The lights are all on green for BTL investment.

May 16, 2014

Over the past week or so, it seems that media headlines have been dominated by numerous statistics and positive news about the Buy To Let sector.

 

Mortgage Introducer reported that the BTL sector continues to go from strength to strength:

The number of Buy-to-let loans in March was 16,200, a rise of 56% compared to March 2013, the CML figures show.

The value of these loans totalled £2.2bn, up by 69% compared to March 2013.

Source story 

Property Industry Eye reported on the rise in rental properties compared to owner-occupier homes:

Over half of UK homes will be rented – with a third rented privately – by the year 2032, it has been predicted.

It will be the first time in 60 years that the majority of homes will not be owner-occupied – and by then home ownership will be the preserve of the elderly.

A report by the Intermediary Mortgage Lenders Association shows that at its peak, in 2003, 71% of households in England were owner occupied. Today the figure is 65%, and the IMLA says the proportion is set to drop. It forecasts that just 49.2% of households in the UK will own their own homes in 18 years’ time.

The report says: “If current trends continue without a major  policy or economic shift to address the shortage of new homes, the majority of UK households will be renting in the private and social sectors by 2032 for the first time since the early 1970s.”

Source story 

The Daily Mail reported that a million more renters are set to join the private rented sector within the next five years:

The buy-to-let boom looks set to continue – despite sky-high mortgage fees, fears of rising interest rates and the chance of political interference.

Keen investors point to new figures from a leading estate agent that say up to a million more renters will be looking for homes in the next  five years – adding to a rental pool that has doubled since 2001.

Many of these new tenants are expected to be hard-working professionals  frozen out of the mortgage market by the controversial tough new ‘affordability tests’ imposed by the Financial Conduct Authority. They apply to owner-occupiers but not to buy-to-let investors and are being blamed for a 12 per cent fall in mortgage approvals.

Investors are certainly keen to take up any slack in demand for property.

Source story 

… and finally …

Reuters report that house prices are set to increase by 8% this year, regardless of interest rate rises:

The Bank of England will act soon to restrain Britain’s booming housing market but prices are still set to rise nearly 8 percent this year as a dearth of supply and a government loan programme fuels inflation, a Reuters poll found.

That is not far off the 11 percent average pace seen in the year to April, which prompted Bank of England Deputy Governor Jon Cunliffe to say earlier this month that it would be “dangerous” to ignore the rapid rise in house prices.

Source story 

But while the lights may all appear to be on green for BTL investors, there are still “threats” to consider including:

*  Increase in landlord licencing programmes

*  Interest rate rises

*  Pension money flooding into the market next year

*  Increasing regulation

*  Housing policies becoming a big part of political agendas

*  Rent arrears increases

*  Increased court fees for evictions, and longer timescales to evict

*  Stricter criteria for getting a mortgage

*  Rents rising below the rate of inflation.

Eric Walker, Managing Director of Northwood comments:

“Reading the headlines would suggest that all is rosy in the world of BTL and this may attract many more amateur landlords into the arena.  But wherever there is opportunity, there are also threats.

Property investment is an expensive business and the price of ignorance can be very high.  Amateur landlords need to be clear on their investment strategy, and, if letting through an agent, they need to work with an agency that fully understands the compliance landscape, how to source reliable tenants,  and also has consumer protection in place.

Northwood is excited to be celebrating our 20th anniversary next year.  In fact, we have been in business since around the same time as the BTL mortgage was launched!  As a company started by landlords for landlords, we are proud of our track record in serving the lettings community and always voluntarily work to the highest possible standards for the benefit of both landlords and tenants.

As the BTL scene evolves and matures, Northwood is committed to being at the forefront of change and always ensuring that we deliver the highest standards of lettings service”.

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Northwood is an established, widely recognised estate agent in the U.K. and the leading supplier of Guaranteed Rent . Northwood is proud to deliver a professional service to all of their customers regardless of whether they are a landlord, tenant, buyer or seller.

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