Buy-to-Let post COVID -19 – What will it look like?
The housing market is facing enormous challenges as it fights against the effects of Government social distancing policy aimed at cutting COVID-19 infections.
Banks have tightened lending criteria, physical viewing together with surveys stopped, tenant evictions prohibited, and many transactions put on hold.
It is anyone’s guess when these isolation policies will come to end, and the market returns to a resemblance of normality, no one really knows.
But I urge you to remain positive and not despair as the UK recently experienced another period of uncertainty due to Brexit and the general election. This resulted in a slower property market, with owner-occupiers and investors holding back their property transactions. The outcome was substantial pent-up demand resulting in rapid recovery in housing transactions for January and February.
So rather than trying to guess when the market might recover here are some ‘tips’ to help make sure you are well placed for the bounce post COVID-19:
Broker
It is imperative you appoint a broker who is highly experienced in all types of BTL financing specialist areas. Too often we hear stories where a mortgage agreement in principle is in place, only for the lender to pull out when they realise the mortgage was not suitable for the property being purchased. This is not the funder’s fault but the brokers.
Conveyancer
Frequently we are told by purchasers they are appointing conveyancers because they are the family’s solicitor for their wills or other affairs. As brokers we must recommend any landlord or investor to be business-minded and appoint their solicitors based on their responsiveness and ability at completing property deals and not by a family acquaintance.
COVID-19 has brought this to the fore with the best conveyancers seamlessly transferring to working from home because they invested in technology to enable them to do so, with paper-based conveyancers struggling.
Lenders
Post COVID-19 mortgage lenders are could be quite conservative, so adjust investors’ expectations. If they are planning to use a mortgage to fund acquisitions, then a 60% LTV is likely to be the new level until the market returns to normal. However we have 49 lenders on our panel and only 7 have withdrawn from the market, showing a 14% drop in capacity, many are in fact back to 75% LTV for standard properties.
As isolation measures are relaxed cash will be ‘king’, as surveyors deal with a large backlog of bank work built up during lock-down. This will slow down mortgaged buyers and make them less appealing to sellers, which presents a buying opportunity for cash investors.
If you are planning to use debt, then pick up the phone to your mortgage broker to know what is available to you and to inform them on what type of property investment and bank help you require. This is important as the market and product availability changes quickly.
Be Aware
What do I mean? Those investors that keep an eye an eye on the market by looking at agents’ websites, property price indices and engaging with sellers and their estate agents are often best placed to snap up the best opportunities.
So, keep looking and talking to stakeholders. It is so important. As the saying goes ‘the early bird catches the worm’.
Demand
Tenant demand is likely to remain high as there might be a reluctance for some lenders to return to higher LTV lending until a wider recovery in the housing market becomes established. In addition, household savings will have been used up by the economic down-turn resulting from COVID-19. Both point to good demand for rental properties.
House prices
These will probably fall in the short-term but are expected to rise in the medium to long term as historically low interest rates and loose monetary policy impact positively on prices. The market anticipates a similar outcome on house prices to that experienced during the Financial Crash of 2009-2017.
It is likely there will be more properties coming to market immediately post Covid-19 from individuals where circumstances dictate, they sell. And for investors who are ready to move quickly might offer excellent buying opportunities.
In summary the market will be difficult in the short-term and might impact negatively on house prices, due to government socialising measures. The fundamentals of the market remain good with historically low interest rates and loose monetary policy. Remain positive as history shows the market will return to normality. And there will be opportunities for those investors who have their ‘ducks in a row’.
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