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UK buy to let sector confident going into 2015, new research suggests
Confidence in the buy to let market will encourage significant investment in the sector by UK property investors in 2015, according to new research. This is despite the fact that 52% of buy to let property investors believe interest rates will rise next year, the report from specialist buy to let business Platinum Property Partners also shows. While the majority expect an increase, overall 42% believe interest rates will rise by less than 2% and only 10% expect to see interest rates rise by 2% or more. However, 29% cited a rise in interest rates as their biggest concern for 2015. An interest rate rise of any size would make buy to let borrowing more expensive, this hasn’t slowed down landlords’ ambitions as 43% of existing landlords intend to grow their portfolio of rental properties next year. Some 23% intend to expand their portfolio by one and 14% say they will purchase two more rental properties in the next 12 months. Landlords owning Houses in Multiple Occupation (HMOs) for young professionals and key workers have some of the biggest ambitions for 2015 with 52% planning to add to their portfolio during 2015, 29% planning to add two properties and 14% will add three. The survey also found that landlords still feel confident about capital growth despite recent reports that the housing market is slowing. While the Council of Mortgage Lenders (CML) point to a dip in mortgage lending as evidence that there has been a ‘plateau’ in housing market activity, landlords are confident that house price growth will continue during the course of the next five years. Just under half, 49%, expect UK property values to climb by up to 10% over this period, while a further 28% of investors predict an increase of 10% or more. HMO landlords have an even more positive outlook for capital growth with 43% saying property prices will increase by 10% or more, some 15% more than the overall average. None of the HMO landlords surveyed expect house prices to decrease in the next five years. However, UK buy to let investors have some concerns about what 2015 may bring. When asked for their number one concern, an increase in interest rates topped the poll at 29%, closely followed by future changes in laws and legislations for landlords at 26%. A further 9% are most concerned about the impact of a change of government ahead of the general election and 20% have absolutely no current concerns. ‘A rise in interest rates is one of landlords’ main concerns for 2015, yet the majority don’t anticipate that these rises will be dramatic or unaffordable. As a result, our research reveals that the sector will continue to grow next year, with two in five planning to add to their portfolio despite a likely interest rate rise,’ said Steve Bolton, PPP chairman. ‘Investors in HMOs show the greatest intention to increase their portfolios, which reflects the fact that HMOs… Continue reading
Consumer confidence in UK property price growth falling
Consumer confidence in the outlook for UK house prices has continued to fall from its peak in July 2014, according to the latest Halifax Housing Market Confidence Tracker. While the overall picture for house prices over the next 12 months is still robust, it has dropped to its lowest level since June 2013. With Halifax forecasting an easing of house price growth to 3% to 5% for 2015, the report shows there has been a reversal of recent momentum, with a higher proportion of consumers now believing the next 12 months will be a better time to buy than to sell and the proportion thinking the next year will be a good time to sell falling to its lowest level since the fourth quarter of 2013. Despite recent forecasts indicating economic growth is expected to reach 3% in 2015, the recent fall in house price expectations mirrors a relative fall in consumer confidence for the economic outlook in the next year having peaked in the second quarter of 2014. Of those surveyed, a net balance of +25 now believe the next 12 months will be a good time to buy, an increase of 14 points since September 2014. Sentiment towards buying is stronger among those who already own their own home, with 62% of owner occupiers stating 2015 will be a good time to buy, compared to 29% who think it will be a bad time, a net balance of +33. In contrast, selling sentiment has fallen to a net balance of +14, a drop of five points since September 2014. And positive selling sentiment fell by six points among owner occupiers between September and November 2014 to +25. ‘The strengthening in the UK economy over the past couple of years has seen a steady convergence between the proportions of people who believe it is a good time to buy and a good time to sell,’ said Craig McKinlay, mortgages director at the Halifax. ‘The outlook for house prices in 2015 is for growth to moderate but continue to increase, which perhaps explains why the proportion thinking it will be a good time to buy is again greater than the proportion thinking it will be a good time to sell,’ he explained. ‘With an interest rate rise expected late 2015, possibly into early 2016 it will be interesting to see what impact the slight reduction in affordability has here,’ he added. The survey also shows that people in Scotland are significantly more likely than those in other regions overall to say 2015 will be a good time to buy at 65% compared to 56%, respectively. Conversely, almost half of those surveyed in the Midlands, 48%, think next year will be a good time to buy, significantly lower than the 56% who say this across Britain. People in Scotland and North England are significantly less likely to say it will be a good time to sell at 38% and 42% compared to 51%, respectively. And people… Continue reading
Fierce competition of rental properties continues despite supply increase
The level of supply in the private rental sector in the UK is showing signs of improvement but there is still fierce competition for rental property as the level of demand remains high. Available rental properties have increased by 10% since the last quarter, according to the latest report from the Association of Residential Letting Agents (ARLA), and this should help ease demand. The average number of buy to let properties managed by ARLA licensed members increased in the last three months from 135 properties in the third quarter to 148 properties this quarter, although two thirds of ARLA members say would be tenants still outweigh available properties Members believe the number of landlords increasing their investment in buy to let properties was driving the improved outlook for supply in the private rented sector, with the number of landlords purchasing properties now exceeding the number selling their investments, a reverse on figures reported three months ago. Those landlords increasing their investment in buy to let properties rose from 27% to 30% in the last three months. Meanwhile landlords looking to sell their current buy to let investments fell 9% from 32% to just 23%. Although the increase in available buy to let property is a step in the right direction for the private rental market and good news for renters, the bad news is that demand still strongly outweighs supply. Some 65% of ARLA Licensed member agents said there were still more would be tenants than properties available on their books, a decrease from 68% last quarter, suggesting that the market could be heading towards a more level playing field. ‘This quarter we’re seeing promising signs that the market is taking small steps towards achieving a better balance between supply and demand, or at least it is easing slightly,’ said David Cox, ARLA managing director. ‘With more landlords investing in their portfolios, ARLA licensed members have reported a growth in supply, while the level of demand witnessed last quarter has fallen slightly. Of course, the market has a fair way to go in terms of completely balancing out,’ he added. The report says that the increase in supply is down to more investment in buy to let property; however a number of ARLA Licensed members also reported an increase in rental property coming back onto the market following failed attempts to sell, rising for a second consecutive quarter, from 16% to 24%. It also points out that as supply and demand levels ease, tenants are taking advantage of the slightly less competitive market as the number of would-be tenants haggling with landlords over rents increased from 32% to 35% over the past six months. ‘It’s great to see an increase in consumers making an active play to agree on rent prices. Letting agents should be able to help tenants to get the fairest deal, and to ensure the process… Continue reading
