Whenever the subject of short-term property finance or buy-to-let mortgages features in the headlines, it is rarely to report good news. And so it proved with two separate media stories in August, spreading doom and gloom, with dire warnings for the future.
The first story in the Daily Express, commented on a RICS report that claimed 22% of their members reported a decline in landlords advertising properties to rent in their area.
The RICS report then went on to argue that the reducing numbers of private rental properties has been caused by taxation changes for buy-to-let investors, which is leading to smaller scale or ‘accidental’ landlords leaving the sector.
The report claimed that increasing tenant demand would put pressure on rents, which could cause average rents to rise 2% over the next twelve months.
The report doesn’t really tell us what is happening to all this unoccupied, unrented property. A few must be appearing on the open market though, with estate agents offering an optimistic view, pointing to more solid markets in many regions in July.
The Times repeats the myth
The second story appeared in The Times and reported that according to trade association UK Finance, the number of buy-to-let mortgages completed in June dropped by just under a fifth compared with a year earlier.
This story reports the number of buy-to-let mortgages continues to fall, with June showing the biggest fall so far.
However, given that about 60% of the UK’s landlords own only one property to rent and the number of privately rented homes in England alone has doubled in 20 years to 4.7 million today, the reductions being reported seem relatively insignificant.
Presumably many of the small-scale landlords selling up have found larger-scale landlords to buy their properties, if there hasn’t been the significant surge in new properties in estate agent windows the report implies there should have been.
Busy in the Signature offices
This is certainly a trend mirrored at Signature Private Finance. We are experiencing the busiest period in our history, with a lot of deals for purchase of properties in need of refurbishment, or conversion to multiple occupancy homes.
Typically, we find ‘accidental’ landlords who have gained one or two properties through inheritance, divorce or marriage, are often unable to afford the upkeep to ensure rental properties are of the standard expected by modern renters – the tax changes are making the decision to sell, easier.
Many of our clients are buying these properties at auction, borrowing against their growing portfolio, with enough funds to complete refurbishment of properties to increase their rental desirability.
Our clients repay funds once the property transformation is complete and they have secured a buy-to-let mortgage. Defaults are non-existent which indicates the finance market is still offering what landlords need and enabling them to deliver the rental properties the housing sector needs.
As the government’s tax changes begin to take effect, we are witnessing an increasing professionalisation of the sector, which isn’t necessarily a bad thing.
The housing sector needs more affordable homes, true. But it also needs more good quality rental properties, owned and manged by professional landlords operating their portfolio as a business, not a hobby, if we are to ensure modern families have options beyond the traditional mortgage.
Many of our clients are restructuring their portfolios in more tax efficient manners and taking advantage of the opportunities this changing market offers them.
That’s being professional and Signature Private Finance has the funds, the experience and the expertise to help them realise their ambitions.