Best cities for buy-to-let investments revealed
Despite the recent tax and regulatory changes, buy-to-let continues to look an attractive income investment at a time of low-interest rates and volatile stock markets, but which city ranks best for buy-to-let investment?
Aldermore’s new Buy-to-Let City Tracker, which analyses 25 cities across the UK to understand the best places for landlords to invest in, has found that Oxford narrowly ranks number one, ahead of Manchester.
The Buy-to-Let City Tracker comprises of five core indicators: average rent per room per month, short-term yield for a new buy-to-let purchase, average property price rise over the last 10 years, the proportion of vacant properties in the city and size of the private rental market.
The index uses a series of secondary data sources including the ONS, Census and other official housing statistics.
Oxford, which scored well on four out of five metrics, has one of the largest private sector markets of all 25 cities, with 28% of all residents in the city renting privately.
Oxford also offers above average rental ability, at an average of £596 per room per month, a low level of vacant properties, and security in investment with property prices having increased yearly by on average 4.8% the past decade.
The only sore spot is that short-term return through yield is one of the lowest on the list.
Damian Thompson, director of mortgages at Aldermore, said: “Aldermore’s Buy to Let City Tracker shows there are still great short and long-term investment opportunities for landlords.
“The number of people renting in the UK has been rapidly growing, up 1.7 million in ten years, so private landlords are an increasingly central part of the housing market as supporting a robust and strong Private Rented Sector becomes more essential.
“The UK housing market has never been a singular thing, instead made up of multiple smaller markets with their own unique conditions and challenges. There have been numerous regulatory changes recently and persistent economic uncertainty but this affects every region differently.
“Going forward, landlords will need continual backing and advice from lenders and the wider industry so they can provide choice, diversity of tenure and quality properties for renters.”
Aldermore’s Buy to Let City Tracker rankings table:
| Ranking | City | Region | Overall score |
| 1 | Oxford | South East | 74 |
| 2 | Manchester | North West | 72 |
| 3 | Edinburgh | Scotland | 72 |
| 4 | London | London | 71 |
| 5 | Norwich | Eastern | 66 |
| 6 | Bristol | South West | 64 |
| 7 | Nottingham | East Midlands | 63 |
| 8 | Cambridge | Eastern | 63 |
| 9 | Brighton | South East | 60 |
| 10 | Milton Keynes | South East | 55 |
| 11 | Plymouth | South West | 54 |
| 12 | Hull | Yorkshire | 49 |
| 13 | Leicester | East Midlands | 49 |
| 14 | Coventry | West Midlands | 49 |
| 15 | Southampton | South East | 48 |
| 16 | Birmingham | West Midlands | 47 |
| 17 | Liverpool | North West | 44 |
| 18 | Cardiff | Wales | 39 |
| 19 | Glasgow | Scotland | 37 |
| 20 | Leeds | Yorkshire | 32 |
| 21 | Derby | East Midlands | 31 |
| 22 | Sheffield | Yorkshire | 30 |
| 23 | Bradford | Yorkshire | 29 |
| 24 | Newcastle | North East | 26 |
| 25 | Wolverhampton | West Midlands | 25 |
Accord looks to make products more accessible to ‘broader range of landlords’
Accord Buy To Let is attempting to improve its service and make its mortgage products more widely accessible by amending its criteria and documentation.
The intermediary only subsidiary of Yorkshire Building Society will now accept a minimum income requirement of £25,000 per application, as opposed to at least one applicant requiring £25,000 minimum income. The move is designed to create greater flexibility for landlords.
In addition, the number of years’ evidence required from self-employed applicants has been dropped from three years to two years.
Chris Maggs, senior commercial manager at Accord Buy To Let, said: “We have reviewed our criteria to improve the service we provide to brokers. These changes will not only increase turnaround times, but will make our products more accessible to a broader range of landlords.
“These latest updates come at the end of a very exciting year for Accord Buy To Let. In the last 12 months we’ve made efficiencies to the application process by replacing signed declarations with a tick box to ensure we can keep our turnaround times as low as possible. We’ve also improved our proposition with the launch of an 80% LTV range, increased maximum age and term and introduced a new income and tax-based Income Cover Ratio (ICR) of 125%.
“Landlords have had a number of challenges to face over the last few years, and it’s likely for the short term at least there will be continued uncertainty, but we are constantly looking for ways we can support the sector and help more property owners grow their businesses.”
Accord Buy to Let recently made modest reductions to the cost of its 80% loan-to-value buy-to-let mortgage range.
The latest products for purchase and remortgage include two-year fixed rates at 3.31% with a £950 fee or 3.85% fee-free.
There is also a five-year fixed rate deal available at 3.63% with a £950 fee.
All mortgages come with a free valuation and £500 cashback or £250 cashback and free legal services for remortgage products.
Simon Garner, product manager at Accord Buy to Let, commented: “We know the present uncertainty in the market is impacting decisions, so following recent improvements to our criteria, we’re continually reviewing the range to offer landlords the most competitive rates.”
Many landlords ‘have not recognised the need to educate themselves’
How do you potentially balance property buying and management with a full-time job? What strategies have you developed to build wealth and generate passive income?
When it comes to investing in property there is a lot to learn.
Generic education has become one of the most important tools for landlords, according to Paul Shamplina, a director at Hamilton Fraser Group and founder of Landlord Action.
“One of the most common excuses I hear from landlords is ‘I didn’t know’,” he said.
Whether you are new to property or a long-term investor, it is important to keep on top of tax and regulatory changes, along with a wide range of other commitments.
Shamplina continued: “We enter education from a young age and then later, may take the path of further education which best suits our skillset or interests.
“No matter what we do, we are always learning. For example, when we start a new job, more often than not, we’re given training and guidance.”
Shamplina feels that part of the problem with the PRS is that for many, becoming a landlord started off as a “lucrative hobby, not a job”.
As the sector has grown, it has become entirely necessary to put some policies in place to protect the consumer and raise standards, just as a business would have in place for its employees and customer.
However, legislation has come so thick and fast that many landlords have struggled to keep up and have not recognised the need to educate themselves as a landlord.
He added: “If you are a landlord that likes managing your rental property yourself, building a relationship with your tenant so that they are encouraged to stay longer and treat your property as a home, that is fantastic.
“However, the latest count I read, was there are now 176 rules and regulations relating to letting a property, so my advice is to simply learn, learn, learn.
“I tell all the landlords and letting agents I train to go online at the beginning of the day before they get stuck into work mode, emails and calls, and just read what is going on in our industry.
Shamplina advises BTL landlords to visit various websites dedicated to the PRS, including Landlord Today.
He also advises landlords to join a landlord association such as NLA or RLA, as, in his view, they “provide the latest news, campaigns, lobbying, market trends and sign posting of recommended suppliers, as well as an advice line”.
He continued: “Being part of this community of professional landlords means collectively we have a stronger voice. This I have seen first-hand while sitting on the Fair Possessions Coalition in response to the government’s intentions to abolish Section 21.
“Along with many other organisations and associations in the industry, we’ve come together. We need more of this going forward.
“Landlord Redress will be mandatory in the not too distant future. Personally, I think this will be a positive move which will force landlords to be accountable, responsive and more compliant when renting out a property. And yes, this will require more learning because it means the consumer, your customer, will be able to make a complaint about your service.
“It’s tough enough working full time, being a parent, running your own house, etc. So, if you simply do not have the time to be a professional landlord, find a tenant, deal with all the compliance paperwork, arrange an inventory and handle regular communication with your tenants, I strongly advise you to use a managing agent.”
Are you entitled to compensation due to onerous ground rent charges?
Thousands of landlords trapped in developer contracts with spiraling costs could be entitled to compensation, according to legal experts.
Around 100,000 homeowners across the UK, including many buy-to-let landlords, are estimated to be affected by onerous ground rents.
Britain has long had leasehold homes, but only in recent months has the ground rent scandal exploded.
A complete ban on new houses sold as leasehold is now being proposed by the government, while it also wants to reduce ground rents to zero.
In addition, the competition watchdog has now formally launched an investigation into the housing market over the mis-selling of leasehold properties.
Daniel Brumpton, partner and head of Nelsons’ professional negligence team, said: “The Competition and Markets Authority [CMA] has formally launched an investigation into the housing market over the misselling of leasehold properties, which will investigate permission fees, ground rents and other terms associated with leasehold properties.
“The competition watchdog will be consulting with developers, lenders and freeholders requesting information in relation to how leasehold agreements are drawn up, agree and subsequently maintained by the parties. The report will also consider the effects that ‘unfair’ terms have on leaseholders and have asked for people to share how they have affected their lives.
“Developers and freeholders could face legal action if the watchdog finds evidence of leasehold mis-selling.”
The East Midlands-based law firm Nelsons is prepped to take on compensation claims from property owners in the East Anglia, East Midlands, Yorkshire, North East and far North West regions.
Brumpton says that there is a lot landlords can do if they are caught in the ground rent trap.
He added: “There are currently four million leasehold properties in the UK, with around 100,000 of these being affected by onerous ground rents.
“We’re ready to help landlords who have found themselves unwillingly involved in the leasehold mis-selling scandal to bring a professional negligence claim against the conveyancing solicitor they instructed to help with the purchase of the property.
“If the solicitor failed to give you advice about the existence and implications of the onerous ground rent clause, we can assist you in suing for damages.
“Historically, ground rents have been low – no more than around £50 per year. However, in the last few years, housebuilders have started to increase ground rents to an initial charge of between £250 to £500 a year.”
Brumpton points out that some developers have also added clauses in the lease that allow them to review the ground rent periodically, for example, every five, 10 or 25 years. Typically, the review clause allows the freeholder to increase the ground rent at each review.
He continued: “In theory, a ground rent that doubles every 10 years doesn’t sound too bad. However, most leases are set for the long-term such as 999 years. If a ground rent of £250 per year doubles every 10 years, you can expect to pay £16,000 per year after 60 years. For many people, that’s simply unmanageable. This is also not something a landlord of a buy-to-let property could expect to pass on to tenants either.
“If you are a leasehold owner who purchased a new build property in the last 10 years, you should check your lease to see what it says about ground rent and what you can expect to pay.”
Best cities for buy-to-let investments revealed
Despite the recent tax and regulatory changes, buy-to-let continues to look an attractive income investment at a time of low-interest rates and volatile stock markets, but which city ranks best for buy-to-let investment?
Aldermore’s new Buy-to-Let City Tracker, which analyses 25 cities across the UK to understand the best places for landlords to invest in, has found that Oxford narrowly ranks number one, ahead of Manchester.
The Buy-to-Let City Tracker comprises of five core indicators: average rent per room per month, short-term yield for a new buy-to-let purchase, average property price rise over the last 10 years, the proportion of vacant properties in the city and size of the private rental market.
The index uses a series of secondary data sources including the ONS, Census and other official housing statistics.
Oxford, which scored well on four out of five metrics, has one of the largest private sector markets of all 25 cities, with 28% of all residents in the city renting privately.
Oxford also offers above average rental ability, at an average of £596 per room per month, a low level of vacant properties, and security in investment with property prices having increased yearly by on average 4.8% the past decade.
The only sore spot is that short-term return through yield is one of the lowest on the list.
Seven of the top ten cities for landlords are in southern England. Both Bristol and Oxford fare particularly well for long term returns, with an average 4.8% increase in property prices. Brighton scores well for rent, yielding an average of £507 per room. The city also has one of the largest market sizes across the UK, with a staggering 28% of inhabitants privately renting.
Damian Thompson, director of mortgages at Aldermore, said: “Aldermore’s Buy to Let City Tracker shows there are still great short and long-term investment opportunities for landlords.
“The number of people renting in the UK has been rapidly growing, up 1.7 million in ten years, so private landlords are an increasingly central part of the housing market as supporting a robust and strong Private Rented Sector becomes more essential.
“The UK housing market has never been a singular thing, instead made up of multiple smaller markets with their own unique conditions and challenges. There have been numerous regulatory changes recently and persistent economic uncertainty but this affects every region differently.
“Going forward, landlords will need continual backing and advice from lenders and the wider industry so they can provide choice, diversity of tenure and quality properties for renters.”
The UK’s next prime minister needs to take housing seriously
Thursday’s general election presents the main political parties with an opportunity to address voters’ concerns about housing, and not just focus on attempts to leave the EU.
With UK house prices and rents continuing to rise, owed largely to the imbalance between property supply and demand, housing needs to be top of the agenda for the incoming prime minister, according to Apropos by DJ Alexander.
Whichever party wins office, the property management firm believes that they need to immediately respond to the UK’s growing housing problem and develop a coordinated response which involves building more social housing, maintaining and developing a better private rented sector (PRS), and encouraging affordable home ownership.
David Alexander, managing director of Apropos by DJ Alexander Ltd, said: “Housing has become one of the key issues in the UK as the population increases, the number of smaller households rises, and the number of older people increases all of which has ensured that demand far outstrips supply.
“There needs to be a coordinated and unified approach to resolving this issue which involves the three main pillars of the housing market: home-owners; the private rented sector; and social housing.
“With the UK population set to increase by over 300,000 people a year for the next 25 years demand will continue to be strong and rather than set one group against the other the market needs to respond as a whole.”
Average rental deposit hits almost £1,300
The cost of the average deposit paid by renters has dropped to £1,299, new figures show.
The latest research from Hamilton Fraser’s deposit replacement scheme, Ome, reveals that in 2019 to date, existing tenants have collectively paid deposits worth £1.9bn.
But the amount paid for the average deposit is due to drop for the first time in five years, already down 3% from last year’s average of £1,336, although it is still 7% higher than in 2015.
So far in 2019, the number of new deposits being taken has dropped by 17% when compared to last year, while the total value of these deposits is also down 19% from some £611m to £496m.
Looking over the last five years, the number of new deposits being taken has fallen by 22%, while the total value is down 17% when compared to last year.
Matthew Hooker, co-founder of Ome, said: “We’ve seen a decline in the number and value of new deposits being taken over the last few years and a driving factor behind this is a change in our lifestyle choices to rent for longer, which reduces the number of deposits being taken and the total value as tenants opt to stay put in the same property.
“Although the average cost for the individual tenant has continued to climb due to increasing rents which form the basis of the deposit calculation, this year looks to be the first in a long time that we might actually see this cost drop.
“This has largely been driven by new legislation that has reduced the number of weeks rent an agent or landlord can charge for both a holding and tenancy deposit.”
Two in five renters fear they will never afford to own a home
A significant number of people renting in the UK say they will never be able to afford a home, according to new research by Halifax and YouGov.
The study found that two in five renters cannot see how they will ever be in a position to buy a property, despite a desire to own a place of their own.
It was also revealed that around three in ten private renters in the UK think it is now normal for people to rent for life. However, just 14% of those aged between 18 and 24 share this view, with more than half of this group believing they will one day own their own property.
Renters aged between 35 and 44 are less optimistic about being able to ever acquire a property, with a third considering it normal to rent for life and 28% believing that they will never buy somewhere.
Russell Galley, managing director at Halifax, commented: “Taking that first step onto the property ladder remains a rite of passage for many,” said Russell Galley, managing director at Halifax.
“Last year, first-time buyers accounted for the majority of the mortgage market for the first time in well over 20 years. This shows that with the right support and a few sacrifices, home ownership can remain an attainable goal.
“The financial hurdle of saving enough for a deposit might feel like a daunting or at times near-impossible task, but there are a number of options out there, including government schemes and family support mortgages, to help put first-time buyers on the right track.”
Rogue landlord ordered to pay almost £3,000 for unlicensed HMO
A buy-to-let landlord in Worcester has been ordered to pay almost £3,000 for operating an unlicensed House of Multiple Occupation (HMO) on Canterbury Road, WR5.
Worcester Magistrates Court heard that Mohammed Rafiq operated a premises illegally, leaving the council with little option but to take legal action against the landlord.
Rafiq was charged with three offences for breaches of the management of HMO regulations, including failing to supply firefighting equipment and having insufficient fire alarms, failing to install emergency lighting and the failure to display his name, address and contact details at the house.
Cllr James Stanley, chair of Worcester City Council’s communities committee, commented: “The majority of landlords in Worcester abide by the law but as this case demonstrates, the City Council won’t hesitate to act in cases where landlords exploit tenants, provide dangerous or substandard accommodation or flout their legal obligations,” said.
“I would urge any Worcester residents who are facing difficulties with their tenancy or have concerns about an HMO to contact the City Council’s housing team for advice and support.”
Property expert urges BTL landlords to ride out recession
With Britain edging closer to its first recession since the financial crisis, a leading property auctioneer is urging property investors, including buy-to-let landlords, to hold their nerve against the spectre of an economic downturn.
The country’s dominant service sector, which accounts for about 80% of the economy, unexpectedly plunged into contraction last month, in a sign of the increasing stress facing the economy as Brexit looms.
According to IHS Markit and the Chartered Institute of Procurement and Supply (Cips), activity in the sector fell as companies reported a fall in sales, job losses, cancelled and postponed projects and weak investment levels.
There has been a recent rise in properties going into receivership, banks unwilling to lend for construction projects and a decline in tenants looking to rent business or residential properties, according to Mark Bailey, managing director of Landwood Group, who says that a rise in auction sales is also evident, largely down to an increase in repossessions.
He said: “Worryingly, at Landwood we are also receiving more instructions over the past few months than we have done for a year or more – instructions for properties that have sadly gone into receivership.
“It is harder for property owners to let business space and for domestic landlords to find tenants – there’s no doubt that a squeeze is on.
“With each failed building project, banks become more nervous to lend, builders stop building… and we fall headlong into a dreaded recession. Once we do, it’s anyone’s guess how deep it is or how long it lasts.
“The blame for all of this cannot be put at the door of Brexit… well, not entirely. There is no arguing with the fact that this is a period of change – domestically and globally. People err to the negative whenever there is change on the horizon – until events transpire and the scales balance out. The big issue is uncertainty and property is key to all of this. Uncertainty causes negativity, while a solid market has the opposite effect.”
So, if the pointers are all correct and a recession is upon us, what is the advice?
“Sit tight,” said Bailey. “Whether you are a commercial property owner or a domestic landlord, try your best to ride it out, perhaps for six months, before making any business decisions. Look at your borrowings and don’t over-stretch yourself at this time.
“There are always people who benefit from downturns in the market and they tend to be cash buyers. So if you have cash to invest long-term, a ripe time to buy may be about to begin.
“For the rest of us, it’s time to batten down the hatches and ride out the storm – see you on the other side.”