Broken front door key in lock?

admin    Uncategorized     agents

Hi Property 118, We wondered what your thoughts are.

We have recently let a property out to a nurse who doesn’t come from the UK. She’s a bit demanding even wanting her bins emptied and didn’t realise until she was told by the letting agents that she has to put them out for emptying.

View Full Article: Broken front door key in lock?

RICS survey indicates global downturn in commercial property market

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The RICS global Commercial Real Estate Market Monitor (Q3 2022) is indicating that the sector is in the early stages of a downturn. That’s according to around 81% of the survey’s respondents in Q3 2022. It marks a significant increase from the previous quarter sample when just 11% of the survey’s respondents felt that the market would turn down.

In the latest survey, which covers domestic (UK) and foreign markets, the RICS Commercial Property Monitor gives a clear indication that both domestic and foreign investors are turning their back on commercial property.

Tenant demand is a big factor in this result in the Monitor’s numerical classification scheme showing tenant demand fell to a net balance of -10 per cent, down from +17 per cent in Quarter 2. Projections for prime office values turned even more negative, with the net balance falling to -21 per cent from +15 per cent last quarter.

Fall in the value of the pound

Capital values and rental projections have as a result taken a negative turn for the year ahead, a dramatic change from the previous quarter’s survey which was showing positive numbers. Despite the fall in the value of the GBPound, enquiries from overseas investment prospects are now in negative territory across all main commercial property sectors.

Everything is pointing to a weakening market activity. With reduced activity comes also the prospect on people’s minds of significant further interest rate rises. This is weighing heavily on the commercial market outlook over the year ahead.

Tenant demand had been recovering following Covid with five successive quarters of growth, but now, in this last quarter, most parts of the UK are seeing a downward trend for tenant demand particularly in office and retail space. Industrial space is still in demand with a positive net balance of +21%, but even here demand is down from the +61% posted in the Q4 survey last year.

Office and Retail affected most

The decline in demand for office and retail space as well as a modest decline in industrial property demand is resulting in landlords offering value added incentive packages to tempt prospective tenants.

90 per cent of the respondents to the surveys now feel that with home working and/or hybrid working bedding in, in most companies, expect businesses to start to scale back at least some of their office footprint over the next twelve months.

One-third of the survey respondents believe this reduction in demand for office space will be in the order of 5 to 10 per cent, while an equal number are predicting that trimming office footprints could be between 10 and 20%+ over the full year.

In the RICS full global version of the survey, it found that two thirds of its respondents reported observing a modest amount of repurposing of offices properties going on, with only around 10 per cent seeing a “significant” reshaping of the estate.

With major external economic forces affecting the commercial market and structural changes impacting the office sector in particular, RICS thinks prime office rents will remain broadly flat over the year ahead. This is a reversal of the position they were in in the previous quarter when an increase was predicted.

For the secondary non prime office market the outlook seems even more negative. For prime and secondary retail, the story is much the same, as twelve-month projections have slipped deeper into negative territory. In the industrial sector however, rent increases are likely to be modest in comparison to the period in the early stages of the pandemic.

Key insights from regions covered in this quarter’s report include:

“North America: A significant shift in sentiment has been noted from the results across North America, with previously strong expectations for growth across all sectors now declining due to the more challenging economic conditions and the prospect of further tightening in monetary policy. Though demand within the occupier market remains firm this quarter, 52% of survey participants from the United States and 59% from Canada now feel the market is in the downturn phase of the property cycle.

“UK: Feedback from respondents this quarter indicate a cautious tone as a weakening outlook for the broader economy weighs on the commercial market. Furthermore, as interest rates increase, -42% of respondents highlight a deterioration in credit conditions this quarter which has dampened momentum behind investor activity.

“Asia Pacific: Results from APAC remain varied at the national level. Sentiment in real estate markets across Singapore and India continues to improve, with tenant demand rebounding in recent quarters (net balances of +55% and +53% respectively in Q2) across all three main sectors. Sentiment from China, New Zealand and Hong Kong however declined from previous quarter and respondents now see the market in a downturn phase.

“Middle East and Africa: Sentiment from MEA remains positive this quarter, with both occupier and investment demand indicators strengthening slightly at a headline level. The strongest momentum is being seen in Saudi Arabia and the UAE, possibly due to higher oil prices. Respondents across MEA also foresee solid capital value growth in most sectors over the coming twelve months at an aggregate level.

“Europe: Macro economic impacts, such as intense inflationary pressures and the prospect of a significant tightening in monetary policy have resulted in a decline in sentiment from respondents across Europe this quarter. As per the findings, investor demand growth has stalled (dropping to -3% net balance from a reading of +13% previously) and capital value expectations have turned marginally negative overall. Some national markets however are showing more upbeat results, with Croatia and Greece recording positive CPSI.”

RICS Economist Tarrant Parsons, says:

“Deteriorating conditions across the UK economy are having an increasingly noticeable influence on the UK commercial property market, with higher interest rates, and the prospect of more to come, now clearly weighing on investor demand.

“The weaker survey feedback is particularly evident in the retail sector, as the cost-of-living crisis and falling consumer confidence takes its toll on household spending. Likewise, the office sector has also seen a renewed decline in demand, with ongoing structural changes to working patterns brought about by the pandemic further exacerbating the broader cyclical downturn in the economy.”

Cost of living crisis

The cost of living crisis, brought on by the war in Europe, increasing energy and food prices, and spiralling inflation, have combined to bring about interest rate hikes by the BoE, with further rises still in prospect. The net result is more caution across the commercial property market.

There was a significant deterioration in credit conditions though Quarter 2, which has had a dampening affect on investor activity. All sectors are still seeing occupier demand increasing, but this is far below the levels seen at the tail end of last year and early this year.

View Full Article: RICS survey indicates global downturn in commercial property market

A question about insurance?

admin    Uncategorized     agents

Hello. Is it usual for insurance for an empty property (which is up for sale) to only provide cover for subsidence? No cover for malicious damage or escape of water.

I’ve been quoted over £600 for one tenanted and one empty property.

View Full Article: A question about insurance?

Michael Gove urged to focus on getting rental reform ‘right’

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Landlords are calling on Michael Gove to get the planned Rental Reform Bill right for both landlords and tenants.

Mr Gove was reinstated as the Levelling Up, Housing and Communities secretary by the new Prime Minister, Rishi Sunak.

View Full Article: Michael Gove urged to focus on getting rental reform ‘right’

What are YOU going to do when mortgage interest rates have reduced your rental profits to zero?

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There seems to be little doubt that interest rates will only be heading upward in the next few years. If you disagree with this please share your thoughts with me.

So, I’ve been running some numbers and scared myself half to death.

View Full Article: What are YOU going to do when mortgage interest rates have reduced your rental profits to zero?

London rents rise faster than inflation to £1,499 a month as tenants fight over flats

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Continued demand for detached properties and a post-Covid resurgence in rent for flats has pushed annual increases in London above inflation.

Average rents have accelerated by 4% to £1,499 during Q3 – more than double the previous quarter’s rise – and up 11% (£160) higher than 12 months ago, says The Deposit Protection Service (DPS), which found that the average rent for detached homes in the capital is up 12% to £2,098 while flats rose 13% to £1,513.

Its latest DPS rent index reveals that UK rents increased by more than 2% for the second quarter in a row to reach £889, an increase of 8% (£71) in the last year.

Although the pace of rental growth slowed slightly in most regions outside London in the last quarter, rents have continued to hit new heights, growing by more than 7% since Q3 2021.

Scotland is up 8% to £721 while the North West is also up 8% to £692, both outpacing the national percentage rise. Rising by a comparatively modest 5% to £705, the West Midlands has seen the lowest growth over the last 12 months.

Shortages

Across the UK, flats saw the greatest annual percentage rent increase, up 9% from £830 to £909, while terraced properties and detached properties both increased by 8% to £860 and £1,213 respectively. Semi-detached properties saw the smallest percentage increase (7%) to £962.

MD Matt Trevett (pictured) says rent increases continued due to shortages in rental stock and general increases in the cost of living. He adds: “Ongoing demand for larger properties in London, as well as flats during the past 12 months, is driving the significant rent increases we’re seeing in the capital. In order to secure a property, tenants are still willing to pay historically high rents.”

Read advice about increasing rents.

View Full Article: London rents rise faster than inflation to £1,499 a month as tenants fight over flats

Are letting agents playing fair with their fees?

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Hello. Our lettings agents found us tenants who stayed a year and then asked to renew for another year. Their contract was renewed for a further year and our agent charged us 8% of ‘incoming rent ‘ for the following year

View Full Article: Are letting agents playing fair with their fees?

Q4 Property Market Insight

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Exorbitant energy bills continue to fuel the ongoing cost-of-living crisis, and continued rate hikes put downward pressure on the property market. But is it all doom and gloom, and what does Q4 have in store for the UK property market?

Property growth is slowing

As the cost-of-living crisis endures, the Bank of England’s seven rate rises since December 2021 are certainly having the desired effect on reducing inflation when it comes to the property market.

While house prices decreased by a marginal 0.1% for the month of September (compared to a 0.3% rise in August), the annual rate of growth dipped further from 11.4% to 9.9%. This is the first time that the annual house price inflation figure has entered single figures since January 2022. According to Halifax’s latest report, this brings the average cost of a UK property back down to £293,835 from the record high of £293,992 seen in August. 

The current Bank rate sits at 2.25%, and experts expect another marginal increase, further impacting mortgage costs. That said, current Rightmove data shows buyer demand is still up 27% compared to 2019, and average new seller asking prices are up 1% compared to one month ago. 

Rental prices and demand continue to rise

Rents have surged across most UK regions since the beginning of the year, particularly in London, the North West, Wales and Scotland. 

Demand for rental properties is also at an all time high, with Rightmove data showing that unique rental enquiries across the UK stood at 567,000 in September 2022, a huge 43.6% increase from five years ago. 

With such an increased demand for renting, this is pushing up rental prices, making for attractive yields for many investors.

1 & 2-bedroom apartments are back in demand

The cost-of-living crisis appears to be pushing renters into smaller flats. The demand for one-bedroom flats rose to 31% (as a percentage of applications of all property types) in August 2022, while applications for two bedrooms also increased to 35% for the same period. Conversely, demand for two and three-bedroom houses dropped to 11% and 12% respectively. 

In addition to cheaper rents, tenants are attracted to one and two-bedroom apartments given their cheaper/more efficient running costs when compared to a house. As we approach the winter months, renters are making moves to reduce their outgoings – it costs approximately 40% less to keep a purpose-built apartment compared to a three-bedroom terraced property, while flat conversions are also estimated to be 25% cheaper to heat.

Eco-friendly properties are more desirable

A new study from Knight Frank compares the Energy Performance Certificates (EPC) ratings of 30,000 properties in relation to their home’s value. The results demonstrated that improving the energy efficiency of a property can improve its value above and beyond any local average growth; the homes which had an improved rating of C from D were seen to achieve an extra 3% in value growth in addition to any average local price growth. This additional growth was found to equate to the equivalent of around £9,000 (based upon average local resale values). 

In addition to the potential for increasing a property’s value, carrying out eco-friendly improvements can make it more desirable to tenants too. Especially given the current cost-of-living crisis and soaring energy bills, energy-efficient homes are in increasingly high demand.

If you are considering renting a property, get in touch with our friendly team of property experts at Leaders and see how we can help.

View Full Article: Q4 Property Market Insight

Man on a Mission?

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I was somewhat surprised by Rishi Sunak’s re-appointment of Michael Gove as Housing Secretary late yesterday. After all, it’s just three months ago that he was fired by Boris Johnson and he announced plans to quit politics. But I’m pleased he’s back

View Full Article: Man on a Mission?

Landlords urge Gove to ‘get weaving’ on key issues as he returns to Cabinet

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Landlords have warned Michael Gove, the new Secretary of State for Levelling Up, Housing and Communities, that he has a full in-tray of ‘to do’ tasks for the private rented sector as he returns to run the department.

Gove (main picture, on the right) met with his Cabinet colleagues yesterday to kick off the PM’s tenure in office, which will now last two years until another General Election must be called.

Ben Beadle (pictured), who is Chief Executive of the National Residential Landlords Association, says that although his organisation wants to congratulate Gove on his return to housing, there are many issues that require remedy, and already-announced initiatives that need progressing.

Top of his in tray will be progressing with the plans he previously worked on to reform the private rented sector, including ending Section 21 repossessions,” says Beadle.

“Our survey data shows that most [landlords] can envisage operating without Section 21 provided other proposals, such as on court reform and reformed grounds for possession, have their confidence.

“We will work constructively with the new Secretary of State to ensure the final reform package has the confidence of responsible landlords and tenants alike.

“This includes the need for action to tackle anti-social tenants, scrapping plans that would decimate the student housing market, and reforming the courts to ensure legitimate possession cases are dealt with more swiftly.”

Section 21 anxiety

As our joint LandlordZONE/Landlord Action webinar yesterday proved after just shy of 2,000 signed up to watch it, anxiety among landlords and the wider PRS is running high over Section 21 evictions being banned.

As Paul Shamplina explained during the 45-minute webinar, landlords are still waiting to hear from the Government how they will evict tenants who build up significant rent arrears without good reason without having to wait months and spending thousands on court and bailiff action.

Hopefully Gove will be able to reveal his department’s plans for the Renters Reform Act soon.

Watch Shamplina’s view on what will happen when S21 is gone

View Full Article: Landlords urge Gove to ‘get weaving’ on key issues as he returns to Cabinet