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Manchester And Liverpool Top Cities For Property Investments

Manchester and Liverpool have been marked out as key northern cities to invest in when building up a property portfolio.

Manchester topped the list of best UK cities within which to be a landlord.

GoCompare recently launched an interactive tool which tells you the best areas to invest in. It includes data on average property prices, average yields and rental price growth. It also assesses the number of people in the city below the age of 35 as this group are considered prime tenants for landlords to focus on.

Following closely behind Manchester was London. Although rents are higher in the capital, yields may be slightly lower because of the initial purchase cost of properties in the capital, which is a factor to consider. Nottingham and Liverpool came in third and fourth place respectively in the list of cities in which to invest.

Manchester offered the highest average yield in the UK of 5.55 per cent with an annual rental growth of 5.76 per cent and a total of 5,545 properties available to rent.

London boasts 50,728 properties to rent, but has a somewhat smaller average yield of 3.05 per cent and annual rental price ‘growth’ is actually in decline at -1.12 per cent.

Stoke-on-Trent was discovered to be the least expensive area to buy with an average property purchase price of just £106,000. In contrast, Oxford offered much higher average property prices of £411,000. In the capital, the average price is £484,000.

In terms of annual rental growth, Manchester also came top at 5.76 per cent, followed by Leicester at 5.3 per cent and Cardiff at 5 per cent. Manchester also offered yields of 5.55 per cent, whilst Sunderland came in second place offering 5.37 per cent in yields. Liverpool also boasted sizable yields of 5.05 per cent per annum.

Source: Residential Landlord

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Wakefield Buy To Let Property Investors Criticised For Vacant Properties

Buy to let property investors in the private rental sector have been criticised for leaving thousands of vacant properties across Wakefield.

Over 3,300 houses in Wakefield have been vacant for at least one month, according to figures which date back to March. However, the number of derelict properties has fallen. The district no longer has any ‘empty property hotspots’ or single streets with lots of abandoned homes.

Councillor Glenn Burton led a task group on the issue and was ‘pleasantly surprised’ by his findings. Speaking at a scrutiny committee meeting on Monday, he said: ‘There’s been a change over time from having very concentrated areas of Victorian terraced housing, which was in very low demand, particularly in the south-east and Hemsworth. “Having been a problem in the past, it isn’t anymore.’

A mere 0.8 per cent of the city’s overall housing stock is empty. This is in comparison to the national average of 1.8 per cent. Councillor Burton said that this demonstrated the way in which Wakefield was ‘punching above its weight on the issue.’

However, there have been problems reported where due to emotional attachments to properties or a desire to wait until property prices rise, many homes have been left vacant by landlords. A lack of funds to renovate a property is another reason why a landlord might leave it uninhabited.

Councillor David Jones said that rogue property owners who did not adhere to legal guidelines were a contributing factor as they were difficult to trace. He said: ‘A number of these private landlords aren’t registered landlords and so they go off the radar. As a consequence, more pressure needs to be put on this particular type of landlords.’

Councillor Betty Rhodes added that some owners were letting individual rooms out to large groups, causing issues with overcrowding. She said: ‘There was one case in my ward (Wakefield North) where every room in the house had a family put in it. There was just one kitchen and one bathroom and all the families had to share them. For some people, it’s just all about the income. The landlord has thought, ‘I can get another family up there, regardless of the consequences.’ It is an issue.’

The report also commended the council’s action on empty homes in recent years but said the ways landlords with empty homes can be helped should be ‘better promoted.’

Source: Residential Landlord

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Second homes – what are the legal considerations?

WITH the lovely weather we’ve had so far this summer, more of us are choosing to spend our holidays in Northern Ireland. Some may even consider the idea of buying a second property for personal use as a holiday or weekend home, providing an escape to the coast or countryside whenever the mood takes them.

It is estimated that around one in ten UK adults, over 5 million people, own a second home with this type of property ownership up 30 per cent since 2000. And despite the sharp rise in stamp duty introduced in 2016 to discourage those buying second homes in England, Wales and Northern Ireland, it is an investment many still see as worth making.

There are a number of reasons why people might decide on such a purchase, of course, not just for holidays. You might buy-to-let as a tangible investment for your future, opting to use rental income to augment your pension in retirement. Alternatively you might buy purely for financial reasons, to renovate and sell, making a profit before reinvesting again elsewhere.

Regardless of your motive, if you’re thinking about buying a second home it’s important to weigh up the potential risks and benefits. We don’t have enough space to cover it all in this article but the following should provide some food for thought:

If a second home can be afforded then it is undoubtedly an interesting and attractive venture, however owners are often unaware of the potential legal implications and associated problems of owning a second home. For example, when purchasing a second home, the owner will need to carefully consider the tax implications.

The 3 per cent Stamp Duty Land Tax (SDLT) surcharge is payable by anyone who is buying an additional residential property for £40,000 or more. This could mean a holiday home, buy-to-let or even a main residence you plan to live in. Even if you already own just a share in another property, it will count so long as the share is worth £40,000 or more. So, for example, if you are buying a second home with a purchase price of £150,000, just the 3 per cent surcharge alone equates to £4,500 – this is in addition to the regular stamp duty on the property.

The very nature of second homes means that they will often be left unoccupied for long parts of the year. Owners may wish to rent the property out for periods of time in order to maximise their income. This can lead to the creation of a Landlord and Tenant relationship, which may give rise to a number of complicated legal issues. The owner also needs to carefully consider the issue of insurance for the second home both when using it himself and when renting it out.

Not everyone may have the funds to invest in a holiday home on their own. The alternative option is to group together with family and friends and purchase a property as a shared/group venture. This not only reduces the cost of owning a second property, but also means you have somewhere that you can all enjoy visiting together. In such cases there is a necessity to be clear from the start about each party’s expectations and all financial and legal arrangements should be set out in writing.

Purchasing a second home abroad also remains a popular option. In terms of buying abroad, purchasers need to carefully consider whether they are tying their money up in something that may prove very difficult to sell should they later need access to the funds.

If you are considering buying a second home, my biggest piece of advice would be to do your homework in advance – if you are clear as to your reasons for buying it along with the significant financial and legal ramifications of such a purchase, then it can prove an extremely rewarding, both emotionally and financially, experience.

Source: Irish News

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Bank of England’s rate hike rush criticised as growth outlook drags

The Bank of England’s hawkish talk on a potential interest rate hike is “ill judged”, according to an influential business group, as new data points to continued sluggish growth in the UK economy.

A poll of more than 6,000 firms from the British Chambers of Commerce (BCC) showed that the balance of firms enjoying increased sales picked up slightly in the second quarter, with a balance of 23 per cent of services firms selling more.

However, forward-looking indicators were weaker, with the number of firms who say they plan to invest more falling.

Multiple members of the Bank’s rate-setting monetary policy committee (MPC) – including governor Mark Carney – have argued that firming wage growth will add to inflation in the medium term. Meanwhile, they argue that first-quarter economic weakness was only a temporary blip.

Suren Thiru, the BCC’s head of economics, said economic conditions remain “subdued” ahead of the next MPC meeting on 2 August.

The pick-up in domestic sales suggests growth improved in the second quarter, in line with economists’ expectations, but signs of a sustained upturn are limited amid falling business confidence, the BCC said.

Thiru said: “The Bank of England’s recent rhetoric around raising interest rates continues to look ill judged. With the UK economy seemingly stuck on a low growth path and inflation easing, it would be prudent for the MPC to provide greater monetary stability rather than undermining the UK’s growth prospects further.”

Economists expect GDP growth to rebound to a 0.4 per cent quarterly rate in the second quarter, according to consensus figures collected by the Treasury. In the first quarter growth slumped to 0.2 per cent.

Separate data to be published today by accountant BDO will show that firms’ output continued to grow in June, but at the slowest rate since December 2012.

BDO’s index, which measures UK business output, fell from a reading of 98.58 points in May to 97.29 in June, below the 100 mark which indicates the long-term growth trend but still above the 95 contraction mark. The index is based on data from the Confederation of British Industry, the Bank of England and IHS Markit’s purchasing managers’ indices.

However, at the same time the employment component of the index has hit record heights, tallying with an unemployment rate of 4.2 per cent at a four-decade low.

Source: City A.M.

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Risky mortgages soar with gentrified Croydon leading the way

The number of people taking out risky mortgages jumped by 15 per cent last year, with Croydon becoming the UK’s number one hotspot for high-risk mortgage lending.

Banks approved 101,380 mortgages in 2017, and the south London town of Croydon had 463 high-risk mortgages taken out, rising 11 per cent on the year before despite the UK average being just 39 risky mortgages per area.

According to Bank of England guidance, mortgages are considered “high-risk” if they are lent at 4.5 times or more of the applicant’s salary.

Along with Croydown there were a number of London areas with a high volume of risky mortgages, with Walthamstow (421), Wandsworth (363) and Streatham (322) all following close behind.

Top 10 areas for risky mortgages in the UK
1. Croydon – 463

2. Walthamstow – 421

3. Wandsworth – 363

4. Streatham – 322

5. Tooting – 319

6. Brighton – 313

7. Hove – 296

8. Battersea – 296

9. Farnborough – 294

10. Wimbledon – 276

The number of high-risk mortgages in Croydon “reflects the turnaround in its reputation”, according to peer-to-peer lending platform Lendy, which carried out the findings.

With the recently-opened Croydon’s Boxpark and the upcoming Westfield Shopping Centre due to begin construction in a year’s time, Croydon has undergone significant redevelopment and gentrification.

Liam Brooke, chief executive of Lendy, said: “More and more people are stretching their budgets to live in Croydon. Unexpectedly it has become one of the country’s property hotspots.”

Source: City A.M.

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Where next for house prices?

House prices are continuing to rise, so this seems a fair assessment. But is property investment still a good plan in the long-term?

A key factor driving house prices upwards is that demand for new homes outstrips supply. Green belt restrictions are an essential consideration here, essentially limiting the expansion of many of our urban areas. Approving more land for housing is, however, unlikely to solve the supply shortage on its own.

A lot of land that is approved for development is not even in the hands of a house builder. The landowner’s choice is between striking the best deal today and waiting for a better deal at a later date, based on the expectation of increasing land prices.

The housing market has stabilised at much higher valuations than were previously reckoned possible. A common measure of affordability is the ratio of average house prices to average earnings. Homes are nearly as overvalued as they were at their peak before the great financial crisis.

In London and Dublin, affordability metrics appear to be defying gravity. But comparing prices to average incomes is less relevant there because large swathes of these cities are owned by overseas investors.

The buy-to-let phenomenon got going in 1996, with the introduction of mortgages which no longer required the borrower to live in the house. However, there are signs that UK regulatory changes have begun to send the buy-to-let boom into reverse.

In 2016 the UK government introduced a 3 per cent stamp duty surcharge on top of normal stamp duty rates for those buying second homes. It abolished a generous wear and tear allowance for those letting furnished properties and began tightening the rules on how landlords write off interest costs against income tax. These changes are enough to turn healthy annual profits into losses.

It is the challenge for policy-makers to ensure that more homes are built, to address inadequate supply. On the demand side, higher valuations deter purchases, and aforementioned tax and regulatory changes have made buy-to-let less attractive. When home-buyers work out whether a property is affordable or not, the cost of servicing a new mortgage as a chunk of take-home pay is now what matters.

The decline in borrowing costs over the past decade goes a long way to explaining why house prices have proven so irrepressible so far in this economic cycle. However, it is probably just a matter of time until we see higher interest rates again.

All of this suggests that in the medium term, the chances are that real house prices will revert to their trend of being flat over time or increasing at most 1 per cent a year.

After accounting for fees, tax, and the advantage of living rent-free, this makes the benefits of owning and occupying a house comparable to the expected return of a moderate risk financial portfolio – albeit without the robustness, conferred by carefully judged diversification across industries, countries, and asset types.

These are our current opinions but the future, as ever, is uncertain and past performance of investments is not a reliable indicator of future performance. If you’re not sure about investing, seek independent advice.

Claire McCombe is a private banker at Barclays Wealth & Investments.

Source: Irish News

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Could Brexit be reversed?

It is common knowledge that Brexit concerns have hit the UK housing market with the London a particular casualty. The situation seemed to calm somewhat over the weekend when the Prime Minister announced that a cabinet meeting had brought together warring parties to create a focused approach to Brexit. This situation has unravelled some was over the last few hours with the resignation of Brexit Minister David Davis and Foreign Secretary Boris Johnson. Theresa May’s Brexit plans are now in disarray and there is talk that Brexit could be reversed with another referendum potentially on the cards.

UK PROPERTY MARKET

While it would be unfair to suggest that the Brexit vote two years ago brought about the doomsday scenario that many experts predicted, it is beginning to have a drip feed effect on sentiment. The price of London property has been hardest hit with there are signs of a slowdown in growth in many areas of the country. Talk that large financial institutions, together with significant financial business, would be leaving London to rebase within the European Union has caused double-digit falls in London property prices.

So, if there was another referendum on Brexit (with recent polling suggesting a swing to remain) what impact would this have on the UK housing market?

NOTHING IS GUARANTEED

At this moment in time even Theresa’s position as prime minister is under great pressure. There is speculation of a leadership challenge from within the Conservative Party, Labour Party members are rubbing their hands with glee and criticism is rife. If we sit back and take a look at the situation from a distance, what does this actually mean?

At the best there will no doubt be an extension in Brexit negotiations with March 2019 no longer a viable exit date. In all likelihood there will be a new leadership challenge within the Conservative Party which would strengthen calls for a general election with a potential Labour government in waiting. What we do know is investors dislike uncertainty and even if calls for a reversal of the Brexit vote grew louder, which political party would dare go against the views of the people?

CONCERN AND CONFUSION

London has both the greatest to lose and the greatest to benefit from a continuation of Brexit negotiations or a reversal of the original decision. What we need today is calming words from the political arena and not the infighting which has broken out across all TV news channels. Infighting within the Conservative Party is rife with many experts suggest they will rip themselves apart, while the Labour Party is not without its own political infighting.

Jeremy Corbyn has regularly commented upon his hatred of capitalism and the fact that he will be coming after businesses if he does gain power. We also know that the Labour Party has openly discussed rent restrictions and other ways to increase the tax income from property investors. So, while the initial belief that Brexit may well be dead in the water has given a short-term uplift to London property investors, there is much pain and confusion on the horizon before the way ahead becomes clear.

Source: Property Forum

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UK property: Tenants to be offered longer tenancies?

Three-year tenancies are being proposed by the UK government, underlining the continued demand for rental property and the need for greater regulation in the sector.

Summary:

  • The UK government is consulting over the minimum tenancy term in the country
  • Under new proposals, tenants would be able to access three-year tenancy terms, helping people to “put down roots” without worries over short tenancies
  • Not only does it underline the growing reliance on the UK’s rental sector, but also the need for greater reform to provide more professional standards of management

UK tenants could soon be able to live in their rental property with three-year tenancies.

New government proposals aim to give more security to renters, with consultations on minimum tenancy lengths likely to continue until August 2018.

It comes at a time when homeownership rates in the country have fallen to 63% in 2017, compared with 72% 10 years’ previous. Of course, while affordability is preventing many people from making it onto the property ladder, there’s also a rising number of tenants that are turning to the rental sector as their long-term rental solution.

Indeed, research published in June found that 70% of UK tenants have no plans to buy a property in the future.

As a result, the UK government has recognised the importance of improving standards for those living in the country’s rental market. Tax reforms in recent years have been regarded as a means of moving the UK away from its traditional, outdated buy-to-let sector, and to instead focus investment into the purpose-built rental sector.

And these tenancy reforms, the government argues, would help those tenants that want to stay in the same rental property for a longer period of time to feel more settled in their home.

“It is deeply unfair when renters are forced to uproot their lives or find new schools for their children at short notice due to the terms of their rental contract,” argued Communities Secretary James Brokenshire.

“Being able to call your rental property your home is vital to putting down roots and building stronger communities.”

Source: Select Property

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Croydon has most high-risk mortgage lending

Croydon is the UK’s number one hotspot for high-risk mortgage lending, with 463 risky mortgages taken out in the area in 2017, up 11% from 419 the previous year, peer-to-peer secured property lending platform Lendy has found.

Croydon’s 463 risky mortgages places it top out of all 2,578 postcode areas studied in 2017 while the UK average was just 39 risky mortgages per area last year.

Walthamstow (421 risky mortgages), Wandsworth (363), Streatham (322), and Tooting (319) are the other leading areas for risky mortgages in the UK.

Liam Brooke, chief executive, Lendy, said: “More and more people are stretching their budgets to live in Croydon. Unexpectedly it has become one of the country’s property hotspots.

“Banks are still piling into the owner-occupier market and choosing to lend more to risky mortgage borrowers rather than property developers.

“If just some of this lending went to well-run property developers, it would get more spades in the ground, more houses built and start to alleviate the housing crisis.”

According to Bank of England guidance, mortgages are considered “high-risk” if they are lent at 4.5 times or more of the applicant’s salary.

The number of high-risk mortgages in Croydon reflects the turnaround in its reputation. Once seen as one of the least glamorous parts of London, it has surprised many by becoming one of the hottest areas in the capital’s residential property market.

Lendy explained that Croydon is now established as one of the UK’s leading technology hubs, with over 1,500 tech startups based in Croydon Tech City.

Croydon’s Boxpark, opened in 2017, and the upcoming Westfield Shopping Centre, due to begin construction in mid-2019, are examples of the ongoing redevelopment and gentrification of the area.

Croydon was also the only area in South London that saw house prices rise in the year to February.

The number of risky mortgages in the UK jumped by 15% last year, with 101,380 approved by banks and Lendy thought that the increase in the number of risky mortgages to residential purchasers means that even less funding is available to property developers.

Banks are choosing to pour more lending into the risky owner-occupier market, rather than fund new housing developments that could ease the UK’s housing crisis.

Source: Mortgage Introducer

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Bank of England chief raises expectations of August rate rise

Bank of England governor Mark Carney has raised expectations of an interest rate rise next month, after talking up the UK’s economic performance.

Data points to a pick-up in growth in the second quarter of the year, after a disappointing start to 2018, according to the chief monetary policymaker.

In a speech, Carney said: “The incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate.

“A number of indicators of household spending and sentiment have bounced back strongly from what increasingly appears to have been erratic weakness in Q1.”

The job market has remained strong and headline inflation is expected to rise in the short-term because of higher energy prices, the governor said.

Economy evolving

He added that the economy is evolving largely in line with the May inflation report projections.

In this scenario, raising interest rates would be appropriate to return inflation to its target, according to Carney.

The Bank of England’s rate-setting Monetary Policy Committee is due to meet again in August.

At the last meeting in June, three members of the committee voted to immediately raise rates to 0.75%, from the current level of 0.5%.

Carney voted to hold rates in June, but following his remarks today, it appears he could switch and favour a rate rise next month.

Source: Your Money