Tuesday, 29 March 2016

Should Glasgow property investors be worried by the new affordability tests

You would have probably seen the news that the Bank of England is proposing further measures to cool the buy-to-let market. 

The BBC reported that the BoE is proposing that Buy-to-let landlords should face new limits on the amount they can borrow and that lenders should be much stricter when deciding whether or not to grant landlords a mortgage. Specifically, the Bank wants lenders to look at the wider financial situation of the borrower rather than just taking the property rental income into account.

Sounds pretty sensible to me, and what you would expect responsible lenders would be doing anyway, or am I missing something?

And it looks like this is designed to cool the over-heated London market where rental returns of under 4% are the norm and where returns are dependent on never-ending high increases in house prices.

This is not the case for those looking to invest in Glasgow where rental returns are around 7% (and higher is achievable) and average prices for flats are £125,000. In Glasgow, investors should largely be unaffected by this I believe and still be able to satisfy the affordability tests of Mr Carney even with mortgages of 75% of the property value.

In any case, before this announcement, the Bank of England was expecting the buy-to-let market to expand by 20% a year over the next few years whereas if these measures are adopted, they believe it will only slow to 17% a year. Not a massive impact.

As always, to discuss anything you have seen in this blog or simply to arrange a convenient time to meet for a chat about the Glasgow property market, please call me on 0141 221 1827 or drop me an email on derek.livingstone@douglasdickson.co.uk.

And if you are considering investing in a residential or commercial property in Glasgow, at Douglas Dickson we are always happy to give you our unbiased opinion. Likewise, if you want to take the hassle from finding the deals yourself, we offer a property sourcing service – click here to find out more.