BREAKING: Rental sector ‘boom’ drives tenancy voids to five-year low
Landlords are experiencing their lowest void periods for the last five years, after peaking at 39% during the third quarter of 2020.
Levels have steadily dropped during the last 18 months and now just 25% have had empty rental properties during the previous three months, according to Paragon Bank’s latest research.
Its survey of 800 landlords, undertaken by BVA BDRC, found that this fall was driven by a reduction in those with six or more properties who had one of their rental properties vacant.
Paragon says landlords in Wales had the largest number of recent void periods, with 39% facing at least one empty let, compared with the South West and East of England where only 23% of landlords reported voids.
Turnaround
Central London has seen the greatest turnaround – further evidence of the capital’s rental market resurgence.
In Q3 2020, 68% of central London landlords recorded a void period, the highest proportion of any region, which has now fallen to just 24%.
Mortgages MD Richard Rowntree says that with sustained strong tenant demand and the constrained supply seen in both the rental and home-buying markets, it’s no great surprise that void periods have reached a five-year low.
“This reinforces our belief that policy designed to support homeownership, which we support, should be carefully considered so as not to be at the detriment of a private rented sector that is evidently as important now as it’s ever been,” he adds.
“Put simply, we need more homes and achieving this will require an approach that sees all tenures viewed as solutions, with each catering to a diverse mix of people at different stages of their lives.”
©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: Rental sector ‘boom’ drives tenancy voids to five-year low | LandlordZONE.
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RENTS: Annual inflation hits 8.5% as tenants fight over fewer properties
The average rent in the UK increased by 0.4% during January to £1,064 per tenancy, or £897 if London’s sky-high rents are omitted, the UK’s most comprehensive rental index has revealed.
HomeLet, which uses data from some 5,000 participating letting agents and a million references each year, says while UK rents are increasing by 8.5% a year, London’s are 12.6% higher year-on-year.
Also, eight of the UK’s 12 regions and countries (see table below) saw rent increases last month, although annual increases remain strong across all of them on a yearly basis with rises strongest in the NW, Scotland, Northern Ireland and the SW.
The figures starkly reveal the current problems facing the private rented sector – the government’s energetic effort to batter landlords on a number of tax and regulatory fronts are leading to less stock while many tenants are staying put as they put off buying their first home.
“As expected, 2022 has started as 2021 ended, with an imbalance between supply and demand, and inevitably that has brought on price rises, that will likely continue in the coming months,” says Andy Halstead, HomeLet & Let Alliance’s CEO (pictured, below).
“There are some caveats, though. Though we have seen another record high rental price this month, we must consider inflation rates, a topic that has been discussed heavily in the past couple of weeks.
“Based on the latest inflation figures, the month-on-month rent increases have been lower than the wider inflation rate, indicating a level of steady growth.
“The private rental sector has played a key role in the UK throughout the pandemic, and we hope that the government will make things easier for landlords in 2022, to allow them to continue playing a key role in the coming months and years.”
Figures in full
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LATEST: Homes now worth £24,500 more than a year ago, on average
Price growth slowed to +0.3% in January – the lowest rise since last summer – although it was enough to push the average house price to a record high of £276,759.
The Halifax House Price Index reveals that the annual rate of growth remains steady at 9.7%, putting overall prices about £24,500 up on this time last year, and £37,500 higher than two years ago.
The lender also reports that transaction volumes are returning to more normal levels.
Wales was by far the strongest performing nation, with annual house price inflation of 13.9%, where the average house price fell slightly to £205,253. In England, the North West was again the strongest performing region, up 12% year-on-year, with an average house price of £213,200.
Although London remains the weakest performing area, annual house price inflation increased for a third straight month to 4.5% – its strongest performance in more than a year.
Deposit pressure
Halifax warns that the pressure on deposit requirements will become more acute in the short-term as household budgets face even greater pressure from an increase in the cost of living and rises in interest rates begin to feed through to mortgage rates.
Twindig CEO Anthony Codling agrees and says: “Deposits will be key to the level of house price inflation this year. Those with a big deposit will be able to rise above the living and mortgage cost rises, those without will not and unfortunately, the deposit poor will also find it harder to save as living costs rise.”
Property portal OnTheMarket.com CEO Jason Tebb adds that it’s not clear whether last week’s interest rate rise will impact buyer confidence, particularly given greater pressure on budgets from an increase in the cost of living.
He says: “With mortgage rates still comparatively cheap and many on fixed-rate products, positive sentiment should prevail for now although it’s possible that the growth in average prices may continue to slow over the next few months.”
Tom Bill, head of UK residential research at Knight Frank, believes supply will pick up as more owners decide now is the time to act.
“A number of prospective sellers had hesitated due to the distortive effect of a stamp duty holiday and a global pandemic,” he says.
“This year could see high demand more evenly matched by supply, which would mean UK house price growth ends 2022 in single-digits.”
Read more house price news.
©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Homes now worth £24,500 more than a year ago, on average | LandlordZONE.
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House Price inflation slows in January
The latest Halifax House Price reported growth slowing in January to 0.3%, the lowest inflation figure since June last year, but average prices still hit a new record high of £276,759.
The annual rate of growth still remains high at 9.7% with transaction volumes returning towards pre-Covid levels.
View Full Article: House Price inflation slows in January
Being an expert after an expert is employed?
You have an EICR done by a NAPIT registered professional – it raises a few C’3. The report actually states ‘ There are no items adversely affecting electrical safety, and the C’s listed are categorised and listed as ‘Improvement recommended’.
View Full Article: Being an expert after an expert is employed?
MARKET: Belvoir predicts another year of rising rents
At the end of last year, Belvoir’s Q3 rental index revealed the highest rental increases since records began in 2008. But what lies ahead for the market in 2022? Read on to find out more…
“Most of Belvoir’s offices operate outside the London area, and bearing this in mind, those Belvoir offices that have been trading since 2008 in England, Scotland and Wales were reporting average advertised monthly rents of £817 in Q3,” says Dorian Gonsalves, CEO of Belvoir.
“Compared to Q3 2020 this represents a large year on year increase of just under 9.5% and an 8% increase when compared to Q3 2019. Furthermore, the majority of Belvoir’s franchisees are predicting that rents are likely to stay the same or will continue to rise in 2022.
Belvoir’s figures are comparable with data from other sources, with the property portal website Zoopla recently reporting the strongest rental growth in 13 years. When you consider that rents do not typically rise or fall by more than +/-4%, these really are staggering figures.
“Belvoir’s offices are experiencing regional variations in rents; for example, our statistics revealed monthly rents ranging from £573 in the North East, £676 in the North West, £759 in the South West, through to £1,161 in the South East and £1,585 in London.
Tight supply
In the South East rents were quite stable in Q3 – even low compared to the previous year – however supply was extremely tight, especially in areas where people were moving from London, and this is placing enormous upward pressure on rents.
Our Belvoir Southampton office reported that the limited supply of flats in their area had forced rents up by 15%, and in some instances tenants have been offering to pay over the asking price in order to secure a property. Over in Tunbridge Wells tenant demand increased for all properties with people moving to the area from London.
As a consequence, rents for flats increased significantly across the board, with house rents increasing by as much as 25%.
Prediction
“Looking ahead to the rest of 2022 and beyond – Belvoir’s franchisees across the country are predicting that rental increases are likely to continue.
“A cross-section survey of franchisees across the Belvoir network reveals that tenant demand is extremely high, but half of our offices are currently experiencing a shortage in all types of properties, from one bed flats up to five-bedroom homes and there is little indication of any easing in the shortage of available properties.
“As the market continues to adjust following earlier lockdowns, tenant trends appear to have changed slightly, in that fewer are staying for less than a year, and the most popular length of stay remains 19-24 months.
“Belvoir’s data suggests that although slightly more landlords are not buying new properties to add to their portfolio, there was a slight increase in both those buying three or more and for those buying six or more or 11 or more.
Mass exodus?
“Despite everything that landlords have had to endure in recent years, there we have seen no evidence of a mass exodus from the sector. The English Housing Survey reveals that BTL grew significantly between 2002 -2016, more than doubling in size to 20%, falling slightly to 19% in 2016.
“The market has remained at this level ever since. This is a good indication that despite everything thrown at landlords they have not left the sector, but new landlords have been discouraged from introducing new properties to the market, which means there is inevitably less availability of properties for tenants.
“Belvoir is predicting that rental inflation will continue to increase at 8-10% for the rest of this year and are only likely to return to lower levels when more landlords feel confident about introducing further properties into the sector.
“We strongly recommend that landlords consider using the services of a reputable, professional property management agent to help them secure the best tenants for their property, to maximise the potential of their investments and to help ensure that they are keeping up to date with government policies.”
To review all of Belvoir’s rental indexes in full visit: https://www.belvoir.co.uk/rental-index/
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Comment: the self-defeating march of ever increasing landlord regulation
Announcing his Levelling-up White Paper, Michael Gove unveiled the government’s plans “to transform the UK by spreading opportunity and prosperity to all parts of it.” The rhetoric sounds fine and dandy, but the reality for landlords is likely to be something quite different.
In addition to having to deal with a slew of additional regulations and restrictions, many private buy-to-let landlords are likely to have to put their hands deep into their pockets to substantially improve their rental properties. Older properties will need the most money
Older rental properties
Gove’s plans will force rental property owners with older properties – and the majority of rental properties tend to be older – to carry out improvements costing up to £15,000 each. There are estimated to be around 800,000 rental properties in England that fall into the category of needing up-grading.
The 400-page white paper proposes new minimum standards for private rentals, and new regulations which come on top top of existing rules, forcing landlords to make properties more energy efficient.
This, combined with the other landlord measures included in the White Paper, the tenant friendly letting restrictions, will undoubtedly drive some existing landlords out of the market. It will exacerbate an already severe shortage of suitable homes in the very regions the policy is focused on rejuvenating.
The National Residential Landlords Association (NRLA) certainly thinks so, it warns that the additional cost of these upgrades will force more private landlords to sell up, unless the Government comes up with some sort of support package.
Minimum health and safety standards
Mr Gove’s proposed changes will mean that all rental homes have to meet minimum health and safety and energy standards. But because areas in the North and Midlands, where levelling up is targetted, tend to have higher rates of poor quality homes, the measures will have a disproportionate effect on landlords in these regions.
Parts of Yorkshire and the Humber, the West Midlands and the North West are specifically mentioned in the white paper, but here property values are lower that other parts of the country, which means that landlords are unable to use mortgage debt to cover the high cost, as is the case in say, the South East.
Arguably, some of these proposed measures are sorely needed where a minority of neglectful landlords are concerned, and particularly those issues affecting health and safety, but others are taking the industry back to the dark old days of long-term security of tenure. The Rent Acts, which gave tenants lifetime security – and some of those legacy tenancies are still around today – are at the extreme end of this scale, but the trend now goes in that direction.
Section 21 to go…
The long anticipated abolition of Section 21, the ‘no fault’ eviction process which has provided a “safety net” for private landlords since the 1980s, is coming to an end, according to the paper. It will end the “unfair situation where renters can be kicked out of their homes for no reason,” the Paper says.
There will also be a consultation on introducing a landlords’ register, yet another measure that is supposed to crackdown on rogue landlords, the idea being that it makes sure that fines and landlord bans stop repeat offenders. However, it introduces further costs and a similar system operating in Scotland for some years now has met with questionable results.
Tightening regulations will make life tough for landlords
The current trend across the whole of the UK regions is to tighten landlord regulations, giving tenants ever more protection, but is this really helping?
Across the regions, starting with Scotland but spreading to Wales, Northern Ireland and now England there are seriously more stringent measures being introduced, all of which make the work of landlords more onerous and risky. They give tenants increased security of tenure, along with other protections.
When faced with delinquent tenants landlords want to be able to evict, and quickly. On the other hand, when landlords have good tenants who look after the property and pay their rent on time, most landlords would want them to stay as long as possible.
Compared for example to some American states – Virginia for example, with police sheriffs evicting tenants if they miss just a few weeks’ rent – evictions in the UK can never be described as quick or easy, averaging around 6 months, and this time period is now set to get extended even further.
A major deterrent for landlords
The assured shorthold tenancy – which remains in tact in England for now – was a major factor in the growth of the buy-to-let market, with around 4.4 million households now rented under the regime. It guarantees that landlords can regain possession, albeit with a few months’ wait, but it provided the necessary assurance that investors and mortgage lenders could at least get their property back, even if it meant a financial loss, usually before too much damage had occurred.
With these new proposals, the shorthold concept is under threat in England and is already gone in Scotland and Wales. It’s passing will be a major deterrent for landlords.
Most tenants are responsible
In my experience of dealing with working and professional tenancies, the majority of tenants, around 90% of them (19 out of 20), are excellent tenants. They respect the property and pay their rent on time. But if you get saddled with the 5% tenant, the one out of 20 who fails to pay, causes damage or generates constant complaints from neighbours, then it looks like you are in for a very rough ride in the future – there will be no quick, easy or inexpensive solution.
So, increasing security of tenure increases risk for those landlords. For those who operate a portfolio of properties, say 5 and upwards – and many now operate through limited companies – they can generally cope quite well with the odd rogue tenant. But what about the 45% or so of landlords with just one property, many relying on their rental income to pay a mortgage or fund retirement. For them a bad tenant becomes a financial nightmare, and it’s likely to get worse as these new laws come in.
House price growth is peaking
So far through the pandemic landlords have been bolstered by the growth in house prices. House prices growth has confounded all expectations though the Covid pandemic, and this has been a boost for buy-to-let investors with rents rising by 5% and house prices by 10%, keeping many landlords in the market. But as the virus recedes, we hope, and we face the massive debt that’s been accumulating, house price growth is likely to stall.
So, take more expensive mortgages, tighter regulations, draconian eviction restrictions throughout Covid causing serious rent arrears, a hostile tax regime and these new proposed measures and combined they could easily trigger a mass exodus of buy-to-let landlords in 2022. That’s what’s likely in store for the UK buy-to-let rental market in 2022.
There is only one result, in my view, of cracking down so heavily on the responsible majority of buy-to-let landlords who operate within the law and provide an excellent service – they will leave. If they leave, a rental shortage will keep rents high or push them even up higher – total rental stock levels are already some 43 per cent below their five-year average, that’s according to property portal Zoopla.
©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Comment: the self-defeating march of ever increasing landlord regulation | LandlordZONE.
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Landlord Incorporation To Pay less Tax for Landlords in 2022
Hundreds of thousands of property landlords are paying too much tax and in this video, I am joined by Mark Alexander from Property 118 to tell you what you can do about it.
Section 24 is a massive tax burden on Buy to Let landlords.
View Full Article: Landlord Incorporation To Pay less Tax for Landlords in 2022
LAW: Landlord brothers lose appeal against being fined £10,000 EACH over illegal HMO
Two landlord brothers have lost their appeal against both being fined for failing to licence their HMO.
Gurmail and Jarnail Gill were each fined £10,000 by Greenwich Council for not licencing the property in Conway Road, Plumstead.
After a First Tier Property Tribunal backed the decision, however, they appealed to the Upper Tribunal which has now ruled that they are both liable because both had control of the HMO.
The court heard how the brothers had inherited the property from their parents in March 2017 and let it to a single tenant, Mr Pradhan, who was holding over under an expired tenancy granted to him by their father.
£1,400 a month
The original tenancy had included a ban on sub-letting but Mr Pradhan did not live at the property and instead sub-let it to five elderly residents.
He paid £1,400 a month to the Gills and collected rents totalling £1,800. In October 2017, the house became subject to an additional licensing scheme.
The pair argued that joint landlords should jointly be liable for a single financial penalty as there was only one person with control, albeit a person comprised of two individuals.
They said that this was reinforced by the fact the rent was shared equally between them, so neither was a person having control who could commit the relevant offence.
However, the tribunal judge ruled: “Each was a person having control of the HMO and each held that status while the HMO was occupied in circumstances which required a licence but where none had been obtained.
“The appellants did not jointly commit the offence, they each committed it and each could have been separately prosecuted. In the same way, each could be the subject of a separate financial penalty because each has committed his own offence.”
©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LAW: Landlord brothers lose appeal against being fined £10,000 EACH over illegal HMO | LandlordZONE.
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EXPERT: Why HMOs are a landlord favourite once more
HMOs are rapidly gaining in popularity with a wider range of renters on a budget, according to the boss of one of the country’s largest property investment firms.
Mish Liyanage, founder and CEO of Mistoria Group, believes HMOs now appeal to more people including professionals, especially those who are progressing through their careers and want to keep costs down.
“Rentals are high, and not everybody can afford to live in the city centre for example, so HMOs become a viable and affordable option,” he tells TheBusinessDesk.com.
Demand has also remained strong throughout the pandemic, particularly in university towns and cities such as Liverpool and Manchester where HMOs continue to be the property of choice for students looking to live with friends.
Risk spread
Liyanage adds: “For investors, HMOs often provide higher yields compared to single-let properties, risk is spread and there is more than one source of income, and we expect to do work with more investors in this area over the next year.”
He has previously warned of the pitfalls of buying properties at auction to convert into HMOs, pointing to increasing numbers of investor landlords who face expensive legal battles when they try to recover losses, due to vendors misrepresenting the legal pack.
Liyanage says: “After going through the purchase process, investors are finding that the development or conversion plans they have proposed to carry out are no longer possible as there are sitting tenants, with no evidence that the deposits have been protected with an approved scheme.”
He advises investors who are considering buying property with tenants in situ via an auction to do their homework on the legal pack, especially the AST, well in advance.
Mistoria Group owns more than 100 residential and commercial properties and manages another 1,000 properties and 3,000 tenancies across the North West.
©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EXPERT: Why HMOs are a landlord favourite once more | LandlordZONE.
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