NLA reveals figures on landlord investment - By Landlord Today

The combined cost of buy-to-let (BTL) mortgage repayments in the past 12 months is £21.9bn according to the National Landlords Association (NLA).

 

Research from the NLA reveals that approximately one million (1.05m) landlords in the UK have some form of BTL borrowing, with the average cost of their mortgage repayments in the past year £20,950.

 

The staggering figure, which excludes upfront deposits of typically 25% of property value, emerges shortly after the Bank of England announced a high of £8bn of BTL lending in quarter three of 2014.

 

The NLA’s findings show that landlords with smaller portfolios (1-4 properties) spent an average of £10,335 on repayments last year, compared to £55,285 spent by those with larger portfolios (11 or more properties).

 

On average it takes six weeks for a landlord to secure a BTL mortgage, with one in five (19%) landlords waiting over two months to complete their BTL application.

 

Carolyn Uphill, NLA chairman, said:

“These figures really hammer home just how much money private landlords put into providing much needed homes for the UK’s estimated nine million renters, especially  if we consider that such a large proportion are single-property or smaller portfolio landlords.  

 

“The majority of private individual investors are keeping a supply of well-maintained homes on the market when previous governments have failed to incentivise or stimulate more housing and social housing has been in long term decline.

 

“There’s no sign of either of these issues letting up anytime soon so is it any wonder that BTL lending is at an all-time high? It’s hard to imagine exactly where all this investment would come from if landlords weren’t financing housing to such an extent.”

 

The NLA is also reminding landlords to prepare for future rises to interest rates and has produced new guidance about dealing with the issue in order to minimise the effect it has on their lettings business.

http://www.martinco.com/news/2015/01/08/nla-reveals-figures-on-landlord-investment/#.VLzm-EesVu1

Why are Exeter tenants, tenants?

I find frequently when talking about the rental market we concern ourselves about property and landlords but seem to forget the other party in the equation, the tenant. Without tenants there is no demand for the rental property.

The profile of the Exeter tenant has changed and continues to change. Although this is in part due to the credit crunch, job mobility and the raising of deposits, an increased number of people in their twenties are choosing to rent rather than buy and have done so, even when they were in a position where they could have bought a property.

I have previously looked at how affordable properties are in Exeter and those frequent readers amongst you will know my thoughts on this so I will skip over this part for now.

I read an interesting article a recently which looked at the age demographic of people who are now renting; interestingly the south west had a higher than average proportion of middle aged renters compared with the rest of the country.  Is this because we are all getting divorced and have to sell our homes, for example, or is it perhaps because people are warming to the idea of renting and living in a property that someone else has to pay to maintain?

In my opinion, home ownership is not for everyone. Similarly being a landlord is not for everyone, however anyone can be a landlord and make money from it with the right knowledge and advice.

Having to think about when you can afford to upgrade your kitchen, redecorate or have a new roof etc can put the fear into the best of us, which coupled with other life stresses can lead to a pretty miserable time. Therefore knowing that all these points and more will be looked after by the landlord is certainly reassuring. It is similar to buying a new car – some people prefer to lease, where they can give it back after a fixed term, whereas others prefer to own it and deal with all the wonderful bills that come with it.

Generally, of course, a landlord’s mortgage, if any, is lower (usually considerably) than the rent they receive, otherwise they would be making a loss, so a tenant could potentially save money by purchasing if they have the required deposit.  However, if you take into account all the costs involved with home ownership and compare the cost of home ownership with the cost of renting, the extra money paid in rent may mean that over the course of a few years the actual amount paid may work out about the same.

It seems to me that renting is becoming more and more a lifestyle choice rather than a requirement. Figures from the EU’s official statistics bureau, Eurostat, show that home ownership in Britain in 2013 was 64.6%, down from 70% in 2005. Only France (64.3%), Denmark (63%), Austria (57.3%), Germany (52.6%) and Switzerland (44%) were lower.

What to Know Before You Buy Your Next Investment Property - by Hazel de Kloe

Investing in property can be very exciting.  It can also be extremely complicated or stunningly simple depending on whom you speak to.

As a special treat and New Year gift to you, I have put together a new report to help you make the best and safest property decisions going forward in 2015.....

To view the rest of Hazel de Kloes' article, please click here.

Collins Road vs Grecian Way

A landlord came into our office looking to purchase a new buy-to-let property.  She had seen two properties of interest, one in Grecian Way, Broadfields and the other in Collins Road, Pennsylvania so wanted my advice on which would be best.

Collins Road offers a wide variety of properties, from bungalows and two bed terraced houses to large detached houses, so it appeals to a wide audience.  Due to the popularity of the road, it has an average rent of £1061pcm, which is slightly higher than the Exeter average, however when looking at the average property value, it is around 7.3% lower than the whole of Exeter combined, possibly due to the high number of rental accommodation units in the area.  A lower property value and higher rent means only one thing, a higher gross yield – averaging around 5.3%, which is around 13.2% higher than the whole of Exeter combined.

Grecian Way in Broadfields is a very popular residential area.  Generally people tend to buy property in the area to live in rather than rent out so this keeps the values higher than the Exeter average, however interestingly though, the average rent paid is considerably lower – around 17.1% lower in fact.  So we now have the opposite position to Collins Road, a higher price and a lower rent, therefore giving an average gross yield of only 3.56%. 

Moving on to compare the two roads directly, the gross yield for Collins Road works out at around an incredible 49.7% higher than Grecian Way, however the properties values are around 15.44% lower. 

This clearly shows that the question of yield over capital growth is the first one to overcome.  The higher property values in Grecian Way mean that in general the capital growth will be greater, depending on market conditions, however if you are looking for a good yield, Collins Road is the place to be.

If you are looking to buy a property in Exeter, please come and see us or call me on 01392 254488.

Stamp Duty 2014

Following my recent article on the rise of stamp duty in Exeter, as many of you will be aware, changes come into force tomorrow that will dramatically change the sales market.

George Osborne said 98% of homeowners in England and Wales would pay less after the changes than they do under the current system and that only people who buy homes worth more than £937,000 will pay more in tax.

The current system:

Stamp duty, which currently operates throughout the UK, charges successively higher rates on the whole of the purchase price. For this reason it is often criticised as a "slab tax". Its structure means there are sudden increases in stamp duty, when the price goes above the next threshold.

For example, someone buying a home for £250,000 would currently pay £2,500, or 1%, in stamp duty. But if the price was £1 more, they would pay an extra £5,000, as they then pay 3% on the whole purchase price.

The new system:

From midnight on 3rd December, the new rates of stamp duty will only apply to the amount of the purchase price that falls within the particular duty band, making it more like income tax.

In other words, someone buying a house for £200,000 will pay nothing on the first £125,000, and then 2% of the next £75,000, giving them a bill of £1500. Previously they would have paid 1% on the total purchase price, giving them a bill of £2,000. Thus although the percentage rates appear higher in some cases, the overall charge will mostly be lower.

The new rates will be

• Up to £125,000 : 0%
• £125,001 to £250,000 : 2%
• £250,001 to £925,000 : 5%
• £925,001 to £1.5m : 10%
• Above £1.5m : 12%

On average, someone buying a home in England and Wales will now pay £4,500 less in stamp duty. The new system will also smooth out the steps - or sudden jumps - in existing stamp duty thresholds.

Please find below a link to the HM Revenue & Customs stamp duty calculator.

http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm 

Capital growth or yield?

A couple came into our office this week looking to purchase another buy-to-let in Exeter.  

They already have three other properties in city and are getting a good monthly return, however as the properties are of relatively low value, they are concerned that the capital growth they will be getting may not be enough to cover their future plans, especially as they are currently on interest only mortgages.

I decided to look into the areas of Exeter that have achieved the greatest capital growth over the last six months, although this is a relatively small time period to make an accurate judgement on a market, it does show the current demand and trend.

Interestingly EX1 came out on top of the list, with an increase of just over 6.8%.  EX1 encompasses the city centre, Heavitree, Whipton, Monkerton and half of Pinhoe.  These areas are not known for their particularly high house prices, the average property price is currently just over £232,000, however as there are a large proportion of terraced properties (around 36.5% of the housing stock), they lend themselves well to the investment markets and buy-to-let landlords.  The area has excellent access routes and public transport so it is ideal for people working in and around the city.

The area with the lowest capital growth over the last six months is EX2, at around 5.85%.  EX2 covers a large area, from Dunchideok through Alphington, part of St Thomas, Countess Wear, St Leonards, St Loyes and Broadfields to Clyst Heath, Digby and Sowton.  Similarly to EX1, this area has excellent transport links and a wide variety of housing stock so it suits many different types of households.

The decision of where this couple should buy could be very different to where you should buy; it is linked to your personal position and requirements.  Therefore, if you are looking to buy an investment property in Exeter, come and talk to us so we can look at the best place for you.

A few facts about the property market around Exminster

A landlord who has invested in rental properties throughout Exeter asked me about the property market in her home village of Exminster.

Exminster and the surrounding areas are highly sought after , due in part to the beauty of the surroundings, relaxed lifestyle and wide open spaces. Many people purchase second homes in the area and it is also highly popular with retired people. 

The most popular types of property in Exminster are detached houses, making up nearly 48% of all available properties. This reflects the area’s popularity with families with children. In comparison, the least common type of accommodation is flats, which make up only 5.6 per cent of the market. It can be difficult for first time buyers in the area, as there is a distinct lack of new affordable housing. 

Unemployment is low in the area and many people living here are generally affluent, living in villages and commuting to towns and cities, such as Exeter and Plymouth. 

In EX6, some of the highest priced streets to live on are Haldon Drive, Lumley Close, in Kenton, and Castle Gate, also in Kenton. In these roads, house prices are on average, about £550,000. Some of the most affordable streets in the area include Kenton Mews, again in Kenton, Courtenay Terrace , in Starcross, and Alexandra Terrace, also in Starcross where prices average at about £110,000.

If you would like to discuss property in your area or where you are looking to invest, please come and see us at our office on South Street or call us on 01392 254488.