Tag Archives: crisis
Houses with multiple tenants are a better option for buy to let investment, it is claimed
Houses in Multiple Occupation (HMOs) are the most stable and profitable form of buy to let investment in the UK, protecting landlords against higher costs caused by an interest rate rise, a new analysis report suggests. HMOs, generally rented to young professionals and key workers, are intrinsically geared towards maximising rental income by letting each room on an individual basis, according to the report from Platinum Property Partners (PPP). Research for PPP has shown that compared to capital gains, rental income for all types of BTL is by far the most dependable and stable source of return on investment. The firm says that HMOs landlords are therefore best positioned to absorb the higher mortgage costs caused by an interest rate rise, an event which the Bank of England has indicated will take place in early 2016. It explains that the profits of a standard buy to let investment can be wiped out by a 3% rise in interest rates, assuming mortgage rates increase by the same amount, as gross rental income is not sufficient to cope with higher mortgage interest repayments. Even although HMO landlords pay for all household bills, the fact that the property generates a much higher gross rental income means that these costs are easily absorbed. The analysis suggests that the maximisation of income from a given size of property by creating extra rooms and renting them to multiple tenants means HMOs can generate rental income that is up to four times higher than the rents achieved in a standard buy to property. Previous analysis carried out by PPP has shown that rental income is a far more stable and dependable source of return than capital gains, dispelling the myth that the success of any buy to let investment is mostly about rising house prices. From 2010 to 2012, investors operating in both the standard BTL and professional HMO market were sustaining capital losses. It was only in 2013 and 2014 that capital gains began to recover but in contrast, rental income consistently increased throughout the same period for both asset classes, albeit at a much higher rate for HMOs, the report says. It also points out that the best way that landlords can ensure their investment can cope with an interest rate rise, and any other unexpected costs, is by planning ahead and having a good understanding of the financial performance of their portfolio. Research carried out by PPP in 2014 showed that a severe lack of research and poor planning is preventing many buy to let investors from maximising their income. A quarter of buy to let investors sought no advice and carried out no research before making their property purchases and a staggering 93% had no five year plan for their investment. Separate research by PPP shows that landlords are also prone to miscalculating their returns. Some… Continue reading
Retirees appetite for assured tenancy rental growing, research suggests
Home owners’ appetite in the UK for downsizing and renting a retirement property when they get older continues to grow, according to new research. There has been a 7% rise in enquiries from people looking for a smaller home to rent once their working life is over in the first seven months of this year compared to the same period in 2014, says retirement firm Girlings. The firm also reports a 34% rise in visits to its website and says that there is a severe lack of purpose built retirement property, either to rent or buy and many people who want to downsize are unable to do so. The research says that less than 3% of housing in the pipeline is aimed at older people and yet, in 20 years’ time, those aged 65 or over will make up 23% of the population. ‘Our continuing message to government is that the UK desperately needs more purpose built retirement property so that older people have the option to downsize,’ said Peter Girling, chair of Girlings Retirement Rentals. ‘Many older people are stuck in homes that are too big for them, have little choice of a suitable alternative and perceive the obstacles to enjoying a better quality of life in their later years are insurmountable,’ he added. He also pointed out that retired people in the UK currently own a third of the nation’s housing stock and enabling them to downsize would free up much needed family houses and give them the opportunity to release their capital, invest in their future and enjoy their retirement, living in housing that meets all their future needs. ‘We believe there is a simple answer to the current housing shortage and that is for older people to consider downsizing to a purpose built retirement property and renting on an assured tenancy. Choosing to rent in later life is a sensible solution and one which thousands of Girlings’ tenants can recommend,’ said Girling. ‘Equally, if older people downsize it will free up much needed family housing for people further down the ladder. The latest statistics from the Home Builders Federation state that we are still some way off of the 220,000 to 250,000 new houses that are needed to be built per year to satisfy current demand,’ he explained. The firm believes that there are many positive reasons for renting in retirement but those opting for such a move should make sure they are fully informed. For example, the provision of an assured ‘lifetime’ tenancy should be considered as this removes any obstacle to renting by providing the peace of mind that people can live in their new home for as long as they wish. Furthermore, should circumstances alter in the future there is not the frustration of trying to sell a retirement property in an uncertain market and the ensuing worry for family and friends. An example is Olive Young who sold her home in Ilford, Essex in 2006 and rented… Continue reading
UK first time buyers sales at their highest since the recession
The number of first time buyers in the UK reached their highest level in July since the recession, paying an average of £161,985, some 8.9% more than a year ago, according to the latest index. There were 29,700 sales of homes to first time buyers, some 4.9% above June with demand judges to be rising to an expected interest rate rise in the New year and despite the fact that the average first time buyer now needs a deposit of £27,975. July’s sales figure also represents a 28% rise on April 2015, amounting to a 6,500 increase over the last three months, the latest First Time Buyer Tracker index from Your Move and Reeds Rains also shows. Average deposits have increased by 10% compared with July 2014’s figure of £25,429 which in cash terms, this equates to a rise of £2,546. The cost of a deposit as a proportion of a first time buyer’s average income reached 71.6% in July, up 3.1% in one month alone and rising 5.4% from a year ago. Equally, the average first time buyer Loan to Value ratio (LTV), which represents the proportional size of an individual’s loan compared to the value of the property they are buying, is steadily dropping. This means first time buyers are having to pay more up front, in the form of larger deposits. July’s rate of 82.7% represents a 0.5% decrease on LTVs in June and a 0.2% decrease on a year ago, as the size of the average deposit rises. A similar picture emerges in the latest Mortgage Monitor from e.surv. The data revealed a decline in the number of small deposit loans given approval in July, dropping 5.9% compared to June and 7.1% compared to July 2014. According to Adrian Gill, director of estate agents Your Move and Reeds Rains, the post general election bounce has given way to a more stable optimism as first time buyers realise that the property market is at no immediate risk of being tampered with by the government. ‘Incentives attractive to first time buyers such as the Help to Buy schemes are running along steadily, while further low cost housing development is being encouraged to entice more people onto the ladder,’ he said. ‘This month’s particularly high transaction rate is also partially due to expectations that the Bank of England may announce a rate rise sooner rather than later. The thought of months of rock-bottom mortgage rates being brought to an end is encouraging many wavering first time buyers to jump on the property ladder before repayment costs shoot up,’ he pointed out. ‘Some may have held back briefly when considering the rising deposit costs. But real wages have been growing too, and first time buyers are able to shoulder the short term burden of a slightly higher deposit to spare the risk of losing out on a good mortgage deal,’ he added. Despite some lenders starting to withdraw their cheapest deals, the… Continue reading
