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BTL valuations fall as remortgage levels rise: Connells

Buy-to-let valuations fell to 7 per cent of market activity in April as the gradual reduction to landlord’s mortgage tax relief began, according to research from Connells Survey and Valuation.

The proportion of BTL valuations was 6 percentage points below the five-year average for April, the research found and lower than it was in April last year, when the Stamp Duty surcharge was introduced.

As of April, landlords can only offset 75 per cent of mortgage interest payments against rental income, down from 100 per cent in March.

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Connells Survey & Valuation corporate services director John Bagshaw says: “The Government’s anti-landlord policies have been hitting smaller players. Over the last year, buy-to-let valuations have made up less than 10 per cent of market activity, representing a new low in April.

“This could suggest that smaller, private landlords, who typically use buy-to-let mortgages, have not been investing on the same scale as previously seen. Buy-to-let used to be seen as a viable way to gain additional income or to fund retirements, but the gradual removal of buy-to-let mortgage tax relief will make it much harder for the man on the street to invest.

“Having said that, buy-to-let valuations only fell 1 per cent month-on-month and so the comparison with the five year average doesn’t always tell the whole story.”

While buy-to-let valuations have declined as a proportion of market activity, BTL remortgaging was found to be 4 percentage points higher than the five-year average for April.

Connells’ data shows that BTL remortgaging is now responsible for 11 per cent of total valuations in the market – a greater proportion of valuations than buy-to-let purchasing.

Bagshaw says: “With bigger tax bills, landlords will start to feel the squeeze. To offset some of the rising costs, landlords have been taking advantage of the lower remortgage rates on offer. As buy-to-let tax relief gradually disappears, remortgaging looks set to be an increasingly popular option with landlords as a way of retaining profitability.”

The proportion of first-time buyer valuations increased to 34 per cent in April, up from 32 per cent in March.

Bagshaw says: “First-time buyer activity has sustained the market, as buy-to-let borrowing has declined. It’s encouraging to see first-time buyer valuations pick up again in spring.

“First-time buyers have been responsible for more than 30 per cent of valuation activity for over 12 months, as more aspiring homeowners get their first foot on the ladder. It remains incredibly difficult to save for a deposit, but the lower cost of borrowing, combined with less competition from landlords, has meant more first-time buyers have been able to purchase a home.”

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This year threatens to be a challenging one for UK dividend hunters. Last year saw an all-time record amount paid out in UK dividends — some £97.4bn, according to research from Capita Dividend Monitor. Yet as Capita also pointed out, out the biggest single factor driving the growth in the fourth quarter of last year was easy to identify: the rising US dollar. 

In our view, this trend is much more than simply a one-quarter phenomenon. It is actually the most profound issue to get right as a UK equity income investor in 2015. We believe that the US dollar will continue to strengthen significantly from its current level. This is due more to the US economy’s demonstrable de-coupling from the rest of the world than to a view on the UK. The US has a strong chance of tightening monetary conditions this year without jeopardising growth or de-stabilising its housing market. The same can unfortunately not be said about the UK.

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