Housing Boom Entices Buy-to-Let Landlords

The government may be trying to give Brits a leg up onto the property ladder, but by inadvertently increasing house prices buy-to-letters are jumping at the chance to benefit from the booming rental market.

The government’s Help to Buy scheme, the first part of which was launched last April, has given thousands of people the chance of home-ownership but it has also pushed up house prices meaning the gulf between those who can afford to buy and those who cannot has grown ever wider.

Figures from charity Shelter show that average earnings would be £55,296 if they had kept pace with housing inflation since 1997. The average price of a home has increased more than three-fold in this time from £75,762 to £253,816 but average wages have increased from £16,500 to just £25,932.

So it is no surprise that 10 million people now rent from private landlords, according to Knight Frank, which says this figure has doubled since 2000. And according to separate research by Countrywide, renters are becoming older, with 60% of tenants over the age of 30, while more families are renting.

For landlords, the benefits are doubled; not only are house prices increasing but rents are still rising, albeit more slowly than in 2012.

LSL Property Services’ buy-to-let index showed the average yearly rent in England and Wales is now £745 a month as rents rose 1.5% in 2013, a smaller increase than the 3.2% rise seen the year before.

Trends for increasing rents and house prices are set to continue and David Hollingworth of mortgage broker London & Country said the interest in buy-to-let will not wane.

‘The buy-to-let market has remained very strong in recent years and as confidence in the general housing market picks up and prices begin to rise it seems hard to see why that will change,’ he said.

‘The focus for buy-to-let investors has perhaps been on the rental income in recent years as they attempt to generate a better return on cash compared with the poor savings rates that prevail. Rental income has held up well and although first-time buyer numbers are up the demand for rented accommodation should remain strong.’

Buying at the top

Hollingworth said rising house prices would ‘add to the attraction’ of buy-to-let but he warned that ‘landlords should be taking a long term view’.

‘Capital growth in the longer run is something that most investors will understandably hope for,’ he said.

Research by buy-to-let lender BM Solutions showed a third of landlords plan to expand their portfolios in the next 12 months as 63% of landlords surveyed said they were confident about rental prospects for the year.

This optimism, alongside the government’s Help to Buy initiative, is ensuring house prices are ticking up steadily. According to figures from the Office of National Statistics house prices are now 1.6% higher than the pre-financial crisis peak and the average UK property is now worth £250,000 – meaning that more home buyers will be dragged into the 3% stamp duty bracket, or in some cases frozen out of home ownership because of the expense.

Howard Archer, chief UK economist at IHS Global Insight, predicted house prices will rise another 8% this year and warned ‘a housing bubble could really develop in 2014’.




Citywire Money, February 20th 2014

Safe As Houses

An interview with Joe Billingham Founder or Prosperity.

One thing is clear; UK house prices are increasing. Higher confidence, low borrowing costs and improving consumer sentiment are boosting demand.Yet with the UKs economic recovery still classed as fragile by some, is the UK property market back at full force and ready for business once again?Many will hope so, as the future income of Britain’s growing, ageing population remains under threat. With predicted pension incomes at an all-time low,the UK Government continues to encourage alternative investment for future income. So - is property the next best investment?


Growth in house prices and lucrative buy-to-let yields are making property investment an appealing option for many, particularly as floundering annuity rates and excessive charges continue to undermine the chances of getting a decent income from a traditional pension.Across the vast number of studies, average figures reveal that one in three people have abandoned pension saving and instead turned to property to fund their retirement. So what do the experts think?


UK property fund manager Joe Billingham has over 20 years’ experience working in the industry. Joe’s passion for property as the No 1 asset class has been widely documented. Presenting at lectures and seminars across the world, Joe currently manages over£50 million of UK property and is founder of Prosperity, the innovative property for pension product allowing clients to purchase discounted UK property on a monthly payment plan. 


UK pensions, where is it all going wrong?
   
The issue is twofold. Prolonged life spans are forcing the UK pensions industry to support a greater number of pensioners for longer periods.This combined with continued poor performances in stock market returns, creates a situation where more people than ever are feeding off smaller returns than ever, as the pension funds fail to deliver. Then, most have no access to these monies until the age of 55 or 60 years, at the earliest. And so it becomes a vicious circle - once retired, many people then have to use their pension savings to buy an annuity to provide an income for the duration of their retirement. As people are living longer, this combined with low yields on gilts, paints a bleak picture. The message is clear - minimum contribution levels just will not provide a comfortable standard of living in retirement. Of course, the Government clearly have a hand in presenting the situation in such a way. They have a key objective to encourage people to save for their own retirement.

Why property?

Property holds many critical benefits as an investment over any other asset class. It is tangible – you can see it. That stands for a lot nowadays, and certainly for those who have been stung in the past by ‘faceless’ funds. Property is the one asset class that buys itself through its own income generation. Rental property can generate monthly income for as long as it is required.

Going back to the matter of population - analysts are estimating that the UK population will overtake Germany as the EU’s highest population by 2045.  So while annuity rates are potentially damaging future retirement income, property has the longevity to match increased life expectancy.
This is a clear message; it is the dawn of an incredibly lucrative time for UK property investment. 



How is the UK property market currently?

Just like the rest of the world, UK property has seen some resistance. OK it’s taken a bashing but not as much as some other asset classes. All of the signs that we’re at the beginning of the next cycle have come back around and will show themselves via a strong growth period for next three to five years. It’s cyclical, the signs are always there. And it’s clear that investors on a global scale are recognising this. We’ve seen a significant increase in overseasinterest from expat and locals, so the message via the media as well as financial advisors and lending professionals is clearly coming across.

Average house prices have increased by £14,000, or 8.8 % in a single year. In fact, they have risen at their fastest pace since 2010 - this is proved by the latest Nationwide house price index.Average property values have risen 0.7% month on month, now reaching £176,491. This is the highest average price since April 2008. What’s more, January marked the 13th consecutive monthly rise in property values resulting in a positive reaction from the lenders.



Isn’t this just the capital, London though? What about the rest of the country?

Not at all.Demand for London property remains strong,it has a great reputation as a safe haven for foreign investment. We are proud of this and are using it to great advantage. We are already witnessing this investor confidence spreading into commuter belts circling the capital as well as other key cities - many of which have experienced unprecedented gains in rental demands over the past 18 months as undersupply has forced tenants into discovering neighbouring areas. The UK Government has made significant commitments to increase national infrastructure, creating an even greater rental demand across commuter areas, market towns and putting lesser known regions firmly on the rental map. Some of the country’s largest Insurance organisations are pledging to invest over £25 billion in related fund vehicles – this says something.


How does the land lie for landlords?

Where in recent years, lenders have ceased low rate  deals claiming to be concentrating on the first-time buyer and re-mortgage market, now landlords are very much back in the market. In response to the rising demand from investors attracted by the increasing rental charges, land lords are now gaining access to a far wider variety of mortgageproducts via the big lenders - ever more eager to access the less risky borrowers. As an example, Post Office Mortgages has returned to the buy-to-let market offering a range of two and five year fixed rates. This is a clear indication that the competition is rising amongst the lenders, forcing them to up the ante.

21st February 2014

North/South rental gap has almost doubled since 2008

Average rent in Britain predicted to rise above £1,000 in 2014

 New figures suggest it is now 69 per cent more expensive to rent a home in Greater London, the South East and South West than around the rest of the UK. In January 2008 the difference was 37 per cent.

The report from HomeLet also shows that rents are an average 2.4 per cent higher than the same time last year.

"A lack of affordable housing stock in the south could be one of the drivers for the growing divide we’re seeing," said Gary Abraham, HomeLet’s Sales and Marketing Director."The private rented sector is becoming a much longer term housing solution for many. We’re seeing a combination of increased average tenant ages, increased income and previous tenancy length."

Its figures indicated that the average age of a tenant rose during the past 12 months and is now 34, while the average income of tenants in the UK increased by 5 per cent to £28,500 and tenancy lengths increased by 6 per cent to reach an average of just over 21 months.

A second report from Move with Us estimates that the average rent in Britain will top £1,000 in 2014.

Compared to January 2013, rents in Great Britain have increased by an average of £16 (1.63 per cent) - the average advertised rent is now £987 per month, on track to hit the £1,000 mark this year.

Rents in Greater London rose to £2,221 per month in January and are almost double those in the second highest performing region, the South East, (£1,138).  In January 2014, average rents were £679 per month in Wales and £695  in the North East.

Robin King, Director of Move with Us said: "London continues to operate in its own bubble and asking rents are on the rise again following declines. It is likely that the current increase in average asking rents is a sign of further increases to come as the population growth in Greater London carries on.

"Although increasing rental prices in most regions in Britain is great news for landlords, it’s not such good news for prospective tenants. Anyone looking to rent will be able to secure a more affordable rental price by acting sooner rather than later as rental prices look set to rise in the coming months."

The Independent - Tuesday 18 February 2014

UK Pensions Crisis: Over Third of Britons 'Will Never Save for Retirement'

Despite the UK's looming pensions crisis, over a third of Britons says they will never save or invest for their retirement.

According to a survey by information firm Nielsen, 37% of UK consumers have no plans to put away money for their retirement. This compares with 22% of people globally.

"Britons appear much less involved in saving and investment activities than other consumers around the world," said Eleni Nicholas, Nielsen's senior vice president for financial services in Europe.

"Our analysis shows the British are engaging in activity to meet, on average, just two-and-a-half financial goals, compared to four goals globally.

"Although retirement is high up on Britons' lists, it's still much less of a thought than it is around the world."

An ageing society and growing population is putting strain on the UK's state pension system.

The state pension age is being pushed back later and later, while the value of the payments is set to steadily decline as they become increasingly unaffordable for the public purse.

This means a greater burden will be put on the individual to save for when they retire, rather than the state to provide a sufficient pension income.

A report by thinktank Policy Exchange said 11 million people in the UK are at risk of entering "pension poverty" when they retire because they are not saving enough.

In order to meet the government's recommended retirement income of £16,200, Policy Exchange argued that someone earning the average salary of £27,000 needs to save 6.5 times more than they currently do.

"People are not saving enough for their retirement," said James Barty, author of the report.

"This is putting an intolerable burden on the state which needs to be addressed sooner rather than later."

The government has created the auto-enrolment scheme, which forces employers to put workers aged over 22 and earning more than £9,440 a year on a workplace pension scheme. Both the worker and employer make contributions.

Chancellor George Osborne has brought forward plans to raise the state pension age. It will now rise to 68 in the mid-2030s rather than 2046 as previously planned.

According to government projections, public spending on the basic state pension will soar from £66bn in 2015/16 to $276bn in 2060/61.


By Shane Croucher | February 10, 2014 08:44 AM GMT