Can't be bothered to do DIY for lodgers anymore

I rent out a couple of properties to tenants and have done for the past five years. I have recently been thinking of selling due to the amount of DIY time it can suck up, but obviously at this current time its not an easy time to do such.

I have delayed selling to wait for the outcome of the Treasury and its potential changes to Stamp Duty.

Arguably many BTL properties fall below the £125,000 threshold, so would not be impacted, but the sale of some of these properties may be held up as buyers moving up the property ladder await any reduction in Stamp Duty on higher value properties.

There are good reasons to believe that the house sector is weathering the storm:

• Tenant Demand
  
  Evidence of good rental growth across the UK can be found not only in the latest RICS Lettings Survey with a headline of "Lettings market shines bright in housing gloom" but also in Paragon's Buy To Let Index for July where yields across the UK are 6.4% with average growth in the last year of 9.3%. Additional demand is being driven by the reduced availability of mortgages at 100% or above for first time buyers who will need to rent until they can save up the necessary deposit and with higher interest rates being charged on borrowing at thee 95% level , it may be more expensive to pay a mortgage than rent for the time being.



• Mortgage Funding
  
  Current funding is based on the known performance of the Buy To Let mortgage book and the recently released CML figures look relatively benign with only 1.1% of loans in arrears over 90 days compared to the broader market figure of 1.33% but still up from 0.73% at the end of 2007. Any significant deterioration would cause lenders to re-trench further at a time when BTL landlords are probably the best hope for the property market absorbing the CML predicted 28,000 repossessions in the second half of the year.




• Mortgage Availability
  
  One year on from the credit crunch, the BTL sector has fewer lenders with tighter credit criteria and risk based pricing encouraging landlords to invest more capital in return for better interest rates. Pricing as low as 5.09% for a 2 year fix at 60% loan to value with higher pricing is applied by those lenders still willing to lend to 85% but with increasing dependency on retail deposits to fund new lending the cost is reflected with rates more in the range 6.5% to 7.5%.




• Preferred Property Sectors
  
  The new homes sector had always been popular with investors in a rising market - where there was no property chain and the opportunity to buy off plan with completion up to eighteen months away held out the prospect of capital appreciation for little risk in the early years of the new millennium. By early 2007 some developers were creating artificial incentives to lure in investors leading to concerns over the true value of developments where upwards of 40% of the units were sold to investors. This has led to rental problems and geographical concentration risk and lenders have placed a 75% LTV restriction and full transparency on the component parts of the transaction. This is bound to impact the house building sector and the results of Taylor Wimpey on 27 August announcing a 96% fall in pre-tax profits and exceptional items of a further £1.5Bn must reflect some of these issues. Effectively the development of sites has mostly ceased as builders concentrate on selling existing stock before developing subsequent phases. Whilst house prices have eased there are not sufficiently large volumes of properties being sold to suggest a collapse of the broader market.



• Market Confidence
  
  Paragon's July Trends Review reveals that investor sentiment towards acquiring further property remains strong with twice as many landlords looking to add properties than intending to sell. This is driven by a belief that they can secure a lower price as well as being high tenant demand being a key factor for 39.3% of them.



• Feel good Factor
  
  There is one additional confidence element that impacts the whole country and that is the somewhat unexpected "feel good factor" that has been created by the well deserved success of Team GB in Bejing. Not only has it dominated the headlines and pushed away the doom and gloom headlines on the property market and economy at large but has created a genuine interest in London 2012. When France won the Football World Cup in 2006 the GDP growth in the next quarter was 0.5% above the predicted rate. The benefit to the UK may last sufficiently long enough for other potential positive measures to show through such as a Base Rate reduction of 0.25% in early November or, heaven forbid, the Government untangling the Stamp Duty fiasco with a stepped aligned on price bands and a raising of the "zero" band to £250,000 - is that too much to hope for ?