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23% more buy-to-let limited companies established in 2019

Landlords set up 41,700 buy-to-let limited companies in 2020, an increase of 23% on 2019, research from Hamptons has found.

Using a limited company enables landlords to save on tax after the reduction in mortgage tax relief.

Aneisha Beveridge, head of research at Hamptons, said: “Despite growth of the private rented sector slowing in recent years, an increasing proportion of buy-to-let purchases are now being held in limited companies.

“We estimate that around half of all rental properties bought today are being put into a company, up from close to one-in-five during 2016.

“While most of this growth has been driven by larger landlords, smaller landlords, particularly those who are higher rate taxpayers, have also reaped the tax saving benefits from incorporating.”

More companies were set up to hold buy-to-let properties between the beginning of 2016 and the end of 2020 than in the preceding 50 years combined.

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At the end of 2020 there were a total of 228,743 buy-to-let companies up and running, an all-time record.

Southern-based landlords have been most likely to incorporate. Given the high cost of property, generally landlords based in the South are more likely to be mortgaged which means that in cash terms their mortgage interest bill is likely to be higher.

Therefore the benefits of incorporating a buy-to-let portfolio into a company are likely to be bigger.

More than a third (34%) of all companies set up to hold buy-to-let properties in 2020 were in London. Together, London and the South East accounted for almost half (47%) of all incorporations.

Beveridge added: “As the company buy-to-let market has matured, more mortgage lenders have entered the space.

“Back in 2016 there were just a handful of lenders who offered company buy-to-let mortgages, often at a greater premium than today.

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“But with more high street names entering the limited company space in recent years, competition has driven down interest rates to within a percentage point of similar products designed for landlords purchasing in their own name.

“December marked the first time since the onset of the pandemic that prospective tenant numbers surpassed 2019 levels.

“At the same time, the number of rental homes on the market fell by double-digit percentages in every English region outside London.

“This has driven rental growth up significantly over the last three months to a point where rents are rising faster than house price growth in almost every region.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Almost half of BTL landlords remain optimistic despite potential tax hikes

Property investors have been the target of many recent tax changes and may feel unfairly targeted at a time when they are facing potential Covid-related tax hikes to pay for the pandemic, and yet almost half of those who invest in the private rented sector remain optimistic going into 2021.

Despite the challenges of the coronavirus, almost half – 45% – of landlords say they are currently optimistic about the buy-to-let market, according to a new survey released today by Property Master.

The online buy-to-let mortgage broker found that less than a third – 29% – of those surveyed were pessimistic about the buy-to-let market, despite fears that the chancellor Rishi Sunak could increase taxes for those with additional homes, as part of the government’s attempts to claw back the cost of extra spending during the coronavirus pandemic.

Mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have hit landlords’ profits over the past few of years, which partly explains why so many people are exiting the BTL market and thus reducing the supply of much needed private rented stock.

Tax and regulation changes continue to have a negative impact on the buy-to-let market, with a number of landlords selling properties with a view to reducing their portfolio, or exiting the market altogether.

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But despite the concern that yet another proposed tax hike could see buy-to-let landlords exiting the market in droves before it is introduced, just 10% of the landlords surveyed by Property Master planned to exit the buy-to-let market in 2021 and almost 70% said they were not about to sell any of their properties in the new year.

Angus Stewart, Property Master’s chief executive, said: “For landlords, as for many other sectors, 2020 is a year that brought plenty of challenges. But in the case of landlords Coronavirus and the resulting economic uncertainty came on the back of a raft of regulatory and tax changes over recent years that have left the sector battered and which saw smaller landlords in their thousands throw in the towel.”

Stewart continued: “However, our survey shows the buy to let sector as a whole is a resilient one. Those landlords that have survived may well be stronger and our survey shows them as giving buy to let the thumbs up as we move into 2021.

“We see the year as being one of two halves. There is clearly continued turbulence forecast for the first half of the year as coronavirus and Brexit play out. But the fundamentals of the private rented sector remain and now more than ever an increased number of people need a good quality roof over their heads, and this will create plenty of opportunity for landlords to do well.”

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The number of landlords surveyed by Property Master who planned to add to their portfolio in the new year was evenly split with those who had decided in 2021 to stick with their existing property portfolio.

Almost 43% of landlords said they planned to buy more property in 2021 and the same number planned to stick with the properties they already had. Almost 13% were undecided.

In terms of buy to let mortgage rates, landlords seemed more relaxed about the outlook although many commentators have recorded an increase in rates in recent months.

Almost 54% of landlords surveyed thought that buy to let mortgage rates would stay the same as opposed to almost 38% who thought they would increase further. Just under nine per cent thought rates would decrease despite the rumours about a possible negative Bank of England base rate.

Stewart added: “A competitive and innovative buy-to-let mortgage market has proved to be a big plus for the private rented sector. Inevitably, the coronavirus has led to some caution amongst lenders especially around loan to value ratios, but we see this as easing as the year plays out.”

By MARC DA SILVA

Source: Property Industry Eye

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Government urged to provide greater support for BTL landlords during this time

More money needs to be made available to support buy-to-let landlords during the existing Covid-19 pandemic, according to safeagent.

The letting agent accreditation scheme for lettings and management agents operating in the private rented sector has expressed fresh concerns that the challenges in the private rented sector are only going to increase as the pandemic continues to put a strain on the economy.

Safeagent is calling on the government to do more to help landlords with tenants who are facing financial hardship and unable to pay the rent, especially in light of the fact that repossession cases on the grounds of rent arrears will not be treated as a priority until tenants have built over a year’s worth of rent debts.

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Added to this is the six months’ notice that landlords now have to give. Where the case is disputed, even before the pandemic, courts were taking an average of almost six months to deal with cases, with the backlog now likely to be longer.

The Financial Conduct Authority (FCA) has issues its updated coronavirus guidance ‘Mortgages and Coronavirus: Payment Deferral Guidance’, stating that firms should allow customers to extend ongoing payment deferrals after 31 March 2021, to cover payments up to and including July 2021, but safeagent argues that a mortgage deferral alone is not the answer for buy-to-let landlords.

Isobel Thomson, safeagent chief executive, said: “It’s positive to see the FCA supporting borrowers impacted by the pandemic with this latest guidance which advises lenders should offer up to six months of mortgage payment deferrals and guarantee it won’t affect a landlord’s credit rating.

“However, while buy-to-let landlords impacted by tenants’ rent arrears clearly need support, we question if deferral of mortgage payments is the answer, or if it pushes the problem further down the track. While lenders will be adhering to the guidance which provides up to six months deferral, we know it may take badly affected tenants much longer to get back on their feet, meaning landlords could be building up debt and struggling to meet mortgage payments for many months to come.

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“We know the good work that agents and landlords are doing to sustain tenancies where tenants are in financial difficulties. But it’s vital that if we are going to keep landlords in the PRS, their financial viability is also maintained, ensuring no unnecessary reductions in the supply of rented housing and helping prevent homelessness.

“We believe there is more to be done. Our recent proposals for a sustainable post COVID PRS suggested that those landlords who build up debt because they are unable to pay entirely or are only partially paying what is due on their mortgage due to a shortfall in their tenant’s Universal Credit, should be eligible for a grant from the Government, similar to the coronavirus small business grant. This would recompense them for the shortfall on their mortgage and any additional interest over the period. This is particularly important for landlords with a small number of buy to let properties, who rely heavily on this income.

“safeagent is also calling on lenders to commit to no exclusions terms in new or existing buy-to-let products that prevent lettings to tenants who are claiming benefits. This is important to ensure tenants on benefits can continue to access the PRS now and in the future.”

By MARC DA SILVA

Source: Property Industry Eye

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One in 10 BTL landlords plan to add to portfolios

One in 10 buy-to-let landlords are currently planning to expand their property portfolio over the next few months, according to new research.

With buy-to-let continuing to deliver solid returns, a fresh report from Simply Business shows that 10% of buy-to-let landlords are planning to add to their portfolio in the near term, compared to just 3% at the end of last year.

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Despite a challenging time for the market, characterised by tax and regulatory changes, not to mention Covid-19, investment in buy-to-let continues to outperform most major asset classes, as demand from private renters grows.

With savers receiving poor returns from banks and building societies, thousands of people continue to turn to residential property as a means of supplementing their income, supported by low mortgage borrowing rates, growing demand from renters and the current stamp duty holiday, as buy-to-let consolidates itself as the investment of choice for many investors.

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Alan Thomas, UK CEO at Simply Business, said: “The coronavirus outbreak and consequent lockdowns have been transformational in UK renters’ attitudes towards property, and therefore where landlords are looking to make their next investment.”

He added “There appears to be a shift in terms of what is considered a desirable property by tenants, and residential landlords – crucial to both the economy and the local communities where they provide housing – along with the market in general, are reacting to this.

“What is clear though, is that the UK buy-to-let market is going through somewhat of a transition, driven by a move away from the previous demand for city centre properties.”

By MARC DA SILVA

Source: Property Industry Eye

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Buy-to-let market proving more “robust” than residential

The Covid-19 pandemic has pushed landlords to broaden the types of property and locations they are looking to invest in, according to analysis from Leeds Building Society.

The mutual noted that industry data suggested that the volume of applications for buy-to-let mortgages held up better than for residential loans between March and the middle of July.

Matt Bartle, director of products at Leeds Building Society, said: “In terms of the volume of applications over this period, the buy-to-let market fell less steeply and recovered more quickly than residential.

“We’ve also seen increased purchase activity; suggesting landlords are taking advantage of a combination of factors, including stamp duty relief, low interest rates and tenant demand.”

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The society’s own research with landlords, as part of its ‘lockdown learnings’ series, supports this, with 79% of landlords who were considering purchasing a buy-to-let property before the pandemic saying their plans had changed. This doesn’t mean they are withdrawing though, with half saying they still want to buy but are taking a fresh look at their plans.

Of those surveyed, almost a third (29%) are reconsidering the type of property they want to invest in, while the same proportion are also looking at new locations. Around one in five (20%) of landlords are reassessing precisely how much they are willing to invest, with almost a quarter (22%) rethinking their timings.

However, half of the landlords surveyed saying they hadn’t been planning to buy before lockdown, and still have no plans to do so.

Bartle added: “Bearing in mind the changes that coronavirus has brought to all our lives it’s not surprising to see landlords reviewing future plans for their property portfolios as tenants’ needs and priorities are also affected by the pandemic.

“The recent Government announcement on stamp duty appears to be spurring prospective purchasers into action, including buy-to-let landlords.”

By John Fitzsimons

Source: Mortgage Finance Gazette

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BTL landlords should prepare to take advantage of Green Homes grants

BTL landlords in England should be assessing the energy efficiency works that their properties require in advance of the opening of online applications for the Green Homes Grant in September, say tax and advisory firm, Blick Rothenberg.

Heather Powell, Property partner at the firm said:

“The applications for the grant will open in just over a months’ time so Buy to Let landlords need to assess their properties now and get their applications in as fast as possible because thousands of people will apply.

“It is also likely that the Government will tighten energy efficiency regulations still further in 2021, making these works essential for many rental properties.”

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“The grant scheme will fund £2 of every £3 spent by a landlord, up to a maximum of £5,000, to improve the energy efficiency of their properties.

“Works can include wall and loft insulation, draught proofing and double glazing, all works that should improve the Energy Performance Rating (“EPC”) of a property.

“Landlords cannot let properties with an energy performance rating of F or G (unless they qualify for an exemption) so they should be planning to undertake works that can be done with the grant funding that is being made available. Their tenants will also benefit as they will get a reduction in their annual fuel bills.”

“The 27 million homes in the UK, which generate up to 25% of the greenhouse gas emissions and energy demand in the UK, are some of the least heat efficient homes in Europe.

“The Government hopes the grants will improve these statistics and help the UK to meet the commitment to have net zero greenhouse gas emissions by 2050.

“Online applications by landlords will be passed to “registered local tradesmen” to do the necessary works – which the Chancellor expects to help generate a further 100,000 jobs in the “Green Sector.”

“There are c2.2m landlords in England, with an average of 1.8 properties each – a total of 3.96m buy to let properties.

“If landlords applied for grants to improve the energy efficiency of just 25% of their properties, and got an average grant of £3,300 for insulation, the Green Homes Grant funding would be £3.27bn, and 990,000 homes would have been improved.

“The Chancellor announced £2bn to fund grants in 2020/21, and stated he hopes 600,000 homes to be improved, but he made it clear that his funding was based on estimates of take up of the funding, and indicated it is not capped, which is good news for BTL landlords.”

“The full details of the Green Homes Grants has not been published, but given the Grant funding announced was only for one year it is important that Landlords start reviewing their housing, assessing what work should be done that is eligible for the grant, so that that they can apply for the funding.

“This is one of the few measures announced by the Government in the last three months that assists landlords, and they should make sure that they take advantage of the funding, and at the same time help the UK achieve net zero greenhouse gas emissions by 2050.”

Source: Property Industry Eye

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Leeds Building Society reintroduces holiday let mortgage range

Leeds Building Society is reintroducing its 2-year fixed rate range of holiday let mortgages.

Products have a rate of 2.84% to 60% loan-to-value and 3.34% to 70% LTV.

Both products come with a free standard valuation, fees assisted legal services, and no product fee.

Matt Bartle, Leeds Building Society’s director of products, said: “In these uncertain times, we believe many will choose to holiday in the UK this summer and take advantage of our seaside towns and stunning countryside.

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“That could well be a trend that continues so we can expect to see more interest in holiday lets in some of the UK’s sought-after locations.

“We were the first lender to launch a range of dedicated holiday let mortgages back in 2013 and our research has shown traditional locations such as the South West, Yorkshire and the Lake District remain popular with holidaymakers, with many favouring a coastal break.

“The recent government announcement on stamp duty is likely to encourage more interest in the buy-to-let market, including holiday lets.

“High demand means high returns but it’s important for landlords to remember performance can be seasonal and affected by the weather.

“Buying a holiday let, like any other property investment, does carry risk but enables an investor to diversify their portfolio risk by letting weekly to a range of occupiers, rather than relying on one individual to pay rent every month.”

BY RYAN BEMBRIDGE

Source: Property Wire

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HSBC returns to pre-lockdown timetable for valuations and revives buy-to-let

HSBC is making buy-to-let mortgages available once again and has cleared its backlog of physical valuations in England and Scotland.

Easing of restrictions have enabled the lender to make the changes which will mean physical valuations will now work to a pre-lockdown timetable.

It also announced it would be re-starting physical valuations in Northern Ireland today (Monday). Meanwhile, in Wales, physical valuations were due to start when the country’s lockdown restrictions are eased.

News of the return of its buy-to-let mortgages will come as good news to landlords who can now apply for these products through online or telephone applications direct from HSBC UK.

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Restrictions on the movement of people and access to properties introduced as part of the Covid-19 lockdown meant that HSBC – along with many other lenders – was forced to change the way it approached the valuation of properties to ensure it was providing responsible lending.

Michelle Andrews, head of buying a home, at HSBC UK explained: “Where we could we expanded our use of desktop and automated valuations, so mortgage applications could continue.

“In some cases, like higher LTV applications and buy-to-let mortgages it is an essential part of the process, so unfortunately those applications had to be paused.

“I am pleased to say that we have now, with the help of our corporate valuations partners, addressed our backlog of physical valuations in England and Scotland and those mortgages that were on hold are progressing, taking those buying a home one step closer to a potentially dream move.

“Plus, as we are now in a position where we can satisfy our requirement for a physical valuation in a safe compliant way, we are also able to provide buy-to-let mortgages again for landlords.”

Andrews added: “We have shown we can work with our valuers at pace when physical valuations become possible, with appointments already in the diary in Northern Ireland for Monday.

“We are looking forward to being able to progress with physical valuations in Wales as soon as the lockdown rules ease.”

By Kate Saines

Source: Mortgage Finance Gazette

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Liverpool named UK’s best buy-to-let area to invest in

New research has identified Liverpool as one of the best places in the UK for buy-to-let investors, with yields as high as 10.30%.

The findings are from analysis by Mojo Mortgages using the UK Land Registry, Zoopla, On The Market and property data portal, PropertyData.co.uk in a bid to find where the current investment hotspots are.

Mojo said: “From our analysis, the North West is one of the top regions for strong buy-to-let yields. As well as a number of profitable areas in Liverpool, the area of M14 in Manchester, which covers Fallowfield, has a yield of 7.60%.

“Both these cities have a solid student population, plus property prices are relatively low.”

In the UK there are an estimated 2.6 million buy-to-let landlords, and despite the pandemic, those who do have the cash to invest believe investment opportunities will emerge, with lenders cutting rates on buy-to-let products and raising affordability thresholds.

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There’s also market sentiment which is leaning towards limiting competition from other buyers and even pushing up demand for rental property.

From its analysis, Mojo found that Liverpool is currently the best place to consider.

The city’s L7 postcode tops the buy-to-let yield table, generating yields of 10.30% and an average asking price of £95,000.

The postcode covers the area of Edge Hill and is in close proximity to Liverpool city centre.

Five more Liverpool postcodes feature in the top 20 list of best places to invest, with yield returns ranging from 7.40% to 10.30%.

Birkenhead’s CH41 postcode came in at 17th in the list, with a return of 7.10% and an average asking price of £84,000.

Eight of the top 10 worst places to invest were in London or the South East, topped by Kensington and Chelsea, with an average yield of 2.1% and an average asking price of £1,612,797.

By Neil Hodgson

Source: The Business Desk

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Precise launches 60% LTV buy-to-let and resi deals

Precise Mortgages and Kent Reliance have returned to lending with 60% loan-to-value products for first-charge residential and buy-to-let.

Precise is offering a 3.14% 2-year fixed rate and 3.69% 5-year fix for residential borrowers. Maximum property value is £600,000 whilst the maximum loan size £360,000.

On the buy-to-let front Precise is offering a 2.99% 2-year fix and a 3.49% 5-year. Maximum loan size and property value are in line with its resi range.

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On resi Kent Reliance will be offering a 2-year fix at 3.39% and a 3.79% 5-year fix. For buy-to-let there is a 3.24% 2-year and 3.59% for a 5-year fix.

The lenders have been able to launch the products after working extensively with their panel parters so as to be able to find a desktop valuation solution.

A spokesperson for OneSavings Bank, parent company of both Precise and Kent Reliance, said: “The OneSavings Bank Group (OSB) has today resumed new business lending with a new, select range of residential and buy to let products, available for purchases and remortgages.

“Supported by desktop valuations, the product range does not incur valuation or administration fees and can be accessed through its Kent Reliance for Intermediaries and Precise Mortgages trading brands.

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“InterBay Commercial will continue to focus on processing pipeline buy-to-let applications that have a physical valuation in place and will not be accepting new business lending until further notice.

“Following the government restrictions, physical property valuations still remain unavailable. However, OSB has been working hard on solutions for its intermediary partners and their customers by working closely with our valuation panel partners to provide desktop valuations on the select new range of residential and buy to let first charge mortgages. Also, where possible, apply the desktop valuations to existing pipeline cases if the new criteria is met.

“Whilst desktop valuations place a limit on what applications can be considered and may increase processing time, these cases will have the benefit of being managed by our internal teams who are in close contact with all areas of the business.

“All intermediary partners should familiarise themselves with the new product details, which are available to view on the Kent Reliance for Intermediaries and Precise Mortgages websites, alongside all the latest updates and FAQs. The BDM teams are ready and available to answer any questions or give further clarification on new cases as required.”

By Ryan Fowler

Source: Mortgage Introducer