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UK landlords seeing average yields falling, latest quarterly figures show
Average yields on residential rental properties in the UK have cooled across the board with landlords owning semi-commercial property sector the biggest losers, according to the latest buy to let index. Yields on semi commercial properties have fallen from 7.5% in the first quarter of 2015 to 5.9% in the second quarter, their lowest level in four quarters and a drop of 1.6%, the data from Mortgages for Business shows. Similarly, returns on houses in multiple occupation (HMOs) have dropped 1.3% to 9.3% between the first and second quarters of 2015 while average yields for standard buy to let have experienced a less marked decline, dipping from 6.4% to 5.8%. Multi-unit freehold blocks (MUFB) saw the only quarterly improvement with average returns up 0.8% to 7.1%. However, the second quarter MUFB yield rate is still below the 8.6% and 9.3% returns recorded in the third and fourth quarters of 2014 respectively. The data also shows that average loan to value (LTV) ratio has begun to fall. Average LTV rates for standard buy to let and multi-unit freehold blocks remained unchanged at 66% and 67% respectively between the first and second quarter of 2015. The LTV ratio for HMOs fell 1% over the quarter to 69% but the largest drop was in semi-commercial property, down from 65% to 54% over the first two quarters of this year, a drop of 11% and the lowest LTV rate for four quarters. ‘LTV ratios and yield rates have slid. While rental yields are still robust they seem to have lost the momentum they were gathering between the end of last year and the start of this one. That said, multi-unit freehold blocks seem to have avoided the yield downturn, demonstrating once again that complex property types produce higher yields because they offer tenants more features and facilities,’ said David Whittaker managing director of Mortgages for Business. ‘While many landlords had hoped that the improving economic climate may have pushed loan to value ratios even higher, the figures appear to have stalled. Property values dipped in the second quarter, but so did average loan amounts, suggesting lenders are waiting for more signs of economic improvement before they lend any more relative to the value of a property,’ he explained. He also pointed out that the General Election campaign impacted on LTV ratios. ‘With the pundits repeatedly predicting chaotic political horse trading after 07 May, many lenders thought it best to not give too much too early. They feared a change in the policy status quo that would hit BTL landlords and, with it, their ability to make mortgage repayments,’ he added. The report also shows that the proportion of HMO loans for remortgaging reached 90% in the second quarter of 2015, a 17% on the previous quarter and the largest proportion of any rental property type in four quarters. Conversely, the proportion of SCP loans for remortgaging has fallen back from 87% to… Continue reading
UK residential property prices showing steady growth, latest index shows
UK house prices increased by 3.3% in the second quarter of 2015 compared to the previous quarter taking the average price to £200,280, according to the latest property price index. It means that the quarterly rate of change has picked up following two successive falls and prices in the three months to June were 9.6% higher than in the same three months a year earlier, the data from the Halifax shows. This was higher than May’s 8.6% and the highest quarterly rise since September 2014 when it was 9.6%, and on a monthly basis prices increased 1.7% between May and June, the fourth consecutive monthly rise. The steady increase in prices comes as home sales remain steady. Data from HMRC shows UK home sales increased by 1% between April and May and sales in the three months from March to May were 0.5% higher than in the preceding three months, but were 4.2% lower than in the same period last year. According to Martin Ellis, Halifax housing economist, supply remains very tight with the stock of homes available for sale currently at record low levels. ‘This shortage has been a key factor maintaining house price growth at a robust pace so far in 2015,’ he explained. ‘Economic growth, higher employment, increasing real earnings growth and very low mortgage rates are all supporting housing demand with signs of a recent modest pick-up in demand,’ he added. Jonathan Samuels, chief executive officer of Dragonfly Property Finance, pointed out that there are a lot of mixed signals in the property market at the moment as the latest index from the Nationwide shows prices falling slightly. He also pointed out that while prices in London have slowed, house prices per square metre have risen by 45% since 2010, highlighting the extent of the growth in the capital in recent years. ‘With economic growth stronger than expected during the first quarter, a buoyant jobs market and people generally better off, you would expect the market to continue to improve throughout the rest of 2015, if at a more moderate rate compared to recent years,’ he said. There is also a potential effect from the current Euro crisis and how what happens in Greece could affect the UK property market. ‘We could see a flight away from equities into bricks and mortar, but at the same time if Europe as a whole is adversely affected then the UK economy will almost certainly suffer, too,’ he added. Thomas van Straubenzee of prime London prime property agency VanHan, is expecting to see an influx of enquiries from wealthy Europeans looking to move their assets off the Continent and into London as they seek to avoid the effects of the euro crisis. ‘We have seen interest from the Middle East and India pick up again, which is not surprising as we had noticed that these buyers were particularly affronted by the idea of a mansion tax. We do not see London… Continue reading
June sees surge in valuation activity in UK residential markets
Strong market growth in the UK has resulted in a surge in residential property valuations in June with activity up 23% year on year, the latest data shows. June’s activity total was also up 42% month on month with valuations for established owner occupiers moving home were especially strong, up 34% in June compared with the same month in 2014 and 51% compared to May. Home movers in particular are showing a very different sentiment to that seen in April and at the start of May and demand is growing faster than the overall market trend and even outperforming the buy to let sector, according to the report from Connells Survey & Valuation. The data also shows that valuations in June for first time buyers saw annual growth of 16% compared to the same month last year, while also registering a 42% uptick on last month’s total. Meanwhile, the number of valuations for the buy to let market rose 24% compared with June 2014 and 22% compared to May 2015. And the number of valuations for those remortgaging their property rose 17% in June compared to the same month in 2014, on the back of 44% month on month growth. ‘First time buyers haven’t benefitted from higher house prices in the same way as those already on the property ladder. An era defining shortage of suitable first time homes, combined with still rapid rises in average prices are keeping many would be home owners renting for the time being. Yet despite this, numbers of valuations for new buyers have shown double digit growth,’ said John Bagshaw, the firm’s corporate services director. He pointed out that remortgaging still lags behind most other sectors in terms of yearly growth. ‘This could also be a sign that the numbers remortgaging to access a better mortgage rate may have reached a plateau,’ he added. Continue reading
