News Review: Buy-to-let

Buy-to-let market is showing signs of revival

by

Paul Howard,

head of corporate accounts, Nationwide

it has been pleasing to see

that a number of surveys and reports over the last month have given weight to the growing view that the buy-to- let market is showing signs of revival. take, for example, LSL Property Services’ buy-to-let index for march. Here it re- ported rising rents and de- clining tenant arrears. the in- dex showed that the number of achievable rents had in- creased for the second month in a row – reaching an aver- age £659, 1.5% higher than a year ago. total annual returns now stand at 13% resulting in

the average return on a rental property being more than £20,000 in the last year. at the same time tenant arrears dropped to 10.1%, the lowest level seen since the index be- gan in 2008. these positive reports are

also reflected in the number of landlords who intend to increase the size of their port- folios. the LSL survey noted that around 50% of larger landlords consider it to be a good time to invest in prop- erty. Valuations for buy-to-let

investors are also on the up. data from connells shows the number of valuations in- creased by 19% this quarter, compared to that seen in the final quarter of 2009. Landlords are feeling more confident too. upad.co.uk‘s rental confidence index

MARKET PERFORMANCE

The latest data from the Council of Mortgage Lenders shows a slight decline in the value of gross mortgage lending during the first quarter of 2010, however the sector grew as a proportion of all mortgage lending from 6.1% in Q4 2009 to 7.0%. In addition buy-to-let arrears continue to decline for the fourth consecutive quarter to 1.81% compared to a peak of 3.06% at this time last year.

So, what is driving the market place at the moment? This year’s first quarter Review of the Buy to Let sector from the Association of Residential Lettings Agents (ARLA) reports landlords believe there is not enough rental property available to meet demand. The research shows that 59% of ARLA members reported there were more tenants than there were properties available, an increase from the 41% of respondents who held this view in Q4 last year. Higher tenant demand is shown by the reduction in void periods revealed in the ARLA data where properties are vacant for an average period of

8 mortgage introducer JUNE 2010

showed that 61% of landlords felt more confident about the buy-to-let sector in april; the fifth consecutive month they have expressed renewed con- fidence in the market. a growing number of land-

lords are planning to pur- chase residential property for investment purposes over the next three months, despite believing some problems with accessing finance still remain, according to Paragon mortgages. its latest Private rental Sector trends report revealed that 12% of land- lords are planning to pur- chase in the second quarter of 2010, compared with 10% who said they would buy in the first quarter of the year. tenant demand was found to have remained strong, with 24% of landlords stating that demand grew during the

just 3.6 weeks; down from 4.2 weeks at the same point last year. The National Landlords Association supports these figures too, as their own data shows the average duration of voids in property rental have reduced from 19 days to 17 days.

CAUSE FOR CONCERN?

One of the main areas of concern reported by landlords is the difficulty many say they experience in trying to obtain finance. The LSL Index revealed that only 13% of landlords managed to secure a mortgage over the past year due to the changes made to lending criteria over the last 18 months.

The survey suggested that landlords feel that those with a larger portfolio, and ultimately more equity available to them, will be at the forefront of the market.

The Mortgage Works has responded with an

increase in the LTV on its core buy-to-let range of mortgages. At 80% LTV, The Mortgage Works is the only lender to offer this level of borrowing which comes as a tremendous boost to this market.

quarter, compared with 8% who said it was declining, while looking forward; de- mand has been predicted to strengthen considerably.

Is rental demand set to grow?

The increased confidence in the sector is being helped by the widely held view that rental demand will continue to grow. Panellists at the 2010 Land Data Debate were upbeat in predicting that the rental market was set to grow from the 12% that is currently being experienced to 20% within the next 10 years.

These positive assessments are promising indeed. As we all know, a vibrant rental sector is good for the economy and is increasingly seen as the main alternative for many would-be first-time buyers. But we must not get carried away. We are clearly still emerging from the dark days of one of the biggest financial crises that we have seen. We need to keep a close eye on the bigger picture – looking at the indicators on consumer economic behaviour which clearly have a direct impact on the housing market’s ability to recover. Take Nationwide’s

Consumer Confidence Index for example. According to the report, confidence remained broadly stable during April. There is a very real possibility that the index could experience further volatility in the coming months if uncertainty remains. Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48