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Build to Rent set to grow in the UK as individual landlords exit the market

Some £75 billion of investment will be committed to the professionally managed private rented sector in the UK by 2025 as the sector continues to grow due to demand, says a new analysis. . . . Indeed, an extra 560,000 households are expected to be renting a home by 2023, taking the proportion of housing in the private rented sector to 22%, up from 20.6% today, according to the multi-housing survey report from real estate firm Knight Frank. . . . It also shows that renters are getting older and those aged 35 to 49 make up the largest proportion of those living in the private rented sector. This age group is also expected to show the biggest growth in households in the PRS over the coming years, with difficulty in obtaining a mortgage deposit to buy a home remaining a hurdle. . . . The report suggests that the number of individual landlords is set to fall as the Built to Rent sector grows. As a result there is likely to be more demand in the Build to Rent sector where currently there are some 29,416 professionally managed units completed with 110,092 under construction or in planning. . . . This comes at a time when individual buy to let landlords are exiting the market with the report referring to mortgage data which shows that the number of new mortgages taken out by landlords has fallen over the last two years. At the same time home ownership rates are falling, although the overall number of home owners is rising, as the population increases, the report also points out. . . . It also expects that the provision of social/affordable housing will increase over the next five years as a response to looser lending rules for councils, new Government funding for social housing and increased activity of registered providers in the land market in recent years. The survey by You Gov for Knight Frank also found that affordability remains the key priority for 61% of tenants when choosing a property while more than one in 10 tenants said renting allowed them to live in an area they could not otherwise afford. Location is the second biggest priority for tenants at 23%, followed by the size of the property for 10% and tenant priorities are more focused on internal amenities than external ones such as local shops. It also found that it is a lack of a deposit that is the key driver for renting, though this ranges from 71% of young families to 41% of those aged under 25. ‘We are seeing a significant number of individual private buy to let landlords exiting the market as the Government’s buy to let tax changes start to bite. Large scale professional PRS landlords are well placed to absorb this, as well as satisfying some of the structural shortfall in our housing supply,’ said Nick Pleydell-Bouverie, head of residential investment agency at Knight Frank. ‘A principal constraint on the delivery of housing is the estimated rate of sales for developers. The institutional PRS market can significantly accelerate this through near immediate absorption. It is crucial that the UK Government resists further legislation and taxation and enables the PRS market to significantly contribute towards the UK housing challenge,’ he added. . . . . According to Tim Hyatt, head of residential lettings at Knight Frank landlords could be squeezed further by more change. ‘Once again, affordability has emerged as a key reason for people choosing to rent in order to live in an area where they would not be able to buy,’ he said. ‘However, average rents in Britain rose 1% in the 12 months to December as more landlords leave the sector and levels of stock decline. The tenant fee ban, which comes in into effect in June this year, may also result in some landlords increasing rents to offset any extra costs,’ he added.

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Tenants having problems with letting agents in London urged to report them

Trading standards services in London are working together to help tackle problems with letting agents who aren’t complying with the law and are rolling out a UK wide programme. A survey of 137 letting agents in the capital by London Trading Standards (LTS) revealed an extremely high level of non-compliance with the requirement to display fees and other information. It also revealed that many letting agents in London are not being transparent about their fees and how they will protect tenants’ money. Some 53% were not displaying a Client Money Protection (CMP) statement, 37% were not displaying landlord fees and 31% were not displaying tenant fees. LTS points out that three years after providing this information became a legal requirement, a number of agents are not still stepping up to the mark and raising standards, but continue to flout the law. In one case, Trading Standards in Islington took ground breaking action against a letting agent who used a rental licence, which attempts to take away tenants’ rights. Despite housing and private sector renting being the number one issue for London residents, there is a low level of reporting of problems with letting agents. LTS is advising those who experience or know of a letting agent acting unfairly to report it to the Citizens Advice Consumer Service who will pass it on to the relevant Trading Standards Service. Mayor of London Rogue Landlord and Agent Checker, a tool unique to London which lists enforcement action taken by London Boroughs against landlords and letting agents, helping people to avoid using them. . . ‘Working with trading standards teams in London and across the country, we are stopping rogue landlords and agents in their tracks. The new measures in our Tenant Fees Bill will save renters around £240 million a year by banning unfair letting fees and capping tenancy deposits,’ said Housing Minister Heather Wheeler. ‘On top of this, new regulations will keep renters’ money safe by only allowing letting agents that join a Government approved client money protection scheme handle their money,’ she added. According to Martin Harland, chair of LTS’ lettings group, a significant number of letting agents and landlords have been getting away with rip-offs for too long. ‘To help us get the big picture and start tackling the rogues, we need to know who is causing problems in the London market. So please report it by contacting the Citizen Advice Consumer Service,’ he said. James Murray, Deputy Mayor for housing and residential development in London, explained that in order to truly improve the private rented sector there needs to be much more wide ranging reform. ‘ In the meantime, the Mayor will continue to stand up for London renters by working in partnership with Boroughs and London Trading Standards on improving standards, enforcing transparency around letting agent fees, and helping renters to access information on rogue landlords,’ he added. The industry wants to see the issue of rogue agents addressed. ‘Professional letting agents who work hard to ensure they adhere to the law have their name tarnished by the agents who fail to comply,’ said Isobel Thomson, chief executive officer of the National Approved Letting Scheme (NALS). ‘Only by reporting these agents can we stamp out rogues, and improve the private rented sector for all. We would also urge consumers to check their agent is a member of a professional regulatory organisation like NALS who will have a strict code of conduct to ensure the highest standards,’ she added.

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Buy-to-let could damage your chances of making a million. Here’s where I’d invest today

Buy-to-let has proven to be a popular place to invest in recent decades. Since the mid-1990s, it’s enjoyed a period of almost uninterrupted growth. Even the biggest financial crisis in a generation only caused a fall in house prices for a short time, having gone onto reach higher highs in the following years. And even though affordability issues have never been far away from the buy-to-let industry, government policies have helped to support capital growth for landlords in recent years. Now, though, buy-to-let could faces an increasingly difficult future. It seems as though there are numerous risks facing the sector which could combine to cause it to underperform other major asset classes, such as the stock market. As such, shares could be a better place to invest in order to make a million over the long run. Changing times A ‘perfect storm’ could be ahead for buy-to-let. From a political standpoint, there’s likely to be a significant amount of change over the next few years. Policies such as Help-to-Buy are unlikely to last in perpetuity. When they do come to an end, it may lead to reduced demand from first-time buyers, and this could impact negatively on the wider market. With there being the potential for a change of Prime Minister, or even government, due to Brexit, such schemes may come to an end much sooner than market participants are currently expecting. Furthermore, there’s a gradual move towards making buy-to-let less appealing from a tax perspective. Changes, such as mortgage interest payments no longer being tax deductible, could be the start of a trend towards dissuading people from becoming landlords. After all, it’s likely to be a popular political move at a time when there are continued concerns about how difficult it is for first-time buyers to get onto the property ladder. Additionally, an era of low interest rates looks set to come to an end over the next few years. A tighter monetary policy seems likely, and this could mean the profit on owning a buy-to-let investment is significantly reduced. Improving prospects While buy-to-let seems to be losing its appeal, shares appear to be becoming increasingly attractive. The stock market has fallen by over 10% since its all-time high last year, and yet the macroeconomic outlook for the world economy remains positive. Certainly, there are risks ahead, such as the potential for a US-China trade war. But with forecasts for global growth being high, a number of FTSE 100 and FTSE 250 shares could generate improving returns. With the government having increased the ISA allowance and made drawing a pension more flexible in recent years, it seems to be encouraging investment in shares. As such, now could be the right time to move from property to stocks, with the latter appearing to offer a better chance of making a million. You Really Could Make A Million Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, "10 Steps To Making A Million In The Market". The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide. Simply click here for your free copy.

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The Motley FoolMENU Buy-to-let could damage your wealth in 2019. Here’s where I’d invest instead

I think it only really makes sense to start an investment in a buy-to-let property when prices seem to be low compared to historical norms. There’s no doubt that property prices tend to fluctuate in a cycle, and that cycle can seem random. But one thing we do tend to expect from cycles is a change in direction every so often – so, what goes down tends to climb back up, and what goes up tends to come back down again. Why property prices look high I reckon property prices are sitting close to their highs, and my favourite measure to judge that is the affordability of homes compared to the average wage in the UK. For some time, the average house price for first-time buyers has been sitting close to five times the average wage in some of the cheapest regions of the UK, and way above that level in other areas. That’s high, and historically the multiple has been much lower. For example, I went into buy-to-let property in the mid-1990s at a time when the average house price for first-time buyers in my region was flirting with figures between two and three times the average wage. House prices seemed cheap back then and it did, indeed, prove to be a cyclical bottom for the cost of a home. Just as property seemed cheap in the nineties, it seems expensive now, in my view. That matters because the cycle will likely change direction at some point and prices will fall compared to the average wage. Indeed, falling property prices and rising interest rates have been in the news during 2018, and there seems to be a lot of pressure building that could push property prices lower. We don’t know for sure if property prices will fall, or simply sit still for years while affordability catches up, or even whether property prices will rise further to form a bubble. Too much risk But I see property investing as risky right now. Because if a property falls in price by around 40%, say, after you’ve bought it, you will need a gain of around 67% from rent, or rising prices later, just to get back to breakeven. And that’s without even considering all the costs and inconvenience you’ll face getting in and out of a property investment. Those kinds of gains could take decades to achieve in the property market and that’s why I wouldn’t buy property now when prices look high. The same principle works with shares. If share prices are high and the valuations of the firms underlying the shares have become stretched, it’s probably a good idea not to plunge into the stock market. This is because the pressure is on shares in general to fall, so that valuations return to more affordable levels. But when there’s been a stock market correction – as recently – valuations can be much more reasonable and dividend yields can be higher, which bodes well for good investor returns in the years ahead. So I’d avoid expensive-looking property and invest in cheaper-looking shares, or share-backed investments, for 2019. My investment vehicle of choice would be a low-cost, diversified index tracker fund that follows an index such as the FTSE 100 or, perhaps, the FTSE 250. Want To Boost Your Savings? Do you want to retire early and give up the rat race to enjoy the rest of your life? Of course you do, and to help you accomplish this goal, the Motley Fool has put together this free report titled "The Foolish Guide To Financial Independence", which is packed full of wealth-creating tips as well as ideas for your money. The report is entirely free and available for download today, so if you're interested in exiting the rat race and achieving financial independence, click here to download the report. What have you got to lose?

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Proportion of foreign investors in London offices spikes as Europeans edge out Asians

proportion of overseas cash being ploughed into London office buildings has hit a record high as a trio of deep-pocketed investors from mainland Europe jostled with others from Hong Kong and Korea in signing a string of multi-hundred-million pound deals. Foreign buyers spent £3.8bn on offices in central London in the three months to September, accounting for 92pc of the total investment, according to figures from property advisors CBRE. The market has traditionally been dominated by Asian investors in recent years but they were edged out by Europeans including Germany’s Deka, which splashed out £457m on the Verde building in Victoria and £86m on another site on Chancery Lane. Other top European investors included Amancio Ortega, founder of the Zara fashion chain, whose Pontegadea business spent £550m on the Adelphi building in the West End. Meanwhile Norway’s state-backed Norges Bank bought Amazon’s headquarters, Sixty London, in Holborn for £321m. CBRE’s James Beckham said the flurry of mega-deals reflected overseas investors’ continued confidence in the capital, despite uncertainty around Brexit. He added: “Attractive yields relative to other European cities, coupled with the comparative weakness of sterling, mean we have seen investors from all corners of the globe hungry to deploy capital in London.” European investors spent £1.7bn in total, ahead of Asians with £1.5bn, domestic investors with £421m and North Americans with £171m. But it was Korea’s National Pension service that inked the biggest deal, agreeing to pay £1.2bn for Goldman Sachs’s new City headquarters, which is still under construction. Total investment came in at £4.3bn, down from £5.1bn in the second quarter and £4.8bn the year before. Mr Beckham said: “There may be some hesitancy from a few investors over the next six months as we enter the latter stages of the Brexit negotiations, but total investment volumes for the year look set to be broadly on par with 2017”.

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Property sales in the UK continue to stagnate

Residential property sales in the UK are continuing to fall with the latest official figures showing that they fell by 3.2% in July compared with the same month in 2017. The data from HMRC shows there were 99.270 residential transactions which was down 0.8% between June and July 2018. There were also 10,960 non-residential sales, up by 8.1% month on month and up by 0.5% compared with July last year. Kevin Roberts, director of the Legal & General Mortgage Club, pointed out that the figures confirm that despite increased innovation in the property industry and assistance from Government schemes such as Help to Buy and Shared Ownership, property transactions remain stagnant. ‘A fundamental imbalance between supply and demand continues to stifle movement within the market, and until this issue is properly addressed, home owners will find it difficult to downsize or upsize into better suited properties,’ he said. ‘The lack of availability of appropriate housing at all stages of homeownership is restricting movement in the market and creating bottlenecks. It’s therefore crucial that the industry continues to take whatever steps it can to ease this block and make the UK housing market accessible for all,’ he added. Alex Depledge, chief executive officer of Resi, also believes that the figures indicate that the challenges facing the current housing market in terms of supply and demand are not being resolved. ‘It’s increasingly tough for homeowners or prospective buyers planning to get on or move up or down the ladder. A further slowdown in market activity is further evidence the issues that have plagued the housing sector are still no closer to being solved,’ he said. ‘Affordability is still a key issue which continues to lock up property chains. Those still unsure or unable to move should consider their other options. Indeed, whilst renovating or extending can at the outset seem like more hassle than it’s worth, adding space to your property can not only boost the value of the property but also provide much needed space,’ he added.

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Record-low interest rates on buy-to-let mortgages have sent landlords rushing to lock in to new deals.

Record-low interest rates on buy-to-let mortgages have sent landlords rushing to lock in to new deals. Almost 14,000 buy-to-let remortgages were completed in August, 4.5% more than in the same month last year, according to the industry group UK Finance. That was despite concerns about the outlook for the property market because of Brexit. By contrast, there was a sharp fall in new buy-to-let mortgages: 6,000 were taken out in August, 13% lower than a year earlier. With demand from new landlords declining, lenders are trying to attract existing borrowers by offering rock-bottom deals. The Bank of England has raised its benchmark rate twice in the past year, yet the cost of buy-to-let loans has fallen. The average five-year fixed-rate deal is now 3.4% compared…

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What is the average equity release rate?

quity release interest rates have continued to fall for new customers, with competition in the sector credited for forcing existing providers to lower their prices. Tapping into property wealth through equity release has become a more mainstream option, with £3.06bn withdrawn by homeowners in 2017, up from £1.6bn in 2015. However, the high cost is often cited as a major reason for consumers to avoid taking out a plan. Falling rates could tempt even more older homeowners into the market. Figures from the Equity Release Council (ERC), the industry group, said the average rate offered to new customers was 5.22pc in July. This is considerably lower than the 5.96pc average recorded a year prior. Simon Chalk of Later Living Now, an equity release advice firm, credited the recent arrival of firms like Legal & General and OneFamily as having forced existing providers to up their game. “New entrants have come into the market seeking to offer something different,” he said. However, consumers should always consider the overall cost of equity release. Even if rates are initially low, the way interest is charged means the cost can soon mount up. Equity release plans have “rolled up” charges, which means that interest compounds and the overall debt increases quickly. For example, a homeowner releasing £100,000 of equity from their £250,000 property with a typical rate of 5.22pc would face interest charges of about £5,200 in the first year of their plan. By year 15 this would have spiralled to £10,600. If homeowners can afford to wait, they will benefit by deferring the effect of compounding rolled-up interest, but this could be negated should rates in future be much higher. “If someone really needs the money now, then they should do it now. If not, then wait.” However, falling rates will offer little comfort to existing policyholders, who are still paying much higher rates. As Telegraph Money reported earlier this month, those who took out loans before the financial crisis can be paying rates of 7pc or higher, with high exit charges preventing customers from switching to a cheaper deal elsewhere.

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