Home rentals “up by 20%”
The number of people renting a home has soared by nearly 20% during the past three months as the housing market turmoil puts people off buying a property, a survey showed today.
Around 64% of letting agents outside of London said demand for rental property outstripped the number of homes they had on their books, falling to 41% within the capital, according to the Association of Residential Letting Agents (ARLA).
Unsurprisingly, given the boom in demand, rents are also rising, with average rents for a house increasing by 3% to £387 a week during the three months to the end of August, while rents on flats have jumped by 7% to around £253.
At the same time, the average amount of time a property is empty has fallen to just four weeks or less each year, while tenants are now staying in properties for around 16.7 months, rising to more than 18 months in London.
Ian Potter, ARLA’s head of operations, said: “This steady rise in rental growth that we see yet again, coupled to clear evidence that there is no unusual selling, proves once again that the credit crunch effect on the private rented sector exists only in the imagination”.
Source: Published by Jane Gething-Lewis for 24dash.com in Housing Tuesday 9th September 2008
Price of auctioned homes falls 25% in a year
Desperate sellers forced to accept sizeable cuts but buyers with deposits are snapping up bargains.
The price of houses sold at auction has fallen by almost a quarter during the past year, according to figures highlighted by the Liberal Democrats.
The average price of the 3,993 houses sold by auction between June and August this year was £130,400 – 23.4 per cent lower than the £170,300 average achieved during the same period last year.
Matthew Oakeshott, the Liberal Democrat Treasury spokesman, said: “These dramatic figures show just how fast house prices are falling at the sharp end. The consensus view is that the decline in house prices over 2008 and 2009 will be around 15 to 20 per cent. Property professionals are now factoring in this fall when buying.”
Richard Morea of London and Country, the mortgage broker, said: “Properties sold at auction could include the increasing number of repossessed houses or those being sold because of probate or a divorce settlement. People who are desperate to sell simply have to take a sizeable cut at the moment.
“For buyers, there are definitely some bargains available at auction, and buy-to-let landlords and developers will no doubt be snapping up these properties, especially if they are cash buyers.
“For other buyers, such bargains are only feasible if they can find the right mortgage. Although lenders have been steadily cutting their rates in recent weeks, the best rates are still only available if you have a sizeable deposit — usually at least 25 per cent of the property’s value.”
Lord Oakeshott said: “The Government must do far more to empower housing associations and councils to buy unsold homes and land, which would save our building industry from collapse. The Government must also act to ensure the banks only use repossessions as last resort.”
But Michael Coogan, director general of the Council of Mortgage Lenders, said: “Lenders must and do see repossession as a last resort.
“We are committed to providing information to borrowers in arrears to help explain the arrears management process, to help borrowers understand what to do and expect, and to set out how their lender will treat them fairly.”
Source: www.timesonline.co.uk Lauren Thompson 11.09.08
Amateur landlords, beware
In some parts of Scotland, homeowners who feel they may not get the price they want by selling their home now are opting to rent the property out in the hope that rental income will cover costs until the market picks up.
Lynn Hilton, an experienced lettings agent with Cluttons, said: “Many new landlords are not entering the lettings market by choice, and they have a great deal to learn about the business.
“A number of them are missing out on opportunities to let by refusing to budge at all on the asking rent, instead settling for void periods, which every professional landlord knows is seriously detrimental to yields.”
The big problem for many temporary, amateur landlords is that they do not anticipate costs involved when tenants demand various improvements.
“The drip feed of costs from a rental property can come as a shock to many homeowners who are not used to being forced to upkeep their property to high standards as part of a contract,” said Lynn.
“They are also often unprepared for administration costs arising from contracts and inventories.”
However, buy-to-let expert David Lawrenson says many of today’s property millionaires started as landlords back in the last property slump of 1989-95, when they had to rent out their first property through default rather than choice.
“For each millionaire today, there were many back then who had a go at being a landlord, had a bad experience and then gave up and cried off hurt,” said David.
“Once again, we will see many novice accidental landlords sign up with lettings agents to find them a tenant.
“There is nothing wrong with using an agent, but they will happily sign contracts with the lettings agent where they will end up paying big letting-agent fees forever, and long after the agent has found them a tenant.”
David suggests, that in some parts of the country, high and ongoing renewal fees have become standard practice among agents, who foist them on novice landlords who don’t know any better or fail to read the small print.
Homeowners must also inform their mortgage lender if their home is about to be occupied by tenants, which may mean a higher mortgage rate being charged. Insurers should also be told when a home is rented out.
New rules from April also require that tenants’ deposits to be lodged with a landlord deposit scheme.
Source: The Press and Journal website – 11.09.08
What does Lehman Brothers fall mean to you?
The collapse of Lehman Brothers has rocked the financial world, but what does a US investment bank’s fall mean for UK consumers
Will British consumers be hit by the Lehman Brothers collapse?
Lehman Brothers is an investment bank, so people do not have Lehman Brothers savings accounts, mortgages or pensions. The vast majority of UK borrowers and savers will have no direct exposure to Lehman Brothers. A handful may have mortgages linked to the bank, as it did have some mortgage subsidiaries. These loans will be sold on and payments will continue as normal.
Indirectly UK consumers will be hit however. Most UK banks and pensions funds will have had dealings linked to Lehman and the complex web of international finance means many institutions will be facing future writedowns.
The biggest hit will be felt in terms of stock market values and investor confidence. Falling stock markets are bad for pension funds, businesses and banks, and this will all impact on the wider economy and British consumers.
Can this affect the property market?
The property market has become the albatross around the neck of the global economy. The credit crunch has its roots in the US mortgage crisis and borrowers’ inability to pay loans back as prices stopped rising and then began to tumble.
As the US property market has crashed, these difficulties have spread beyond poor credit ’subprime’ borrowers and have begun to affect higher grade property owners. Despite repeated claims that they are in control of the situation, banks are fearful that they still do not know the full extent of the problem and the ongoing credit freeze has further exacerbated the problem.
Not only do UK banks have exposure to the toxic investments created by selling on US mortgage debt, but they also fear similar problems spreading in the UK from lax lending practises. The UK does not have the easy planning laws that allowed huge over supply of property in the US, but it did have rapid and unsustainable house price inflation, an oversupply of certain properties – new build City centre flats – the buy-to-let investment bubble and a raft of 100%-plus mortgages.
Many of the problems UK borrowers are currently facing come as lenders reprice risk and the best value loans are only offered to those with sizeable deposits, leading to large repayment increases for those remortgaging on high loan-to-values and a sudden halt to rising house prices as credit dried up.
In recent months mortgage rates have fallen slightly in the UK, and in June and July the Royal Institution of Chartered Surveyors reported a slight increase in interest from new buyers, although this stalled in August. The Lehman Brothers collapse is likely to undermine the prospects of banks increasing mortgage lending, as they wait to discover what will happen next and will not help the fragile property market.
Source: thisismoney.co.uk
Should you dive in to buy-to-let investing?
Prices are plunging, markets are in turmoil – but, incredibly, now could be the time to put your money in property, writes Richard Dy
Buy low, sell high has always been the maxim. Invest against the flow. In that case, with headlines warning of apocalyptic property crashes and a mortgage crisis, could it really be a good time to be investing in bricks and mortar?
Experienced landlord James Fraser characterises the buy-to-let frenzy of recent years as being made up of two types of investor.
First, there are landlords like himself whose prime concern is finding property where the rental income covers the cost of the mortgage and delivers a small profit on top.
These gains are religiously accounted for, saved and hoarded against future rises in mortgage rates or other unforeseen expenses – and to fund future investments.
‘For most serious landlords, income and cashflow are the prime concern,’ says James, 40, who was an actor before becoming a full-time landlord.
The other type of landlord, he says, is the more speculative and often less experienced investor who bought property hoping to profit purely from its rise in price.
Seduced by the claims of property clubs, such as the now defunct Inside Track, many hoped to profit from owning a property even before it was built. That kind of speculation worked for some, James admits, though it has been the ruin of others (see below).
James reckons there is nothing left in today’s property market for short-term speculators. But for long-term landlords, prospects are brightening.
‘When prices were rising strongly, yields – rental income versus the property’s value – were falling. Now, as property values are dropping, these yields are rising.’
A jump in tenant demand is helping, he says, by allowing him to push up rents. The growth in demand comes from people who cannot afford to buy, or who are holding off from buying in the hope of further price falls.
James owns 20 properties in his home town of Stevenage, Hertfordshire, all post-war, three-bedroom, terraced, former local authority houses that he lets to young professionals and families.
He knows these properties and the neighbourhoods intimately. He knows how to price, advertise and maintain them and precisely how much he needs to charge to clear his mortgage and other overheads.
He can let such houses for £750 a month. A year ago, he says, they might have cost £165,000 to £175,000, giving a yield of 5.1%. Now he could probably buy one for less than £150,000 and push up the rent to £800 – giving a yield of 6.4%.
‘Mortgage costs are negating some of these gains,’ he says. But if he keeps down his borrowing, the numbers still work.
James aims at rental income delivering at least 20% above mortgage costs. With best-buy landlord mortgage rates at 6.4%, if James puts down £50,000 and borrows £100,000, his monthly interest-only payments would come to £533, generating a £267 monthly profit from a £800 rent.
Even if that £267 was not defrayed by other costs, such as maintenance, it would still make a yearly return of only 6.4% on his £50,000 capital -comparatively unattractive beside the seven per cent-plus that cash on 12-month deposit can earn today.
‘Times have got tougher,’ he says. ‘You do need to put more money down. And releasing equity from your existing properties by remortgaging has got far harder.’
Further growth in the number of tenants and rental income, plus falls in property prices, will work to his advantage.
Source: This is money
