Surveyors expect to see rent rises in the New Year as the number of buy-to-let properties coming onto the market fell for the first time since January 2008.

According to the latest Royal Institute of Chartered Surveyors survey, while the recent pick up in the housing market seems to have led to drop off in the number of rental properties, a fifth more surveyors expect rents to rise rather than fall in the next three months.

The drop off in buy-to-let property supply is the main driver for the more positive sentiment with regard to rents, says the society, with new buy-to-let properties reaching their lowest levels in the surveys history. RICS says it is seeing less landlords come onto the market, so it thinks the competition for rent will fall and rents will therefore rise next year.

This is in stark contrast to levels seen late last year when the housing market was still suffering from falling prices and many would-be sellers were turning to the lettings market when their houses failed to sell.

And demand for rental property is still rising as 16% more surveyors saw rental activity over the past three months pick up. In particular it found a demand for houses was particularly strong, with 22% more surveyors reporting rising rather than falling numbers of people looking to rent.

RICS says: "It seems the current upward trend in the housing market is having a more significant effect on lettings, with many of the accidental landlords returning to the market to take advantage of the recent price increases. As a result the recent oversupply is reversing, with new landlords at the lowest levels we have seen. This of course is impacting on prices and tenants no longer have as strong a bargaining power as they did."

SOURCE: RICS, 02/12/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

The likely regulation of the buy-to-let sector by the Financial Services Authority will boost business and help the sector to flourish, according to one property expert.

Assetz says many of the buy-to-let investors who entered the market during the boom years hoping to achieve short-term capital gains have now left the market as a result of the credit crisis, paving the way for a new type of property investor taking a long-term view.

The firm says the FSA must go ahead and implement regulation, not just of buy-to-let mortgages, but of property investment as a whole in the UK. It says this would prevent the widespread mis-selling that has taken place in recent years and ensure risks are properly disclosed to investors.

It says regulation will also stop cowboy mortgage brokers and solicitors who continue to push investors into risky schemes and plans which only lead to false promises and broken dreams.

Stuart Law, chief executive of Assetz, says: "We fully support any considered move to regulate the sector, and this is certainly a step in the right direction and if implemented well could deliver a greater willingness by lenders to lend again into the buy to let sector by reducing risks and further improving transaction transparency.

“Buy-to-let mortgage regulation could well stop speculators with no money entering the market and should also improve the transparency of individual transactions further. Far from impeding the recovery of the market, taking away the speculative, higher risk transactions will improve the risk profile of the sector from a lenders perspective.

"This will aid the recovery of the housing market as a whole and buy to let loan to values and interest rates will become more competitive as lenders once again view more that buy–to-let as a lower risk sector than standard home loans.”

SOURCE: Assetz, 30/11/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

The rental sector is increasingly seen as key to future housing strategy as production of new homes is out of line with consumer demand and as such it needs more help from the Government, according to the Association of Residential Letting Agents.

ARLA's most recent survey of the private rented sector noted that the balance of supply and demand in UK housing is already climbing towards pre-recession rates – it says central London has seen particular bounce-back as the number of tenants looking for property begins to outstrip the number of properties available – with 19% of ARLA members reporting more tenants than properties, compared with 6.9% six months previously.

Ian Potter, operations director of ARLA, says: "The reality of the UK housing market is that the private rented sector shoulders the burden of the lack of housing supply both now and in the future. What is also manifestly apparent is that landlords need governmental assistance in ensuring that stock is of the quality that modern housing standards demand."

To do this, ARLA says the Chancellor must look to removing VAT on the purchase of materials and labour for capital expenditure to improve older property brought into the rental market. He should also introduce capital allowances for landlords improving housing stock over a certain age and should also continue a stamp duty ‘clawback' to purchasers of older properties where a survey report and an Energy Performance Certificate show a property is likely to benefit from capital investment.

Potter says: "If the private rented sector is going to continue to support the nation's housing demands and improve the quality of its stock, the Chancellor must recognise the need to support the UK's private landlords. Landlords, in general, are not treated as businesses within the fiscal regime. This is a real disincentive to producing well managed, well maintained, property for certain parts of the market."

SOURCE: ARLA, 28/11/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

A quarter of buy-to-let landlords are just breaking even or worse at the moment – be one of those that make a profit by making sure you have the best possible buy-to-let mortgage.

The latest findings from research agency BDRC found that most landlords have seen their profit margins fall in the third quarter of 2009 and just over a quarter of landlords either break even or make a loss. Of those, 7% make a small loss and 1% "a large loss".

Interestingly, the survey also probed how frequently private landlords approach their tenants for rental increases – 21% saying they haven’t actually implemented a rental increase yet, whilst 50% increase the rent regularly at frequencies of between six months to two years. Looking over the last 12 months, 19% have decreased their rent, 27% have increased it and 49% have kept it static.

While making a rent change might make you a profit, it might be risky – demand too much and tenants will look elsewhere. The best way of making a profit is striking a balance between your rental income, your mortgage rate and your investment choices – there is more to making buy-to-let profits than just shaking your tenant down for money.

Mark Long, director at BDRC, says “With 2009 characterised as a year of survival for many landlords, we are starting to see signs of a brighter future into 2010. Despite the current profitability situation, as shown by these findings, prospects
for rental yields do appear to be improving in line with our landlords’ optimism index. The UK’s private landlords are a resilient bunch and will opt for a strategy that allows them to protect their income and portfolio.”

If you are not making enough, talk to your mortgage adviser right away. A new mortgage might make all the difference. Then again, you may have sensibly raised rents and now have extra income – again, your first port of call should be your mortgage adviser. They will help you put your money to work through clever savings, clever investment or even an expansion of your buy-to-let portfolio.

SOURCE: BDRC, 10/11/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

Almost 70% of England’s five million housing association tenants do not want a rent cut next year, according to a new poll.

The survey, commissioned by the National Housing Federation, showed that 69% of tenants would rather forego the Government’s proposed rent cut for 2011 of around 0.9% than suffer cuts to community services.

Under the Government’s proposals, which are due to be confirmed on Friday, housing association tenants would be given a small rent cut to reflect the current bout of deflation. This will not only affect social landlords, but it will also affect the communities' resources.

The NHF says that even a small rent cut would reduce income for social housing providers by millions of pounds – housing associations invest £272m a year on providing a huge range of community services – and attract a further £163m from other sources to fund the work.

The Federation says social housing rents have never been cut before, even during the two world wars and the Great Depression, and it has called for a rent freeze next year to protect the interests of tenants and prevent services being cut. And tenants are behind the call – 69% of residents would rather forego a modest cut of 0.9% in their rents if it protected community services. Only 28% of tenants backed a rent cut.

David Orr, chief executive of the NHF says: “Faced with a shortfall of millions of pounds in their income, housing associations could be forced into cutting back dramatically on the key services tenants really value – such as anti-social behaviour programmes, job training schemes and education programmes.

“The fact that nearly 70% of tenants would rather forego a cut in their rents in order to protect these services shows just how vitally important they are.”

SOURCE: NHF, 06/11/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

Some tenants are still facing financial pressures in this recession, which are leading to increased rental arrears – the only way to be sure that you are not affected is by taking out the right insurance.

Research conducted by the National Landlords Association has revealed that nearly three quarters of landlords have experienced rental arrears. Worryingly, 43% of these occurred in the last 12 months.

Getting the right buy-to-let landlord insurance offers a way for landlords to minimise the risk from loss of rent. Should problems arise during the tenancy, you can also get cover that provides legal expenses and even medical bills for anyone hurt while working on your property.

David Salusbury, chairman of the NLA, says: “Landlords may not realise they can protect themselves against rental arrears, but our research clearly shows there is a need to safeguard your rental income. Unfortunately we aren’t out the woods with the economy just yet, and thanks to redundancy and unemployment some tenants are struggling to pay their rent.”

The NLA says that landlords should not just get the right insurance, but they should not forget the importance of taking full references and making checks at the outset of a tenancy. Keep in touch with your tenants too – if they feel they can come to you if they are facing difficulties, you may be able to come to an arrangement before rental arrears become more serious.

Ian Potter, operations manager of the Association of Residential Letting Agents says: "Rental arrears is more common during a recession as redundancies occur and tenants' financial stability changes. With the private rented sector continuing to grow, it is important that those tenants struggling to meet payments are supported."

SOURCE: NLA, ARLA, 20/10/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

The buy-to-let market showed the first signs of stabilising in the last three months as arrears improved significantly, according to UK mortgage lenders.

Latest figures from the Council of Mortgage Lenders fund that there were 21,600 new buy-to-let loans advanced in the second quarter, a relatively modest 4% decline from 22,400 in the preceding three months. But buy-to-let arrears showed considerable improvement in all measures.

The CML found that there were 29,400 mortgages in arrears of three months or more – 2.49% of all buy-to-let mortgages – down 17% from 35,600 in the first three months of 2009. And the number of mortgages in arrears of more than 1.5% arrears fell 20% from 28,800 at the end of April to 22,900.

Rob Thomas, senior policy adviser for the CML says: "So long as properties have paying tenants, landlords now have much greater ability to service mortgage payments and we expect arrears to continue to fall as landlords are helped by lower interest rates. But healthy rental demand is contingent on a number of factors, including tenants' continued employment."

Keshav Thukaram, managing director of Smartlandlord.co.uk, says these hopeful buy-to-let arrears figures show that the market has bottomed out and is starting to recover – albeit slowly.

And the National Landlords Association says: "This reflects how much landlords are benefiting from lower interest rates. This can only be good news for tenants – however, for buy-to-let landlords the worst may not be behind them. Rent arrears, owing to job losses and financial difficulties, remains a serious concern for many and this is set to continue."

SOURCE: CML, NLA, Smartlandlord, 14/08/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

Average UK rents rose for a second consecutive month in June according to Your Move, giving landlords some more hope as they look to manage their buy to let loans in this downturn.

The letting agent recorded a huge 11.3% fall between August 2008 and April 2009, in which average rents declined from £717 to £636 per month, but it says rent levels are now recovering. In June 2009, rents rose 0.3% to a UK average of £641 per month – having grown 0.5% in May.

Of course, rising rent comes after rising demand, and there is certainly more demand – overall, Right Move found the number of new tenants registering to rent soared 18% in the past year. More people are finding it impossible to get hold of mortgage credit, so have had to resort to renting.

David Newnes, managing director of Your Move, says: “Since last summer rents have been forced down by a huge increase in the supply of stock on the lettings market. This was largely a consequence of a surge in the number of accidental landlords unable to sell and making their homes available to rent. However, a rapid rise in demand from tenants in May and June has helped redress the balance and stopped the downward pressure on rents."

Rents in London have fallen more sharply than in almost any other region in the past year, down 7.1% since June 2008, but the capital is now recovering fastest. Average London rents rose 1.2% in June 2009 over May, rising from £857 to £868 per month. The biggest drop in rents was evident in the North West in June – down 3.2% compared to May, from £487 to £471 per month.

Newnes says: “Rents in London have plummeted since last summer as demand from tenants has been hit by redundancies and falling number of overseas workers coming to the capital. But the London rental market is resilient and rents are starting to rise again."

But Right Move warns that the recovery may not be as strong in the South West of the country, where rents have fallen fastest in the past twelve months. It says the region is home to a large number of second homes, more of which have made available for rent by homeowners looking to boost their incomes.

SOURCE: YourMove, 22/07/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

More landlords are becoming increasingly rigorous when it comes to assessing the financial status of their potential tenants before handing over any keys.

According to the Financial Times, property owners want to see proof of income, including bonuses, as well as highly personal information such as the value of investment and share portfolios and savings accounts. Lettings agents, on the behest of the landlords, are demanding piles of paperwork for every tenant they deal with.

Knight Frank says that rather than using traditional credit checking agencies it is now conducting manual checks itself. Landlords are more distrusting of credit checks and want to see, on paper, that their tenants will be able to meet rental demands every month.

The FT reports that in some cases Knight Frank says it is having to procure an indication of the tenants’ net wealth from their banks as well as guarantees from their employers that their jobs are permanent and not under threat, and details of their anticipated bonuses. Landlords want to see the long-term potential of tenants to avoid continuous costly churn of renters.

David Mumby, head of Knight Frank’s Chelsea office told the FT: "This is a pretty radical change. We are doing much more thorough checks as putting tenants through a reference company is simply not enough any more."

As a landlord operating during a recession it's crucial to be sure that you will be receiving rent every month. So if you think that you need to check and double check your potential tenants' credential don't be afraid. This news proves that letting agents will oblige and do understand the pressures that landlords are under. The worst thing that can happen to landlord right now is a defaulting tenant – so cover your back and keep checking.

SOURCE: FT, 04/07/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

While it hasn't bounced back, the latest figures from Land Registry are showing that the housing market drop over the last three months is beginning to slow.

Its figures show the rate of decline in annual house prices is easing in England and Wales – in May an annual movement of -15.9% took the average house price to £152,497.

The Land Registry found that as in April, monthly house prices fell again by 0.2% in May, compared to a fall of 0.5% in March.

Simon Rubinsohn, chief economist of the Royal Institute of Chartered Surveyors says that because completed transactions have settled down at just over 30,000 per month, and if more timely buyer enquiries and mortgage approvals data is anything to go by, the actual level of completed sales is likely to climb towards 40,000 over the coming months.

But he says: "Even this improvement, however, continues to demonstrate the adverse impact of the lack of mortgage finance on activity."

Keshav Thukaram, managing director of Smartlandlord.co.uk says the small dip will probably be followed by another, from looking at Rightmove's latest statistics. He says the Land Registry lags a few months behind Rightmove because it measures every sale of registered property in England and Wales while Rightmove's index only looks at asking prices posted by sellers.

He says: "Prices look likely to fall again after this. The problem is that mortgage rates are making it increasingly difficult for cash-strapped first-time buyers to secure home loans. So speculative landlords who piled in at the top of the market are getting very low rental yields at the moment, having expected to rely on capital gains to make a profit. These people need to look at ways of cutting costs – managing properties themselves, and using online tenant find products at a fraction of the price of an agent.

"But most landlords are in the fortunate position of needing less debt. This is a perfect opportunity for them to invest in further properties while they offer the best value for money – securing good yields for the future while expanding their portfolios."

SOURCE: RICS, Smartlandlord.co.uk, Land Registry, 26/06/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog