There have been so many factors impacting on the property market in recent times that it has been difficult to keep up. It is also very difficult to attribute the effect of one issue because with so many factors influencing behaviour and buying decisions, it is impossible to say that one single matter has led to certain decisions or behaviour. However, alongside Brexit, the removal of stamp duty for first time buyers and an increase in interest rates, there has been a notable squeeze on buy to let investors.
In recent years, the buy to let market has been extremely important, propping up the property market with sales at times when people weren’t looking to buy. However, a change in the rules on mortgage lending for the buy to let market, seeing them become far stricter, could see some markets being significantly affected. The Hale property market has enjoyed growth of late but with so many different factors influencing buyer behaviour, will the Hale property market be able to withstand this and other challenges?
Buy to let lending criteria has changed
As of the 1st of October 2017, landlords seeking finance will have their complete property portfolio assessed with respect to viability. This is a change from looking at the individual property which the mortgage was for, which used to be the focus for lenders.
At best, these changes mean that landlords and investors will have to carry out a lot more paperwork when applying for a mortgage and of course, at worst; these changes will see a number of landlords being left unable to obtain an affordable or a mortgage at all. There is also the fact that some lenders may decide that the increased workload that they have to carry out is not worth the inconvenience which means that there is likely to be a dip in the offering of loans to buy to let investors.
It is believed that Santander have informed their mortgage advisers to not offer loans to landlords who have a large portfolio, as this will lead to an inefficient workload for them. It is also likely that many of the smaller lenders will no longer be able to provide these loans with Platform Home Loans saying they will no longer be able to provide this sort of loan to investors.
Challenges can be opportunities to some people or businesses
Like every change in a market, this challenge can pose an opportunity to companies who are willing to understand the changes and carry out the work required. This means that there may be some options for landlords to consider but on the whole, there are concerns that many existing landlords will decide against increasing their portfolio under these conditions.
The continual squeezing on the buy to let market is supposedly carried out to enable first-time buyers to get on to the market, and there have been other moves along these lines of late. The removal of stamp duty for first time buyers for property up to £300,000 (and a reduction in the stamp duty for property costing between £300,000 and £500,000) has been another step that is supposed to aid people get on to the property ladder and many landlords may decide it is no longer viable to operate in this market.
However, with some sources suggesting that the removal of stamp duty will lead to higher prices, there may not be the intended impact on first time buyers. If property isn’t any cheaper to buy, there is still going to be a high level of demand for rental accommodation. This is where problems could arise if there is a fall in the supply of rental options in the market.
Hale offers good expected rental yields
The Hale property market carries a lot of reasons for people to rent and there are some attractive expected rental yields in the WA15 postcode area. A one bedroom property offers a rental yield of 7.31% and a two bedroom property provides a rental yield of 5.58%. For buyers who have been priced out of the market, Hale is still an attractive option and this has encouraged the buy to let market in the area.
Landlords know that there is still going to be demand for rental property in the area but it is down to the individual to determine if the return is worth the added level of effort, risk and cost of obtaining a mortgage under the stricter buy to let lending criteria. It is inevitable that some landlords will decide that the market is too expensive for the reward they expect to make. Hopefully other investors will step in to ensure that the supply of property continues but this remains to be seen.
No matter what you want to achieve in the Hale Property market, come and speak to Hale Mortgages and we will do what we can to provide you with dependable and reliable guidance.
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