With a turbulent year finally coming to a close there is a lot for Landlords to reflect on as we move into 2012. In 2011 we’ve seen the boom of HMO Mortgage and Multi Unit Freehold Blocks as the available yields on those in some parts of the country exceeded 10% despite the struggling economy. As property prices stagnated in much of the country Let To Buy became increasingly popular as home owners wanted to take advantage of good yields to profit while avoiding selling their house for less than they’d like when it came time for them to move on. Here are our 10 predictions for next year…
Unemployment and the government cuts start to bite in many parts of the country. Landlords will need to pay much more attention to postcodes than this year as some areas will see big falls in rental yields.
Abbey and Woolwich will bring huge price competition to the buy to let mortgage market leading to reduced rates and fees for prime applicants and amateur landlords who are likely to be the main targets for these lenders.
Competition between applicants for the high yielding HMO and multi unit properties will gradually see yields easing off. The current market is somewhat specialist but as more lenders move into this arena more landlords will have access to these properties pushing up values and reducing rents leading to more normalised yields. This is good news for landlords who have already purchased as they may see some increase in value.
Britain will continue to build enough new homes. This will continue to ease the downward pressure on rent caused by the recession and in fact as we’ve seen over 2011 rents in most of the country will rise as a consequence.
There won’t be as much innovation as in 2011. Buy to let is an exciting market for lenders, but 2012 will see much tougher lending conditions caused by the Euro crisis and I think most of the competition will yield better rate competition but not so much new lending criteria hitting the market.
Amateur landlords will face their first struggles with tenants in arrears. How they adapt to this will determine their future as landlords.
Tens of thousands of landlords will continue to fail to take suitable tax advice and as a result throw away a significant fraction of their profits.
Paragon will dominate the specialist sector despite increased competition from Aldermore Bank. This will be due to the higher LTV’s and wider distribution – most independent advisers can access Paragon.
Less first time landlords will be first time buyers. Despite the increased popularity of trying to stay at home and invest using buy to let, lenders are becoming increasingly negative on this. NatWest is the most recent lender who allows this to put the squeeze on with a new minimum income requirement. Expect more in 2012.
A big battle develops as the EU look to increase mortgage regulation and significantly complicate things for UK landlords – lenders may even be forced to affordability test portfolios without taking rent into account. Landlords should all continue to write to their MP as we previously noted this will be a big issue in 2012 and on.