the buy-to-let market.

By Andrew Ferguson

Source: Mortgage Introducer

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Record 47,400 Buy-to-Let Companies Set Up in 2021

Last year saw a record number of companies set up to hold buy-to-let property. In total there were 47,400 new buy-to-let companies incorporated in 2021 across the UK according to Companies House data.

This is nearly twice the number that were set up in 2017 when it was announced that investors with properties in their personal names would no longer be able to claim mortgage interest as an expense. While individual landlords are effectively taxed on turnover, company landlords are taxed on profit. This has meant that for some landlords – particularly those who are higher rate taxpayers – it has become more profitable to move their buy-to let(s) into a company.

However, the rate of growth in new incorporations fell compared to previous years, with a 14% increase recorded between 2020 and 2021, down from a 30% increase recorded between 2019 and 2020.

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While the number of buy-to-let companies up and running in the UK passed through the 200,000 mark as the country emerged from the first lockdown, by 2021 this figure rose to a new total of 269,300. 61% of these companies have been set up since the withdrawal of mortgage interest relief which began in April 2017.

The average buy-to-let company has been operating for 9.2 years, a figure which has fallen amid the rising number of new incorporations over the last five years. At the other end of the scale, 7,900 or 3% of companies have been running for more than 50 years, while 440 have been going for more than a century.

50% of new buy-to-let mortgages in 2021 were taken out by a company rather than someone buying in their personal name, meaning we estimate that around half of all new landlord purchases last year used a company to hold their buy-to-let. 40% of these new purchases went into a company which was less than a year old, suggesting newer landlords still account for a sizable proportion of growth.

Buy-to-let companies currently hold a total of 583,000 mortgaged properties, accounting for around 29% of all existing buy-to-let mortgages nationally. This figure has increased from 26% over the last 12 months.

The bulk of new buy-to-let companies set up in 2021 were in London and the South East, with the two regions together accounting for 45% of all new incorporations. These two regions have long led the incorporation charge given higher rents mean the tax advantages from incorporation are generally larger. Only the North East, the cheapest region in the country, saw fewer (-6%) buy-to-let companies set up in 2021 than in 2020.

Northern Ireland (36%) has seen the biggest annual increase in the number of new buy-to-let companies set up, albeit from a low base.

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While the number of buy-to-let incorporations has continued to grow, around 25,100 have closed their doors since the onset of the pandemic. 15,200 companies closed in 2021 which equates to around 6% of all buy-to-let companies up and running today. The average company closed down after 5.8 years, a figure which has fallen steadily in recent years as the number of incorporations has increased.

RENTAL GROWTH

Despite rental growth across Great Britain peaking over the summer months, an annual growth figure of 7.2% recorded in December 2021 means that rents were rising at around twice the rate recorded in December 2020. This compares to a peak of 8.7% in July 2021 and 7.9% in November 2021.

For the sixth month running, rents grew faster in the South West (12.8%) than in any other region. This growth means that average rents have now surpassed £1,000 per month in all four Southern regions of Great Britain: London before our records began in 2012, the South East in July 2016, East of England in December 2020 and the South West in December 2021.

Rental growth continued to strengthen in Greater London on the back of a recovery in Inner London. Inner London rents rose 8.6% over the last 12 months, the fastest rate since March 2016. This leaves the average rent here just 2.0% below where it was on the eve of the pandemic in January 2020.

Rental growth (3.7%) in Outer London has remained considerably more stable, returning to its pre-pandemic trajectory.

Source: Property Wire

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UK Finance: BTL purchase lending up 83% in 2021

UK Finance has predicted that buy-to-let (BTL) purchase activity will have increased to £18bn this year, up 83% on 2020.

UK Finance said the main driver of lending in 2021 was for house purchases at £200bn, up 53% on 2020; however, homeowner remortgaging activity was slightly down on last year at £62bn.

The predictions outlined that total house purchase transactions, including cash purchases, will reach 1.5 million in 2021, some 47% higher than 2020, and the highest number since before the Global Financial Crisis.

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UK Finance estimated that gross lending overall would peak at £316bn, up 31% on 2020, then moderate to £281bn in 2022, before increasing again to £313bn in 2023.

Looking ahead, UK Finance said that while the 2022 and 2023 gross lending figures will be reductions on the 2021 peak, they will be higher than the 2020 and 2019 figures, representing a return to more stable levels of activity.

James Tatch, principal, data and research at UK Finance, said: “2021 has been a bumper year for mortgage lending amid the stamp duty holiday and homeworkers moving from cities.

“The outlook for the housing and mortgage markets over the next two years is for a return to more stable, balanced picture following the upheavals of the last two years.

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“While risks remain, both to new lending and ongoing affordability, the market looks to be emerging from the pandemic in a better place than previously anticipated, supported by a much-improved wider economic outlook.”

Elise Coole added: “It has been an enormously busy year for the buy-to-let market, with pent-up demand from the pandemic and the end of the stamp duty causing a spike in activity.

“UK Finance has predicted a significant slowing of purchase volumes in the buy-to-let sector next year, but this is not surprising given how pumped up the market was by artificial stimuli this year.

“What’s important though, is that UK Finance expects another strong year of lending next year, both for purchase and remortgage, with remortgage activity being driven by the tax changes introduced by George Osborne when he was Chancellor.”

By Jake Carter

Source: Mortgage Introducer

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