Podcast Summary
London property market sees price drops for 35% of listed properties: London's property market is shifting towards buyers, with 35% of listed properties having price reductions and 77% selling below asking price.
The London property market is experiencing a significant shift, with an increasing number of properties having their prices reduced since being first listed. According to recent research from Property Wire, 35% of properties in London have had their prices dropped, up from 29% in February. This trend is particularly noticeable in expensive areas like Richmond and Kingston upon Thames. Furthermore, 77% of properties across the country are now selling below their asking price. These figures suggest that the market is becoming more favorable for buyers, potentially offering opportunities for deals. This trend aligns with previous discussions about the market cycle and the approaching buyer's market. Additionally, the financial performance of estate agents like Foxtons highlights the challenges faced by the industry during this shift. Overall, these statistics indicate that the London property market is experiencing a notable change, with buyers potentially having more bargaining power.
New Rules for Safe and Responsible Lending in Property Market: The PRA introduced new rules for lenders, including tougher rental cover tests and detailed underwriting for portfolio landlords, to prevent risky lending practices and ensure safe investments in the property market.
The Bank of England's Prudential Regulation Authority (PRA) has introduced new rules for lenders to ensure safe and responsible lending in the property market. These rules include tougher rental cover tests, which have been in effect since January 2017, and more detailed underwriting for portfolio landlords, coming into effect in September 2017. The rental cover rule requires that the rent paid on a property must be at least 125% of the mortgage payment when interest rates are at 5.5%. This means that if your mortgage payment is £500 at a 5.5% interest rate, you would need to rent the property out for at least £625 per month. These rules are intended to prevent risky lending practices that contributed to the last housing market crash. It's important for potential property investors to understand these rules to make informed decisions and avoid potential pitfalls.
New Rental Cover Calculation for Buy-to-Let Mortgages: Borrowers must now prove they earn enough rent to cover mortgage payments at 5.5%, or £15,000 of borrowing for every £100 of rent, or rent multiplied by 200 for 75% leverage. This rule applies only to individuals, not limited companies.
Starting this year, all buy-to-let mortgage lenders in the UK are required to use a standardized rental cover calculation of 5.5% when assessing mortgage applications. This means that borrowers must prove they earn enough rent to cover their mortgage payments at this rate. This is a change from the past when lenders could decide their own tests. The calculation can be simplified by remembering that for every £100 of rent, a borrower can support £15,000 of borrowing, or by multiplying the rent by 200 if leveraging at 75%. However, this rule only applies to those buying properties under their own name, not through a limited company.
New mortgage rules for individual landlords from January 2022: From January 2022, individual landlords face stricter mortgage tests, but exceptions apply for certain situations and longer-term loans.
Starting from January 2022, landlords with portfolios in their own name looking to remortgage will face stricter tests from lenders, particularly if they want to release more funds or increase their debt. However, not all situations will be subjected to these tests, such as those involving limited companies, bridging loans, commercial or semi-commercial properties, and holiday lets. Additionally, loans with a fixed term of 5 years or longer could be an alternative. From September 2022, the regulatory focus shifts to portfolio landlords, who own four or more mortgaged properties, with lenders required to assess risk more thoroughly. This won't affect the majority of landlords in the UK. Overall, these changes mean that landlords with low-yielding properties may find it challenging to secure high levels of leverage, particularly if they're banking in their own name.
Lenders now require a comprehensive review of a landlord's rental business for multiple property applications: Landlords applying for mortgages on multiple properties must provide extensive documentation, leading to a slower and potentially more declined application process
For individuals looking to acquire or remortgage multiple properties, the mortgage application process is becoming more complex and time-consuming. Lenders are now requesting a comprehensive review of an applicant's entire rental business, which includes various documents such as a property portfolio spreadsheet, cash flow forecast spreadsheet, income and expenditure spreadsheet, business plan, bank statements, tax overviews, and tenancy agreements for all properties. This shift is aimed at assessing the overall financial health and sustainability of a landlord's business, rather than just evaluating a single loan application. As a result, the application process is expected to be slower due to the increased documentation requirements. Additionally, more applications may be declined as lenders have more information to consider. Switching lenders mid-process is also a possibility, as one lender may decline an application for reasons that another might not. It's important to note that this new requirement does not apply to limited companies, which already undergo similar scrutiny. To navigate these changes, it's highly recommended that individuals work with an experienced mortgage advisor or broker. Their expertise and guidance will be invaluable in helping applicants navigate the increasingly complex mortgage application process.
London property market challenging for amateur landlords: New regulations and increased paperwork make property investment more complex for new landlords, requiring professionalism, education, and preparation.
The property market in London and possibly the southeast has become more challenging for amateur landlords due to stricter mortgage requirements and increased paperwork. This means that those looking to invest in property need to be more professional, educated, and prepared. The market is changing, and those who are serious about property investment can take advantage of these changes. However, for new investors, it's essential to understand the complexities and seek guidance to avoid potential pitfalls. The buy-to-let market, which has existed for over 20 years, is no longer a simple process of buying a property and letting it out without proper planning and knowledge. With increased regulations and taxes, it's crucial to have a solid plan and the right advice to succeed in property investment. Overall, the market is becoming more professionalized, and those who are willing to put in the effort and educate themselves will be the ones who thrive.
Professionalization in Real Estate: Benefits and Challenges: The real estate investing industry's trend towards professionalization brings benefits for tenants, society, informed investors, content creators, and the industry, but may widen the wealth gap between property owners.
The trend towards professionalization in the real estate investing industry is beneficial for tenants, society, informed investors, content creators, and the industry as a whole. It will help filter out uninformed speculators and create more wealth for those who stay in the game. However, it may widen the gap between the haves and have nots in terms of property ownership. The hosts encouraged listeners to keep up with the latest developments by tuning in to their podcast and thanked a listener for a positive review. Additionally, they introduced a new resource of the week called Podsync.net, which allows users to sync YouTube playlists or channels into their podcast apps.
Listen to and download YouTube content as podcasts: Access YouTube videos offline with audio-only podcasts, useful for travel or limited internet access, and tune in to The Property Podcast for a balanced perspective on landlords next week
You can now easily listen to and download YouTube content as podcasts using a simple website. This allows you to access YouTube videos offline, whether you choose to keep the video or just the audio. This is particularly useful for those who travel frequently and have limited internet access. Additionally, next week on The Property Podcast, Rob and Rob will be challenging common misconceptions about landlords based on recent reports. They aim to provide a more balanced perspective on the private rented sector. Don't forget about the Property Hub meetups and the weekly property podcast. Until then, happy listening!
