Buy-to-Let Deal of the Day - Substantial Four Bedroom Family Home Offering 4.3% Gross Yield AND Capital Growth

Landlords will often approach us looking for buy-to-let investments and one of their first questions often is "how long would it take to find tenants?"

Well, in the case of this four bedroom house in Stockbridge Road, the answer is "no time at all!". That's because this property currently has an excellent set of long-term tenants in situ at a rent of £1250pcm.

http://www.rightmove.co.uk/property-for-sale/property-41329899.html?premiumA=true

As well as providing the new purchaser with an income stream from 'Day 1' this also saves money in terms of letting agents fees for finding new tenants.

Further still, property prices in Stockbridge Road have risen by £4681 over the last 6 months (that's over £180 a week!) due to it's ever popular location to Chichester City Centre, railway station and Chichester Gate Leisure Complex. Couple this with a 4.3% gross yield make this property, in my opinion, an excellent buy-to-let investment proposition. 

Buy-To-Let Deal of the Day - Two Bedroom Flat Offering 5.1% Gross Yield

Looking through Rightmove this lunchtime and noticed a two bedroom apartment which has recently come to market in Whyke Marsh, Chichester.

http://www.rightmove.co.uk/property-for-sale/property-58822799.html

Located towards the south of the city, this development was build by Persimmon Homes around 4 years ago and comprises of around 60 purpose built apartments, maisonettes and houses.

With a property of this age you are less likely to inherit the maintenance problems you can encounter with older investments which can have an impact on the rental return. You would also have the remainder of the NHBC warranty should there be any serious issues with the property.

In terms of tenant profile we would expect the property to attract a working couple, or perhaps professional sharers due to its proximity to the city centre and railway station. 

Modern and up-together properties normally command a solid rent and similar flats have let for around £850pcm.

This could net an investor a healthy 5.1% gross yield based on a £200,000 purchase price, however, as with all leasehold properties, please remember to enquire about leasehold costs and ground rent before committing to an offer!

Tax increases may drive landlords out of the buy-to-let sector, say London School of Economics

Tax increases for private landlords could result in some leaving the sector, while others may pass the costs onto the tenants via rent increases, therefore stretching household budgets and putting home ownership further out of reach.

This warning comes from a new report written by the London School of Economics, “Taking Stock” which analyses the private rental sector and its importance to the UK housing mix.

Despite the Government’s efforts to introduce institutional investment in the form of ‘build-to-rent’, the majority of private rented stock is made up from small private landlords with 2 or 3 properties.

The report also says that demand for rental accommodation is set to grow and that to match this demand there needs to be investment in the sector.

However, it points out that small private landlords are already treated less favourably in terms of tax, compared to landlords in many other countries. These include a surcharge on Stamp Duty Land Tax, removal of wear and tear allowance and reducing the amount of mortgage interest eligible for tax relief.

The authors of the report, Kath Scanlon, Christine Whitehead and Peter Williams highlight that the private rented sector has more than doubled in the last 15 years and now accounts for almost one-fifth of all dwellings.

The report also states that the growth of buy-to-let is, in part, a product of the low returns available to investors elsewhere in the market. High house prices and the need for large deposits make it unlikely that younger household will enter owner-occupation to the extent they did in the last four decades – increasing the reliance on a strong private rented sector.

By hindering landlords via new tax treatments this could damage returns and create disincentives to invest in the sector.

Kate Scanlon concluded: “The current Government favours institutional landlords, but even if that part of the sector were to grow rapidly, small landlords would still be the backbone of the industry"

“We need a private rented sector that works for the long term, with policies that reflect the housing challenges the UK faces”

What would Brexit mean to the Chichester Property Market?

I don’t know about you, but I find that if you read the Daily Mail there are normally two topics that make the blood boil of ‘Middle England’. Bureaucracy from Brussels and House Prices. If we as a country are to unshackle ourselves from the chains of Brussels, could we inadvertently effect the second topic and make UK house values drop?  

If you read the newspapers, the Brexit debate seems to be focused solely on central London. Many commentators have said Brexit would mean central London would have a lower standing in the world, meaning less people would be employed in central London, with the implication of lower wages, fewer jobs etc., “in central London” – but we are Chichester, not Marylebone, Mayfair or any part of Zone 1 London.

Now on the run up to the vote on the 23^rd of June, I predict that the ‘in’ camp will start to scare homeowners with forecasts of negative equity and the ‘out’ camp will appeal to the 20-somethings, who have been priced out of the property market, with the prospect of a new era of inexpensive housing. There are also fears from central London estate agents and developers who believe the bottom will fall out of the market if we were to leave.  In my opinion, the only reason the Mayfair’s, Knightsbridge’s and Kensington’s of central London are attractive to foreign buyers are political and economic steadiness, an open and honest legal system and a lively cultural life. None of his is threatened by Brexit.

…But again, we are in Chichester and central London is 72 miles away! We are the famous Cathedral City, home of the Festival Theatre and birthplace of astronaut Timothy Peake! Whilst the central London property market exploded after 2009, this explosion really and honestly didn’t affect the Chichester property market. So, putting central London aside, what would an ‘in’ and ‘out’ vote really mean to the 15,550 home owners of Chichester?

Initially, over the coming months approaching the referendum, I believe it will be like the run up to last year’s General Election. With the short-term uncertainty in the country, quite often, big decisions are put on ice and people are less likely to make big money purchases i.e. buy a property. However, in the four months up to last year’s Election, property values in Chichester increased by 0.76%, not bad for a country that thought it would get a hung parliament! So that argument doesn’t hold much weight for me.

Post vote, should the UK opt to leave Brussels, there would be a much more noteworthy impact. I believe that a vote to stay in the EU would see the Chichester property market return to a status quo very quickly, but the contrasting result could lead to some changes. The principal menace to the Chichester (and UK) housing market could be variation (in an upward direction) in interest rates as a result of a Brexit, which could theoretically see the cost of mortgages grow swiftly, pricing many out of the market, but then again two thirds of landlords buy without a mortgage, so that won’t affect them so much. Also, according to the Bank of England, 80.33% of all new mortgages taken out in 2015 were fixed rate. Looking at all mortgages as a whole, according to the Bank of England, 44% of all UK mortgagees have a fixed rate mortgage, but that’s 56% that don’t! So, if you aren’t on a fixed rate, talk to your mortgage broker, because they can only go in one direction! 

So in reality, if I really knew what will happen, I wouldn’t be a letting/estate agent in Chichester, but a City Whiz-Kid in London earning millions! However, I suspect that whatever decision the electorate of Chichester and the country as a whole make, over the long term it won’t have a major effect on the local property market. We have seen off ‘the end of the world’ credit crunch of 2008/9 and subsequent property crash, the 1988 Nigel Lawson induced post dual-MIRAS property crash, the 1979 Winter of Discontent property crash, the 1975 oil crisis that stimulated another property crash. We can even go back nearly a century with the 1926 post General Strike slump in property prices!

Today, property prices are 274.85% higher than 20 years ago in Chichester and are 15% higher than 5 years ago. So, make your own decision on 23^rd of June 2016 safe in the knowledge that whatever the result, there might be some short term volatility in the Chichester property market. In the long term (and property investment is a long term strategy) there aren’t enough houses in Chichester to live in either to buy or rent, and until the Government allow more properties to be built, the Chichester property market will be just fine! Even if it has a little blip in the summer, there could be some property bargains to be had on the run up to Christmas.

Retirees would struggle without Buy to Let income

Almost three quarters (72%) of pensioners who have an investment property said they would struggle to make ends meet if they didn’t have the income from their buy-to-let, according to a poll carried out by Responsible Equity Release.

The reliance on income from buy-to-let in retirement is revealed, with eight out of 10 (81%) pensioners aged over 65, who own a buy-to-let, admitting their properties provide an important, even vital, boost to their retirement income, especially with low interest rates hammering retirees’ savings.

Responsible Life polled more than 1,000 retirees about owning a buy-to-let property. The majority, more than nine out of 10 (92%), said they are worried about the changes to mortgage interest tax relief and the impact on the profit they make from their investment property.

The buy-to-let tax changes coming into force have left many pensioner landlords considering whether it’s worth holding onto their buy-to-lets at all. Four out of 10 (41%) said although their buy-to-let property was a valuable income generator,they are now thinking seriously about selling it.

Steve Wilkie, managing director at Responsible Equity Release, said: "For many pensioners, having a buy-to-let property has been a life saver in this low interest environment. While their savings have languished, earning very little interest, and pension income has been hit hard by falling share prices, property income has remained strong.

“Without the income boost from their buy-to-let, many would really be struggling to make ends meet. But the Chancellor has yet again ignored UK’s retirees when he announced changes to the way buy-to-let would be taxed.

“George Osborne was so focused on taxing the rich, he forgot that a new tax on buy-to-let won’t just hit the wealthy, it will also hit those honest, hardworking people, who may have a single buy-to-let property, and were just hoping it would earn them a little extra income in retirement.”

Article courtesy of Landlord Today

HMRC reports whopping 70% leap in transactions thanks to Stamp Duty Surcharge

There was an extraordinary 70 per cent leap in residential transaction volumes in March this year compared to the same month in 2015 - the first quantification of the extraordinary surge to beat George Osborne’s stamp duty surcharge.

HMRC’s provisional data shows 165,480 residential transactions in March, which was 41.5 per cent higher than in February.  

The Revenue says the large increase in transactions for March was very likely to be down to the 3% surcharge being introduced on April 1 for buy to let and second homes. It says the same applies to Scotland, where the Land and Buildings Transaction Tax surcharge - mirroring the stamp duty surcharge south of the border - was an issue.

HMRC mentions that buyers may also have been trying to beat new and much-anticipated restrictions on buy to let mortgages as a result of expected Bank of England reforms, expected to be rubber-stamped in the coming weeks. 

The figures produced by HMRC are dramatic enough but are in fact they are adjusted to take account of seasonal fluctuations and other irregularities. 

When these are not taken into account, the non-adjusted residential totals are even more dramatic with last month’s figure being 74.8 per cent higher compared with February, and 77.1 per cent higher than March 2015.

Article courtesy of Letting Agent Today

Chichester’s “Generation Rent” to grow by 1,783 Households

 “The growth of the private rented sector, and the arrival of an investor class of buy to let landlords within it, is an issue that won’t be going away anytime soon, no matter what you read in the Daily Mail!” I said as I chatted over a coffee with a landlord client of mine last week.

Some commentators are saying that buy to let is about to die, with the new stamp duty changes and how mortgage tax relief will be calculated. Some say 500,000 rental properties will flood the sales market nationally in the next 12 months as landlords leave the rental market. Have you heard the phrase “Bad news sells newspapers”? Let me explain why buy to let in Chichester is only going in one direction – and not the direction the papers say it is going.

According to Sheffield University, buy to let landlord will continue fuelling the growth of the private rented sector in the coming decades. By their estimates (and they are considered a centre of excellence on the topic), the rate of homeownership nationally will fall to 50% by 2032 (today it is 58% in Chichester) while the rate of private sector renting will increase to 35% (interestingly, in Chichester it stands at 22% today). Therefore, the demand for rental accommodation in Chichester is expected to grow by 1,793 households’.

Chichester property values over the last six years have risen a lot more than average salaries, and as mortgage availability is dependent on your ability to pay, this means the dream of owning your own home is out of reach for many. This is at a time when the stock of council houses has actually withered (Nationally, the number of council houses in the last ten years has dropped from 3.26m to 2.18m – a drop of 31.1%).

Now it’s true that the Government’s efforts to fix the deficiency of affordable housing have focused on those who want to buy a home, ranging from Help to Buy and their much vaunted Help to Buy ISA and Starter Homes Scheme (an initiative offering a 20% discount for first time buyers). But if you are unable to save for the deposit, none of this means anything to the “20 somethings” of Chichester who still need a roof over their heads!

Currently 3,035 households live in private rented accommodation in Chichester. These are big numbers and a sizable chunk of the electorate. So whilst it appears Chichester’s “Generation Rent” will continue to rent and not to buy for the reasons set out above, Chichester’s buy to let landlords will be lifted by the projections of greater rental demand. Chichester and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a very desirable place to live.

Taking into account the projections from the experts at Sheffield University, the number of households in rental accommodation in Chichester will rise to over 4,800 in the next decade or so. This prediction in growth is even on the back of the Government clamping down on tax reliefs for landlord’s. 

Gone are the days of making guaranteed returns on buy to let property. For the last 20 to 30 years, irrespective of which property you bought, making decent money on buy to let property was like ‘shooting fish in a barrel’ – anyone could do it. But not now. Landlords must take a more considered approach to their existing and future portfolio, especially in Chichester. The balance of capital growth and yield, especially in this low interest rate world we live in, means Chichester landlords need to do more homework to ensure the investment in property gives the desired returns. One place for local landlords and homeowners to visit for such information is the Chichester Property Market Blog – www.chichesterproperty.com