20th Aug 2016
Only yesterday we confirmed another deal, they are there for the taking at the moment. This one has the potential to convert from a one bedroom to a two bedroom, it’s in a purpose built block in W1 and comes with a long lease and has been agreed at £625k. The property is a great deal and is in a very desirable block and it is priced almost at the level as some ex local authority properties are.
It helped that the agent, whom I have never met, has been doing business with us since 2009. We have bought several bits from him over the years hence there was an instant connection and the deal was agreed over the phone. Central London is a funny place, it the hub of the wheel, you can be working with someone for years before you even meet them.
The rental cover on BTL mortgages is increasing as well as the interest used to stress test these amounts, this will have the effect of reducing the amount of loan you can get when purchasing a BTL mortgage. Traditionally this used to be 125%, meaning if the mortgage was £1,000pm your rent would need to be £1,250pm. The amount used to calculate the monthly mortgage is also increasing, instead of using the actual amount paid many lenders are using a higher percentage for this calculation.
This will mean it will be difficult for new entrants to enter the BTL market, especially in Central London. Many will need to start in places outside of London where prices are lower and the rents higher. This is due to the rents not keeping pace with the capital growth of property in Central London over the last few years.
There was a golden period in the UK property history, when the doors were wide open. It seemed the only requirements for a mortgage where a clean credit score and a desire to take the plunge. The market is always changing and evolving, reacting to changes in stamp duty, tax, lending and the economic environment.
The property market in London is a 500 year old market, one thing is for sure it will not go out of fashion.