Newsletter August 2007

 
Don't misslead the Buy to Let sector - ARLA warns

Buy to Let investors are vital to the health of the whole housing market. Without them there would be little or no choice in housing and they should not be misled by suggestions that they are the recipients of favourable tax treatment, ARLA, the professional body for the Private Rented Sector said today on publication of the quarterly ARLA Review & Index .

The latest quarterly results show that 42 % of all investment landlords have one or two properties to let while one in ten have more than ten. Four out of ten Buy to Let investors have mortgage borrowings with a loan to value ratio of between 51 and 75 percent. A further quarter has borrowings that account for less than half of the value of their residential property investments.

Six out of ten of these investors expect to acquire further properties during the next twelve months and the average life expectancy of these investments is over 17 years.

Commented Adrian Turner, Chief Executive of ARLA, "Again, our quarterly figures show that investment landlords are in the business of residential letting for the long term. This is vitally important. Without these investors, who have helped to save the Private Rented Sector by re-financing it, there would be little or no choice in housing. If that had happened, the probability is that house prices would have risen further and the social rented sector would have buckled under the pressure. So, we must ensure that investors are neither misled nor panicked as a result of ill-informed criticism of the sector."

"Also, it should be made perfectly clear that these investments are taxed on profit and capital gains in precisely the same way as any other investment or business," Adrian Turner added.

The ARLA Review shows that the current rate of return on a cash investment in rental property is 11.32%, up 0.14%. On a geared - mortgaged - investment, the returns are 23.25%, up 1.57%. These returns include rental yields and capital appreciation.

To bring the figures into line with the market, the assumptions in this quarter's Review are for a mortgage interest rate based on an average of the two year fixed rates currently available from the ARLA Group of Buy to let Mortgage Lenders. This is instead of an arbitrary 1.75% above base rate that was applied before and reflects the Buy to Let mortgage market trend.

The annual rate of rent inflation is assumed to be the same as the Retail Price Index, currently 4.8%. The ARLA Review & Index takes its information each quarter from an average of nearly 500 letting offices and over 250 investment landlords.

Again this quarter, the Review shows that the average time tenants remain in a property is longer at 18.2 months, against 18 months in the previous quarter. This continues the upward trend of the past two years. Asked what properties investment landlords favour, less than 20% report buying new build. The majority, 45%, have bought property that is already in good condition, 18% bought property needing refurbishment. However, property that is actually in a poor condition is the least likely to be purchased.

Said Adrian Turner, "Private individuals who invest in the Private Rented Sector are cautious and make good landlords. This is precisely the type of individual that ARLA hoped to attract when it launched Buy to Let, the post housing crash rescue operation for the whole sector over a decade ago. We must continue to encourage private investment in the rental market or risk seeing increasingly serious problems in the general availability of housing."

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Torrential rain causes acute shortage of rental properties in flood affected areas.

The NAEA urges owners of vacant properties to come forward

The aftermath of the recent weeks nationwide flooding can now be seen in full pelt with an estimated 27,000 homes and 5,000 businesses having been affected by the torrential rains that swept across the UK. Additionally, it is believed that the cost of damage to homes in the UK could be as high as £1 billion. It is with this devastating aftermath in mind that the National Association of Estate Agents (NAEA) is urging owners of vacant properties in the flood hit and surrounding areas to place suitable, undamaged properties available for letting onto the market, to help ease the plight of the thousands of homeless flood victims.

Prime Minister Gordon Brown recently announced a £14 million package of immediate support for the areas worst hit by flooding to help local authorities and communities aid recovery but this still does not disguise the fact that there is still an acute shortage of homes available for rent for those who have been left homeless due to the recent torrential rain.

The areas reported to be worst hit by the flooding include: Humberside, Sheffield, Leeds, Lincolnshire, Gloucester, Bideford, Ludlow in Shropshire and Lowdham in Nottingham.

Peter Bolton King, Chief Executive at the NAEA, comments: “The flooding has left a huge amount of devastation throughout the UK and individuals, couples, families and the elderly have been forced to leave their damaged homes and move to cramped hotel rooms due to the acute shortage of rental properties currently available.

“It is with this in mind that we are urging owners of vacant properties in the flooded areas and the surrounding locations to place their properties available for rent with the help of local authorities or reputable lettings agents. This will help ease the shortage and help victims of this recent torrent of flooding across the UK to start rebuilding their lives. Homeowners who would like to be of assistance can visit www.naea.co.uk to search for an NAEA approved lettings agent in their area.”
 

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RICS UK Housing Market Survey June 2007

House price growth eased in June to half the pace of the previous month and demand weakened due to the impact of rate hikes, says the RICS UK Housing Market Survey.

House prices rose for the 20th consecutive month in June but the rate of growth more than halved, falling below the survey’s long run average of 21.6%. 10.6% more Chartered Surveyors reported a rise than a fall in house prices, down from 22.5% in May.

In England, London remains the region with the strongest price rises but Scotland is equally as buoyant. Northern Ireland continues to lead the way as the peace premium remains a boost to price growth.

New buyer enquires declined at the fastest pace since February 2006 as the interest rate cycle began to weigh heavily on first time buyer affordability. 15% more Chartered Surveyors reported a fall than a rise in new buyer enquiries compared to 2% in May. New buyer enquiries fell across all regions, except for Wales, the West Midlands and Scotland. New instructions to sell property fell sharply, as forecast in last month’s edition of the survey.

Many vendors brought forward their instructions into May, in order to avoid the upfront cost of Home Information Packs. 27% more Chartered Surveyors reported a rise in new instructions down from 41% in May.

The ratio of completed sales to the stock of available property on the market fell for the third consecutive month indicating that market conditions continue to loosen. Four interest rate rises and the prospect of more to come have dented surveyor confidence in the house price outlook.

Surveyor confidence in the sales outlook almost halved, falling to the lowest level since June 2004.

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