Property prices in England and Wales up 0.1% in October

Property prices in England and Wales up 0.1% in Oct, says Land Reg index

 Property prices in England and Wales increased by 0.1% in October, taking the average price to £177,377, according to the latest index from the Land Registry.

The data for October also shows an overall annual price increase of 7.7% but there are considerable regional variations. London has seen the biggest annual price rise at 18.6% and a 0.7% month on month rise, taking the average price to £460,060.


The East experienced the greatest monthly rise with a movement of 1.6% and has seen prices rise by 11% year on year to an average of £198,338, while the South East had an 11.4% year on year rise and monthly growth of 1.2% to an average of £240,070.


The average price in Yorkshire and Humber is now £120,807 after a 0.6% month on month rise and annual growth of 4.3%, the South West has seen prices rise by 0.2% month and month and 6.4% year on year to £185,615 and the West Midlands also saw prices rise 0.2% month and month and an annual rise of 4.4% to £135,378.

Elsewhere prices have fallen month on month but are still some way ahead of a year ago. The North East saw the steepest monthly fall with prices down 2.7% but they are up 2.7% year on year to an average of £97,356.

In the North West prices fell 0.3% month on month but are up 4.5% year on year to £112,642. The East Midlands saw a month on month fall of 0.4% but price are up 5.7% compared to a year ago with an average price of £131,274. Wales also saw prices fall month on month, down 0.9% but up 2% year on year to an average of £118,437.

The most up to date figures available show that during August 2014 the number of completed house sales in England and Wales increased by 4% to 82,415 compared with 79,587 in August 2013.

The number of properties sold in England and Wales for over £1 million in August 2014 increased by 15% to 1,363 from 1,185 in August 2013.

Peter Rollings, chief executive officer of Marsh & Parsons, pointed out that while UK house prices are still edging forward, growth is slowing compared to the first half of the year and although London has considerably outperformed all other regions during the last 12 months, growth has slowed considerably and on a monthly basis only edged up slightly.

In addition, prices are slipping in some of the most expensive areas of the capital, with values in Kensington and Chelsea falling 2.5% over the month to October, as growth tails off more sharply at the top end of the market.

‘Activity levels at the top tiers of the UK housing market have shown healthy growth, with sales of properties worth over £1 million rising 15% in the year to August 2014. But fears of a potential mansion tax could contaminate demand for prime property in the run up to the general election,’ he pointed out.

‘Uncertainty surrounding this and the possibility of other populist wealth taxes is putting off all buyers be they overseas or home grown, for whom prime London property usually commands global appeal as a gold standard asset. This could be a worrying development for London’s reputation as a business hub and natural outlet for investment, and could spell trouble beyond the capital if this lack of confidence at the highest rungs trickles down the housing ladder to the wider market,’ he added.

While property price growth may now be taking smaller strides on a monthly basis, the housing market has covered extensive ground over the past year, according to David Newnes, director of Your Move and Reeds Rains estate agents, but he pointed out that the headline figures paper over significant regional variations.

‘While few traces of the financial crisis are distinguishable in London where boisterous annual price growth continues, for places like Wales and the North East, home owners are still waiting to see evidence of the housing recovery, as property values stall,’ he explained.

He also pointed out that the flagship Help to Buy scheme has stimulated the confidence that was required to re-energise the bottom of the market and compared to last year, there is much more choice for new buyers looking to secure a good mortgage, helping them access cheaper monthly repayments and relatively smaller deposits.

‘But with uncertainty in earlier months over a base rate rise, and the rate of house price rises changing, the Government and the Bank of England need to safeguard first time buyer demand,’ he said.

‘Our research reveals a worrying lack of understanding over new regulation among first time buyers with four in 10 thinking that the recent loan to income caps have made it trickier to get a mortgage compared to six months ago. That’s breeding a new air of caution. Any further affordability measures need to be outlined more thoroughly, so that they don’t numb demand,’ he added.

Source: www.propertywire.com

UK house prices to rise between 3% and 5% next year

A further moderation in house price growth in the UK is likely next year and house prices nationally are expected to increase in a range of 3% to 5% in 2015.

 



The prospect of higher interest rates at some point in the year and the deterioration in affordability over the past year are expected to be key factors curbing housing demand, according to the latest house price inflation report from the Halifax.


But housing demand should be supported by solid economic growth, higher employment, still low mortgage rates and the first gain in ‘real’ earnings for several years, the report suggests.

Halifax said it expects to see a more even regional pattern in house price growth during 2015.
Global economic worries could reduce demand and activity at the top end of the London market in 2015.

Further ahead, price growth is expected to rise broadly in line with income growth, as rising interest rates increase the affordability constraint on the market. Higher levels of house building should also limit upward house price pressure.

‘The fortunes of the housing market are closely tied to developments in the wider economy. The strengthening in the UK economy has contributed to higher housing demand over the past 18 to 24 months. There has been an increase in the number of buyers, fuelled by rising confidence and the improved cost and availability of credit. Higher demand, however, has not been matched by an increase in the number of sellers in the market, resulting in strong upward pressure on house prices in some parts of the UK,’ said Halifax’s housing economist, Martin Ellis.

‘The deterioration in housing affordability as a result of higher house prices, earnings growth that has been consistently below consumer price inflation until very recently and increased talk of an interest rate rise, appear to have combined to temper housing demand since the summer. Tighter mortgage rules may also have acted as a brake on activity. The weakening in housing demand has led to a modest easing in both price growth and sales,’ he explained.

Source: www.propertywire.com

UK property transactions up 3.2% month on month

UK property transactions up 3.2% month on month, HMRC provisional data shows

The number of seasonally adjusted property transactions in the UK increased by 3.2% in October and are up 4.3% compared to a year ago, according to the latest data published by HMRC.

The pattern since the beginning of 2013/2014 has been of a general month on month increase in transactions for the seasonally adjusted data until February 2014, then a gradual decrease followed by a flattening out of transaction numbers.

The data also shows that August 2014 saw a peak for recent non-seasonally adjusted transactions, the highest level since November 2007.

In October 2014, the number of non-adjusted transactions has risen compared with September 2014, for residential properties. However, the rise was smaller than in previous years, so the seasonally adjusted figure for October 2014 is lower than in the previous month but higher than in October 2013.

The seasonally adjusted estimate of the number of non-residential property transactions increased by 0.1% between September 2014 and October 2014. This month’s figure is also 8.0% higher compared to the same month last year.

Seasonally adjusted transactions of non-residential property have been fairly stable over the last year. Non-seasonally adjusted transactions had a large drop in the first two months of 2014, but increased sharply in March. There were also dips in May and August, with month on month growth since then.


Meanwhile, the latest transaction data from the Land Registry shows that it completed over 1.5 million applications from its customers in October.

This includes 1,464,352 applications by account customers, of which 382,966 were applications in respect of registered land (dealings), 662,153 were applications to obtain an official copy of a register or title plan, 205,537 were searches and 102,912 were transactions for value.

The South East topped the table of regional applications with 349,858 and Birmingham topped the table of local authority applications with 23,528.

Source: www.propertywire.com

Birmingham rents second highest in UK, says property survey 

 

Birmingham is among the least affordable places in the UK to rent a home, a new report has claimed.

The city was in joint second place with Edinburgh in the poll, which revealed payments accounted for 47 per cent of the average monthly renter’s income.

Only London with 49 per cent of an average monthly income taken up by rental costs was more expensive than Birmingham.

The figures were released by HomeLet, which provides insurance products to the private rented sector. It analysed 16 cities across the UK to calculate the cheapest and the most expensive places to rent, compared with local incomes.

Plymouth was named as the most affordable city, with rents typically taking up just over a quarter (27 per cent) of a renter’s take-home income.

Martin Totty, chief executive of Barbon Insurance Group, of which HomeLet is part, said: “Our analysis of the affordability of renting in the UK’s major cities has produced some surprising results.

“In some parts of the UK, such as Scotland and East Anglia, where rental prices are now falling or stagnant, the data tells us that renting in some cities in these regions is still stretching tenant affordability.”

Source: www.birminghammail.co.uk

UK house prices back on track after September dip

UK house prices back on track after September dip

 

 UK house prices back on track after falling slightly in September dip with a 1.2% rise in October and up 7% annually, the latest published index shows.

Growth of up to 5% is now predicted across UK in 2015 but the data from haart, the UK’s largest independent estate agent, with a network of over 200 branches, also shows that first time buyers are paying 8.1% more than a year ago.

The latest rise takes the average annual house price to £204,247 but in London it is £501,561 with prices in the city up 18% year on year although monthly growth has slowed to 0.3%.

The firm predicts UK property price growth between 3.5% and 5% in 2015 and in London up to 7% as 10 buyers chase each new property instruction across the country and 17 in London.

‘Although price growth is easing it is merely a market correction with all signals pointing to price rises of up to 5% across the UK next year. Savvy buyers and sellers would be wise to run with the window of opportunity that this creates now,’ said Paul Smith, chief executive officer of haart.

He predicts that in the run up to the election next May it will be a case of ‘steady as she goes’ with little intervention from the government which thinks it has bigger fish to fry. However, he thinks this is short sighted.

‘Now is the time for some erudite analysis of the housing market by all political parties if we are to emerge post-election with renewed vigour. Supply of homes is the biggest issue affecting prices and until this is properly addressed, prices will continue to rise,’ he explained.


The data also shows that the number of new buyers registering is down 12.3% annually and 2.4% on the month, but this must be seen in the context of the first six months of this year which were exceptionally busy with a renewed enthusiasm to buy driven by low interest rates and the availability of good mortgage deals.

The number of properties for sale has dropped slightly annually, which again must be seen in context. The previous four months all saw an increase in the number of properties for sale. Overall demand remains strong across the UK.

Again, with demand from first time buyers, there has been both an annual and a monthly fall in volumes by 17.2% and 3.6% respectively. First time buyers are putting down, on average, a deposit that is 4.4% lower than this time last year and the average LTV achieved is now 79.5% which is up from 78.7% last year. First time buyers are now taking out higher mortgages, at an average of £131,119, an 11.9% annual increase.

Finally, you can hold buy-to-let in your pension. Here's how

Swap your properties for shares in a new fund and your investment could grow tax free

Buy-to-let landlords may be about to have their biggest dream come true: being able to hold their properties in a personal pension.


This would make any future capital gains tax-free. Holding residential property in a pension has previously been impossible.


The change, which comes about as a result of a new fund that invests in rental properties, could even see investors receive a windfall from the taxman if the value of their buy-to-let portfolios is boosted by tax relief when it is put into the pension.


This manoeuvre, which would see investors swap their existing, directly owned properties for shares in the property fund, could suit small buy-to-let investors with a handful of properties. A different tax perk could benefit larger landlords who own their properties via a limited company, who may be able to defer some of their capital gains tax liability.


Either process would be complicated and would involve costs as well as benefits. Here we look at how they would work, first for small landlords and then for larger ones who already own, in effect, their own property company.

Smaller landlords who own their properties directly

How would I swap my properties for shares in the fund?

There are two ways. First, the fund, called Mill Residential, said it was interested in acquiring portfolios of buy-to-let properties directly from owners and paying them in its own shares. Alternatively, you could simply sell your buy-to-lets in the ordinary way and use the proceeds to buy shares in the fund, which is structured as an investment trust and plans to list on the stock exchange soon.

Wouldn’t this mean a big capital gains tax bill?

Yes, although this could be offset by the tax relief you make at the next stage, when you put the shares in a pension.

Tax would be charged at 28pc on any gains above the threshold for basic-rate income tax; below this level you would pay 18pc, although any other income is taken into account. Swapping your property for shares would give rise to a tax bill in the same way as selling it.

But you would be able to use the capital gains tax annual exemption of £11,000 and any additional allowance under the “principal private residence” rules if you had recently used the property as your main home, as many “accidental landlords” will have done.

So how does this tax bill get wiped out?

Once you have the proceeds of selling your properties, whether shares or cash, you can transfer them to a self-invested personal pension (Sipp). When this happens, the Sipp operator will automatically claim basic-rate tax relief from HMRC, and you can claim higher-rate relief via your tax return. You need to have paid sufficient tax that year to claim the relief.

If you swapped your property portfolio for shares in the fund, you can transfer them to the Sipp “in specie” or as they are. You can still claim tax relief on their value. If you transferred cash, you use it to buy shares in the fund.

Greg Kingston of Suffolk Life, the Sipp company, said shares in the fund would be eligible for inclusion in a Sipp.



But my portfolio is worth hundreds of thousands. Surely I can put only £40,000 a year into a Sipp?

Yes, but there are two ways to boost the contribution. First, if you and a spouse own your portfolio jointly and both swap for shares, you could both contribute to (separate) Sipps. Second, you can carry forward previous years’ unused pension contribution allowances, as long as you belonged to a pension scheme at the time and had sufficient taxable earnings. This could boost each spouse’s total contribution to the Sipp to £190,000.

What happens once the shares are in the Sipp?

Just as with any other asset in a pension, your shares can appreciate with no liability to capital gains tax. Withdrawals would be taxed at your top rate at the time, although you could take advantage of next year’s new pension freedoms to take money out in the most tax-efficient way.

John Moret of More to Sipps, a consultancy, said: “This offers a flexible route to getting money out of property investments and dovetails nicely with the pension reforms.”

What are the pros and cons of swapping your properties in this way?

The pros include the ability to exit your property investments gradually once you own the shares. This could be ideal once you are retired. Actual properties can, of course, be sold only in one go. You will also no longer need to manage the properties yourself or employ agents, although the fund itself does incur costs. Another advantage is that for small landlords a single empty property could decimate their income, whereas in the fund there is likely to be a fairly consistent, hopefully low, level of vacancies.

The cons include the fact that you are giving up direct control of your assets and trusting the fund manager. Sipps also impose charges, while rates of tax relief could change in future.

What is the position regarding capital gains tax?

If you own the properties through a limited company, capital gains will normally be charged at the corporation tax rate of 20pc.

But it’s different if you dispose of these properties by exchanging shares in your company for shares in the fund. Under special tax rules, share transfers are tax free.

This means that you could defer your capital gains tax bill until you eventually sell the shares in the fund.

In certain circumstances, buy-to-let portfolios held directly, rather than in a company, may also qualify for such transfers. You would need to have a larger portfolio with 10 or more properties and to be personally involved in running the portfolio as a business, rather than as a passive investor. This is something of a grey area, however.

One landlord who could benefit from this is Fergus Wilson (pictured below), who, with his wife, Judith, has amassed a buy-to-let portfolio of almost 1,000 properties. Although they own their properties directly, rather than through a company, the exemption for large, managed portfolios could apply.

They are in the process of selling up for an estimated £200m and could face a capital gains tax bill of around £30m.

“There’s always somebody who shows up with a handful of magic beans and says all you have to do is hand over your properties,” he said. “I would want to look at the details quite closely, but for landlords thinking of retiring, like us, it could be one option worth investigating.”

How do the tax perks affect the value of my buy-to-let company?

Because there is no capital gains tax to pay at the point of the exchange, the fund said it would pay more for properties acquired via a share swap.

For example, if a professional landlord has a company with property worth £4m and £2m worth of mortgage debt, the company’s net assets are £2m. If the capital gains tax due on the sale of the properties is £500,000, the company’s net worth is £1.5m.

Because of the capital gains tax deferral when the company is sold to the fund, Mill Residential said it would share the benefit by paying £1.75m for the company.

By taking shares in the fund rather than cash, landlords roll over their personal capital gain until they sell their shares in the fund.

Could you then transfer shares in the fund to a Sipp?

You could, but this would count as a sale and capital gains tax would become due.

How does the fund work?

Mill Residential is a “real estate investment trust” or “Reit”. This is a special type of company that owns income-producing real estate such as commercial or buy-to-let properties.

Capital gains and rental income are exempt from tax when inside a Reit, but holders of its shares are subject to tax when they sell.

Investors who buy shares in the Reit receive a proportion of the fund’s rental income through dividends. Reits must pay out at least 90pc of their taxable income as dividends to shareholders each year.

Investors are taxed on the dividends at their marginal rate, so a 45pc taxpayer receiving a dividend of £100 would pay £45 in tax.

 Source: www.telegraph.co.uk

Housing stock valued at £5 trillion

The total value of the UK's private housing stock has broken through £5 trillion this year as the property market recovery has taken off, a report has found.

The collective worth of privately-owned homes across the country has increased by £1.83 trillion over the past decade - and around one third of this extra value has been added in the past year alone, Halifax found.

Almost half of the value of the country's £5.06 trillion worth of homes comes from London and the South East.

 

 

In London, the value of owner-occupied and privately rented homes has more than doubled over the last 10 years, from £545 billion in 2004 to £1.14 trillion in 2014.

Halifax estimates that on average, Londoners are sitting on £313,466-worth of equity in their home.

Homes in the South East are now worth £950 billion collectively, marking a 55% increase over the last decade.

Over the past year, the value of UK housing stock has surged by £630 billion or 14%. This percentage increase marks the fastest annual growth since a 22% year-on-year rise was recorded in 2002.

After London, Scotland has seen the fastest growth in the value of private housing stock over the last decade, with a 96% increase taking its total worth to £333 billion.

The West Midlands and the North East have seen the smallest growth in collective values over the last decade, at 32% and 33% respectively.

Martin Ellis, a housing economist at Halifax, said: "An increase in average property values combined with a rise in the number of private new builds has contributed to the increase in the value of housing stock across all UK regions, although the growth is stronger in London and the South East."

Halifax used a combination of government and commercial figures to make its calculations.

Here is the value of privately-owned housing stock in each region according to Halifax:

:: North East, £120 billion

:: North West, £390 billion

:: Yorkshire and the Humber, £289 billion

:: East Midlands, £273 billion

:: West Midlands, £333 billion

:: East, £530 billion

:: London, £1.14 trillion

:: South East, £950 billion

:: South West, £456 billion

:: Scotland, £333 billion

:: Wales, £167 billion

:: Northern Ireland, £77 billion

Source:  www.dailymail.co.uk

House prices 'growing faster in the North than in London'

House prices in Manchester, Birmingham and Newcastle will be growing faster than in London by the end of the year as bargain hunters turn to cheaper property in the North of England, a report has forecast.


The average property price in the capital rose 0.3 per cent between September and October to reach £402,800, according to analysts Hometrack.


By comparison, property prices in some cities outside the South East jumped by more than two per cent during the same period.


The cities where property prices were rising fastest were Milton Keynes, up 2.2 per cent, Middlesbrough, up 1.2 per cent, and Blackburn and Gloucester, both up 1 per cent. 

 

Hometrack's data showed that house prices grew 0.3 per cent in Manchester and Birmingham in October and 0.4 per cent in Newcastle.

He said returning confidence in the economic recovery had convinced more buyers to seek property in less fancied part of the country, where prices were lower.

The data showed the average home in Newcastle is priced at £123,800 – around a third of the price in London. 

 

 Source: www.telegraph.co.uk

UK buyers better off than renters

UK buyers better off than renters after five years, new study has found

Buyers in the UK are better off than renters within five years on average as a result of equity outstripping the value of savings, new research has found.

While home owners with mortgages pay £316 more on average per month compared to those renting equivalent properties, they become better off after a few years, according to the study from property website Zoopla.
The research also shows that the average monthly rental across the UK currently stands at £865 per month versus an average monthly mortgage repayment of £1,181.




But while renters may pay less each month, owners recoup their initial costs and become better off than renters within five years on average as a result of the value of equity outstripping the value of savings. And after seven years, the average owner is £13,850 better off compared to an equivalent tenant.

Aberdeen, Dundee and Glasgow are currently the most cost effective towns for buying versus renting, as the average monthly mortgage repayment is less than the average rent.


At the other end of the scale, Bournemouth, London and Huddersfield are the most cost-effective places for renters due to higher property prices relative to rents for equivalent properties. London owners pay nearly £1,790 more a month than the average renter in the capital.

‘People who invest in property are playing the long game. While buyers have to swallow the initial upfront costs of purchasing a property, they ultimately reap the benefits over renters down the line,’ said Lawrence Hall of Zoopla.

He explained this is due to building up equity in an asset that they will own by the end of the mortgage term. ‘With the strong house price growth we’ve experienced this year and interest rates still low, saving for even a 10% deposit takes its time,’ he added.

Source: www.propertywire.com

 

Property prices up 12% year on year

UK property prices up over 12% year on year, latest data shows

Tuesday, 18 November 2014

UK house prices increased by 12.1% in the year to September but there is considerable variation with London driving national prices up, the latest data shows. Overall, house price annual inflation was 12.5% in England, 5.8% in Wales, 7.6% in Scotland and 10.9% in Northern Ireland, according to the figures from the Office of National Statistics. Annual house price increases in England were driven by an annual increase in London of 18.8% and to a lesser extent increases in the East at 13.4% and the South East at 11.6%. Excluding London and the South East, UK house prices increased by 9.1% in the 12 months to September 2014. The data also shows that on a seasonally adjusted basis, average house prices increased by 0.5% between August and September 2014. In September 2014, prices paid by first time buyers were 13.3% higher on average than in September 2013. For existing owners, prices increased by 11.5% for the same period. According to Peter Rollings, chief executive officer of Marsh & Parsons, the housing market recovery is still showing spritely movement, and good ground has been covered in property values compared to a year ago. ‘Values have retreated back from peak levels in the majority of regions across the country. London remains the spark plug injecting energy into the overall annual rise in UK house prices, and lively demand to live and work in the capital has always spurred growth on at a faster pace than in other regions,’ he said. ‘Following a slower than normal summer in London, an attractive combination of greater supply of property, excellent lending conditions and more realistic asking prices are attracting good amounts of potential buyers to the market,’ he added. David Newnes, director of Reeds Rains and Your Move estate agents, pointed out that recent hiccups in the market have not shaken the overall underlying stability. ‘Zooming in on the regional footprints unearths a more complex path of growth as the recovery continues to advance with a Southern leaning slant,’ he said. ‘If we omit London and the South East from our calculations, a milder annual change in property prices emerges. Yet at the very top end of the housing market in prime central areas of London, growth is subsiding,’ he added. He also pointed out that the firm’s research shows that October saw the highest level of house sales completed in a month since November 2007. ‘This increased level of house sale completions marks a considerable, though laborious, reflection of the increased buyer activity earlier in the year since the recession zapped the energy from the market. Not only this, but activity is starting to shift towards areas where the recovery still requires support and attention,’ he explained. The research also found that the biggest uplift in completions in the third quarter of 2014 compared to 2013 has been witnessed outside of London. Completed house sales in both the West Midlands and East Midlands have risen 22%, while in London house sale completions are up by just 3% over the same period. ‘Further growth in activity is critical to warm up the local recovery. First time buyers in particular need shielding from any future cooling interventions from the government or Bank of England,’ he concluded. Stuart Law, chief executive officer of Assetz, said the figures shows that the regions are no longer hanging on the coattails of London but showing decent price growth in their own right.‘The Eastern region of the UK is well ahead of the South East’s 11.6% at 13.4% and the North West and Midlands are also creeping closer. Mortgage availability remains good and with wage growth finally showing an uplift, the traditional seasonal lull in market activity in the run up to Christmas is looking a lot less unnerving,’ he pointed out. According to Graham Davidson, managing director of Sequre Property Investment, also believes it is good news for the regions. ‘All nine English regions have seen house prices continue to rise. First time buyers are on the rise, thanks to incentives such as Help to Buy beginning to kick in, although new limits to responsible lending mean that the proportion of first time buyers is still inconsistent with the rest of the market,’ he said. ‘Prices for first time buyers have increased by 13.3% over the course of 2014 which is the highest annual increase in prices for first-time buyers since March 2005 and is perhaps a reflection on the continued issue of demand outstripping supply,’ he pointed out. ‘London’s market, whilst still on the up, has begun to slow thanks to policy changes such as the impending introduction of Capital Gains Tax (CGT) for non-UK residents next April which is now dampening the interest from overseas investors,’ he added. Source: www.propertywire.com

Rent – the next big asset class?

Rent – the next big asset class?

 A new style of renting is coming to Britain. A far cry from the awkward Victorian conversions and unresponsive landlords that bedevil the image of traditional renting, these purpose-built, large scale properties offer long-term tenancies, more predictable rents and shared services such as a concierge or rooftop garden.

Welcome to the age of the professionalised private rented sector (PRS), where big institutional investors are homing in on an industry until now dominated by amateur buy-to-let landlords.

Drawn by rising urban populations and the promise of stable, long-term returns, pension funds and other large investors are increasingly either buying up blocks of existing rental accommodation or embarking on so-called “build to rent” – a trend familiar to investors and tenants in the US, Canada and continental Europe.

The development of a PRS in the UK could give tenants an alternative to the traditional small landlord – and may also create opportunities for UK investors to put their money to work in the rented sector without the risks of buying a property themselves.

Institutions are making significant investments, mainly in London and the Southeast. The value of rental property deals for large-scale investment rose from £1.6bn in 2012 to £2.5bn last year, according to Savills, the property agent. “It is happening in a bigger way,” says Jacqui Daly, Savills’ director of residential research.

One of the largest build-to-rent projects is the construction of 1,439 properties in the former Olympic Village at Stratford, east London. Delancey, the developer, is teaming up on the project with Qatari Diar, the property arm of the Qatari sovereign wealth fund. The flats will be rented out on long-term three-year tenancies, with no management or agents’ fees.


Elsewhere, the real estate arm of M&G Investments last year bought 534 homes for rent from Berkeley Group, another developer, in a £105m deal. The majority are one or two bed flats in 13 different locations mainly in London and the south. Other deals completed by the group include 401 rented homes at the Stratford Halo development beside the Olympic Park and 233 homes, some for rent, at East India Dock.

Ready-made blocks of rented homes such as those offered by Berkeley are the preferred target for institutions, as they avoid the upfront costs and risks associated with planning and construction. At this kind of scale, however, they are few and far between.

Alex Greaves, M&G residential fund manager, says: “If we have the opportunity we’d like to buy another one but the reality is they don’t come up that often. And if you can’t buy it, you have to build it.”

Much investment to date has come from overseas, where the model of large-scale managed rental properties is already well established. Essential Living, a UK specialist in PRS development, is backed by M3 Capital Partners, which in turn is funded by US pension schemes. Fizzy Living, a private sector arm of the Thames Valley Housing Association, is funded by Australian investor Macquarie Capital.

“Investors are increasingly aware of this market. It feels like there’s momentum in it,” says Andrew Allen, head of global property research at Aberdeen Asset Management. He expects the fund manager to be “significantly more invested” in five years.

APG, the Dutch pension fund group, has invested in a £430m fund with Grainger, the UK’s largest listed residential landlord, for developments amounting to 1,700 homes. And Akelius, the Swedish pension fund group, which owns 34,000 flats in Sweden and Germany, has invested £200m covering 950 homes.



City institutions do have a history in the sector. For much of the 20th century, they owned rental properties as part of their portfolio of investments. But they departed after the advent of rent controls in the 1970s and the pool of PRS management skills dissipated. Margaret Thatcher scrapped rent controls, but pursued ardent promotion of home ownership for all. That effectively left the field clear for individual buy-to-let investors.

Institutions may be keen to return to the fray but other obstacles remain. Sir Adrian Montague, chairman of an independent review into the barriers to institutional entry to PRS, identified a dearth of large-scale sites as one. Another was the planning system, which developers say favours for-sale projects rather than construction that delivers its return over 20 or 30 years.

While returns from PRS have been dwarfed in recent years by rises in capital values, institutional investors such as pension funds see attractions in matching their long-term liabilities to a steady income stream. M&G is targeting a return of 7-9 per cent on its residential investments, while a study by Resolution Foundation looking at a notional portfolio of rental property found a total return of 7.2 per cent per annum over ten years.

To sweeten the market, the government last year unveiled a series of measures aimedkick-startingting institutional build-to-rent. These include a £1bn equity fund to trigger development; £10bn of loan guarantees for the social and private rented sector; new draft planning guidance on build-to-rent projects; and a Whitehall task forceorce overseeing the fund and loan guarantees.

Jacqui Daly of Savills says the loan guarantees in particular will boost confidence in the market. “The guarantee could have a huge impact on how quickly the market matures. It will help to improve the returns.”

But while the main political parties are aligned on the need for more housing of all kinds, policy gaps are emerging. Landlords and developers reacted with fury last week to proposals from Ed Miliband, Labour leader, that rented homes should be subject a system of rent rise caps and three-year tenancies, in a bid to provide a “fairer deal” for tenants.

Richard Lambert, chief executive of the National Landlords Association, said changing the structure of tenancies would create uncertainty among landlords and lenders, dealing a “devastating blow” to investment in housing. Others said the move would stall institutional growth in the sector. “This has the potential to put the evolvement of the private rented sector using institutional equity back 40 years,” said James Coghill, director at Savills.

Future asset class?

Political uncertainty notwithstanding, could build-to-rent eventually become a new asset class for retail investors? The market for student accommodation has been opened up to public investment over the past 20 years, with the emergence of listed providers such as Unite and funds specialising in student properties. Some believe build-to-rent could become the next new addition to the marketplace.

The UK sector has ballooned from a fringe investment 10 years ago to being a global market worth $200bn today

Real estate investment trusts – listed vehicles that gain tax advantages in return for paying out 90 per cent of their rental income as dividends – are one of the most likely options. But at present, few residential portfolios have the scale and yield required to turn themselves into a Reit.

Nick Jopling, executive director of property at Grainger, believes this will change as purpose-built rental communities come into being. “We are at a real turning point in the market . . . In time, the rented residential sector will be an investable asset class of scale just as most other real estate asset classes.”

‘Home starts at the front door’

It is hard to envisage Archway Tower, an unloved 17-storey office block overlooking a notorious gyratory in north London, as an exemplar of the new rental nirvana. But Essential Living, a developer, is planning to reclad and refurbish the block over the next two years, creating around 100 homes with access to a “roof terrace, winter garden and club room”.

Shared spaces are a common feature of build-to-rent. A tenant in a studio flat, for instance, might be able to reserve a communal upper floor flat for a dinner party for 10. Barbecue areas might be booked in advance or bikes repaired in an on-site workshop. Scott Hammond, Essential Living managing director, says: “The idea is that your home doesn’t start at the door to your flat, it starts at the front door of the building.”

Others cite “build to rent” advantages such as a concierge who could take in parcels for delivery or allow workmen into the flats under superviWiFi. Wifi or multichannel television, bought in bulk, could be offered to tenants at discounted rates. But building a block for ownership over 15-30 years, during which many tenants will come and go, requires different specifications from those that operate in the for-sale market. The Urban Land Institute, a property industry thinktank, last month published a guide for developers in the sector which sets out recommendations on design, engineering and the use of materials that can be “robust, durable, maintainable and replaceable”.

Instead of giving every apartment dweller their own balcony, it suggests developers consider a communal roof terrace or garden. Prefabricated “bathroom pods” might be installed to save time and reduce costs.

Hot and cold running water should be sourced centrally, rather than from individual boilers, and kitchen cookers vented centrally where possible.

Source: www.ft.com

First buy-to-let investment trust to float

An investment trust aiming to buy and rent out houses and flats is raising cash ahead of a year-end stock market flotation 

 

 

Britain's first listed “buy-to-let” investment fund will start raising money from private and institutional investors on Monday.


Mill Residential plans to float on the London Stock Exchange before Christmas. It will be the first real estate investment trust (REIT) in Britain focused on mainstream flats and houses, initially buying newer properties around London and the South.


It is managed by Mill Group, a property specialist overseeing a £2.5bn portfolio of office space, social and privately rented housing.


The fund aims to yield a modest 3pc after costs, which Mill’s chief executive, David Toplas, said is “quite acceptable to investors where it is underpinned by rising capital values.” The fund will borrow sums equal to the capital raised and buy properties worth between £200,000 and £400,000.


Share issues next year and beyond will enable the fund to buy big portfolios “lock, stock and barrel” from established, private landlords, Mr Toplas said, and help “consolidate” Britain’s “fragmented private rented sector”.

Large-scale residential REITs have been mooted for a decade, but not taken off. Analysts say one factor that has changed is the growth of very large private landlords. Swapping holdings for REIT shares can be a tax efficient way to retire.
Private investors wanting to subscribe must invest a minimum £1,000 via the SyndicateRoom crowdfunding platform.

Source: www.telegraph.co.uk

More Britons look towards buy-to-let

 

The buy-to-let market in the UK is riding high at the moment with confidence levels soaring. As a result, nearly half of British homeowners in a recent survey are harbouring an ambition to become a landlord in the next two years, a dream that could be realised thanks to the new pension freedoms coming into force next year.
However, according to the latest Buy-to-Let Index from the Bank of Ireland UK, while many would-be landlords understand the benefits of buy-to-let, few understand its tax implications.

Consumer confidence and pension freedom

 

Buy-to-let loans increased by an impressive 32% year-on-year in August, according to figures released by the Council of Mortgage Lenders (CML), and consumer confidence is also on the up, with 91% of those surveyed by Bank of Ireland UK believing that they can afford their mortgage repayments. Confidence about the strength of the buy-to-let market has also risen, with the index reporting a positive score of 60.8, compared with a score of 58.7 from the first wave of research in June.
Clearly, the buy-to-let market is experiencing a great deal of buoyancy, and it is this quality that is likely to attract the investment of those approaching retirement. Thanks to the changes to annuity rules and the other pension freedoms that will come into force in April 2015, retirees in the UK are set to flood the buy-to-let market, boosting its growth even further.
According to the index, 49% of those questioned said that they were interested in becoming landlords in the next couple of years, with around one in six stating that they were "very interested". Another 29% said that they were already planning on using a lump sum from their pension to buy a rental property. Those living in London were particularly property-hungry, with 47% declaring that they were intending to purchase property with their pension savings.

Missing knowledge

 

However, the index found that while many Britons were keen on creating or expanding their property portfolios to fund a comfortable retirement, fewer than 30% of respondents fully understood the implications of income tax, capital gains tax or inheritance tax. This is a worrying finding, as it could mean that a rental property does not provide the desired income for retirement and it could also impact the fortunes of beneficiaries when the estate is valued after death.

Be advised

 

Investing in a buy-to-let property may have the potential to secure you excellent returns, and it could help feather that retirement nest, but jumping blindly onto the buy-to-let bandwagon without getting proper financial advice could mean that you are caught out by the taxman.
"Our research has identified a massive knowledge gap in the area of buy-to-let mortgages, which is particularly concerning as the market is currently experiencing growth," commented Mark Howell, commercial director of Bank of Ireland UK mortgages. "It's important that people seek financial advice on tax matters before making big financial decisions or investments, like buying a property to let."
So, if you fancy yourself as a future landlord, make sure you talk to a professional. An adviser can explain the ins and outs of the tax system and prepare you for any deductions. This way, you can purchase your new property with a realistic idea of the returns you are going to get – and the costs.
If you want to get the best deal from your rental property, you are also going to need the best possible mortgage. To check out the best deals and find the mortgage that suits your ambitions, take a look at our top deals. We have also gathered together a chart of the best mortgages for first-time landlords, so if you are new to the market, make sure you have a look.

Source: www.moneyfacts.co.uk

 

The Difference between Gross and Net rental yield

What's the difference between gross and net buy-to-let rental yield?

One minute briefing: a property might have gross yield of 9pc according to lenders' analysis, but offer real returns to buy-to-let investors of under 4pc. Heres why

The simplest calculation of rental yield involves dividing a property’s price by the yearly rent. Take the real example of a flat priced at £500,000 commanding a rent of £850 per week. The yield is 8.8pc, arrived at by dividing £500,000 by £44,200 (£850 multiplied by 52 weeks).


When mortgage lenders talk about rental yield this is almost always what they mean. And research that refers to buy-to-let yields in various cities or on various property types is usually calculated in this way too.


But this is a “gross yield”, in that it takes into account none of the costs associated with owning the property.


It is less helpful to a landlord hoping to achieve an income after costs from their investment. They need to work out a “true yield” or yield net of costs.


The landlord’s biggest cost is likely to be the mortgage. After that they should also allow for the substantial ongoing costs of maintenance, insurance, ground rent, service charges and a plethora of other add-ons such as lettings agent’s fees or advertising the flat if they do it themselves, getting a third party to undertake an inventory and so on.



Putting the mortgage aside, the insurance and maintenance could easily gobble up 15pc of the year’s rent. Using a traditional lettings agent could take another 10pc, pushing the costs to 25pc.

Now factor in the mortgage. Since most landlords favour interest-only loans, where the capital sum is not repaid, monthly outgoings are lower than for ordinary mortgages. Say the landlord looking to buy the £500,000 flat has a 40pc (£200,000) deposit. He borrows the remainder interest-only at a rate of 4.5pc. That costs £1,125 per month.

The annual mortgage costs are therefore £13,500. Add another 15pc of the annual rent to cover the costs of maintenance, insurance and so on – if he’s letting it himself – and the costs are now above £20,000 a year. Annual rent, net of costs, comes to £24,000, giving a “net” or “true” yield of 4.8pc.

Now do the same calculation with an extra 10pc lettings agency cost included, and the real yield falls further to 3.9pc. That is still an attractive net yield.

But, as many professional landlords point out by way of warning, when would-be buy-to-let investors sit down to calculate net yields on this basis they may end up with a negative figure. In other words, an ongoing loss.
 
In recent years, despite rising rents, the increase in property prices has meant even gross yields have fallen below 4pc, and in extremely expensive areas lower still. A studio flat being marketed today in a desirable central London location for £525,000 attracts monthly rent of £1,500.

That translates into a gross yield of 3.9pc. If costs in this scenario are 25pc of annual rent, that leaves just £14,600 per year to cover the landlord’s mortgage. A £300,000 interest-only mortgage charged at a rate of 4.5pc would all but consume this cash. And if the mortgage rate rose to just 5pc, the borrower in this scenario would have negative net yield and be losing money each month.

 Source: www.telegraph.co.uk

Home Lending in UK reaches Highest Quarterly Level for seven years

Home lending in UK reaches highest quarterly level for seven years
Tuesday, 11 November 2014

Lending for home buying in the UK has reached its highest quarterly level since 2007, according to the latest data from the Council of Mortgage Lenders (CML).

However, first time buyers saw a month on month lending decline for the second month in a row, down 3% compared to August, but still 16% up on September 2013. By value, there was £4 billion advanced to first time buyers in September, 2% down on August but 25% higher than September last year.

Lending to home movers also weakened month on month for the second month in a row. In September, the number of loans advanced to movers was 31,700, a 10% fall on the previous month but up 11% on September last year. By value, lending to movers totalled £6 billion, 12% down on August but up 18% on September last year.

Remortgage lending activity saw an increase month on month in September, with the number of remortgage loans totalling 28,300. This was 20% up on August but 12% down on September last year. The value of these loans at £4.4 billion was up 22% on the previous month but down 6% on September last year.

There were 18,100 buy to let loans in September, representing lending of £2.5 billion. Following the August low of 15,700 loans worth £2.2 billion, this returned buy to let lending to levels very similar to July, up 24% by volume and 32% by value on September last year.

The data also shows that first time buyer affordability changed fractionally, with first time buyers typically borrowing 3.4 times their gross income, compared to 3.42 in August and the typical loan size for first time buyers rose month on month to £125,999 in September, up from £125,375 in August.


Home movers typically borrowed 3.06 times their gross income in September, compared to 3.05 in August. The typical loan size for home movers was £154,800 in September, down from £155,995 in August. The typical gross household income of a home mover was £53,291 in September compared to £54,150 in August.

‘We are approaching the end of 12 months of change, transition and growth. This has been a year when lenders and intermediaries have been put under increased spotlight from regulatory, political and media spheres and have risen to meet the challenges,’ said Paul Smee, director general of the CML.

‘The lending market is healthier than it was a year ago, and set to remain so. Remortgaging has returned as a driver of lending volume in the buy to let sector. But any fears of overheating in the housing market are now dissipating as house purchase lending activity seems to be softening,’ he added.

Source: www.propertywire.com

UK property to increase in value by 19% by 2019

Property consultancy Savills has predicted average house prices in the UK will rise 19.3% by 2019.

Summary:
UK house prices will increase by 19.3% over the next four years, according to Savills
The size of the private rented sector will increase as first-time buyers are priced out of the market
Buy-to-let property is set to continue to generate high rental returns for investors

Property is set to increase by an average of 19.3% to the end of 2019, according to a new five-year forecast from Savills.

Investors seeking purely capital growth may now need to look outside of London, as the capital’s property market is expected to flat line, following a period in which it has significant outperformed the UK average.

Next year will see property prices in Scotland rise the most, with property values in the country set to increase by an average of 3.5%.

“Stress testing of borrowers’ ability to service a mortgage and loan to value lending caps will increasingly limit the amount buyers can borrow, making it more difficult to access or trade up within the market,” said Lucian Cook, UK Head of Residential Research at Savills.

Inevitably this will mean that fewer people will be able to purchase their own home and first-time buyer numbers are expected to show no net growth over the next five years.

Subsequently, this will mean that investors will see rising demand for their buy-to-let property as over the same period, the size of the private rented sector is set for continued growth.

In fact, Savills’ forecast states 1.2 million more households in England and Wales will be private renters by 2019, meaning almost a quarter of all homes will be privately rented. The property consultancy explained this will present investors with new opportunities.

Earlier this year, a report from lettings agent networks Your Move and Reeds Rains found that rental returns in the UK are already at record highs.

UK landlords experiencing high levels of tenant demand, latest monthly survey shows

Friday, 07 November 2014 

  

UK landlords are still experiencing high levels of demand during the third quarter of the year with just 3% reporting that it is declining, the latest monthly buy to let survey shows.

Overall 41% of landlords surveyed said tenant demand was growing or booming and 51% said in their view demand was stable, according to the Private Rented Sector Trends survey from specialist lender Paragon Mortgages.

The survey, which has been running for the past 13 years and tracks landlord confidence and their views on the wider buy to let market, also shows rental arrears are expected to remain stable.

Looking ahead, 61% of landlords felt that the level of tenant arrears would remain stable over the next 12 months. In comparison 12% of landlords stated that in their view tenant arrears would increase and 8% expect a decrease.

Landlords were also asked what the most important factor is when they are looking for new buy to let mortgage finance. Interest rates remained the most important, having been top of the list for the past 12 months, followed by average loan to value and product fee.

‘Our latest survey of landlords reveals that that the past quarter has been a stable and steady one, with just over a third of landlords saying they feel more optimistic about the prospects for their rental portfolios,’ said John Heron, the firm’s director of mortgages.


At this point in the year, we can usually gauge how the wider buy to let market has performed and what likely lending volumes for the calendar year will be,’ he explained.

He pointed out that last year, the Council of Mortgage Lenders (CML) reported total buy to let lending for 2013 as £20.7 billion. ‘Current thinking is that gross buy to let lending this year will be around the £25 billion mark, which represents a healthy increase over 2013 but there has been some evidence that the rate of growth has slowed as the year has progressed,’ added Heron.

Source: www.propertywire.com