Further Threat to Buy-to-Let Market Means It May Be Time to Sell
Apart from George Osborne’s punitive policies, one of the biggest threats to private landlords in recent times has been the advent of Build to Rent.
And while the Buy to Let sector is in decline, this newer approach appears to have galvanised major investors.
The latest development in this housing revolution has been an announcement by the big players in the Build to Let sector about a pledge they have signed to offer tenants three year tenancies in any of their new developments.
The pledge, masterminded by the British Property Federation, could mean that longer tenancies ,which research shows families really want, becoming the norm.
The signatories include 20 of the Build to Rent sector’s most active investors and developers.
They are providing a new generation of purpose built, professionally managed rented homes with family-friendly tenancies up to three years.
This presents another challenge to traditional Buy to Let investors, who in the main can’t compete with the new offerings.
Many of these smaller investors are now seeking new income streams and are looking to get out of the rental business.
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Meanwhile, it is claimed that buy-to-let is dead… or as good as, according to most experts.
Recent changes to tax and legislation have made it virtually impossible for ordinary individuals to now build a profitable buy-to-let portfolio.
The result is a 44% decline in buy-to-let mortgage applications compared with this time last year.
For those still in the business there are other indicators that all is not well.
A new report states that there has been a 24% increase in evictions across Scotland’s social rented sector in the last two years, with the vast majority, 95%, for rent arrears.
While private landlords are faced with different challenges, this report highlights the fragile state of the letting sector as a whole.
Another negative statistic comes from the Nationwide who found that the residential property market in the UK is cooling.
The latest index shows that prices have dipped for the second month in a row and annual growth is at its weakest since 2013.
Prices were down 0.4% month on month in April and year on year growth is now 2.6%, down from 3.5% in March, taking the average price of a home to £207,699.
Suggestions that the figures are due to a general election being called are perhaps premature as they cover the weeks before the announcement.
But it is clear that price growth is slowing.
“In some respects, the softening in house price growth is surprising because the unemployment rate is near to a 40 year low, confidence is still relatively high and mortgage rates have fallen to new all-time lows in recent months,” said Robert Gardner, Nationwide’s chief economist.
“While monthly figures can be volatile, the recent softening in price growth may be a further indication that households are starting to react to the emerging squeeze on real incomes or to affordability pressures in key parts of the country,” he added.
Alex Gosling, chief executive of online estate agents HouseSimple, said: “If we were seeing a house price growth soften during a traditionally quiet period for buying and selling then this could be overlooked, but we are now in the middle of the spring market when we expect to see activity pick up.
“People’s buying and selling decisions are underpinned by confidence, and at the moment they are facing a huge amount of uncertainty which is inevitably going to dent confidence.
‘There’s every chance the market will cool further in May as buyers and sellers hold off making a decision until after, the General Election on June the 8th.”
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