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.

The only way is up for property in Q3 of 2013

A host of stories this week confirms that the property market is continuing its recovery and we thought, we'd share the good news.

Figures from both the Office of National Statistics (ONS) and the Council of Mortgage Lenders (CML) are showing that - despite a seasonal dip in September - the last quarter has been the industry's strongest since 2007, well before the recession set in.

The CML reports that buy-to-let (BTL) lending is up 36% year on year with 43,900 loans compared to the same quarter last year. The value of these loans - £5.7 billion - even equals a rise of 43% compared to 2012.

Numbers for BTL house purchases and remortgaging also continue to grow at a healthy level.

Where the property market as a whole is concerned, house prices have risen 3.8% in the year to September, up from 3.7% in the 12 months to August.
It's a small rise, showing that the recovery continues - without a bubble.

Looking regionally, London continues to grow fastest, whilst Scotland as a whole still shows falling prices. Edinburgh itself has always enjoyed a microclimate when it came to the property industry and prices are starting to grow slowly with more growth forecast. Interesting times!

No property price bubble in sight as BTL yields grow

For a few weeks now, there has been talk about a property price bubble getting ready to burst. With prices on the up for a few months now, more properties coming onto the market and mortgage finance options increasing, it's easy to see where the concern comes from, although it does seem to be a little premature.

This week's Halifax House Price Index confirms that there is little or no threat of a bubble as house prices are rising more slowly. The latest quarterly increase was measured at 1.6%, the slowest since May. At the same time, mortgage approvals and home sales have risen sharply compared to the same time last year.

Part of this development may be the beginning of the seasonal slowdown in the property market, which may see activity remaining the same or dropping slightly as the colder weather sets in.

Looking at the buy-to-let market, London property specialists Assetz are seeing continued rental yields of around 7 to 8%. Those strong yields are connected to investors having bought when prices were relatively low. However, current price rises are not strong enough to lower rental yields.

Taking the maths one step further and considering combined capital and rental yields in Edinburgh, two current examples show that there are a number of very interesting properties for investors to consider. As prices are rising (and they are in selected areas of Scotland despite the quarterly average for the country), capital growth will follow, thus adding to rental yields.

These are exciting times for investors!

Buy to let returns on the up as investors shell out more

Buy-to-let investments are providing higher gross yields despite rising property prices. This is the tenor of Mortgages for Business' Complex Buy-to-Let (BTL) Index.

According to the index, standard residential properties increased their yields by 6.3% in the three months to the end of September, up from 6.1% in the previous quarter. HMO properties, which are especially popular with student tenants, showed even more improved yields.

Gross yields tend to fall as property prices rise, but the fact that they are keeping up is taken as an indicator of the strong rental market.

At the same time, the Landlord Centre has found that BTL investors are purchasing more expensive properties with the average price stopping just short of £170,000 over the last quarter, an increase of over £7,500 compared to the period from April to June.

Apart from increased confidence and consistently high yields, competitive mortgages with low interest rates are cited as the main reason for investors to spend more. The research also showed that student properties performed better than other types of residential properties.

Whilst there is a plethora of news about the sector each day, the overwhelming trend has remained the same for a number of months: property prices are rising, but rents are keeping up. And despite more property sales, a large number of people remains keen to rent long-term, giving investors the security to be able to make long-term decisions about their properties.

Property market continues to soar

The Office of National Statistics (ONS) has published its latest statistics for the UK housing market and reports the highest year on year change since 2010.

House prices increased by 3.8% between August 2012 and August 2013 due to price increases in England, Wales and Northern Ireland. Scotland is currently lagging somewhat behind with a 0.7% decrease in property prices.

The overall trend for the UK property market is clear - prices are rising steadily. There is no sign of a housing bubble yet, but there is certainly an upwards movement. For potential investors, this is an interesting time to look for their next property.

Rising house prices are attracting more sellers into the market, increasing investors' choice of suitable properties. At the same time, while prices are starting to rise across the UK, they are moving slowly. Therefore, investors can still find very good deals.

Edinburgh is currently especially well placed for property investment. With sellers' confidence rising, more properties have come onto the market. At the same time, property prices in Scotland are rising even more slowly which means often property prices can be negotiated.

Looking at the longer-term development of your investment, demand for rental properties continues to be high and rents for high-quality properties are rising steadily. With property prices now rising as well, the capital value of the investment is increasing, too.

Look after your property and your property will look after itself

Well, maybe your property won't quite look after itself, but looking after your rental property is key to its performance. 

Whilst much has been written about competition for the best rentals among prospective tenants, there are certainly enough properties available to allow tenants to choose the better quality flats and houses first. For you as a landlord or a property investor, having a desirable property translates into achieving higher rents whilst maximising occupancy. 

So, what makes a flat desirable? There are obvious factors, such as location and number of bedrooms that can't be changed. However, a surprising number of small adjustments can make the difference between a property standing empty or being snapped up:

1) First impressions count

Make the property look fresh, welcoming and cared for. A new lick of paint will make a huge difference to someone looking to move into a new home. At the same time, you are showing tenants that, as a landlord, you care about the state of your property, encouraging them to look after it better.

2) Make your property energy efficient

If you are looking to invest in your rental property at all, improve its energy efficiency. Cavity wall insulation, double glazing, energy-saving light bulbs and efficient white goods are some of the ways you can help tenants lower their utility bills, making your flat more desirable.

3) Deep clean the property

Invest in oven cleaner, grout stick and a professional carpet clean. Showing your property at its best does not necessarily mean redecorating. Investing in a professional clean might well do the trick. 

Is it all worth it? A recent study by Strutt & Parker found that those who regularly invest in the maintenance of their investment, even with a sitting tenant, spend less over a three to five year period than landlords who wait until things get dire. 

Looking at Edinburgh, there is strong tenant demand, but at the same time, tenants do have a lot of choice, making desirable properties fly off the shelves. 

Reluctant landlords leaving the market

New research from the Association of Residential letting Agents (ARLA) suggests that so-called 'reluctant landlords' might become a thing of the past.

The term was coined for those who decided letting their property because it could not be sold. ARLA members have reported a decrease of 5% in properties being let because they couldn't be sold over the last three months, bringing the total figure of 'reluctant landlords' to 21% of the residential property market.

The numbers are even more impressive when we compare them to last year's when ARLA members recorded that up to 42% of landlords had entered the market as a last resort.

ARLA's Managing Director, Ian Potter, puts some of these developments down to the increased activity in the residential sales market which will have caused a number of people to leave the lettings market and sell their property as originally planned.

The developments mean that competition for great value rentals may increase over the next few months. However, in our experience many reluctant landlords have not only been reluctant to enter the lettings market, but in many cases their properties have not necessarily been the most desirable for potential tenants.

This is not about properties not being looked after, it's simply the difference between a property bought with its potential as a rental in mind and a property bought as a family home. In Edinburgh, residential lettings have traditionally been strong. Especially sought after are larger, traditional tenements in areas popular with students. Whilst there is some competition over the more popular ones and viewings are usually very well attended, students do find somewhere suitable to live - although they may have to compromise on location at times.

Are your properties safe?

It's Gas Safety Week this week, an opportunity to remind landlords as well as home owners to look after their gas appliances.

It's all too easy to assume that cookers and boilers will work year-in, year-out and many of them actually do function faultlessly. But think about it like this: you wouldn't skip your car's MOT - it's equally important to have gas appliances checked annually to ensure they are working correctly.

According to research conducted by Gas Safety Week's organisers, 43% of Britons don't have their appliances checked regularly and 10% own appliances that have never been checked. Quite a disconcerting statistic.

For our landlord clients, we arrange annual checks with registered gas engineers as part of our comprehensive landlord services. If we source an investment property for you, manage its renovation and let it out, we also make sure that all relevant checks are completed before your first tenants move in. After that, annual checks are scheduled to ensure both your investment and the tenants are safe.

Whilst we are lucky to work with a trusted supplier who are registered 'Gas Safe' engineers, if you need to look for your own engineer, make sure to select a reputable company that will carry out checks carefully and thoroughly. More information can be found here.

First landlord charged under new tenancy deposit rules

Earlier this week, an Edinburgh landlord was the first one to be ordered to pay his tenants three times their deposit under tenancy deposit regulation brought in last year. The Scotsman's property supplement comments on the ruling today.

The new government regulations, designed to weed out so-called rogue landlords and ensure the fair return of deposits at the end of a tenancy, entitles a tenant to receive three times the amount of the deposit should they discover that the landlord did not place the money in one of the government-approved schemes.

Was this particular landlord a 'rogue'? We don't know. One thing this ruling has made clear is that all landlords need to be aware of the rules and regulations they have to adhere to. Whilst tenancy deposit schemes were introduced gradually, there was relatively little coverage in the mainstream media and the government did not run a large-scale information campaign. For those reasons, it's entirely possible that landlords - especially those who self-manage and are 'only' renting out a flat because they can't sell it - didn't know about the regulations.

Whilst not intentionally 'rogue', they may inadvertently find themselves on the wrong side of the law. This recent ruling spells good news for tenants as it makes it absolutely clear that the courts will find for them if landlords break the rules. For landlords, it shows that breaching existing regulation will not be taken lightly, which is definitely a step in the right direction: with very effective rules in place, it's up to the authorities to enforce them. The result will be increased fairness for tenants and those landlords who are happy to stick to the rules.

Student property investors buoyed by Moody's rating

Moody's Investor Service recently awarded a long-term A2 rating to bonds issued by Holyrood Student Accommodation Plc, showing the agency's confidence in student accommodation in Edinburgh.

Whilst the details of the rating are explained here, there are a number of obvious developments that have made the city a favourite with both students and investors for years, some of which have been mentioned in this blog before.

Take the reputation of Edinburgh's universities, for example. They are among the UK's leading academic institutions with a number renowned worldwide and notoriously hard to secure a place at. Accordingly, there is competition to study in the city and, whilst the universities themselves continue to grow, so has the student population over the years.

Many of Edinburgh's students are looking for good quality accommodation in convenient locations. Once out of halls, many want to share flats with friends and spacious, traditional tenement flats have long been a favourite. They continue to be snapped up year after year, yielding a net rental return of over 7%, on average.

At the same time, buy-to-let (BTL) mortgage finance has made a return this year with more products available at competitive rates. Metro Bank's latest offering is only one example.

For more detailed information, read our case studies or get in touch.

Edinburgh beats London property

One of the biggest attractions Edinburgh property holds for investors are reasonable property prices, allowing relatively easy access to a good choice of high quality flats or houses. In fact, many of our investor clients tell us that -  apart from average net rental yields above 7% - it's this accessibility that attracts them to the Scottish capital.

Their alternative? London has continuously shown high demand for rental property, both from tenants as well as investors. However, in many cases the rental yields don't match Edinburgh's and the amount of cash required to invest has certainly made buyers think twice.

Research from estate agents Knight Frank is now backing up our anecdotal evidence that investors are starting to think twice about spending their money on London property as 'buyers are becoming more resistant to continued price rises'.

Whilst buyer interest is still growing slightly, it has certainly slowed down at the top end of the market, for properties worth more than £5 million. At the same time, rents for prime central properties have fallen slightly, by 1% since the start of this year.

By comparison, Edinburgh rents have remained stable or grown, depending on the size and location of the individual property. For a better idea of Edinburgh investment opportunities, click here, or contact us directly.

Asking prices, mortgage lending and availability - all on the up

It's been a flurry of good (property) news on the Property Reporter website today. It's more than enough to give you a bit of a round-up here and all down to increase confidence in the property market.

Asking prices for properties for sale are becoming more steady, with less of them being dropped by sellers looking to move a flat or house. In fact, Edinburgh showed the second-lowest proportion (after London) of discounted properties in the UK with only 27.7% of properties for sale having their price dropped. This is compared to a much higher national average of 32%, which fell from 37% last year. On average, property prices are being reduced by just over 6%, down from 7.6% last August.

Altogether, the trend is pointing towards a growing confidence in sellers, who appear to be happy to wait for the right buyer to come along and pay a price they are happy with.

At the same time, things are starting to look up for first time buyers as gross mortgage lending hits nearly a five year high at an estimated £16.6 billion in July, a 29% on last year. In fact, it is the highest estimate the Council of Mortgage Lenders (CML) has published since October 2008. According to the CML, the increased lending activity is down to stronger housing and mortgage markets as well as falling interest rates on fixed rates due to the Funding for Lending scheme.

Having said that, those looking for a mortgage also have a lot more choice than they would have had even a year ago. Last month, more than 10,000 mortgage products were available to consumers, the highest number since September 2010. The typical home buyer borrowed just under £160,000, a slightly increased loan to income ratio.

In our opinion, all three of these stories reflect a growing upwards trend in the property market. For those looking to invest, this is a great time with plenty of choice of mortgage products available and property prices still stable. At the same time, despite the number of mortgage products increasing, many still require a sizeable deposit which will keep a large proportion of people in the rental market for years to come.

Low interest rates for 3 years, but is now the time to buy?

The Bank of England’s (BoE) new Governor, Mark Carney, has announced his first ‘forward guidance’, saying that the Bank ‘will not even think of raising interest rates’ until UK unemployment drops below 7%. The rate is currently 7.8%. The BoE envisages that this will take about three years to achieve.

For potential property investors this means three years of financial stability, making residential property once more a low-risk investment. Add to this the net rental yields investors and landlords can currently achieve – on average around 8% on Edinburgh student rentals – and it’s easy to see why we have seen more interest and commitment from investors in the past six months than we have in years.

Looking at Cullen Property’s investor clients, shows of interest have increased markedly and we have purchased more than £1.1 million worth of residential property in the last month alone.

There’s no decent investment without risk, I hear you say. And what happens if the interest rate goes up sooner than envisaged by the BoE? After all, the bank did include a few ‘get out’ clauses in its guidance, as discussed in today’s Scotsman newspaper.

Whilst the BoE may interest rates sooner, Carney has made it clear that this would only be the case if the UK’s GDP increases and inflation rises. In other words, the economy would have to be doing better, thus allowing for unemployment rates to drop at the same time.

If that were to happen, not only would investors see their interest rates go up, but the rents achieved by their properties would follow.  It is also likely that the housing market would be improving along with the wider economy, bringing with it capital growth.  A win-win situation.

'Learner landlords' change face of buy-to-let

Reluctant landlords have been a bit of a buzz word over the last few years and to mark the trend away from traditional property investors the Association of Residential Letting Agents (ARLA) has now divided landlords into three groups - investors, good parents and reluctant landlords. 

We thought we'd share their thoughts and let you decide whether you think you fall into one of those groups. Within each group, ARLA describes a sub group of those new to buy-to-let (BTL) as 'learner landlords', which is possibly quite an apt description?

But let's take a look at the three groups:

(1) Investors

The majority of all BTL investors own a rental property as an investment. The main change in this group has been a move towards expecting a shorter term gain. While many investors used to look at property as a long term investment, this year, over half of new landlords were looking to "capitalise on low interest rates and schemes such as the Government's Funding for Lending programme".

(2) Good parents

Bearing in mind some members of this group will also be genuine investors interested in a profit, they have moved in to BTL to provide financial support or a legacy for their children. Over a quarter of landlords now cite this as one of the reasons for their investment.

Looking at Edinburgh student property, there has always been a group of parents who bought a flat when their first child went to uni and rented the other rooms to the child's friends. Once their course finished they became bonafide investor landlords, renting to the student market.

(3) Reluctant landlords

Probably the best-publicised group of the three, the number of reluctant landlords has grown since the recession started with those unable to sell their homes renting them out for the time being. Whilst generally looked at negatively, entering the market reluctantly does not necessarily mean a landlord is 'bad' or unsuccessful. 

What is important for any landlords is to work out their figures, ensure the rent generated by the property in question covers its outgoings and to also plan for void periods - most of which can be taken care of by a reliable letting agent.