Buy to Let Lending Totalled £3.7Billion

Posted on May 10th, 2012 by tenantsure

The Council of Mortgage Lenders are reporting that new buy to let lending  totalled £3.7 billion for the first quarter of the year.

While the figure is 32% higher than it was for the corresponding period in 2011 it is still down 5% for the fourth quarter of 2011 and is only a third of the amount for 2007. Buy-to-let lending for house purchase in the first quarter fell by a greater amount (9%) than remortgaging (1%), but both were around 30% higher than in the first quarter of 2011.

The buy-to-let sector continues to increase its share of the mortgage market, with buy-to-let mortgages representing an estimated 12.8% of the total value of outstanding mortgages at the end of the first quarter, up from 12.6% at the end of 2011 and 12.2% at the end of the first quarter of 2011. The total number of buy-to-let mortgages stands at just over 1.4 million, with a total value of £159.4 billion.

The average maximum loan-to-value available from lenders on buy-to-let mortgages remained at 75% in the first quarter of the year, with the average minimum rental cover 125% – up from 123% in the previous quarter, but otherwise the same as for nearly three years.

In terms of loan performance, the number of buy-to-let mortgages in arrears fell a little in the first quarter of 2012, and the arrears rate on buy-to-let mortgages continues to be lower than in the owner-occupied sector.

At the end of the first quarter, around 1.7% of buy-to-let mortgages were in arrears of more than three months (including cases where a receiver of rent has been appointed), compared with around 2% of owner-occupier mortgages. The repossession rate was 0.12% – virtually the same as for the last five quarters – compared with 0.08% in the owner-occupied sector. It is not surprising that the buy-to-let repossession rate is higher than in the owner-occupier sector, where the focus is on forbearance and trying to keep home-owners in their homes.

In the rented sector, expired tenancies allow repossession to be undertaken without unexpected disruption to tenant households. In absolute terms, the number of buy-to-let repossessions remains only a small proportion of total repossessions.

CML director general Paul Smee said:

“Even though buy-to-let lending is running at only around a third of its peak levels, the sector is continuing its gradual expansion. It has become an important part of the overall landscape of housing provision in the UK.”

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Average UK Household spending £10416 Per Year on Rent

Posted on May 8th, 2012 by tenantsure

New figures from FindaProperty.com have revealed that UK households are spending an average of 28% of their take-home income on rent, rising to 71% in London.

The latest Rental Index, recently released by the property website shows that the average asking price for renting property in the UK now stands at £868 per month. This is an increase of 1% for the corresponding period in 2011 but remains below the record set in September 2011 of £890.

Currently UK households have an average net income standing at £27,242 per year meaning that those individuals who live in rented accommodation are spending approximately £10,416 on rent.

However, for those living in London the amount spent on rent increases significantly to the point where, at an average of 71%, individuals are spending almost as much on rent as the average UK household takes home in income!

Last year’s rental price increases appears to have come to an end for the time being with the slowdown driven by the steady or falling price of houses and larger flats. In contrast, the rental asking prices of studios and one and two bedroom flats are at an all-time high, creating a tough rental environment for tenants seeking smaller, more affordable accommodation.
Samantha Baden, property analyst at FindaProperty.com, said:

“Average rental prices peaked in September of last year but have come down since then, most likely as a result of more properties coming onto the market.”

“Overall, rental supply increased in the first quarter of the year, especially for bigger properties. In contrast, smaller homes remain in limited supply and as a result, individuals and couples are still facing record asking prices for smaller flats and therefore spending a significant proportion of their overall household income on this.”

“This is particularly pertinent in areas like London where demand is high, which is why tenants looking for more affordable rental property should consider the impact of location as well as size.”

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Landlord Buying on the Rise

Posted on May 3rd, 2012 by tenantsure

Independent research commissioned by specialist buy-to-let lender Paragon Mortgages has revealed that property acquisition activity remained strong in the first quarter of 2012.

The report, which was produced by independent researchers BDRC Continental, showed that during the last quarter landlords increased their portfolio size by 1.8 properties. In Q1 2012 the average portfolio size was 10.8 properties, accommodating 1.3 tenants per property.

Of those landlords that took part in the survey, 20% said that they expect to purchase property in the next 12 months.

From those Paragon Mortgages customers who took part in the survey, 35% said that they expect to add to their portfolio in 2012. Terraced houses continued to be the most popular property choice for investment (64%), followed by flats (individual units) 57% and semi-detached houses 46%.

Tenant profiles remained largely unchanged in Q1 with young singles still the most prolific tenant type (53%), followed by young couples (51%) and families with children (51%).Attitudes around being a landlord remained positive and 89% of those surveyed said that they are satisfied with their current tenancies.

Landlords were also asked to comment on the level of communication they have with their tenants, the majority (39%) speak to their tenants every two – three months, and 27% once a month.

John Heron, Director of Paragon Mortgages, said:

“It has been a steady and progressive start to 2012. Whilst landlords are still benefiting from attractive market conditions, there is still a long way to go to meet the increasingly high level of tenant demand. More investment across the private rented sector is needed during the coming year to help to meet this demand.”

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Britons Confidence in Housing Market Rising

Posted on April 25th, 2012 by tenantsure

Britons are becoming increasingly confident in the outlook for the housing market, according to the latest Halifax Housing Market Confidence tracker.

Some 39 per cent of people polled have predicted that house prices will increase over the next year, almost double the 20 per cent of people who believe house prices will fall. This is the most positive view since the lender began measuring consumer confidence in the housing market 12 months ago.

Londoners remain the most confident about the outlook for the housing market, but households in the North East of England are feeling the least positive, the research shows.

Martin Ellis, housing economist at the Halifax, said:

“It is encouraging that the level of consumer confidence in the housing market continues to improve, albeit from a very low base.”

More than half – 55 per cent – of people surveyed nationwide think now is a good time to buy, compared with around one in four (24 per cent) who believe it is a good time to sell.

Nearly two-thirds said job security was the main obstacle facing potential homebuyers, while raising a deposit was the second biggest hurdle, the study indicates. At the same time, seven in 10 people polled predict that the cost of private sector renting will rise over the next 12 months, driven up by demand from frustrated potential homebuyers.

Mr Ellis added:

“Overall, we continue to expect little overall movement in prices this year provided that the UK economy does not suffer a pronounced weakening.”

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Scotland Laying Out Blueprint for Landlord Regulation

Posted on April 19th, 2012 by tenantsure

The Scottish Government has laid out and launched plans to clamp down on the private rented sector which could provide a blueprint for regulation in the rest of the UK.

Housing minister Keith Brown has launched a consultation aimed at rooting out rogue landlords and improving the system for those who provide a good service to tenants. The consultation is based on the work of the Private Rented Sector Strategy Group supported by the Scottish Government over the past six months.

Proposals include:

  • A simpler, more targeted regulatory system for the private rented sector, focusing enforcement action on those landlords who give tenants a poor deal, cause safety and management concerns and tarnish the image of the sector.
  • Increased effective partnership working between a range of public services such as housing, social work, education and police to identify and prosecute the small group of exploitative and unprofessional landlords who bring the reputation of the private rented sector into disrepute.
  • Help for landlords and communities dealing with tenants who engage in anti-social behaviour.
  • Achieving quicker and more effective justice for tenants and landlords in dispute through reform of the courts and consideration of the role of a new housing panel model.

Housing Minister Keith Brown said:

“A small group of exploitative and unprofessional landlords bring the reputation of the private rented sector into disrepute and undermine the work done by the many good landlords who provide good-quality homes with high management standards.”

“The Scottish Government is committed to enabling effective action to help remove the small minority of rogue landlords from the private rented sector and to ensure that local authorities have the powers that they need to tackle this problem.”

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First-time Buyer Numbers Increased in February

Posted on April 16th, 2012 by tenantsure

Lending to both first-time buyers and home movers increased in February with first-time buyers taking the bigger increase, according to figures released today from the Council of Mortgage Lenders.

14,100 loans worth £1.7 billion were taken out by first-time buyers, up 8% by number and 6% by value from January and up 18% by number and 21% by value on last February.

Home movers took out 22,500 loans worth £3.7 billion, a 2% increase in number and a 3% increase in value from January and a 16% increase in number and 19% increase in value from February 2011.

Table 1: Loans for house purchase and remortgages

Number of
house purchase
loans		 Value of house
purchase loans
£m		 Number of
remortgage
loans		 Value of
remortgage
loans, £m
February 2012 36,600 5,400 25,500 3,300
Change from January 2012 4% 2% -3% -6%
Change from February 2011 17% 20% -13% -6%

House purchase lending rose in February. 36,600 loans (worth £5.4 billion) were taken out, up 4% by number and 2% by value from January and up 17% by number and 20% by value from February last year. Remortgaging continued to decrease in February. £3.3 billion was advanced, a 6% fall compared both to January 2012 and February 2011.

Table 2: First-time buyers, lending and affordability

Number of
loans		 Value of
loans
£m		 Average
loan to value		 Average
income multiple		 Proportion of
income spent on
interest payments
February 2012 14,100 1,700 80% 3.23 12.5%
Change from January 2012 8% 6% 80% 3.19 12.1%
Change from February 2011 18% 21% 79% 3.13 12.7%

For the first time since April 2011, there was an increase in the proportion of income first-time buyers spent on mortgage interest payments, from 12.1% in January to 12.5% in February. This is likely to reflect a combination of factors including an increase in average first-time buyer income multiples (from 3.19 to 3.23) and a modest increase in some borrowing rates. This still leaves mortgages for first-time buyers much more affordable than as recently as 2008, when first-time buyers on average spent 19.6% of their income on mortgage interest payments. First-time buyers borrowed on average 80% of their property’s value in February, unchanged in over a year.

Table 3: Home movers, lending and affordability

  Number of
loans		 Value of
loans
£m		 Average
loan to value		 Average
income multiple		 Proportion of
income spent on
interest payments
February 2012 22,500 3,700 70% 2.91 9.8%
Change from January 2012 2% 3% 70% 2.91 9.6%
Change from February 2011 16% 19% 68% 2.87 9.7%

Since the summer of 2011, more than 95% of first-time buyers have taken out repayment loans and February’s proportion was 96%, unchanged from January. Repayment loans to new home movers and remortgages also increased in February from 81% to 82% for home movers and from 76% to 77% for those remortgaging. 51% of first-time buyers bought properties priced between £125,000 and £250,000 in February, up from 49% in January. February was the last full month of the stamp duty concession although next month’s data is expected to bring a further rise in first-time buyer numbers as they moved to beat the 24 March deadline.

CML director general Paul Smee said:

“It is encouraging to see the continuing year-on-year improvement in house purchase lending. However it is not yet clear whether the end of the stamp duty concession will lead to a falling off in first-time buyer numbers and how much this may be offset by the government’s NewBuy scheme, available to all buying a new build property.”

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Increase in Stamp Duty Sees £13 Million of Exchanges

Posted on April 5th, 2012 by tenantsure

W A Ellis reported £13m of exchanges after the increase in stamp duty, announced in the March Budget.

Richard Barber, partner in residential sales at W A Ellis, comments on sales:

“March has been dominated by the impact of the Budget – the Chancellor’s announcement to increase stamp duty to 7% on properties priced £2 million and above prompted a wave of activity within our sales department – £13 million worth of sales exchanged during the afternoon and early evening, as purchasers rushed through contracts to avoid paying the further 2%.

“This announcement coincided with the Rightmove statistic showing that the average asking price in Kensington and Chelsea has tipped over the £2 million level, but my interest, as an agent, is drawn to HM’s Land Registry turnover figures, which reveal a 17% decrease  in the number of properties sold at £2m or above in December 2010 compared to December 2011.

“It will be interesting to see how this December’s ‘transactional figures’ above £2 million will look in the light of the stamp duty increase. We predict a further decline, as well as the average asking price to fall slightly as vendors adjust their expectations.”

Lucy Morton, senior partner and head of lettings at Prime Central London estate agency, W A Ellis, comments on lettings:

“Rents continue to plateau rather than increase as we enter spring and, as I reported in our February market comment, the main reason for this is because the City is not bringing in the normal annual influx of expats.  Rental allowances are being reduced by the corporates, and tenants are feeling the squeeze.

“Current tenants are considering moving for more space with the possibility of finding a bargain too. Increases on renewals are averaging around 5% but prime properties in good locations continue to attract bidding wars. Those properties not presented in perfect condition are the ones suffering longer voids and achieving reduced rents.

“The most damaging effect of the Budget on the lettings market is the uncertainty surrounding the possibility of an annual charge from 2013 on residential property worth in excess of £2million and owned by ‘non-natural persons’.  How will this be managed and who will set the value of the property?

“Foreign investors who until now have been flocking to London need to know all their outgoings and yields when purchasing a property and they will not be happy with this uncertainty hanging over their investment.  I personally don’t believe that the Government has thought this through properly or wisely.

“This Budget has had more of a negative impact on landlords than tenants. The Government should be encouraging overseas investors into London, not putting them off and encouraging them to invest their money elsewhere. The lettings industry is huge and is more lucrative to the UK than the car industry and, while I believe foreign investors would absorb an increase in SDLT, such an enormous hike in one fell swoop plus the possibility of the annual levy is a bitter pill to swallow.

“We will all have to wait for the dust to settle and hope that the uncertainties will be banished, the annual tax will not be levied and that our foreign landlords will not be put off investing by the sharp increase in SDLT.”

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Rent Arrears on the Rise

Posted on April 3rd, 2012 by tenantsure

The amount of people renting property with severe levels of arrears is growing, according to Templeton LPA.

Quarter 1 of 2012 saw the number of tenants who are experiencing severe financial troubles climb by 10.2% with almost 8,800 more tenants facing overdue rent arrears of more than two months that for the same quarter in 2011. The figures were revealed in the latest Tenant Arrears Tracker by Templeton LPA, the specialist practice of LPA Receivers, part of the LSL Property Services plc Group.

An average of 94,400 tenants across England and Wales were in severe arrears during Quarter 1 2012, an almost 20% increase for the quarter 1 of 2011. It is expected that if the current growth rate continues then the amount of individuals renting property who will have rent arrears of two months or more will rise above 100,000 in Quarter  of 2012.

Despite the increase, tenancies in severe arrears represented 2.4% of all properties in the private rental sector in England and Wales in the first quarter of 2012. Although severe arrears cases (tenants with arrears of more than two months) continue to climb, overall tenant arrears have improved, with 9.3% of all rent late or unpaid by the end of February , a decrease from 10.7% at the end of 2011.

Paul Jardine, director and receiver at Templeton LPA comments:

“While the general tenant population has absorbed the rising cost of renting in the last two years, a minority of tenants are facing severe financial difficulties –a minority that is growing. These tenants have been pushed into deeper and deeper arrears by a combination of rising living costs, high rents and a weak labour market, and are now months behind with the rent cheque.

“In turn, these severe rental arrears figures have been inflated by the ongoing impact of county court closures. The closures have prolonged arrears cases, with landlords less able to gain court dates to quickly remove non-paying tenants. This is creating a backlog of tenants in extreme arrears, increasing the amount of rental income lost for landlords or their appointed receivers of rent.”

“Despite the recent surge in severe arrears cases, overall tenant arrears have performed remarkably well given the challenging economic environment. In fact, as we often see at this point in the year, more financially robust households are now paying down post-Christmas debt and putting their finances in order, which is helping to reduce the overall level of tenant arrears.”

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City House Prices Most Affordable in 9 Years

Posted on April 2nd, 2012 by tenantsure

The  Lloyds TSB Affordable Cities Review has revealed that people looking to live in cities are finding the cost of purchasing a home the most affordable for almost a decade.

The average asking price for a home in a UK city currently stands at £173,202 which is 5.5 times the gross annual average earnings. This is the lowest ratio since 2003 when the figure stood at 5.3 and is lower than the 5.7 from 12 months ago.. he highest recorded figure was in 2008 when the ratio stood at a whopping 7.2. However, city living is still more expensive than the UK average ratio of 4.3.

The improvement in the affordability of city homes has been attributed to the significant drop in city house prices. Since 2008, the average city house price has fallen by 18% (£37,403) from £210,605 in 2008 to £173,202 in 2012.

The North West city of Salford is currently the most affordable UK city to live in with an average property price of £102,391. This sum is lower than 4 times the gross annual average earnings with a ratio of 3.81 and is partly due to a 32% decrease in the average property price of that part of Greater Manchester since 2008. Londonberry and Bradford follow with ratios of 3.87 and 3.98 respectively.

Seven out of the eight most affordable cities are in Northern Ireland and the north of England. Ely in the East of England is the most affordable city in the south of England (4.60).

The least affordable city in the UK is Truro in the South West where the average property price (£250,489) is nearly ten times (9.71) gross average earnings in the area. The quality of life benefits associated with living in this picturesque part of Cornwall have supported prices here over the past decade. Oxford (8.80) is the second least affordable city, followed by Winchester (8.76).

Inverness (5.97) and York (5.95) are the least affordable cities outside southern England.

As expected there is a considerable difference in northern and southern cities with the north-south divide prevalent. The sixteen most affordable cities in the UK are all in the North and the fifteen least affordable cities to live in are all in the South.

Suren Thiru, housing economist at Lloyds TSB, commented:

“The improvement in housing affordability within many of our major urban conurbations has been significant during the past few years and reflects the decline in house prices over the period. There is, however, a distinct north-south divide to the locations of the most affordable UK cities.”

“Looking forward, the marked improvement in city affordability is likely to help support demand for those able to enter the housing market. Much of this benefit, however, maybe offset by the continuing difficulties many households face in raising a deposit and uncertainty over the outlook for the UK economy.”

Other Key Findings:

  • City house prices, as a multiple of earnings, remain higher than a decade ago at 5.5 times gross annual average earnings on average compared with 4.7 in 2002.
  • In 2002, Bradford was the most affordable UK city (2.73), followed by Hull (2.86) and Durham (3.02). In contrast, Oxford was the least affordable UK city (8.61).
  • Thirteen of the twenty most affordable UK cities in 2012 were also among the twenty most affordable in 2002. Seventeen of the twenty least affordable UK cities were among the twenty least affordable a decade ago.

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Positive Start to 2012 for Private Rented Sector

Posted on March 30th, 2012 by tenantsure

The private rented sector has seen a positive start to 2012, according to research carried out by specialist buy-to-let lender Paragon.

The research was revealed in the PRS Trends Report for Q1 where landlords where asked for their views on a number of points including  tenant demand, planned property purchases and their views on the wider buy-to-let market. Landlords reported a healthy average yield of 6.2% which was the same figure for Q1 in 2011.

Void periods, between tenants when a rental property is generating no rental income but the landlord still has to cover overhead costs, also remained low with Q1 of 2012 dropping to 2.6 weeks – down from 2.9 weeks for Q4 of 2011. Small scale landlords saw a slight decrease from 2.7 weeks  to 2.6 weeks and professional landlords an even bigger decrease from 3 weeks to 2.6 weeks.

20% of all landlords surveyed said they expected to purchase a buy-to-let property during the second quarter of 2012. From those planning to invest, 46% are expecting to purchase a terraced property and 21% a flat or maisonette.

Landlords’ views on tenant demand remained largely unchanged during Q1, with 44% saying tenant demand was growing or booming and 53% saying they expect demand to increase over the next 12 months.

Nigel Terrington, Chief Executive of Paragon, said:

“The findings of the Q1 Trends survey are interesting and show that it has been a positive start to 2012. Landlords are optimistic about the year ahead and are planning to invest in their portfolios.

“Despite some reports suggesting tenant demand may be falling, landlords are still experiencing decreasing void periods, so the appetite for quality, private rented housing is still very much there.”

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