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Landlord and Tenant News: Negative equity a big threat to those with interest-only mortgages

Fri, 28 Oct 2011 12:27:42 +0100

Landlords with interest-only mortgages could be facing a 'ticking time bomb' of problems according to one property expert.

Paul Holmes, CEO of advisory service Firstrung, says that a future slump in the housing market could lead to many property investors finding themselves in negative equity.

And being in such a position at the end of their mortgage term would lead to a multitude of financial issues.

"Interest only mortgages are particularly prevalent in the buy-to-let sector, so unless there is a major shift in house prices upwards in the next ten to 15 years a lot of buy-to-let investors are going to find themselves in deep trouble," he said.

In normal terms, interest-only mortgages are taken alongside an investment vehicle that will go towards repaying the capital at the end of the mortgage period.

However, with a let property being an investment in itself, most landlords have not felt the need to pay into separate, and sometimes costly, policies.

Despite concerns over such mortgages, calls to prohibit interest-only lending have been criticised by some financial advisers as they feel it will hinder a lender's ability to help push the housing market.

Buy To Let investment News

Landlord and Tenant News: West Midlands rivals London in buy-to-let stakes

Wed, 26 Oct 2011 12:05:16 +0100

London isn't the UK's only hotbed of buy-to-let activity.

According to new research by specialist mortgage provider Paragon, the West Midlands is outperforming the capital in terms of rental income.

A survey of almost 600 landlords found that rental properties around Birmingham, Wolverhampton, Coventry and Worcester generate an average yield of 7.35 per cent, compared to 7.32 per cent in outer London and 7.07 per cent in the South-West.

The research also found that student lets are still delivering the best yield with an average yield of 7.62 per cent.

Houses in Multiple Occupation (HMOs) are still performing well with the average returning 7.56 per cent, while private family lets brought in 6.57 per cent, followed by migrant workers at 6.53 per cent.

Nigel Terrington, chief executive of Paragon, believes the rise in rental income for West Midlands-based landlords is due to the regeneration of Birmingham city centre bringing many workers into the area.

He stated: “The area is a hub for manufacturing, has a strong professional services sector, is home to several large universities and is undergoing significant redevelopment, so therefore attracts a healthy mix of tenant types.

"The yield a rental property generates is a hugely important part of a landlord's business plan, as they give a good indication of how well the property is performing and the level of income it is providing."

The latest buy-to-let index from LSL Property Services recently revealed that landlords in all areas of England and Wales saw an increase in their rental income in September.

The figures are the largest since records began with the average rent rising by 0.7 per cent to reach £718, exceeding the previous high of £713 set in August

Overall this represents a 4.3 per cent increase on the same period last year.

And Greg Kinnear of Landlord Assist has estimated that ongoing rises in living expenses will prohibit people's ability to buy property, driving the rental market up further.

London Rental Property News

London Property to Rent: Check size of university before investing in student housing

Thu, 22 Sep 2011 16:58:47 +0100

Landlords looking to invest in student accommodation in London should do their homework before splashing the cash.

This is the advice from Stuart Cook, acquisitions manager at Freshstartliving.com, who suggested would-be landlords look at the size and type of university in a city and work out how many students would be looking for residences each academic year.

"Our research has found that there was a shortfall of accommodation for students in all cities across the UK, with around 100,000 units needed urgently. So long as the investor invests in a property close to the university with good transport links, they will be able to let it and see a good return," he noted.

Such property has, in the past, been "highly lucrative", meaning it was harder for landlords to secure.

"But the recession and increasing demand have changed much of that. Student accommodation is now a highly sought-after commodity," Mr Cook added.

London Property to Rent

Investment Finance News: Landlords 'should be optimistic' about buy to let opportunities

Mon, 12 Sep 2011 09:10:00 +0100

Landlords with property to rent in London and other parts of the UK are increasingly turning their thoughts to expanding their portfolios, an independent property industry expert has said.

Malcolm Harrison commented that many landlords are right to be optimistic about their buy to let prospects, as the rental market will "remain very tight" until there is more housing stock and a wider range of UK mortgage offers for first time buyers.

"There is no house building, there is a shortage of decent housing in many areas and you can't get a mortgage, so quite a lot of people are going to be very dependent on buy to let investors," he pointed out.

"I think [landlords] are right to be cautiously optimistic anyway because we don't know what is happening with the overall economy yet."

Mr Harrison's comments come after LSL Property Services published research showing half (49 per cent) of landlords think now is a good time to invest in their portfolios, with 86 per cent are planning to do just that in the next few months.

Investment Finance News

London Housing Market News: London 'seen as a global leader'

Wed, 31 Aug 2011 14:42:58 +0100

People searching for high end property sales and rentals in London may be pleased to know that the capital is still considered to be a global leader.

Property expert Ed Mead pointed out that the city has an established culture and international travel links that other global locations, such as Moscow, Mumbai and Abu Dhabi, do not yet have.

"I think it will be a long time before London is overtaken as what I describe as a global leader," he explained.

However, the recession did take its toll on the city's property market, with volumes now half what they were before the onset of the financial crisis.

"And that makes the impact of foreigners coming in [to invest] more important because before the recession, foreigners probably accounted for 25 to 30 per cent, they now probably account for more than half the transactions in the centre of London."

Mr Mead added that overseas property buyers in London continue to see the capital as a safe haven for their money, despite incidents such as the street riots earlier this month.

London Housing Market News

Buy to Let Investment News: Lenders 'are easing restrictions on funding'

Mon, 18 Jul 2011 17:03:46 +0100

Lenders of buy to let funding are starting to become more flexible, according to Property & Finance Solutions.

Darren Owen, director at the organisation, commented: "We are back to 85 per cent loan-to-value on buy to let now, which has improved the market rapidly. The criteria changes all the time."

He pointed out that UK mortgage lending companies used to be "black and white" about their criteria, but these restrictions are beginning to ease.

"They are starting to adapt a bit more of a common sense approach now and look at the cases overall and say, 'This guy is probably a good bet, we will lend him the money'."

Mr Owen's remarks came after research from Paragon Mortgages revealed that almost half (47 per cent) of buy to let mortgages processed by intermediaries in the second quarter of this year were for landlords looking to expand their portfolios.

This was up from 43 per cent in the previous quarter.

Buy to Let Investment News

Buy to Let Investment News: Bricks and mortar 'is solid investment option'

Mon, 11 Jul 2011 12:03:47 +0100

The perception that bricks and mortar is a safe haven for investors' money is driving more prospective landlords towards buy to let, according to Chainbow.

Roger Southam, chair and chief executive of the company, pointed out that the financial crisis saw a shift in the way individuals are saving money.

"There's been a wait for money to drive forward on properties and various surveys and articles about the hotspots around London and the UK [have been circulating]," he noted.

"What is becoming more prevalent is that you're not getting a general trend in one direction or the other, but you're getting various pockets that will keep rising, regardless of what's going on in some areas."

Investors could receive good rental yields and returns in London as long as they pick "the right product at a good price", Mr Southam said, adding that the difficulties first time buyers are facing are "fuelling a boom" in lettings.

Buy to Let Investment News

Buy to Let Investment News: Buy to let sector 'is for the long-term'

Fri, 08 Jul 2011 15:19:47 +0100

Prospective investors in buy to let property have been advised that it is a good sector in which to make significant returns in the long term.

Malcolm Harrison, an independent property industry expert, said there is likely to be an increase in the number of new landlords coming to the market in the next few months, because there are some people "whose careers and ability to make money has not been impinged by the crash".

"It is a long-term investment and the people who got burnt before the crash were those who saw it as a speculative investment; they thought they could buy, let it for a couple of years and then flog it. The mature investor recognises that a buy-to-let investment is for at least ten years if not more," he noted.

If individuals can see what is going on with their own eyes, they are more likely to know whether or not to invest in property and secure buy to let funding, Mr Harrison added.

Buy to Let Investment News

Building & Construction News: Self build model needs to change to go mainstream

Wed, 22 Jun 2011 16:45:58 +0100

Self build properties could become more common in the future if its model changes, Homebuilding & Renovation magazine has posited.

Jason Orme, editor of the publication, commented: "There are several things that need to happen before it becomes mainstream and the key one is for the process to be de-risked."

This means removing all the elements that could deter people from self-building, for example, worries about dealing with builders and concerns about getting a fixed price for their finished property.

"Under the model that I think the government is keen to develop, it will be a much more mainstream option because those issues won't be on the table. It will be a softer self-build in a way and that is really where it will become more mainstream," Mr Orme noted.

His comments come in light of a letter sent by housing minister Grant Shapps to key players in the UK mortgage lending market, which asked them to support a self-build 'revolution' by providing funding to those interested in such projects.

Building & Construction News

Planning Permission News: Square Mile 'could suffer' if offices are turned into homes

Fri, 17 Jun 2011 10:40:53 +0100

Government plans to overhaul the planning system could see more office space in London being turned into residential properties.

According to city planning officer for the Corporation of London Peter Rees, the Square Mile and other renowned business districts could lose their power to attract international organisations and investment if they are not safeguarded.

Speaking at a British Property Federation conference, he is expected to say: "The cyclical nature of the property industry means that if developers were to turn offices into residential blocks when times were tough, the City's ability to attract and house new firms when market conditions improved would be seriously diminished."

Such changes to the planning system could "dilute the concentration of offices", making it harder for companies looking for investment properties in London to find commercial space in the Square Mile, Mr Lees added.

His comments come after the Institute for Public Policy Research revealed that the UK could face a shortfall of 750,000 homes by 2025 because the construction of new build properties is at its lowest peacetime level since the 1920s.

Planning Permission News

UK Pub Sales News: Listed pubs for sale in the West Country

Thu, 16 Jun 2011 17:09:29 +0100

Property investors looking for pubs for sale might be interested to learn that two special properties in the West Country have come on the market.

ThisisDevon.co.uk reported that the Grade-II listed Ashill Inn in Culm Valley has been put up with a value of £295,000.

The freehold includes a restaurant, ground floor bar and commercial kitchen, along with two double bedrooms and a pool room.

Meanwhile, the Swindon Advertiser stated that the Queen's Head in Dunkirk Hill, Devizes, is also on the market.

The pub, which is Grade-II* listed, has been granted planning permission to undergo a change of use and be converted into a house.

Paul Redman, joint owner of the empty pub, told the news site: "We spoke to agents about it reopening as a pub but they were recommending lower rents for it and there were better conditioned pubs coming on to the market. Everyone was telling us that other pubs would survive before this one. It was obvious no one would want it."

He noted that turning the pub into a home raises its value and would allow it to be repaired properly.

"Structurally the property is pretty sound. There are no major defects but it does need a lot of work done on it," Mr Redman added.

Steve Oliver, negotiator at Paramount Investments, commented: "Although I'm sad to see another pub close, I'm pleased that this old building will be restored for future generations to enjoy the outstanding architecture."

UK Pub Sales News

London Commercial Property News: Office space in London 'will return to 2008 prices'

Tue, 14 Jun 2011 14:20:02 +0100

Companies and individuals looking for office space in London might wish to invest now before prices shoot up again.

According to Simon Jones, research project manager at officebroker.com, the increasing uptake of office space in London is hopefully a sign of a positive return.

"Our [managing director] Jim Venables recently made a prediction that … central London prices will turn to their 2008 pre-recession peak by the end of this year and then he thinks the regional cities will probably see them exceeding or returning in the next 12 to 18 months.

"So, that's a good sign, but it all depends on the economy and it all depends on things keeping moving," Mr Jones noted.

He pointed out that businesses in a niche market, such as production companies and casting agencies, would do well to find serviced offices, which let them move in, set up and go.

Meanwhile, BBC Television Centre has been put up for sale, with the west London site expected to bring in hundreds of millions of pounds for the broadcaster.

London Commercial Property News

UK Pub Sales News: Travelodge to target former pubs for sale

Mon, 13 Jun 2011 16:48:37 +0100

Budget hotel chain Travelodge will be seeking former pubs for sale in order to expand its operations by 100 new small hotels.

The company unveiled plans to develop Metro accommodation, which would see smaller sites containing between 20 and 40 rooms each being launched in prime locations.

Office space in London is one area Travelodge is looking to develop into hotels, along with old pubs, derelict cinemas and theatres, disused business parks and retail outlets.

Guy Parsons, chief executive of the chain, commented that a pilot scheme in Edinburgh showed how successful the Metro model could be.

"Downsizing our hotel building requirements will open hundreds of development opportunities for us. This will enable us to expand quickly and meet the growing demands from consumers who want low cost and good quality accommodation in prime locations," he added.

Meanwhile, Travelodge has also announced plans to link up with pub companies, including Greene King, Mitchells & Butlers and JD Wetherspoon, as part of a £100 million expansion project.

UK Pub Sales News

London Commercial Property News: Businesses 'assume' they should occupy office space in London

Mon, 13 Jun 2011 12:11:49 +0100

Office space in London is going to attract many big players because the capital offers benefits that other towns and cities cannot.

Philip Papenfus, member of the British Council for Offices Urban Group, noted that lots of companies assume they should occupy offices for sale, rent & lease in the centre of London.

"There are a lot of businesses that are absolutely tied to the central London office market, for key staff there are very good reasons for being there," he said.

However, firms could outsource parts of their business to locations outside the middle of the city in order to save money on rent.

"The markets outside of central London haven't seen anything like the rental hikes either that central London has seen," Mr Papenfus pointed out.

However, the reason why not many businesses have taken the plunge and moved out of the capital is due to the "complete inertia" of the economic recovery, he added.

This could mean that office space in London remains attractive to businesses while the economy picks up pace.

London Commercial Property News

Mortgage Rate & Home Loan News: Property investment 'is not sustainable in the short term'

Thu, 09 Jun 2011 17:03:43 +0100

Investors who have taken up high loan-to-value UK mortgage offers might be feeling concerned about the future of the property market.

This is the view of Peter Mindenhall, researcher at IPINGlobal.com, who said that falling house prices mean short-term investors who are attempting to 'flip' property could be experiencing a "tough time" and may be worried about negative equity.

However, he noted: "Long-term investors with low loan-to-value mortgages or that have paid cash are likely to be less concerned, [because] even if and when interest rates rise they will still have a reasonable comfort zone."

Mr Mindenhall argued that "the days of just buying a property and watching it rise in value are over", at least for the short term, and added that purchasing a home for a short-term investment is not the sustainable way to take advantage of the opportunities posed by the housing market.

His comments follow research from Halifax suggesting that house prices fell 1.2 per cent in the last three months, although they rose 0.1 per cent in May.

Mortgage Rate & Home Loan News

London Commercial Property News: Office energy consumption could be cut with education

Tue, 07 Jun 2011 16:58:52 +0100

Occupiers of office space in London will be able to cut their energy bills by educating staff about the financial benefits of eco-friendliness.

Paul Edwards, chair of the British Council for Office's Environmental Sustainability Group, noted that by informing employees, tenants and the operators of office property investments in London, firms could make big savings.

"There are a lot of studies around that say you can save anything between ten and 20 per cent of energy purely on behavioural elements," he noted.

"Get people to turn off the lights, turn off their computers, turn off printers at night, turn off machinery and equipment that doesn't have to run. There are lots of things that you can do that are fairly simple."

Meanwhile, research from E.ON found that saving money on energy bills is a top priority for individuals in the UK.

This could encourage companies occupying offices for sale, rent and lease to take steps towards reducing their energy consumption.

London Commercial Property News

Building & Construction News: Construction of new build properties 'hampered by loss of confidence'

Tue, 07 Jun 2011 16:34:44 +0100

The number of new build properties being constructed is being hampered by the loss of householder confidence.

This is the opinion of Brian Berry, director of external affairs at the Federation of Master Builders, who noted that the picture "is very different from what is happening in the other parts of the construction industry because it mirrors the housing market".

"That is connected of course by the stagnation in house building and the fact that householders have lost confidence," he explained.

Homeowners are concerned about their job security, the public sector cuts and frozen salaries, which is resulting in reduced expenditure on home improvements.

Mr Berry's comments follow data from the Office for National Statistics showing the total volume of all new construction orders in the first quarter of the year was down 23 per cent in comparison with the final three months of 2010.

It was also down 18 per cent compared with the same period last year.

Building & Construction News

Investment Finance News: Is now the time to expand rental portfolios?

Thu, 02 Jun 2011 15:27:10 +0100

Landlords with property to rent in London may be thinking that now is a good time to expand their buy to let options.

According to research from LSL Property Services, 86 per cent of landlords plan to secure buy to let investment in order to make a purchase within the next 12 months.

Even those in other parts of the country could be looking to the London housing market to make a profit while tenant demand remains strong, with landlords who already have a steady relationship with their bank perhaps more likely to secure UK mortgage offers for additional property purchases.

David Warren, sales negotiator at Paramount, commented: "With rents at their highest we have ever seen them and mortgage rates low, we are still finding that a lot of people are choosing to buy.

"Most of our buyers are prepared to settle in London for at least three to five years and on this basis it would be very unlikely that they would not make money on their property in London," he added.

Investment Finance News

London Commercial Property News: Cut office bills by turning down the air con

Thu, 02 Jun 2011 15:25:30 +0100

Those who invest in office space in London, whether to rent it out or use it themselves, will be able to cut their energy bills simply by reducing the use of their air conditioning.

Paul Edwards, chair of the British Council for Office's Environmental Sustainability Group, noted: "Air conditioning is a major consumer of energy. If you can look at the temperatures you're controlling, ask yourself if you really need to control the room to 20 or 22 degrees."

He pointed out that people are able to work comfortably at 24 degrees, although most offices tend to set temperatures at between 20 and 22 degrees.

"I know that doesn't sound a lot, but a two degree difference can greatly reduce your energy consumption," he added.

Mr Edwards' remarks come after a company looking for offices for sale, rent & lease in Marylebone purchased International House in Chiltern Street for £63 million.

London Commercial Property News

London Estate Agents News: London property investors 'should buy the best home they can afford'

Thu, 19 May 2011 11:59:52 +0100

A property expert has urged those looking for flats and houses for sale in Hampstead, London, and other parts of the capital to invest in the best abode they can afford.

Naomi Heaton, chief executive of London Central Portfolio, said: "Investors of any age buying property for rental investment are advised to target the most prime addresses that their budget affords. The old adage of location, location, location has never been more appropriate."

She noted that the "core tenant demographic" for rental investment properties is either single professionals or couples with professional jobs.

"In London Central, they will be wealthy in their own right, upwardly mobile in their careers and will be exacting in their requirements for property," Ms Heaton pointed out, so the homes they will lean towards should be immaculate and have good transport links to the tenants' place of work, such as the City and Canary Wharf.

London Estate Agents News