The Property Investor’s Factfile presents a range of relevant data for buy-to-let investors, traders and developers.
Below are some noteworthy observations over the last month:
Property Market Trends
- According to Halifax data, whilst property values rose for the second consecutive month in June, the market still remains flat in light of a relatively low level of activity. However, managing director Russell Galley commented: “We continue to see very positive factors of continuing low mortgage rates, great affordability levels and a robust labour market. The continuing shortage of properties for sale should also continue to support price growth”;
- Nationwide data also reported slower annual price growth – 2% in June, a drop of 0.4% relative to the previous month. Chief economist, Robert Gardner commented that over the past 12 months, there has been “little change in the balance between demand and supply in the market.” He also said that “there are few signs of an imminent change. Surveyors continue to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent”;
- According to Office of National Statistics (ONS) data, English property prices rose by 0.3% between April and May 2018. East Midlands values rose the most during this period (1.7%) followed by Yorkshire and the Humber (1.0%). The North East saw a monthly drop of -0.5%;
- Royal Institution of Chartered Surveyors reported that its members have been observing a steady decline in agreed sales and interest from new buyers. It is currently taking 18 weeks on average to sell a property (between listing and being sold), compared to 16 weeks in Spring 2017;
- According to PwC affordability data, the average property value is expected to grow from £221,000 in 2017 to approximately £285,000 by 2025 – meaning that prices will stand at 8.7 times above average earnings (compared to 8.4 in 2017);
- Other regional-specific data by Hometrack’s Cities House Price Index reported year-on-year growth (up to May 2018) in Edinburgh (7.1%), Manchester (7.0%), Bournemouth (6.6%), Birmingham (6.5%), Nottingham (6.5%), Liverpool (5.9%), Leicester (5.7%), Cardiff (5.5%), Portsmouth (5.4%), Sheffield (5.2%), Bristol (4.6%) amongst others. Negative price growth was seen in Aberdeen (-5.7%);
- This interactive map produced by Bloomberg tracks London’s property prices, median sale values, sales volumes and price changes (using Land Registry data);
- If you have not the chance to check it out, this excellent house price tool by the BBC (covering England and Wales) shows how real values (factoring in inflation) have performed since the Credit Crunch (thanks to @HenryPryor for sharing this resource on Twitter);
- A free new portal PropCast provides users with a ‘weather report’ that shows levels of buyer demand in UK housing markets. According to the most recent data, Birmingham, Manchester, Bristol and Cardiff are currently experiencing sellers markets – whereas it’s the opposite in London.
Rental Market Observations
- The most recent HomeLet Rental Index report indicated that average rents across the UK rose by 1.8% in June 2018 relative to June 2017 (average monthly rents are now £924). According to the data, average London rents stand at £1,596 per month – increasing by 4.7% in June 2018 compared to the same month in 2017. Excluding London, the average UK rental value was £767 in June 2018, up 1.3% relative to 2018. Homelet’s interactive infographic is useful to observe broader rental market trends;
- For the 12 months up to April 2018, Landbay’s Rent Check reported increased rental values in Nottingham (3.3%), Conway (2.8%), Leicester (2.8%), Monmouthshire (2.8%), Edinburgh City (2.6%), Clackmannanshire (2.6%), Northamptonshire (2.5%), Cardiff (2.5%), Caerphilly (2.4%), Stirling (2.4%). Drops in rental values were seen in Aberdeenshire (-5.1%), Aberdeen City (-4.5%), Windsor & Maidenhead (-1.4%), Halton (-1.3%), Luton (-1.2%), Brent (-1.0%), Kensington & Chelsea (-0.9%), Hartlepool (-0.7%), Kingston-upon-Thames (-0.6%) and Barnet (-0.5%);
- Your Move’s latest England & Wales Rental Tracker reported that rents grew faster in the East Midlands and the South West than anywhere else in England and Wales in the 12 months to May 2018. The London, Wales and North East rental markets posted annual falls;
- According to July’s Pearl Rental Index, rents increased by 1.0% in the 12 months to June 2018. London rents decreased by 0.2% over this period (the first decline since September 2010);
- Royal Institute of Chartered Surveyors (RICS) reported that lettings agents have seen a continued drop in the number of rental properties coming to market. This is likely to prompt rental premium growth. According to policy manager Geoff White: “The situation in the private rented sector gives great cause for concern as supply continues to drop. It would appear that new policies on taxes and Stamp Duty have made it so difficult for landlords, at a time when the UK needs more homes to rent, that many continue to exit the market”;
- Listen to our conversation with David Bond, head of PRS and build to rent at PRSim on the back of the organisation’s 2018 ‘Tenant Survey’ which surveyed over 3,750 tenants across the UK;
- Please also check out other relevant rental data and statistics in the RENTING section (page 2) of this month’s factfile.
Macro-Economic Conditions for Buy-to-Let Property Investors / Traders
- The Consumer Price Index measurement of inflation held steady 2.4% in June despite speculation that it may increase due to oil price rises;
- Suren Thiru, head of economics at the British Chambers of Commerce commented to the FT: “With inflation holding steady, wage growth sluggish and economic activity subdued, the case for tightening monetary policy continues to look very weak.”
- Speaking at the Northern Powerhouse Summit in July, Bank of England governor Mark Carney stated: “Domestically, the incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate. A number of indicators of household spending and sentiment have bounced back strongly … The Monetary Policy Committee will continue to monitor incoming data and review prospects for growth and inflation in the UK in order to set monetary policy consistent with returning inflation sustainably to target”.
Buy-to-Let Investing / Financing Conditions
- The 3-Month London Interbank Offered Rate (LIBOR) increased from 0.62850 on 19th June to 0.75800 on the same date in July;
- The 1-year SWAP rate grew from 0.785 on 19th June to 0.854 on 19th July;
- The 5-year SWAP rate dropped from 1.289 on 19th June to 1.265 on 19th July;
- The latest Kent Reliance “Buy-to-Let Britain” report stated that Limited company lending is currently accounting for 72% of BTL property purchases;
- According to Moneyfacts, the average 2-year fixed rate for buy-to-let mortgages has fallen to 2.83% – compared to 3.19% in July 2016. There are 1,268 buy-to-let mortgage products on the market available to first time landlords (rising by 339 over the last two years);
- Special Purpose Vehicle (Limited Company mortgage rates featured in this month’s property investor’s factfile include a Barclays fixed 2.74% pay rate until the end of October 2023 with a £1,950 arrangement fee. The State Bank of India continues to offer a 5-year SPV mortgage with a 3.24% tracker pay rate and a £937 loan fee. For more information and to discuss your specific borrowing circumstances please get in touch with Paul Lowcock at firstname.lastname@example.org or direct on 01133 203240. Also, check out Paul’s commentary on the impacts of Section 24 and Prudential Regulation Authority (PRA) criteria on the mortgage lending landscape;
- Our extended “Section 24 “Landlord Tax” – Expert Insights on Phase 2” post collates a wide range of indispensable commentary from professional accountants and tax advisors actively working in the buy-to-let industry;
- Check out Ruban Selvanayagam’s article for South Yorkshire based lettings agency Bricknells: “Landlords, are you prepared for Section 24?”;
- The BM Solutions’ full rental income calculator checks the eligibility for buy-to-let loans prior to submitting a case. To see the results, enter the number of applicants, type, income, product rate, term length, maximum loan to value, property value, loan required and anticipated monthly rental income. Note the disclaimer that the calculations are for illustrative purposes only and do not represent a full mortgage offer;
- Please see our post on mortgage underwriting (within the buy-to-let sector) for some insights into the key influences of buy-to-let mortgage pay rates.
First Time Buyers
- According to UK Finance data, the number of completed first-time buyer mortgages grew by 8.1% when comparing May 2017 to May 2018 (32,000 in the month). The number of new buy-to-let mortgages fell by 9.8% (5,500) over the same period;
- Clydesdale Bank’s announcement that it was rolling out a 95% loan-to-value first-time buyer mortgage raised concerns of a return to pre-financial crisis erratic lending practices. A spokesman refuted such claims, commenting that this specific mortgage offer: “is available for a very small group of highly qualified customers … As with all mortgage applications, our lending decisions are based on a full income and expenditure assessment to assess individual affordability, ensuring that we continue to lend responsibly.”