Has the buy-to-let bubble burst?
There are many indicators which suggest that the good times have gone and that tomorrow’s investor in residential property will face a rocky road.
For a start, the number of buy-to-let mortgages available is falling.
This is a reaction to lower demand, which is fueled by punitive new taxes and more stringent new lending regulations.
Since the turn of the year, new affordability standards have been levied by the Prudential Regulatory Authority.
Landlords must satisfy their lenders that they can afford the level of debt they want to take on.
They are now required by many lenders to prove they could afford the loan repayments if interest rates rise to 5.5%.
The upshot is many buyers are unable to borrow as much as in the past or as much as they would like.
In some cases they are not able to borrow at all.
And some investors who bought their properties under old affordability rules will not be able to remortgage.
In addition, the amount of rental income required to service a loan has been increased by many lenders.
Until recently the industry standard was 125%. In other words for every £100 of mortgage interest applicable the rental income had to be £125.
Today in many cases that income figure stands at 135-140%.
This leaves landlords with two options – either borrow less money or increase rents.
Yet, several recent surveys suggest most tenants already believe they cannot afford any rent increases.
They claim they are already stretched financially just coping with current rental levels.
In the meantime, recent research shows that rents have actually increased by less than inflation in the past 12 months.
In January the average UK rent was 0.7% higher than in January 2015. The rate of inflation for same period was 1.7%.
If you are a buy-to-let landlord who views the future with despair, then perhaps we can help.
R&T Property Solutions is on the look-out for all types of properties, whether they are individual flats or gathered in a portfolio.
We’re based in Glasgow but operate throughout Scotland.
If you are interested in selling properties in Aberdeen, flats in Dundee, homes in Edinburgh or portfolios which include central Scotland, then contact us right away.
We will do our best to agree terms with you in a speedy and efficient manner.
It would suit us if you wanted to sell in a hurry as we can make you an offer within 24 hours, buy fast and pay cash.
We will do our utmost to limit any disruption to your tenants, if you have any.
You won’t have to worry about estate agents’ fees and a Home Report will not be required.
And if you use a solicitor on our panel we can pay the fees.
It all adds up to a hassle-free, fast and transparent transaction.
Unlike many investors, we are not influenced by political or economic fluctuations. We’re family-owned and have been in business for 60 years.
We hope to be here buying property and land for another 60 years.
We understand that many buy-to-let investors are concerned about what is becoming an increasingly challenging industry.
And depending on circumstances these fears are genuine.
This has been reflected in a 5% fall in the number of loans available in recent months.
This decline is the worst since this period in 2009.
Year-on year in 2016 buy-to-let borrowing was down by 21pc, according to the Council of Mortgage Lenders.
This has resulted in a substantial drop in the number of properties bought by private landlords.
Later this year yet more obstacles will be placed in front of investors.
In April, higher-rate taxpayers will not be able to deduct their mortgage costs from their income when assessing their tax liability.
Instead they will receive a basic-rate tax credit of 20pc. The could mean some landlords losing money on their investments, thus forcing them to sell.
The changes will be fully implemented by 2020.
Turnover, rather than profit, will determine tax liability. If mortgage rates rise, but rents don’t, landlords will suffer losses.
In September, new rules will mean lenders will be required to make a detailed assessment of a landlord’s total portfolio if he or she owns four or more properties.
It’s a gloomy picture. And it could get even worse.
Buy-to-let landlords are increasingly expected to sell more properties than they buy in the coming years.
This is unlikely to push up prices and values may begin to fall.
R&T Property Solutions will provide you with a fair valuation for your property, whether we eventually purchase it from you or not.
We are particularly interested in buying flats or larger homes which may have structural issues. Over the years we have gained a reputation as specialists in this field of property purchasing.
So, if you want to beat what might become a stampede and sell in a hurry then contact us today.