The Property Investor & Homebuyer Show is always a valuable opportunity to gauge sentiment among property investors. Karl Griggs sat on the Shawbrook Bank panel at the April edition on Friday 28th and there were a few topics that stood out as of particular interest to investors, which we wanted to share with you.
What do investors need to know about obtaining finance now?
Since January 1st, affordability requirements for buy-to-let mortgages have become more stringent for investors. Lenders are now looking in much more depth at borrowers’ financial commitments. Affordability assessments should now take into account: borrower’s costs including tax liabilities, verified personal income (where used by the lender) and possible future interest rate increases or implementing an increased stress test on the rental coverage. This may make it harder for some borrowers to obtain the required level of finance
From September 2017, investors who have four or more properties will be classed as portfolio landlords. Borrowers will be required to demonstrate concrete expertise, a solid track record, wider accounts and the entire portfolio will be evaluated to consider a loan.
For more detail about recent changes to the landscape investors need to be aware of, see our blog.
Is it getting harder to get finance for property investment?
It is no secret that the landscape has become more challenging for investors. The government is keen to see a more professional class of investor and keep a lid on the market. The series of measures it has introduced over the last year or so (stamp duty, stricter lending rules, changes on mortgage tax relief, etc) have certainly made some people think twice about investing in property.
However, for investors with a solid investment strategy, who treat property investment like a business, there are still finance options available. Indeed, lenders will continue to innovate to make sure that regulators are kept happy, while still serving the market. To help investors think more long term, and meet the new affordability requirements set out by the PRA, we may be seeing more 5-10 year fixed buy-to-let mortgages.
What is on the horizon?
Short-term rental growth is currently slowed down by tougher affordability requirements but ultimately growth will continue driven by a supply/demand imbalance. Nationally, rents are forecast to continue to grow considerably in the next decade, with the South seeing faster increase than the North.
As the government encourages the rise of build-to-rent, we will see more businesses investing in developing properties and investing in purpose-built rental properties. This will change the landscape for individual investors and make it more competitive. Build-to-rent, where rental properties are developed and built at scale, will have a different relationship with tenants. These property providers will be providing more than a home, they will be offering a lifestyle – complete with on-site gym, shops, restaurants and anything else tenants could need. To compete with them, individual investors will need to treat their tenants like customers, providing a service as well as bricks and mortar. This will help them attract and retain loyal tenants.
If you have any questions about property finance or the changing regulations, please get in touch on 01923 655441 or contact@cpcfinance.co.uk.