Monthly Archives: June 2009

Less Risk Averse Banks Turned Blind Eye To Hyped Valuation

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Citywire, a well respected financial website, this week published an article outlining the difficulties faced by buy to let investors in the present climate. 

They covered a lot of ground that we have discussed before but it is interesting to see the views of people who are not as close to the issue as some of us obviously are. 

The report confirmed the fact that a lot of people had come into the landlord game very reluctantly when they were unable to sell their properties. It also looked at the fact that this quickly led to an oversupply of rental properties and increased void periods for a lot of landlords. It points out that the number of people attempting to get into the property business is falling for the first time in some years and puts that down to bad publicity about the state of  the rental market at the moment, and also the fact that banks have become far more risk adverse. 

The report suggests that banks were willing to turn a blind eye to over-hyped valuation in a less risk adverse recent past but now are increasingly pessimistic when evaluating a properties worth. This is driving a lot of new buyers away. Along with the fact that very few banks now accept less than a 15 percent deposit and some are asking as much as fifty percent on buy to let, the report concludes that the market should be a lot less crowded in the near future. 

This probably sounds like a very good thing to a lot of established landlords.

National Registration Fee Still Causing Outrage

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We have talked on here before about the new scheme the government have dreamt up which involves landlords joining a national register and paying £50 for the privilege, ostensibly to cover administration costs. 

Whether you agree with the aims of the national body or not, being forced to join one feels is a little dictatorial and to be forced to pay for it as well just adds insult to injury. 

Landlord Assist is concerned with this fee being the straw to break the camels back on top of all the other fees associated with setting up to become a landlord. I tend to be of the opinion that if you are going to be put off by an extra £50 then perhaps you do not have enough financial flexibility to be considering entering into the property game. But I also feel this is not the point.  

In my opinion you cannot make joining a club compulsory and then force reluctant joiners to pay for it as well. I feel my opinion on the matter is unlikely to make any difference as the government has already set a precedent on this type of thing. Teachers were not long ago forced to join a national registering body and still pay around £50 pound a year to be a member of something many disagree with. 

I feel that the national registry for landlords and the fee associated with it are probably inevitable but it will not stop me voicing the fact that I am opposed to it as a matter of principle.

Tenants To Be Protected In Repossession

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Housing minister Margaret Beckett has recently announced a proposed change to the law governing tenants rights in the event of a property being repossessed by a lender.

The change would insure that any tenant is guaranteed two months notice if they are to be required to leave their home. On the face of it this seems to be a fair and just change and indeed, most would consider it common sense. As the website www.landlordexpert.co.uk points out, though, things are rarely as simple as they look.

One complication with this situation is the number of landlords who have bought houses on a residential mortgage even though they are actually renting it out. In that case, it is unlikely that the lender is even aware of the existence of a tenant.  Most lenders are happy to honour the tenancy of a property if the tenant has been prompt with payment of rent and stuck by all other important obligations, but it can still put the lender in a difficult position. There is a very fine line to tread here between protecting the rights of the tenant but also protecting the interests of the lender.  The government is expected to consult on these proposals over the summer and legislation should be in place by by 2010.

Buy To Let Market Stabilising

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Last week The Telegraph printed a very heartening article in which it indicated that there are signs the buy to let market may actually be stabilising. As its proof it revealed the fact that in May the average price of renting a property in the UK remained the same for the first time in nine months.

That average cost is, apparently, £819 per month. And for the first time since August 2008 it did not fall in May.

Another good sign according to The Telegraph is the fact that the number of properties actually being put onto the market eased in May. There was a rise of only 2.7 percent in this area in May compared with a huge 14.5 in May last year.

This easing in the rate at which available properties are rising will hopefully start to see the reversal of some of the negative aspect of an oversupply. With any luck we could soon see a decline in the void periods currently being suffered by a lot of landlords, which would be a huge relief for many.

It is also possible we are not far from a time when landlords can feel a bit safer in demanding a reasonable price for the rent of their properties. The increased competition recently has led to a dramatic fall in the rent some landlords are able to ask for, with disastrous results for their bottom line.

Let’s hope all this does start coming true as The Telegraph seems to be indicating it will.