International Students

The recent study conducted by the British Council revealed that International Students heading to the UK is set to increase by 10% over the next decade, making it the fastest growing destination for International Students outside of Australia.

This is definitely good news for those who are considering to venture into the buy-to-let market. Though the academic year seems to be a long way away, those who are keen in becoming a buy-to-let landlord should already be in the process of making the necessary adjustments and planning in a University town or city.

According to Samantha Baden, property analyst at FindaProperty.co.uk, “Given the continuous controversy over fees, loans, and available spaces, the rental sector especially for students continues to grow and in many areas, they outstrip mainstream housing growth, demand, value and yield.

Student towns are known to be a very promising sector with impressive yields but in order to fully benefit from it, potential landlords have to think it throughly through.

Balance is essential, says Nicholas Leeming, the business development director at Zoopla.co.uk. While most students will be pleased having a roof above them, making the property too “high end” or too “simple” will either make or break a potential deal. Tenants especially students, are either supported by their family or will be paying the rent themselves so keeping the property affordable is key to securing a tenant.

Older properties with multiple rooms are a good bet as that would allow the landlord to accommodate more than 1 individual thus enabling the landlord to receive a more profitable yield.The down side of it is that students will move on from year to year and so finding a new tenant can be quite daunting.

Other than that and the necessary paperwork, documents and procedures, renting out your property during the academic year is bound to be beneficial.

Below are the 10 most popular locations for students –

1) Birmingham

Birmingham is in pole position, according to Zoopla. In 2010/2011, 57,115 full-time students were in the city which is home to three universities. Average rents have risen 15 per cent in two years.

Average yield: 7%

2) Nottingham

Nottingham also offers two leading universities and access is decent via the M1 motorway. With two-bed flats going for around £112,033, there are some bargains to be had.

Average yield: 6.4%

3) London

The capital is seen as one of the most stable places to invest, not least because it continually outperforms the market during tough times. “There are lots of universities and a plethora of wealthy overseas students,” says Karelia Scott-Daniels from Manse & Garret Property Search.

Average yield: 6.4%

4) Coventry

In the last academic year, 35,265 students attended Coventry University or City College Coventry. Two-bed properties in the area are on the market for £109,904.

Average yield: 6.4%

5) Glasgow

A two-bed flat in the city might cost you a mere £108,106 . “A high percentage of graduates actually choose to stay in the city or surrounding areas after completing their studies, which means the city has a thriving young professional market,” says Matt Hutchinson of flat and house-share website Spareroom.co.uk.

Average yield: 6.2%

6) York

The city boasts 15,782 students and great transport links, with London and Edinburgh only a few hours away by train. The university is also undergoing an expansion.

Average yield: 6.1%

7) Reading

Reading houses two universities – The University of Reading, which educates 19,000 students, and a campus of the University of West London.

Average yield: 6.1%

Oxford

Although property prices are second only to London in the top 10 at £230,863 for a two-bed flat, rental prices are steep at £1,166.

Average yield: 6.1%

9) Manchester

There are three universities in the city, catering for 50,000 students. With demand outstripping supply, Zoopla’s yield estimate could be on the conservative side.

Average yield: 5.8%

10) Leicester

Has, possibly, more realistic house prices than many other university cities at around £115,980 for a two-bed flat.

Average yield: 5.8%

There you have it. A list of the top 10 locations for students accommodations.

Buy-To-Let

According to Colordarcy, a leading property investment company, the buy-to-let market is experiencing a boom in demand especially in areas such as Clapham, Wimbledon and South West London and the fact that these areas have good transportation link makes it even more attractive to potential buyers and investors both local and foreign alike.

One of the factors that is drawing the interest in investors is the upcoming Olympics as not only is it a prestigious event, it is also a good opportunity for home owners and investors to make back profit during the event and with the buy-to-let sector currently in high demand, those who have been wise to invest in such area will definitely be reaping their rewards.

The other reason as to why renting out homes is becoming more popular is the fact that first time buyers who are having trouble to secure a mortgage will have no other option but to rent for the time being until they are able to finally climb up the property ladder and become home owners themselves.

As London is know as the “safe haven” for investors both localy and abroad, it is little wonder why properties are being snatched up, more so now when the economy is slowly finding it’s way back to stability. Experienced investors knows an opportunity when it is presented and they possess the ability to reap a fortune out of it.

With that being said, London has the ability to attract the attention of international investors, so competition for property in good areas will definitely be heating up. The mortgage market will remain squeezed for the majority of the population and house price recovery is still weak.

As most property investors will say, a strong rental market will help fund a purchase, a hot rental market will pay for it. For now the London buy-to-let is still hot.

Home Ownership

Owning your own home is a dream come true for everyone but given the current economic crisis, owning your own homes might just have to wait.

Reports shows that the number of privately rented homes has risen from 2.1 million to 3.4 million, in less than a decade. Though these tenants would love to be able to own their own homes, they are unable to do so due to job insecurities and the ongoing economic crisis.

And to make matters worse, banks and building societies are demanding large sums as deposit before approving any loans. As a result, potential homeowners have no choice but to put off acquiring their own homes and just be contented with renting instead.

This means that the age for first time buyers is now in their 40s and even if they do managed to finally get in on the property ladder, they will be faced with the possibility of paying up their mortgage till they are well into their 70′s.

The global economic woes that have left first-time buyer numbers at record lows will shatter the goals and aspirations of many as they face the reality of renting for far longer than they originally planned.

Trapped renters over the age of 40 could face the prospect of being an OAP mortgagee, or face difficulty getting a 25-year mortgage term if it takes them beyond lenders retirement- age criteria.

Lenders have been slashing their charges as the Bank of England’s base rate remains at a historic low of 0.5 per cent – but with rents predicted to rise due to a shortage of supply, tenants will find it increasingly difficult to save an adequate deposit.

According to reports published last week, rents in England ans Wales reached a record high of £718 per month in September and while the financial crisis is already putting a strain in household spending power, the soaring inflation and the rise in energy prices is only making matters worst.

The momentum of the runaway rental train shows little sign of slowing, Mr Shipside said. New tenants are still looking to clamber aboard in their search and are finding a dwindling number of places to rent, as existing tenants have limited exit opportunities and stay put.

The rental journey is the only real option for many, and the majority seem resigned to having to pay more.
Last year, a study by insurance specialist Aviva found that one in ten homeowners over the age of 75 is still paying off a mortgage, with an average outstanding debt of £72,500.

With that said, those who were wise enough to enter into the buy-to-let market is set to profit in these trying times. What more with the Olympics that will be held in London next year, homeowners who have chosen to rent out their property is sure to benefit from their decision.

On a more positive note, mortgage-approval rates showed signs of recovery in August. The Bank of England recently reported 52,410 home-loan approvals during that month – the most since December 2009. But despite the improvement, the figure is still well below the 90,000 monthly average seen before the crash.

Buy-to-let market

Demand for buy-to-let mortgages has increased significantly in recent months as landlords rush to cash in on the continuing boom in rental prices, according to the Bank of England. The scramble to purchase rental properties is even leading would-be buyers to put in sealed bids in some areas of the south-east.

In its latest Trends in Lending Report the Bank said most major UK lenders reported demand for buy-to-let lending continuing to increase over the summer, reflecting rising rental yields.

Rents rose in every region of the UK in September 2011, pushing the average rent to a record high of £718 per month – £1,029 in London – according to the latest LSL Property Services buy-to-let index. Lea Karasavvas, director of broker Prolific Mortgage Finance, says this is driving demand for properties, We’re having sealed bids with buy-to-lets because the rental market is just so strong.

Landlords are now getting an average yield of 5.3%, up from 5.2% in August, LSL says. Meanwhile, tenant arrears have dropped to their lowest level since April 2010, with just 8.6% of all UK rent unpaid or late by the end of September.

There were 32,000 buy-to-let loans, worth £3.5bn, taken out between April and June, the highest number and value since the last quarter of 2008, according to the Council of Mortgage Lenders (CML). Director general Paul Smee called this “encouraging news”, and said first-time buyers were not being displaced by buy-to-let landlords.

But Matt Griffith of first-time buyer campaign site PricedOut, disagrees. He says: “In a market where equity is king, investors are able to outbid first-time buyers for available lower-level properties.

In the housing market, equity is nearly always a result of longevity – which gives older homeowners a head-and-shoulders advantage. Housing wealth and ownership is more generationally lopsided than it has been since the 1940s, and we appear to be seeing older groups pressing home their advantage through investment buying.”

Both tenants and first-time buyers, then, face a bleak future: squeezed out of the market by house prices that remain high across swathes of the country, and soaring rents charged by landlords.

According to the Association of Residential Lettings Agents, the problem is a lack of supply, and the government should be doing more to encourage landlords. It says the private rental sector is nearing capacity – three-quarters of its 6,000 members believe there are now more tenants than properties, with the increase in demand particularly acute in London and the south-east.

Tim Hyatt, president ARLA, says: “There is a finite amount of rental property and unless both housing supply and mortgage availability improves, renters will find their options in the market are reduced.

The government is doing little to encourage landlords to invest in new properties, therefore we are running out of quality stock to offer to tenants. This is reflected in rent increases and a lack of choice for consumers.

However, communities and local government minister Greg Clark said in early October that the private rental sector is “destroying family life”. Similarly, MP Caroline Flint , in a speech at the Labour Party conference, said she wanted stronger private tenants rights.

Improved tenure rights, such as longer notice periods for eviction, are favoured by some landlords because they offer them greater security, too, and Griffith thinks they could make the market more stable.

Stronger tenure rights would help reduce the level of short-term investment flows into the sector as well as improving the experience of the renter, who is steadily getting older and as a result requires stability for children, family and schools, he says.

But many lenders will only issue buy-to-let loans on a property with an assured shorthold tenancy in place (typically a tenancy term of at least six months and no more than 12 months).

“It’s the bankers, not the landlords, to blame here,” Griffith adds. Halifax and Accord Mortgages, for example, both demand that properties be let on an assured shorthold tenancy basis – although some, including Woolwich mortgages, do not.

If the opportunities for lenders and borrowers evaporate, the buy-to-let boom may run out of steam. LSL’s David Newnes points out that while rental yields have hit 5.3%, total returns over the past year fell to 1.8% (a result of house prices falling outside London).

Griffith says banks may be underestimating the risks of buy to let. “Yields are still very low in historical terms, further declines in house prices look likely and tenant arrears have been climbing steeply. Both the later trends may intensify as we move into a very difficult period for UK household income.”

Loans on offer

This year has seen a number of small lenders return to the buy-to-let mortgage market but things have changed since the credit crunch.

“Borrowing 85% [of a property's value] was easy pre-credit crunch, and the fees on those loans were a lot lower,” says Lea Karasavvas, director of Prolific Mortgage Finance. Now charges of £1,999 are not uncommon and borrowers will find little choice above 75% loan to value (LTV).

Rates are not as competitive as they were. “Before the credit crunch there wasn’t a huge difference between residential and buy to let rates,” says property funding specialist Adrian Anderson.

For landlords with at least a 40% deposit, Principality building society is offering a two-year fixed-rate deal at 3.89% and a fee of £999, while Woolwich has a lifetime tracker at base rate plus 2.98%, with a fee of £1,999.

Other criteria have also tightened – for instance Lloyds banking group now lets landlords take just three loans from its lenders, which include Birmingham Midshires and Halifax, but the minimum rent required is still typically 125% of the monthly cost of repaying the mortgage.

Buy-To-Let

Over three quarters (76.8%) of UK property investors are considering buying additional investment properties over the coming year, reveals a new survey of the Assetz investor database.

Confidence in the UK buy to let market is robust, with investors highlighting strong rental demand as their main incentive for expanding their portfolios, followed by high and rising rental values, and thirdly the belief that prices are at or near the bottom. Just 10% of investors believe now is a bad time to invest in UK buy to let, with the majority citing concerns about the economy as the main deterrent.

Investors are taking a long term view of the property market, with 50% stating that long term capital gain is their top priority, closely followed by rental income (44%). Just 6% stated that they were hoping to benefit from short term capital gain.

Nearly half of those surveyed (45.9%) said they are currently achieving gross rental yields of more than 5.5%, with almost a fifth (19.4%) achieving 9% yields or higher.

Stuart Law, Chief Executive of Assetz, commented on the research:

“The buy to let market is booming with landlords returning in considerable numbers, encouraged by the excellent rental returns currently available as well as the prospect of long term capital growth if property prices continue to strengthen. UK residential property in the right locations is increasingly viewed as a safe haven, offering investors a long-term, low-risk investment for their cash.

“Risk-averse lenders are making no secret of the fact that they would rather allocate the limited funds they do have to the lower risk option of buy to let loans with deposits of typically 25 – 40%. The sector has not been as hard hit by the recession as originally feared, due to the fact that interest rates have remained extremely low. This has protected landlords by giving them cashflow, and future rate rises, which are likely to be small and gradual, will be covered largely by rental increases.”

Assetz has seen sales of UK investment property more than double in the last twelve months and predicts it will expand at least 50% again over the next year.

Mortgages for Professionals is a specialist mortgage broker offering lenders from the whole UK market. We provide a service dedicated to individuals with professional qualifications and high projected earnings – from doctors and dentists, to accountants and engineers
Our offices are based in central London, although we arrange mortgages for professionals throughout the UK.
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