London Property Investment Market – Update

Here at Ventis Property, we have been noticing changes in attitude towards clients investing in London property as the expectations and ability to secure solid investments has become increasingly challenging.

Like the rest of the country, London has seen a decrease in the number of sales over the past several years as a result of the impact of the credit crisis and difficulties in securing mortgages, however we are witnessing values rising.

The number of home sales has fallen again across the country

Source: CML 

Lenders report that mortgage demand remains soft and unlikely to increase soon

Source: Bank of England Credit Conditions Survey 

Average house prices grew 6% in London in the last year, higher than other regions

Source: CLG

So how is this impacting investors?

In recent years the investment market has been highly focused on securing properties under value from anything up to 30% off comparable values. With interest rates remaining at an all-time low, the volumes of distressed opportunities has significantly decreased even though nationally the UK’s economic activity has remained stagnant.

London and the South East has remained a consistent performer in property as money from overseas and its diverse economy has kept values stable and in many areas we have seen an increase. The demographics and density of population has kept the rental market particularly buoyant and we are seeing a solid growth in yields.

A majority of surveyors in London expect house prices to rise in the next quarter

Source: RICS

As a result, investors are finding it increasingly difficult to secure deals in London at target prices achieved post 2008 as demand has significantly increased and supply stagnated. Where values have been on the decrease around the country, access to  below market value deals are available, however the appetite and concern of risk against further decreases has created a focus for investors towards the South East.

What’s on the outlook for investors?

Our view is that London and the South East is becoming somewhat of a ‘safe haven’ for investors and concerns around achieving 25% or 30% off comparable property is on the wane. Where our clients are able to achieve yields of over 6% or 7%, deals are being secured where discounts can be viewed between the 5% to 15% range.

Investors are viewing the significant potential for capital growth in the medium to long term as less of a risk than investing in alternative locations around the UK.

Author: Tahir Akram

Ventis Property Investment

Kensington Mortgages has launched a new range of buy-to-let deals with loan-to-values up to 85%.

Key points are as follows:

• At 85% LTV there is a two-year fixed rate mortgage at 5.99% with a 2.50% fee and at 80% LTV, customers can choose between a two-year fixed rate at 5.69% with a 2.50% fee or go for a 5.99% rate with a flat fee of £1,499.

• It has also reduced the rental cover it requires from 125% to 120%.

• Landlords can choose between a two-year fixed rate mortgage for 5.24% up to 75% LTV, with a 2.50% fee, or opt for the flat fee of just £1,499 and pay a rate of 5.74%.

This piece of news suprised a lot of people, including ourselves here at Alpha Property Investment. The return of 85% LTV on buy-to-let finance is clearly a positive development for the investors and the property market as a whole. The fact that lenders are upping the LTVs reflects their increased confidence in the property market as well as the ability of the clients to keep up the payments on their mortgages.

The rate is slightly on the high side at 85% LTV, but considering it is fixed for 2 years, we believe this is a sensible option for clients looking to minimise capital input and lock in their ongoing mortgage payments.

Having to put in only a 15% deposit is a very attractive proposition for investors and our clients are welcome to talk to one of our partner mortgage brokers to check on their eligibility on this great new product.

A study last month by Moneyfacts.co.uk has shown that the number of mortgages on the market is greater than 3,000 for the first time in 15 months and 42 per cent more than were on the market last July.

Recent additions that investors are to note are the introduction of a new 75% LTV product by Aldermore to compete with the likes of Birmingham Midshires, Cheltenham & Gloucester & Natwest as well as the emergence of the first 80% LTV we have seen in a while by the Mortgage Works.

Nationwide also announced today that house prices are 9.5% below their 2007 peak with transaction volumes still relatively low despite a slow return of more sellers in recent months. It is likely that the announcement of anticipated capital gains increases may prompt some landlords with more than one property to sell before tax rates go up which will shift the demand-supply balance back in favour of buyers, halting house price rises.

Buying below market value today and locking away equity is still very wise when taking the medium to long term view, particularly if buying wisely for monthly cashflow as well as growth.

The Mortgage Works have launched a new range of buy-to-let mortgage products which include 80% loan-to-value products at very competitive rates.

This is very positive news for the buy-to-let sector as this is the first mainstream lender to offer 80% finance in over a year.

Highlights include;

• 80% LTV, 4.69% until 31.07.2011, thereafter 4.99% (variable) 5.4% APR, 2.5% arrangement
• 80% LTV, 5.69% until 31.07.2011, thereafter 4.99% (variable) 5.4% APR, 1.5% arrangement
• 80% LTV, 5.99% until 31.07.2011, thereafter 4.99% (variable) 5.4% APR, £1,795 arrangement
• 80% LTV, 5.49% until 31.01.2012, thereafter 4.99% (variable) 5.5% APR, 2.5% arrangement
• 80% LTV, 5.99% until 31.07.2012, thereafter 4.99% (variable) 5.7% APR, 2.5% arrangement
• 80% LTV, 5.99% until 31.07.2013, thereafter 4.99% (variable) 5.8% APR, 3% arrangement

Many of the brokers we speak to on a daily basis believe that other mainstream lenders such as BM and C&G will follow suit shortly and introduce an 80% LTV product to remain competitive.

*PLEASE NOTE: these are a guide and accurate as of 20/05/2010. Terms & conditions attached to the loans vary and for full information you should contact the Mortgage Works Direct or call the office and we will put you in touch with our recommended mortgage broker.

Communities Secretary Eric Pickles and Housing Minister Grant Shapps today announced that with immediate effect, they are suspending the requirement for homeowners to provide a Home Information Pack when selling their homes.

Pickles today laid an Order suspending HIPs in England and Wales with immediate effect, pending primary legislation for a permanent abolition.

Communities Secretary Eric Pickles and Housing Minister Grant Shapps today announced the suspension of the legal requirement for homeowners to provide a Home Information, or HIPS pack prior to selling their property. The suspension takes immediate effect across England and Wales as of today, May 20^th.

Today’s move is a key step taken by the Coalition Government to reduce the cost of selling in the current market, which finds itself in need of a boost.

Eric Pickles said:

“The expensive and unnecessary Home Information Pack has increased the cost and hassle of selling homes and is stifling a fragile housing market.

“That’s why I am taking emergency action to suspend the HIP, bringing down the cost of selling a home and removing unnecessary regulation from the home buying process.

“This swift and decisive action will send a strong message to the fragile housing market and prevent uncertainty for both home sellers and buyers.

“HIPs are history. This action will encourage sellers back into the market, and help the market as a whole and the economy recover.”

Energy Performance Certificates, or EPC’s as they are more commonly known are still a legal requirement for the time being as they are eco-friendly and are informative for potential buyers when considering future energy bills.

Housing Minister Grant Shapps said:

“This is a great example of how this new Government is getting straight down to work by cutting away pointless red-tape that is strangling the market. Rather than shelling out hundreds of pounds for nothing in return we’re stripping away bureaucracy and letting home owners sell their properties.

“But we’re also showing our commitment to a greener housing market by keeping Energy Performance Certificates and making them more relevant in helping buyers make informed decisions on the energy costs of their new home.”

Hopefully landlords across the UK will soon be hearing news of another positive step by the Coalition Government – that is, the abolition of direct payments to tenants on benefits, and a return to the old system which saw housing benefit payments going directly to landlords.

Watch this space!