LATEST: Tenant demand soars in burbs as more renters quit inner city

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A rise in demand for homes in commuter zones and well-connected towns is causing a mini-boom in the rental market, according to buy-to-let specialist Thirlmere Deacon.

The pandemic has left more renters looking for extra space, pushing rents up as they search outside of city centres. Rents outside the capital have soared by 8% in the past year, as a lack of available homes means half of landlords have increased their income. 

However, London bucked this trend, with a double dip in rental prices in February after five months of continuous growth, with average rents in inner London falling 17% year-on-year, according to research from Hamptons estate agents.

This rise in rents of newly let property outside the capital is the highest since Hamptons started its index in 2012; rents grew in outer London by 5% and in the South East by 10%, as tenants sought out more rural areas and working from home space.

Tenant demand

Increasing tenant demand for commuter towns has also translated into changes in the average time to rent out houses and flats; according to Zoopla, as it now takes 30% less time to rent out a property than it did a year ago.

Thirlmere Deacon director Stuart Williams (pictured) says: “Investors who have been closely monitoring market movements will recognise that there’s been a shift in tenant preferences and an increased demand for properties located in commuter towns.”

The company reckons its new development – Library House Brentwood – is a good opportunity for anyone wanting a buy-to-let property in an established commuter location. This modern apartment block features secure bike storage for green commuters, additional storage facilities, daytime concierge and allocated parking spaces.

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ANALYSIS: Councils continuing to invest in risky commercial property

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Some councils are continuing to invest in commercial property to boost their day-to-day income, despite warnings that these investments are risky.

One recent example is Somerset’s four district councils investing over £200 million between them in commercial property, in order to fund front-line services.

The trend has been in train for some time now as ultra-low interest rates have enabled councils to borrow to buy these investments very cheaply.

Consequently, local authorities across the UK have been buying-up income producing commercial property, planning to use the rental income to make up for reduced grant funding from central government.

The problem for many of these investments has been that Covid 19 has had a dramatic effect on this rental income, in some cases reducing it to zero as major retail chains have gone into administration.

Empty stores

There are examples of councils investing millions into large department stores that now lie empty, and far from producing an impressive income stream, they have now become a liability, with business rates, insurance and security costs all falling on the owner – the council and in turn, the local taxpayers.

In the Somerset case, the four councils have invested taxpayers’ money into a range of investments, ranging from offices and warehouses to housing projects and business parks.

Granted not all of these investments have or will turn sour, but nevertheless the councils have been warned by property professionals that they are entering an unfamiliar field, where even with the best skill, judgement and expertise, things can easily go wrong. These investments in commercial property, especially in the current business environment, are highly ‘risky’.

Below forecasts

The Taxpayers’ Alliance (TA) has been warning for some time that some of these investments in commercial property are delivering yields which are well below forecasts.

The latest analysis by the taxpayers’ campaigning group reveals a ‘mixed picture’ for investments made by councils across the UK, even before the pandemic.

The group’s study found that Leeds, Shropshire, Buckinghamshire, Surrey, Runnymede and Woking councils all reported that rental income was well below what they expected when the investments were made.

According to the TA, Spelthorne council was the only local authority it selected that reported all investments were returning income in line with forecasts.

Harry Fone, campaign manager at the TaxPayers’ Alliance, has said: “While it can see some success, including keeping council tax down, there are no guarantees with any investment and ultimately it’s ratepayers that will end up footing the bill for underperforming portfolios.”

Cllr Richard Watts, chair of the Local Government Association’s Resources Board, in response to the TA’s comments, has said: “When making investments, councils need to follow strict rules and assessments to ensure they invest wisely and manage the risk of their investments appropriately. Investments are not only made to try and plug funding shortfalls but also to help contribute to local economies.

“Councils continue to face significant extra cost pressures and huge income losses as a result of the pandemic. The Government’s commitment to fund a portion of lost income from fees and charges is a step in the right direction but does not cover full losses, nor does it extend to commercial income losses.”

It has been reported that in the Somerset case, between the four councils in the county,  £202,427,000 has been invested in commercial property, to date. South West Taunton (SWT) Council in particular has intimated that it could invest significantly more in property over the coming 12 months, potentially outstripping each of its three neighbours.

Not all of these investments reside in the local area. Here’s a rundown of the council’s current investments provided by Wellington Weekly News:

• Wickes Extra, Birmingham – £9.81m
• Aztec West Business Park, Bristol (unspecified number of units) – £9.1m
• B&Q store, Ayr – £6.6m
• The Range, Halifax – £5.445m
• Mecca Bingo, Corporation Street, Taunton – £1.614m
• Roughmoor Enterprise Centre, Roughmoor Lane, Williton – £1.405m
• Blackdown Business Park, Scott’s Lane, Wellington (four units) – £1.308m
• The Arcade (formerly The Carousel or K’s), Warren Road, Minehead – £314,000
• Other investments (under £250,000 in value) – £1.577m

Martin Henwood, SWT Council’s corporate finance adviser has said: “We invest in a diverse investment property portfolio, both locally and nationally, with the intention of generating surplus income that will be spent on local public services delivered within the district.

“This is an essential response to significant reductions in government funding over recent years and further reductions expected in future, in order to meet our service delivery objectives and avoid service cuts.

“We plan to increase our investment by up to £100m by the end of 2021/22,” he confirmed.

Pic credit: Stephen Oldham | Flickr

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LATEST: Landlord faces £455,000 bill after Court of Appeal decision

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The Court of Appeal has overturned an earlier judgement by a crown court to reduce a landlord’s Proceeds of Crime Act confiscation order from £455,000 to just £270.

North London landlord Hamid Kamyab now faces having to repay the huge bill after a long wait.

The saga began in July 2007 when Kamyab bought a house on Llanvanor Road in Golders Green (pictured, above) for £612,500 to rent out as an investment property.

He contends the five-bedroom property was bought already converted into nine apartments but Barnet council disagreed and in 2010 served an enforcement notice requiring him to re-convert the property back to its original configuration.

Kamyab did not comply with the enforcement notice for three years and in February 2015 he was convicted of breaching planning regulations and fined £10,000 plus £10,000 legal costs.

Proceeds of crime

Barnet then brought a Proceeds of Crime Act confiscation order against Kamyab, arguing that he had benefitted from the property to the tune of £455,414.

But at the POCA hearing in December 2019 a judge reduced this to £270 ‘in error’ by misreading the original court summons served on Kamyab, the Court of Appeal has now said, and linking his decision incorrectly to a similar case in 2017.

Barnet then sought to appeal the original judge’s ruling, and this has now been allowed – a decision how the situation will be remedied will be taken at a later date.

Read more: What is the POCA 2002?

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Worst choice on record for placing cash deposits

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Moneyfacts UK Savings Trends Treasury Report data, not yet published, reveals that the number of deals available to savers has contracted to a record low, at a time when savers would hope to see a boom during ISA season. Average rates rest at record lows

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Double Tax Agreement on property sold in Cyprus?

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I moved back to the UK 7 years ago from Cyprus. I have dual citizenship for both countries. I bought a flat in Cyprus in 2003 where I lived until 2013 when I moved to the UK and moved into my partner’s house until today 2021.

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ADVICE: Robust referencing and regular visits vital amid cannabis farm boom

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The recent story of a Nottinghamshire landlord who tipped off police when he couldn’t gain access to his property, but could smell cannabis, serves as the latest reminder to landlords to carry out a thorough tenant referencing check and make regular visits to their property.

In this case, the police arrested two men after discovering a cannabis farm in the rental property, where some 200 plants were being grown and the electricity had been bypassed.

Following a nationwide boom in the illegal cannabis industry over lockdown, police have been urging landlords to carry out regular checks on their properties.

Leicester police report closing down at least one cannabis set-up every week, while Nottinghamshire Police have seen a rise of 280 per cent in cannabis plant seizures during lockdown compared to the same period last year.  

And nationally, police say that more than 90 per cent of cannabis farms are set up in residential properties. Rented properties, the police warn landlords, are particularly attractive due to the lack of paper trail, which means that they can’t so easily be connected to the gangs running the operations.

Steve Barnes, Associate Director at Hamilton Fraser Total Landlord Insurance, explains how landlords can make sure they are protected should they discover their rental property has been turned into a cannabis farm.

“Firstly, landlords should check that their policy covers malicious damage, as many don’t. Our premier policy offers protection against malicious damage by tenants and their guests, as well as loss of rent resulting from the need to carry out repairs. But for a claim to be successful, you’ll need to provide evidence that you did all you could to prevent the damage from happening in the first place.

Although carrying out regular visits and thorough referencing checks may be a bit more complicated in a pandemic, these figures highlight how important they are. If anything goes wrong, to make a successful claim you’ll need to be able to show that your tenant passed a full and robust four-point reference check and that you carried out regular inspections.

Our updated guide to tenant referencing contains all the information you need to know about referencing and what a four-point check involves.”

The police have appealed to landlords who suspect foul play to look in on their homes, at least from the outside, every three months, as this is about the time it takes for a cannabis plant to provide a yield. 

The tell-tale signs of a cannabis farm include a strong smell of cannabis, blacked out windows, excessive condensation, powerful lights, fluctuations in electricity bill and birds gathering on the roof as it is warmer than others in the street.

Find out more about the signs to look out for and the steps you can take to minimise your risk in Hamilton Fraser Total Landlord Insurance’s guide, The growing threat of cannabis cultivation for landlords.

Cannabis farms pose a real threat to landlords today – not only is the production and distribution of drugs often linked to more serious organised criminal activity related to drug dealing networks, as well as violence. But cannabis farms cause enormous damage to a property.

Cannabis can be extremely dangerous due to the fire risk, especially if people are living in adjoining properties. Hamilton Fraser Total Landlord Insurance has seen a rise in cannabis farms, in particular those that cause major fires within properties due to the rewiring of electrics and overloading of sockets from heat lamps.

Case study

“The landlord had been trying to contact the tenants to collect rent for the forthcoming month but was not receiving any reply. So they decided to drive past the property and saw the police removing bags of material from the flats,” says Melissa Choules (pictured), Senior Claims Technician at Hamilton Fraser Total Landlord Insurance.

“The police officers explained that the property was being used as a cannabis factory and made the property secure while they carried out their investigations.

“The tenants had caused extensive damage where they had used the bedrooms to grow cannabis. They had knocked down walls and made holes in the ceilings, rewired the electrics and reinstalled the plumbing systems. In this case, the landlord had completed full tenant reference checks and carried out regular property inspections.

“Because they had done everything they could to prevent this from happening and were able to provide evidence, the insurers paid out £25,000 for the buildings damage and £350 for loss of rent.”

The coronavirus pandemic may have made it more difficult to carry out referencing checks and property visits, but it has also caused a nationwide boom in cannabis farms. Landlords need to be aware of this and do all they can to minimise risks by making sure they have adequate landlord insurance, are carrying out robust referencing and regular visits to their rental properties. 

As a valued LandlordZONE reader you’re entitled to 20% off Hamilton Fraser Total Landlord Insurance’s policies, call the team today on 0800 63 43 880 quoting code LZ2021 or get a quote online in under 4 minutes. 

Pic Credit: Cannabis Urlaub via Flickr.

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