Professionals Back into Buy To Let Market

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It appears that the low price put on a lot of housing at the moment is encouraging professionals such as lawyers and doctors to get involved in the buy to let sector.These people have cleaned out the stock of several leading house builders recently, especially in the northern cities.

According to Cluttons, the estate agents, they are also becoming increasingly active in London.
 
Speculation on why these youngish professionals have chosen now to get into the buy to let sector throws up a multi faceted answer. Most of these people are sick of the small return on their money from the average bank. With interest rates being so low, they would rather put their cash into something they can see returning handsome dividends in the long term.

Another issue that faces these people, in a lot of cases, is the prospect of future housing for offspring attending college and university. They see buying rental property now as killing two birds with one stone.

Hopefully, their asset will appreciate, and when the time comes they will have then somewhere to house children rather than being forced, or opting, to move from the family home.

In theory this sounds like a good plan. All we can hope is that they are prepared adequately for the rigors of becoming a landlord. Many people aren’t.

UK House Sales Remarkably Stable

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As I ended the last blog with some of the bad news floating around regarding the property sector, I have decided to begin this one with some more upbeat news.

It appears that house sales in the UK have been holding very well in last financial year. According to construction companies such as Redrow, UK house sales are very stable at the moment.  A spokesperson for Redrow had this to say this week after the company’s general meeting.

“Home sales in the financial year to date have been remarkably stable with net private reservations averaging 45 homes per week, including the normally seasonally weaker months of July and August,” the company said.

“Total net private reservations achieved in the first 18 weeks are 47 per cent ahead of the same period last year with cancellation rates having returned to historic norms.”

This is a very encouraging sign of renewed growth in the housing sector that can only benefit the entire economy.
 
On the down side the same companies were quick to point out that the lack of mortgages available from the banks is still a matter for concern. As we know, that concern is twice as relevant in the buy to let sector as banks seem determined to keep options very limited in this area. We can only hope that banks see the error of their ways and loosen their purse strings sometime in the near future.

Doom and Gloom Predicted!

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Having given all of us, and myself, a few cheery blogs in a row it is time to face up to the fact that some experts are not giving the thumbs up to the immediate future in the property sector.

The National Landlords’ Association is very clear about the fact that rental arrears are still causing potentially ruinous problems for a lot of landlords. In a recent report, the NLA revealed that according to their figures three quarters of landlords have experienced problems with rental arrears and, even more worryingly, nearly half of these reported substantial problems in the last twelve month.

Of course, this rental arrears issue then impacts dramatically on a landlord’s ability to meet their own commitments including their mortgages and the upkeep of their properties. Tenants with financial difficulties appear to still be a huge headache for landlords despite all the talk of an upturn in the economy.

Another worry on the horizon for professional landlords is the plan to bring the property sector under full regulation. Many may think there is nothing to fear from this but it is certainly a huge unknown that is making many landlords uneasy. It is a fact that regulation tends to cost a lot of money, and that cost is often passed down to the ones being regulated. This fact alone is enough to make landlords nervous.

In the next blog I will look at the way landlords are being treated by the financial institutions and do a bit of a summary of where all this leaves us.

Rental Returns Looking Rosy

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In the last blog, I covered some of the positive stories that are around at the moment about the rental sector. This blog is a little more of the same with a bit more focus on the rental returns aspect of things which, let’s face it, is the most vital part for any landlord.

LSL Services, which owns the UK’s largest lettings agent network, puts the improvement in rental returns in the UK at 13 percent over the last twelve months. It now puts the average rent in Britain at £669.

One of the things that LSL attributes this to is the number of first time buyers who are being turned away by the banks’ new lending policies. It estimates that a staggering two hundred thousand of these have become renters when before they would be in their own houses. This increased demand has allowed landlords to put a fair price on their rental properties.

All of this good news has resulted in a feeling of optimism in a lot of landlords, with surveys showing that fourteen percent of us are expecting to add to our portfolios over the next two to three months.

Looking at it from the point of view that this purchasing will promote growth, it is easy to think that things really do look quite rosy in our sector, but should all this good news be tempered with a bit of caution? According to some experts it should.

I will look at what they have to say in the next blog.

The Long and the Short of the Good and the Bad!

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As I said in my last blog, I am a bit of an optimist myself so I am going to start this series off by looking at some of the good news that abounds about the property sector and where it is heading.

There have been a lot of positive murmurs coming from the buy to let sector over the last month or so and we should be encouraged by this. One thing that I’ve learned from economics 101, is that positivity breeds positivity.

According to property portal findaproperty.com, things improved dramatically for long term landlords in September and October when ‘accidental landlords’ finally decided it was time to sell up and the stock of available rental property dropped by ten percent. This clearing of the glut of properties up for rent allowed a lot of landlords to return to the fair asking price they had been forced to drop because of the oversupply of housing.  There is no denying this is excellent news for landlords, not to mention the relief for the ‘accidental landlords’ who had no desire to be involved in the rental market in the first place.

Average rent also rose in the month of October, not by a lot but any rise is a step in the right direction. Further good news is that it rose for the sixth consecutive month, giving out strong signals that things may be beginning to stabilise in the market.

Finally, for this section, the average time that a property sits vacant has fallen. Properties are now rented in an average of 58 days. We all know that less vacant properties is excellent news for landlords.

There is further good news in the area of rental returns but I will cover that in the next blog.

Landlords Being Ridiculously Optimistic?

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With the huge amount of media coverage that the buy-to-let sector generates, it stands to reason that people will have different opinions but sometimes the opinions differ so wildly it can be hard for the average person to get any sort of handle on what is going on.

Just this week, financial analyst, Christina Jordan, warned that “Landlords are being wildly optimistic about the potential of the buy-to-let market. Stop kidding yourselves – you’re still in for a rough time.” A very tough sounding warning and perhaps one we were unprepared for as we have been listening to other experts giving us mainly good news in the last few weeks.

So, a lot of property landlords such as myself are wondering what is really going on and who can we trust to be telling us the truth. To be honest, it is largely a matter of personal opinion and, perhaps, temperament. Those more prone to optimism have plenty to be glad about and the more cautious among us can still see signs of trouble ahead; the best we can do is arm ourselves with all the facts and be prepared for anything that may pop up.

To that end I am going to do a series for the rest of the week summarizing the good and the bad news stories out there so we can all get a clearer idea of where we stand. Being a bit of an optimist myself, I will start with the good news in my next blog.

Causing A Stir: Controversial ‘Empty Property Tax’!

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British Union boss, Brendon Barber, has come up with a highly innovative and controversial proposal designed to ward off the housing crisis that many believe Britain is heading for.

Under the terms of the radical proposal that Barber is believed to have put forward for the consideration of Alistair Darling, properties that are allowed to stand vacant will attract an ‘empty property tax’. The clear purpose of this proposed new tax is to encourage landlords to sell or rent their property as quickly as possible, thus reducing the housing shortage.

The proposal would affect nearly a million properties in the UK and if present figures were to remain the same then the tax would be set to raise 5 billion in additional revenue. One can only hope that that revenue would then be put back into the property industry in an endeavour to head off the predicted shortage. It is hard not to have doubts on this point, however.

If the goal of the proposal was achieved then it is to be assumed that the tax revenue raised would be much lower than anticipated but that a lot of living space would be bought back into the market earlier than the owner had planned. This does presume, however, that people are choosing not to rent or sell their properties rather than being forced into that stance. It is a troubling thought that landlords who cannot find anyone to rent a vacant property could also be forced into paying out more money in tax. It will be interesting to see how this proposal is greeted by Mr Darling.

Letting Franchisee Gets Tough

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In recent months the number of letting agencies has been on the increase. It is not surprising as property sales have been at the low end and there have been more accidental landlords entering the market.

However, be warned that being a letting agent is not another ‘get rich quick scheme’.

One of the leading Franchises has recently been terminating franchises because the franchise owners haven’t been playing by the rules.

The license of Rochdale franchisee has been terminated by Martin & Co for allegedly failing to make timely rental payments to landlord clients.

It happened when Martin & Co managing director Ian Wilson and a team of colleagues, visited the franchisee on October 1, which is when his license was terminated. It was claimed the  franchisee was taking longer than the seven working days which is the standard time the company requires franchisees to pay clients.

Before this was the license termination of the network’s Chester franchisee, who Wilson alleges is responsible for the removal of client funds.

So, in short, if you are thinking of becoming a letting agent or are thinking becoming a franchise then make sure that you know what your responsibilities will involve!

Weekday Residential Rentals grow in Popularity

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Britain’s buy-to-let sector is witnessing a great impact from the new phenomenon of weekday rentals.

The ongoing recession and high unemployment figures have forced citizens to take up any job that is available. People are travelling far for work and the commute can be quite agonising. So it makes perfect sense to rent an inexpensive and very modest room or flat during the week, and then spend each weekend at home.

The demand for weekday rentals outstrips the current supply of such properties. Here is a potential business opportunity in the buy-to-let sector, as it is one of the few areas that has not been oversaturated.

Some 30,000 Britons are looking for inexpensive weekday rentals at any given moment, whilst only around 10,000 residential landlords actually offer such properties. But landlords can benefit from such an arrangement, especially those who rent out a suite or floor of their own home.

Most weekday tenants spend very little time in the rented property. They tend to work long hours during the week and return at the end of the day to sleep and almost often return home at the weekends.

This is indeed a good proposition as the average landlord can easily earn around £4,250 per year when they rent a room or suite to weekday tenants.

Stamp Duty Must Go

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The government is being urged to scrap the “anachronistic” Stamp Duty Land Tax by a property sector coalition. The ‘1808 Coalition’ feels that Stamp Duty should be reformed because its ‘slab’ structure tends to unfairly distort the UK’s property market. The stamp duty is like a “relic” belonging to another age that fails to recognize the modern British property market. 

The 1808 Coalition formed by the NAEA and ARLA addresses the issue of “modernizing” Stamp Duty in the run-up to the Pre-Budget Report. 

86 per cent of the UK’s estate agents feel that the tax is unfair. 81 per cent of agents believe that if the Government makes an announcement to reform Stamp Duty, there would be a very positive effect on the beleaguered property market. In fact, 91 per cent of estate agents surveyed feel that the current Stamp Duty “holiday” for properties worth £175,000 or lower which is due to expire imminently should be extended.

Stamp Duty prohibits entry of many first-time buyers and prevents those looking for a step up the property ladder. Those investing in buy-to-let portfolios are unfairly penalised and have to pay Stamp duty on bulk price whereas individual buy-to-let investors pay a lower rate on the individual unit price.