Newsletter October 2008
£37Bn bank bail out to bring forth new BTL products.
Well, it's been another amazing week with some light at the end of the tunnel. RBS has already confirmed its commitment to providing competitively priced mortgage products in line with the government requirements for banks to return to 2007 levels of funding. This will benefit small businesses and individual mortgage borrowers. RBS doesn't traditionally have a strong Buy To Let offering so we await news of new products from BM Solutions, Bank of Scotland and Cheltenham & Gloucester who are much stronger in that sector and of course are destined to be under the combined Lloyds / HBOS banner very shortly.
We will send out product alerts as details are released in the coming days. If the government wish to see money flowing rapidly into the mortgage market to improve the ability of borrowers to acquire residential property in 2008, then these products will need to be launched within days rather than weeks.
We will be sure to keep you up-to-date as rates are released so you can have the latest product details to hand.
Click here for Buy to Let, Commercial , Property Development Finance and Residential mortgage products.
Private Rented Sector Continues To Flourish
The last three months have seen a rise of almost 20% in new tenancies, according to the latest ARLA quarterly survey of its member letting agents. This is in line with other market indicators showing that the private rented sector is taking up the slack as the owner-occupier market cools.
This sharp rise in demand has in part been the cause of an increase in rental returns, which throughout the country rose from 4.8% to 4.9% for both houses and flats. Outside of Central London, 64% of agents continue to report that tenant demand exceeds the supply of properties on their books, while in the central London area this reduces to 41%.
The ARLA survey shows that the values of houses to rent in prime central London rose by 8.3%, although in the rest of the South East they fell by 4.3% and by 2.2% elsewhere.
The values of flats to rent rose by an astonishing 13.7% in prime central London and, away from London and the South East, still rose marginally by 0.4%. In the South East, away from London, values fell by 4.6%.
ARLA believes that, although these figures are comparable to the latest figures in the Land Registry Index, there is also a probability that more expensive properties being released onto the rental market have had an effect on the responses to the survey.
Despite these bullish figures, investment landlords are still waiting to see what will happen to property prices before making new investment decisions. However, it is now clear that the peak for buying and selling rental property occurred during the autumn and spring of 2006/7.
Commenting on the latest figures, 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. This is underlined by the short void periods and length of time that tenants stay in rental properties."
The average time rental properties are empty remains short, at an average of four weeks or less a year. This take up is further boosted by tenants continuing to stay in properties for longer periods. On average, tenancies are lasting for 16.7 months, rising to well over 18 months in London.
Rents have increased moderately over the last six months. The average rent achieved for the three months to the end of August was £387 a week for houses and £253 for flats. Prices ranged from £799 a week for houses in central London and £532 for flats, to £214 for houses and £144 respectively away from London and the South East.
The latest figures show an average rise in rents of 3% for houses and 7% for flats, largely driven by the London increases. Across all regions, the average rent of a house is at least half as much again as the rent for a flat.
All areas report that there are properties, mainly houses, coming on to the rental market because they cannot be sold. However, as yet, the number is unquantifiable. Meanwhile, 84% of ARLA's member letting agents believe that immigration from the new member countries of the European Union has had an impact on the rental market.
Click here for Buy to Let, Commercial , Property Development Finance and Residential mortgage products.
Buy to Let Landlords Calm in the Face of Storms
Investment landlords in the Private Rented Sector continue to remain calm in the face of the current financial storms. Over three quarters of those questioned for the third quarter ARLA Review and Index, will not sell their investments because of falling house prices. Instead, they expect to keep their property portfolios for an average of over 16 years. A further quarter intend to hold their investments for more than 20 years.
The Third Quarter Review shows that the average rate of return over five years on residential rental property bought outright averages 10.92%. For a geared investment with a Loan to Value ratio of 75%, the average return is 21.07%.
Portfolio landlords carry an across-the-board Loan to Value ratio of only 57.3%. When making new acquisitions, they expect their Loans to Value to be about 70%. Four out of ten of those surveyed expect to buy property over the next twelve months.
Commented Ian Potter, ARLA's Head of Operations, "These figures show that investors are still intending to make use of the availability of Buy to Let mortgages and that the profile of the typical Buy to Let investor has not changed since ARLA first launched Buy to Let following the last serious downturn. The average investor is cautious, mature and aims to support the Private Rented Sector for the long term by looking for the right property in the right market."
According to the latest surveys that form the basis for the Review and Index, migrants from the new European Union countries continue to make an impact on the rental market.
Said Ian Potter, "Before the credit crunch, ARLA was forecasting sustained growth in the rental market, driven by a variety of domestic demographic factors. It is very clear that without the support of the Buy to Let investor, the sector would be seeing some very serious shortfalls in the supply of housing to rent in some areas given the downturn in the housing market."
Click here for Buy to Let, Commercial , Property Development Finance and Residential mortgage products.
