Residential yields steady at 6%

Buy to Let: ‘Extends Alternatives’

The ‘New’ NFRL

Size should not Matter

Confidence in the Future

Getting a Quart into a Pint Pot?

Residential yields steady at 6%

The Bank of England’s successive hikes in interest rates are expected to discourage many aspiring first time buyers from getting onto the housing ladder, but this will have a much more positive impact on hundreds of thousands of buy-to-let landlords, says Paragon Mortgages.

Latest research from Paragon’s Buy-to-Let Index, January 2007 reveals that rental yields achieved by residential investor landlords have remained steady at 6% for the past eight months. It seems 2007 has started on a positive trend for landlords, and the buy-to-let market is set to remain strong as rising interest rates put increasing pressure on first time buyers.

John Heron of Paragon Mortgages says: “The private rented sector fills a key role in the housing market by providing decent, affordable accommodation for a growing number of households. In particular, people who need flexibility before they settle down or who are unable to afford to purchase their own home do tend to turn to privately rented accommodation. With high property prices and rising borrowing costs, more and more would-be home owners will choose to live in rented homes for longer, while they save a large enough deposit.

Buy to Let: ‘Extends Alternatives’

The belief that buy to let investors are pricing first time buyers out of the housing market was dismissed by a leading expert in property economics at the recent ARLA Annual Conference.

Professor Michael Ball, Professor of Urban and Property Economics, University of Reading Business School, told delegates that there is only one way to lower house prices.

“It is to build more houses that people actually want to live in and in places where they want to live”

Professor Ball said that Buy to Let has substantially improved housing market stability and that without Buy to Let and a stable rental market, young households would be forced to enter owner-occupation earlier, at a more financially precarious time of their lives.

The ‘New’ NFRL

At the Extraordinary General Meeting of the Southern Private Landlords Association on 7th February 2007, members agreed by an overwhelming majority to amalgamate the Southern Private Landlords Association (SPLA) and the National Federation of Residential Landlords (NFRL).

This move is in recognition of changes that are taking place in the industry and positions the National Federation for Residential Landlords as a membership based organisation with over 9,000 private landlords across the UK.

Barry Markham, CEO of SPLA said: " We are leading the way to allow a national, regional and local structure to develop across the country, building real capacity at all levels for our members benefit and to strengthen our voice at both local and more importantly, national level."

Mike Stimpson, Chair of the NFRL said: "This is a real opportunity to take the national organisation forward by extending the level of support, advice and training available to our members and bring further professionalism to our industry."

Size should not Matter

Mortgage broker Landlord Mortgages say that they have seen an annual increase of 126% in the number of investment properties under 25 square metres in size.

"The UK is facing a housing crisis as there is a chronic lack of desirable residential property which is leading to significant price hikes and many consumers being priced out of the market. One of the ways that the housing industry is working to try and combat this problem is by building smaller units - thus the rise of the studio flat." says M.D. Lee Grandin

"This rise of the 'mini-mansion' has trickled down to the buy-to-let market and we believe that this trend is set to grow and will continue, as builders realise the advantages of building smaller and more 'cost effective' properties.

"Despite the move towards smaller homes, landlords who attempt to purchase a 'petite property' often have difficulty finding a lender, as many companies will not lend on flats under 25 square metres in base size. We urge lenders to react to the need in this market and enhance their lending criteria to take into account the re-saleability of the property rather than just the size. When it comes to buy-to-let property, size shouldn't always matter."

Confidence in the Future

Despite UK interest rates creeping up and rental yields tightening in some locations, it seems that a significant numbers of established private landlords are looking to expand their portfolios as they remain committed to buy to let as a long term investment. A recent survey carried out by the upcoming Homebuyer Show (02-04 March, ExCel, London) reveals that 47% of people wishing to purchase a property are looking to expand their portfolio, compared to 40% last year.

Getting a Quart into a Pint Pot?

Land values for smaller residential development sites in England and Wales could fall after 1 st April 2007 when the Government’s Planning Policy Statement 3 (PPS3) comes into full force. PPS3 lowers the minimum development site threshold for affordable housing, which is typically required by developers as a Section 106 obligation.

Valuation specialists with property consultant Allsop are concerned that the fall in the affordable housing threshold from 25 to 15 units will reduce developer’s profitability on smaller sites, leading to reduced demand and a suppression in land values. The change is most likely to affect suburban and rural locations rather than city centres where dwelling densities for flats and apartment schemes are already normally in excess of 30 per hectare. Sites with planning permissions already in place will be unaffected, as will retrospective amendments to existing consents.

Andrew Hunt, a valuation specialist with Allsop’s northern office says: “This aspect of PPS3 will squeeze developer’s profit margins still further and product quality may suffer as construction costs have to be kept as low as possible."