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WHAT’S HAPPENING OUT THERE?

With the banks stock markets and any other market you care to think of appearing to be in crisis or melt down; Property Hawk decided to see what is happening on the streets for every day buy-to-let landlords in the UK right now.

Thank God that’s not me!

We start by highlighting one case quoted in the much respected blog produced by property investment expert David Lawrenson.

He recalls the tale told to him by a contact of a novice northern landlord who had bought 7 off plan apartments (1/2/3 bed) in a block of 30ish apartments about 10minuntes from Manchester Centre which completed 6 months back for a total of just over £1 million as his first property investment. No money down, naturally and allegedly a series of 15% gifted deposits from the developer. The developer promised to pay interest payments for 6 months, or until they were let. Apparently he cannot now be contacted.

Do you need buy-to-let insurance in 2008?

The interest only monthly mortgage payments come to £6000 per month but only three apartments have been let and at much less than what were promised. They are bringing in £1485 per month in total leaving a shortfall of £4515 per month. Ouch!

As David says:

“You have to ask who on earth would lend this man this money on the figures involved – they do not add up whichever way you look at it. It is madness!”

So how ever bad things get for us landlords there is always somebody who is worse off. We have been warning landlords for some time about over priced city centre apartments but if landlords do get into trouble with their mortgage lender here is what they need to do.

Most popular investments

Despite the fact that many new landlords are perceived to have bought apartments according the recent research conducted by Mortgage Express the traditional terrace property is still the most popular type of property with 59% of landlords having a terraced property in their portfolio. Flats were also popular with 47% of landlords having two bed flats in their residential investment portfolio. Only 13% & 7% of landlords had a detached property or bungalow. Our favourite is still the unloved maisonette owned by 11% of respondents.

Rents rising

According to Association of Residential Letting Agents (ARLA) rents in the private rented sector have risen by an average of 4% for houses and 2% for flats in the three months to the end of February. These averages have however been boosted by a 9% rise in Prime Central London and a 5% rise away from the South East. In the South East itself, rents fell slightly, by 2% for houses and 5% for flats.

The view of a general trend of rising rents is supported by the Mortgage Express survey which recorded 37% of respondents reporting increasing rents compared to only 2% reporting a fall. Landlords are generally optimistic about rents with the survey showing that a third that expect to raise rent levels in the next 6 months.

The exception to this positive picture is in provincial cities where anecdotal evidence shows that over supply of apartments is still placing a downward pressure on rental levels. We think that landlords are right to be optimistic with many potential homeowners struggling to get mortgage finance or deciding to rent in light of house price uncertainty rather than commit to a house purchase Property Hawk projects that rents should continue to rise.

Landlords find out how to raise your rent here


House prices

After continuing their upward progression during 2007 with house prices according to the HousePriceCrash site, rising in all parts of the UK the picture in 2008 so far is mixed. For instance Right Move showed a rise of 3.2% for February but acknowledged that because their indices reflects prices of properties coming to the market February is characterised by a jump in price as new sellers look to test the market. In contrast both the Halifax
and Nationwide continued to record small falls in the average selling price of residential property with them showing prices still off their 2007 peaks by 1.6% and 3.6% respectively. The picture is very patchy with some areas such as Scotland pushing ahead strongly whilst others such as the East Midlands showing gentle falls.


Are landlords getting worried?

Just less than 45% of landlords interviewed by Mortgage Express reported that they were not concerned by the down turn in the buy-to-let market because they are in it for the long-term with capital appreciation being their primary motivation. Fifteen percent admitted to being quite concerned, but had no plans to sell. Only 1% of landlords said they were planning to leave the market. 43% of landlords planned to increase their portfolio over the next 6 months. This confidence is borne out by the Repossessions figures produced by the Council of Mortgage Lenders (CML) which shows that only 0.04 of mortgaged buy-to-let properties were taken into possession during the 4th quarter of 2007.

Letting experiences

Most landlords have managed to avoid voids over the last 6 months with only 28% reporting an unplanned void period. Over half 58% reported no voids at all.
The majority of Mortgage Express respondents have not got into rental arrears(67%), although just over a quarter of landlords (27%) reported experiences with tenants that were in arrears.

Mortgages & interest rates

Most economists predict that the current Bank of England base rate should be heading down during 2008 from its current 5.25% to possibly as low as 4.5%. The dark clouds on the horizon are being cast by the resurgent spectre of inflation. This could prevent the Bank of England cutting rates by as much as it would want to for fear of not meeting the Governments 2% inflation target.

Despite falling interest rates buy-to-let mortgage pay rates have not being falling because of the ‘credit crunch’ making credit and mortgages more expensive. Some of the best rates highlighted by leading financial website Moneyfacts are Cheltenham Gloucester 4.98% fixed rate product with a 85% LTV. Chelsea BS are offering a 5.04% discounted rate for 2 years but with only an 80% LTV. They are also offering a term of loan variable rate of 5.91% for landlords who don’t want to have to swap their buy-to-let mortgage. To access these products, search for other mortgages or just to get a little more advice try Property Hawk’s

Use our FREE Landlord Software – free property management software for landlords.

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