New BTL mortgage deals bound to add to market excitement

The number and attractiveness of buy-to-let (BTL) mortgage deals has taken longer to improve than their residential counterparts, but the most recent deals available should help make the market move even more.

Research from Mortgages for Businesses suggests brokers are expecting a bumper year and with two-year fixed rate deals having interest rates of 2.49% it's easy to see why investors are attracted to the market.

Arrangement fees are also on their way down with ten mortgage products currently available fee free.

At the same time, loan-to-value for BTL mortgages has climbed up to 80% for selected Keystone products, making entry to the market more affordable for investors.

Having said that, a successful property investment still relies on the investor putting down a sizable cash deposit. However, taking a look at Edinburgh, desirable mortgage products paired with affordable investment properties, that are set to perform where rental as well as capital yields are concerned, will add to the city's pull for residential property investors.

At the same time, 'student property season' is about to start. At this time, students cue to view the most popular properties for the new academic year. What does it mean for investors? You have the piece of mind of securing a new tenant several months before the current one is moving out.

Rising rents and larger choice of mortgages for landlords

2014 is shaping up to be a bumper year for UK landlords.

Mortgages for Business have proclaimed a 'buying spree' among buy-to-let investors and whilst that statement is possibly a little over-enthusiastic, there is no denying that the number of buy-to-let mortgages has increased significantly over the past three months as has the activity across the market in general.

Whilst remortgage deals are still outperforming new purchases, the gap between them is closing fast. Loan-to-value has remained stable across most BTL mortgage products.

Looking at yields, the picture across the UK is similar to that in Edinburgh. HMO properties, which are very popular with affluent Edinburgh students, are outperforming other types of BTL investments.

Much of the activity in the property market has been fuelled by a larger number of properties becoming available. In turn, a wider choice of mortgage products has allowed more buyers to enter the market and is slowly starting to lead to higher property prices. These increases have grown organically and are not (yet) cause for concern.

For any landlord, rents will be a major concern. Research by an England-based lettings agent show increases in agreed rentals and rent charged throughout 2013, leading to the conclusion that a stronger sales market is not necessarily detrimental for private lettings.

This particular research found a rise of 8% in monthly rents. Looking at Edinburgh, rents have increased steadily, especially for sought-after properties. However, as tenants have a lot of choice, future increases are likely to be somewhat smaller.

Property market set for growth

As Scottish house prices have sown their strongest growth since June 2007, the housing market looks set for a strong year of growth.

Some of this relatively new activity appears to be thanks to first time buyers, who have created a lot of activity at the lower end of the market.

At the same time, UK homeowners, questioned by Zoopla.co.uk, predicted a house price rise of over 7% between now and the summer, with smaller rises to follow later in the year. Overall, more than nine out of ten homeowners expect house prices in their area to rise - a massive increase from 65% last year and the highest proportion on record.

For Edinburgh property, a mixed picture develops. As a lot of the growth is fuelled by first time buyers looking for smaller properties, investors interested in the student property market can still find very interesting properties at great prices.

This is the case especially for larger, traditional tenement flats, perfect for sharing between three and six people. Whilst some of the opportunities on the market require refurbishment and other work to ensure they stand up to HMO regulation, the capital and rental yield on a long term investment speak for themselves.

Looking at the first time buyer market, there too are bargains to be found as more properties are coming on the market. Over the course of 2013, whilst prices were slowly starting to rise and mortgages were becoming more easily available, many potential sellers were holding back.

As positive news continues to be heard, more sellers will put their properties on the market, leading to more choice for buyers. We're not looking at a property bubble at this time, but at a recovering market.

What 2014 has in stock for landlords

Throughout 2013, we've seen an abundance of stories about the vitality of the buy-to-let market. Looking at property media now, more and more stories appear about house prices growing, more properties coming on the market and selling faster.

Does that mean the good times are over for private lettings? Whilst some suggest so, we beg to differ. First of all, we strongly believe that a vibrant property market is generally more appealing to all buyers than a stagnant one.

Whilst mortgage finance, for both investors and owner occupiers, has become more widely available, substantial deposits are still required to access some of the better deals. The government's Help to Buy programme, designed to help first time buyers onto the property ladder, has had good success, but not to the detriment of the private rented sector.

In fact, the National Landlords Association, based in England, has recently published statistics that show just over one in five landlords is concerned about their rental property because of Help to Buy.

What is interesting is that, despite the number of homeowners growing once more, 'renters' seem to come from a wide variety of backgrounds, with those earning over £40k per year just as likely to rent as those on lower incomes, according to the Cover4LetProperty.

We strongly believe that high-quality properties will continue to attract reliable tenants for years to come.

Over 50s favour BTL for financial security

The phrase 'safe as houses' hasn't been around for such a long time for no reason and it looks like more people are starting to rely on property investment once more.

Here's a story highlighting research that sees people over the age of 50 using property investment as a way of providing financial security for their retirement.

The research found that property investment was more than twice as popular as shares. Combined with disappointing interest rates for savings, the appeal of well-chosen property investments is obvious. 

In Edinburgh, we have seen a number of clients this year who are approaching retirement and have decided to put a chunk of their funds into residential property. Interestingly they are mainly buying in cash and then happy to live off the rental income as their pension.

For the sort of properties our team is buying in the student rental market the long range outlook is pretty solid, meaning investors can see a secure income for many years to come.

Being sure about the type of investment, the location and any obligations attached is key to a successful investment. Take a look at our brand-new Property Investor Guide for more information!

Looking ahead to 2014

December is upon us and it's time to take a look at what's in store for 2014. 

For the first time in a few years, most property experts agree that things are looking good for the UK property market, both for landlords / investors and tenants. House buyers can also look forward to a  bigger choice of properties becoming available. 

One of the key factors that will continue to help the market expand is the availability of finance. The number of mortgages available to investors improved throughout 2013 - this does not just mean higher numbers but also includes more competitive rates as lenders were looking to 'woo' larger numbers of clients. Mortgages for Business predicts that the trend is set to continue next year and envisages a 25% increase by this time in 2014. 

Their research also shows that around 60% of landlords are keen to increase their portfolio by the middle of next year, while only 7% are looking to shrink theirs. This means good news for tenants, as the supply of private rented property will grow as a consequence.

At the same time, a larger number of rental properties available means that landlords will need to offer quality at a reasonable rate in order to attract suitable tenants. In fact, online service Rentify predicts that rents will plateau in 2014 in all but a number of select areas. In our opinion, rents will largely remain stable, but there is potential for growth where some of the most sought-after properties are concerned. 

In Edinburgh, this would include larger tenement flats popular with students. As the student population continues to grow, these properties continue to be in high demand, offering great returns for investors. 

Is your property well looked after?

A couple of stories about London-based landlords have caught our eye this week: One talks about a landlord being fined over £12,000 for breach of fire safety laws in an unlicensed HMO property. The other features a landlord being jailed over the faulty installation of a boiler, leading to several leaks. The boiler eventually had to be disconnected and sealed off by the National Grid.

Whilst you may think these are stand-alone examples of rogue landlords, breaching regulation is easier than many private, self-managing landlords believe. In most cases, there is no malice behind the breach - it's a simple lack of information, both from the tenant and the landlord.

Letting and managing your own property may not be rocket science, but it does require time and the ability to stay on top of new laws and regulations. In Scotland, landlords need to be registered with the local council. The individual properties
require gas safety certificates and PAT tests, with HMO properties having to fulfill further criteria.

All of this comes before advertising a property, managing viewings, completing a tenancy agreement, collecting deposits and placing them into one of the tenancy deposit schemes approved by the Scottish Government. We're not keen on scaremongering, but with all the work involved, it's easy to see why using a professional lettings agent makes sense.

As a first-time - and maybe even a 'reluctant' - landlord, you may wonder about the costs, but the amount of hassle and time saved make up for it in the long run.

At the moment, our team manages around 400 properties across the city of Edinburgh, and our tenants are a mixture of students and professionals. Some of our landlords own one property, some rent out a larger number. All of our clients, landlords, tenants and investors, benefit from our industry knowledge, giving them the peace of mind to know they won't be the next landlord in the dock.