Landlords’ confidence in buy-to-let has been bolstered by strong tenant demand – but concerns are growing about the difficulty in raising mortgages and their costs.
Exactly half of landlords who have recently attempted to raise mortgage finance think it is more difficult to secure than a year ago, while only 11% believe it is now easier to obtain mortgage finance.
The cost of finance also remains an issue, with 45% of landlords who have recently taken out a mortgage reporting that monthly payments are more expensive than 12 months ago.
Despite these difficulties, nearly half (48%) of the 1,464 landlords polled earlier this month by LSL believe that now is a good time to invest in property, while less than 1% think it is now a good time to reduce their portfolios.
Four-fifths of landlords (82%) who think now is a good time to buy rental property cited attractive property prices, while 53% mentioned strong tenant demand.
David Newnes, director of LSL, said: “House prices are still subdued in many parts of the country and tenant demand is still growing. This is presenting landlords with the opportunity to secure strong yields on properties, and boosting confidence in buy-to-let as a long-term investment.”
The strength of tenant demand has been the key driving force behind recent rent rises, with LSL’s latest Buy-to-Let Index showing rents at a record high of £725 in England and Wales in July.
In the past six months, 44% of landlords have seen a rise in tenant demand, while just 1% have seen a decrease in demand. Investors expect this growth to continue. Two-thirds of landlords (64%) anticipate demand will increase further in the next 12 months.
Four in ten landlords expect to increase rents over the next year, with just one in a hundred investors expecting they will reduce rents. Those expecting to raise rents anticipate they will do so by an average of 4.5%.
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Comments
don't forget you can be bankrupted for owing just £750
any debt at all is a risk let alone multiple mortgages on an asset going down in price with costs rising
many will face financial ruin and never recover
why is japan different?...they had a credit bubble and bust then printed money and had almost zero interest rates
just because loads of people come into the country,doesn't mean houseprices must be high
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Prices were highest in Tokyo's Ginza district in 1989, with choice properties fetching over 30 million yen[7] (approximately $215,000 US dollars) per square meter ($20,000 per square foot). Prices were only marginally less in other large business districts of Tokyo. By 2004, prime "A" property in Tokyo's financial districts had slumped to less than 1 percent of its peak, and Tokyo's residential homes were less than a tenth of their peak, but still managed to be listed as the most expensive in the world until being surpassed in the late 2000s by Moscow and other cities. Tens of trillions of dollars worth were wiped out with the combined collapse of the Tokyo stock and real estate markets. Only in 2007 had property prices begun to rise; however, they began to fall in late 2008 due to the financial crisis.
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Dave
You also make the assumption that all BTL landlords are "over levereged" as you call it. Whilst there will always be some that are, I can assure you that most of us are a little clever than that.
Dave
Thank you for your advice about a risk management course.
I think comparing the housing market in Britain to the housing market in Japan and thinking the same will happen here a little short sighted.
Good or bad, we are totally different countries with different economic situations and for this reason you should not assume that the same thing WILL happen. Do you honestly think with the "open border" policy we have been operating and turning a blind eye to for years that our population will ever fall to 1950's levels like you say allegedly happened in Japan? People will always need somewhere to live. Fact.
in the past property tended to stand up reasonably well because like you say you could stay put if you could afford the mortgage
the reason for stock crashes is mainly gearing
the difference this time is that the property market has gearing in it via buy to let...many portfolios will be trashed and people ruined if prices fall,they find themselves in 600k negative equity and the bank wants its money back
bingo
Given the quality of some of the posts by the following generation, a fall of £60k per property would be well worth paying.
The thing with the game that is being played simply isn't going to workl like it does with stocks and share, the property investment is a slow and expensive one to get into and a slow, expensive and unpredictable one to get out of. Property owner have nothing to fear from falling prices and tus can contbe scared or propagandered to sell.
You keep rattling on about Japan but if this is your chosen route to influencethe market or be profit of doom then you ought realise that you are yacking to deaf ears.
So far I can recall a single poster who has agreed with anything you have to say, either you are right and the whole of the uK market is wrong or you are still right but we are all too thick to know it. I doubt very much that there is any chance of anyone so experienced as you will ever be wrong.
oh and the kids who would be btl fodder all left the country and the population fell to 1950s levels
expect the same here
think you are in fantasy land
when price fall towards 100k average...owning property will be classed as an illiquid noose round the neck
I japan prices fell 90-99% in central tokyo and 70% elsewhere since 1991
21 years later they are still 40% lower than 1991
expect the same here on your 'investments'
If I am sat here on a pile of gold did it matter to me that Gordon Brown sold off the UK Gold reserves as the price of lead? If I hadto sell then yes it would, but today some 13 years later that low price means nothing. Same with Property the investment is not going down in value if it is not going to be sold.
If I can't make up the shortfall then it was the wrong investment, my bad choice, take it on the chin.
The lender want a greater % loan to value, pay up or get out, deal with the market on the day.
Interest rates go up, the reason interest rates go up will probably be to control inflation, inevitably that will see an inflation of rents. Not worried at all about that!
Tax on BTL goes up, you will have to be a bit clearer on that one tax on the profit of rent or tax on rent? Given that there is not enough social housing and BTL are now a major provider of housing in the UK. name a government that will do anything to see a reduction in the supply of Housing. Will not happen.
Prices go down and people rent rather than buy, like they have since 2008? Oh look prices fell back and stabilised about £160,000 average and rents are going up, any FTB property that comes on the market being snapped up by Retired investors who have been shafted by the institutions.
Dave go and have a beer with your mate (the banker) it is he and his industry who are in trouble and have to find new ways of getting their hands on the cash and investments of a much wiser population.
well as long as you are happy with an investment that is going down in value...good luck
as for helping the poor..the reality is btl was bailed out at the expense of the next generation so they were LUCKY
what is
1/you cannot make up the shortfall
2/your lender makes you repay some of the nequity
3/interest rates go up
4/tax on btl income goes up
5/prices go down and people buy rather than rent
BTL does not involve selling properties so the price is of no relevance. Rents are indexed linked to the number of people looking to rent and nothing else.
The Yield on BTL is not worth worrying about either, as long as one is happy with a return which is both secure and while there is population, stable. If buy landlords are mortgaged and an increasing number are not then so long as a landlord is happy to invest the difference between the rent received and the mortgage payment then there is no reason why the price of the property needs enter any discussion.
BTL is not just about profit in many cases it is now about providing the following generation with a foothold on the ladder.
Lots of folk who have had lump sums earning nothing in the banks and building societies are snapping up BTL properties to provide an income that they have control of. That way the individual can earn or lose as a result of their own efforts rather than simply lose at the whim of bankers, investors or government.
The thing is Dave enough of us are smart enough not to think that everything promoted as the next best thing, is.
Dave,
Please can you stop spouting complete tosh
Ray
jane kay
I feel a course on risk management wouldn't go amiss
your assumptions smack of total naivity
yes we live in a hard world
you assume that you will always be able to pay the mortgage...what about gaps and non payments or tenants refusing to leave
what if prices fall to affordable levels and rental demand dries up?
you will be repossessed thats what
if you have cash you can get around 4% in the bank..why take the risk
houses won't become worth nothing assuming you can keep hold of it
I think you are confusing buy to let with residential property. In the long term with buy to let you are still going to have a tangible asset paid for by somebody else even if it is worth less, as with buy to let the tenant is literally paying the mortgage off for you.With the best will in the world house prices are not going to hit rock bottom and become virtually worth nothing even if some people dream of this happening, 3-4% is still a good return based on the interest rates given on savings accounts. As a business person, if the interest rates do go up, I do what every business person does, pass the rise onto the customer, ie the tenant.We live in a hard world.
btl appears to be a no brainer....rising rents stable prices
however,btl is the worst investment around because prices are falling and will continue to do so
even with cash the return if you are lucky is 3-4%
interest rates are only going up and prices down..possibly for 20 years