Landlord confidence rises as house price growth inflates

Landlord confidence rises as house price growth inflates

Keeping you in the loop with the latest property investment headlines

Property investment news provides the up-to-date information that helps you keep your portfolio profitable and your strategy on point. We bring you regular updates of the property market news that has caught our eye, and that we think you need to know.

Here are five recent headlines you didn’t want to miss.

Property price inflation rate increases for the first time in eight months

Data released by Halifax has confirmed that the annual rate of house price inflation increased in November. It is the first time in eight months that the rate of annual house price inflation has increased from the previous quarter.

Annual inflation measured on a quarterly basis in September and October held steady. With prices in November 0.8% higher than the previous quarter, annual house price inflation rose to 6% from 5.2% in October. While this annual rate of house price growth is some way below the 10% peak recorded in March, it’s still a healthy increase.

On a monthly basis, UK house prices rose only slightly. While monthly rises have slowed from the rapid increases in the first half of 2016, property investors shouldn’t be too concerned.

Although affordability issues may have dampened demand in the short term, low mortgage rates and a long-term shortage of new homes should help to support property values. Property investment in the UK remains a good long-term play, and slower rises now could help avoid the hard landing that so many property analysts were predicting immediately post the Brexit vote.

Another BTL mortgage provider toughens up lending criteria

Specialist lender, Paragon, has followed other lenders and toughened up its lending criteria for buy-to-let mortgages following the property tax changes that affect mortgage interest relief.

With some landlords facing higher costs as the changes are phased in over the next five years, Paragon has updated its affordability rules. Landlords who fall into the higher rate income tax bracket will be assessed at 140% of rental income, rather than the 125% cover currently required. Landlords paying basic rate tax will not be affected.

Paragon will also be assessing with a stressed interest rate set at 2% above the interest rate charged on the mortgage product applied for (or 5.5%, whichever is higher).

Other lenders are likely to update their affordability rules accordingly. In a squeezed lending environment, it’s even more important to use a buy-to-let mortgage broker when arranging or restructuring your property investment finance.

Commuter towns are the new hotspots for property investment

Probably no surprise to property investors who read our investment guides, commuter towns are the current UK property hotspots. Research by a property finding group has concluded what we’ve been saying for a while: commuter towns are among the best places to invest in property UK.

Land Registry data in the 12 months to September 2016 show that property prices in the south east of England increased by 10%. In London, the increase was 11%, but prices in commuter towns outstripped even this rate of price growth. The highest rates of property price growth were highest in:

  • Brentwood (16%)
  • Canterbury (16%)
  • Hertford (15%)

Some of the commuter towns offer exceptional value for Londoners moving out of the capital. Home prices and rentals are more affordable, and there are great schools, retail, and leisure facilities. Perhaps most exciting of all for property investors is the transport infrastructure (such as Crossrail and Crossrail 2), which will slash commuting times into and across London.

Crossrail heats up property prices

Now that we’ve mentioned Crossrail, it’s apt that we examine the investment news that highlights how Crossrail is affecting property prices in London. It has been reflected in new research produced by Lloyds Bank. Even though the full service is not due to be in operation until 2019, property investors have seen property prices near Crossrail stations leap by an average of 22% during the last two years.

The rise in property prices close to Crossrail stations compares to an average growth of 14% in the immediate surrounding area over the last two years. The best rises have been witnessed in Abbey Wood and Forest Gate, at 47% and 46% respectively. To the west, Slough and Maidenhead are among the best performers, with rises in the average price of properties of around 33%.

Property prices in Paddington are the most expensive on the Crossrail route at more than £1 million and have almost doubled in eight years.

Crossrail has been a catalyst for property price growth along its route, as once ‘faraway’ places have ‘moved’ to within just a few minutes of central London. Commuting is easier, and regeneration of previous brownfield sites and residential slums has been encouraged.

Landlord confidence soars

Kent Reliance has produced a report that shows landlord confidence has soared despite government policies that have been seen as anti-buy-to-let.

Property investors are more confident than at any time in a year, with more than half believing that the value of their property portfolio will increase. It compares with less than 40% in the second quarter of 2016 when confidence was depressed because of the stamp duty increases.

Property investors have begun to use various strategies to mitigate the stamp duty increases. These strategies include investing in property via a company structure to allow financing costs to be offset against rental income. A study by Kent Reliance shows that there has been more than twice the number of mortgages issued to limited companies this year when compared to the whole of 2015.

It seems likely that moving property portfolios into a limited company structure will become more popular to avoid tax – though equally popular appears to be transferring holdings into the name of a spouse who pays a lower rate of tax.

Landlords have also found that they have been able to increase rents to combat higher taxes. Even though the supply of rental property has hit an 18-month high, average rents have increased to £881 per month – up by 2.4% over 12 months earlier. Survey results show that the extra costs on landlords (which will be a result of the ban on letting agent fees on tenants) will result in higher rents.

A third of landlords expect to raise rents in the next six months by an average of 5.4%. Higher taxes and increasing rental demand are the major reasons cited for rental increases, though the need to evidence higher rental income on order to obtain finance to buy is also a major factor in the decision to raise rents.

Stay on top of property investment news

Property investment news has the potential to impact property prices and investment strategy. Stay on top of the news that matters by keeping and eye on the Gladfish investment blog.

Property investment can change your life, but you need to ensure that you’re investing for the right reasons and in the right location. Contact our property consultants today on +44 (0)207 923 6100 and we’ll bring you up to date with all the news that affects you and your property investment portfolio.

Live with passion

Brett Alegre-Wood

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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