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UK landlords seeking more remortgages, buy to let index shows
Some 66% of buy to let loans in the UK in the first quarter of 2015 were for remortgaging compared with just 34% for new purchases, new research shows. This compares with 62% in the final quarter of 2014, according to the latest Mortgages for Business Complex Buy to Let Index. For houses in multiple occupation (HMOs) remortgaging is now an even higher proportion, standing at 73% of HMO mortgages in the first three months of 2015, up from 70% in the fourth quarter of 2014. Moreover, the same trend is even more pronounced for multi-unit freehold blocks (MUFBs) with remortgaging representing 89% of mortgages in the first quarter of 2015 compared to just 42% in the final quarter of 2014. Semi commercial property witnessed the same trend but with a more gradual change, from 86% to 87% of new loans agreed for remortgaging. As landlords have remortgaged in increasing numbers, their average loan to value ratios (LTVs) have crept slightly higher over the course of the last three months. For vanilla buy to let, the average LTV now stands at 66% compared to 63% in the final quarter of 2014. Landlords of HMOs have seen loan to value ratios rise to 70%, up from an average of 64% LTV in the last quarter of 2014. Likewise, MUFB properties are now mortgaged to an average of 67% of the property value, up from 64% LTV in the final quarter of 2014. Semi commercial properties saw a more gradual shift, though for these landlords the average LTV also rose from 64% in the previous quarter to 65% in the first quarter of 2015. ‘Record low mortgage rates are driving wave upon wave of landlords to reassess their finances. A great deal agreed last year may be uncompetitive by today’s standards. So this stampede is completely rational as it represents a charge by landlords to make the most of an unprecedented economic situation,’ said David Whittaker managing director of Mortgages for Business. ‘Remortgaging is often done for the purposes of raising extra capital, and this is clearly reflected in higher loan to value ratios. However, this is by no means an unwelcome trend and could in turn open the door to more new purchases and investment by landlords,’ he explained. ‘Rental yields are healthy and there is a gathering demand from an increasingly prosperous base of tenants. So the fundamentals of the rental market, and of landlords’ finances, are still extremely solid,’ he added. The report also shows that for standard vanilla buy to let property, gross yields have now risen to 6.4% in the first quarter of the year up from 6.3% in the last quarter of 2014. On a similar note, gross rental yields on HMOs have now broken through the ten per cent mark to stand at 10.4%, up from 9.0% in the fourth quarter of 2014. Semi commercial property has also seen yields grow, from 6.4% to 7.5%… Continue reading
House sales flatten in UK due to forthcoming general election, says RICS
Buyer enquiries and house sales have flattened in the UK in the run up to the general election, according to the latest monthly market survey from the Royal Institution of Chartered Surveyors. In most parts of the country, the supply versus demand imbalance led to 21% more surveyors reporting a rise in house prices in March, up from 15% in February, and 15% more surveyors expecting prices to increase over the next three months compared with 10% in February but the results for both are significantly lower than in March 2014. Nationally, Northern Ireland continues to outperform the rest of the UK with the strongest house price growth in March and the highest price expectations over the next three months. However, across much of the rest of the UK, particularly in Wales and Scotland, price gains over the next three months are expected to be much more moderate. In London, a lack of prospective buyers saw enquiries and the number of agreed sales both fall for the eleventh consecutive month and 24% more surveyors reported a decline in the number of new properties coming onto the market for sale. However, compared to the start of the year when 42% more surveyors reported a decrease in prices, just 13% more surveyors saw prices fall in March and across the whole of the UK, the average surveyor sold 19.5 properties, reflecting activity since Autumn, although it remains some way down on where it was in the early part of 2014. The boost that was given to the housing market by the Help to Buy scheme has begun to dissipate and activity levels have slipped back as a result, according to Simon Rubinsohn, RICS chief economist. ‘Even more worrying are the tentative signs that price momentum could be set to pick up once again as the supply of stock to the market continues to fall. Anecdotal evidence does suggest that election uncertainty may be having some impact on the market, but underlying the trends visible in the latest survey is a very real housing crisis which will urgently need to be addressed by the next government,’ he explained. ‘It is significant that price expectations nationally are accelerating both at the three and twelve month time horizons and at the latter they are at their highest level since the spring of last year,’ he added. Continue reading
Farm land in England breaks the £8,000 an acre barrier
Even the impending general election in the UK has failed to pull back the farmland market in England, with prices continuing to rise in the first quarter of the year. The farmland market in England has gained further ground this year with the average price of bare agricultural land rising by almost 2% between January and March to break the £8,000 an acre barrier for the first time. An acre is now worth £8,059, according to the Knight Frank Farmland Index. Values have risen by 10% over the past 12 months and by 192% over the past 10 years. This compares with 10 year capital growth of 138% for the prime central London residential market, 40% for the FTSE 100, despite the index hitting its own record high earlier this year, and 250% for gold. An imminent General Election, particularly one with so many possible outcomes, might have been expected to cause the market to pause for breath, but it appears the appeal of farmland is overriding the uncertainty, according to Andrew Shirley, head of rural research. But he pointed out that the market continues to separate into two clear sub-markets, each with their own distinct performance trends. Large blocks, ideally over 1,000 acres, of arable land are being eagerly sought after by investors and demand is so strong that prices upwards of £12,000 an acre are regularly being paid and even £15,000 an acre has been achieved on a number of occasions. Although East Anglia has traditionally been the main source of investment farmland, buyers are now looking across the country and exceptionally strong results have also been recorded in counties such as Hampshire. Continue reading
