MARKET: Belvoir predicts another year of rising rents

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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/

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – MARKET: Belvoir predicts another year of rising rents | LandlordZONE.

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Comment: the self-defeating march of ever increasing landlord regulation

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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

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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.

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LAW: Landlord brothers lose appeal against being fined £10,000 EACH over illegal HMO

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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.”

Read more about HMOs.

©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

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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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HMO platform raises £275,000 as it bids to become ‘Airbnb for house sharing’

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A tech platform that enables landlords to manage HMOs more effectively has raised £275,000 in new funding as its bids to become the ‘Airbnb for shared living’.

The money comes from asset management giant Mercia which has ten offices around the UK. Its MEIF Proof of Concept & Early Stage

Fund has made the investment in COHO, whose CEO Vann Vogstad (main pic, centre).

He came up with the idea of an online property management platform just for HMOs after living in house shares in Birmingham when he was a student.

COHO, which is unique within the housing tech space, is hoping to accelerate the growing trend for co-living amongst people of all ages. It allows property investors to manage their portfolio and tenants to find a suitable house share with like-minded people.

The platform, which Vogstad co-founded with Liam Cooper last year, has since then signed up 80 landlords.

The funding will allow the Worcester-based company to expand the team with the addition of five new jobs and develop a host of new features to improve the management of shared living.

Mainstream

“By making house sharing easier to manage for both landlords and tenants, COHO aims to bring it to the mainstream,” says Vogstad.

“The support of our investors will enable us to move forward at a much faster pace to achieve our ambition of making shared living more accessible to both property investors and tenants, and become the Airbnb of house shares.”

Kiran Mehta, Investment Manager at Mercia, says: “The property management sector is ripe for innovation with many landlords, in particular those with HMOs, having to patch together multiple management tools.

“COHO offers a one-stop shop for property management. Vann and the team have carved out a strong niche in the HMO market and have plans for some exciting additions to the product roadmap.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – HMO platform raises £275,000 as it bids to become ‘Airbnb for house sharing’ | LandlordZONE.

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Landlords are their reducing leverage requirements

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“Since the end of lockdown, we’ve seen an increasing population of landlords who do not wish to leverage their properties as much as they may have done previously. As a responsible lender, we have launched some 50% and 60% LTV products to cater for this market and reward this prudent approach.

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Interest Rate Rise Impact Calculator Wizard

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Calculating the extra amount of interest you will pay as a result of the recent 0.25% interest rate rise isn’t exactly rocket science for some people. However, if numbers isn’t your thing and/or you would like to understand how the Bank of England decision will affect your cashflow and your tax position I’ve designed the wizard below for you to use free of charge.

View Full Article: Interest Rate Rise Impact Calculator Wizard

£1.5 billion fund launched by government to back SME rental home construction

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SME developers and builders will soon have access to £250,000 home-building loans through the government’s Levelling Up Home Building Fund, announced as part of its new White Paper.

It wants to encourage innovative projects to build rental and for-sale homes, such as community-led housing projects and groups of small firms working together to deliver larger sites and will share out the new £1.5 billion fund in the hope it will lead to 42,000 new homes being delivered.

Individuals and UK firms will be eligible for finance as long as their project is financially viable, they are planning on building or refurbishing five or more homes on a site in England, and their project would stall, or progress much less quickly, without the cash.

They need to have a controlling interest in the land and a clear route to achieving planning consent.

Managed by Homes England, the fund offers finance from £250,000 for a five-year term but the government has also partnered with Invest & Fund to hand out loans of between £400,000 and £2.5 million for applicants who are planning fewer than five units.

Brian Berry, chief executive of the Federation of Master Builders, says the loans should be targeted at reversing the decline in SME housebuilders, who are now delivering only 12% of the country’s housing stock, down from 40% in the 1980s.

“Local housebuilders develop on underutilised land that will be vital for hitting housing targets. However, these plans must make sure we’re helping to deliver new homes where demand is highest.”

He adds: “It’s positive that the government is taking steps to improve the quality and energy efficiency of our existing housing stock in the private rented sector. Local builders will be critical to the success of this policy and should be considered at each point of its implementation.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – £1.5 billion fund launched by government to back SME rental home construction | LandlordZONE.

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Are Gove’s ‘levelling up’ plans a step too far for landlords?

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Taxes. Regulations. Rental changes. Reforms. High standards. Section 21 being scrapped. Is this all too much for some landlords?

The government’s dramatic Levelling Up White Paper feels like another knife in the back to the private rental sector.

A national landlord register, crack-down on rogue landlords, the implementation of a national ‘decent homes standard’ and moves to abolish section 21 ‘no fault’ evictions; it’s easy to see why so many landlords are anxious about the changes.

Frustration

Many landlords are already worried about the looming EPC and ‘decent standard’ refurb costs being forced through by the government.

On a £60,000 property, which may only earn £6,000 a year in rent, a £10,000 to £15,000 refurb raises the question: is it worth it, or is there a way out?

What’s more, many landlords have been hit with the mammoth task of incorporating their portfolios. It’s safe to say, the landlord sector isn’t what it used to be. But what are the solutions?

Limited company

Incorporate, absorb the costs and hope things get better could be an option, and there are plenty of companies out there that are rising to the challenge and providing landlords with a service to do so.

Property118 are landlord incorporation specialists who can solve Section 24 problems by efficiently transferring property rental businesses into Limited Companies.

This solution works well for those who can fork out the fees, and are resisting selling because of Capital Gains Tax, but is CGT really a problem?

A deeper dive shows it might not be as bad as landlords think. With the decision of how best to manage the equity in portfolios, another option could be to sell up and cash in.

Selling up

It’s a route that many landlords are taking. Landlord Sales Agency is the leading portfolio exit specialists that have a credible track record when it comes to selling, and they’ll sell your entire portfolio in one sitting for 80 – 90% of the market value.

It takes handles all the hassle and delivers a lump sum for the whole portfolio in your bank in 7 to 21 days.

Expert view

David Coughlin, CEO of Landlord Sales Agency says: “You can either look at the changes as a frustration, or an opportunity to get out now while you still can.

“I’m selling my own portfolio and at Landlord Sales Agency our team know exactly what to do to help other landlords do the same.

“Between £2 million in the bank and the chance to lose the headaches and retire, or all the money we’re going to end up forking out as the government makes things tighter and tighter, I’d pick cashing in right now.

“We’ve had a good run of it, it’s now time to take the lump sum and reinvest in other business projects or retire and relax.”

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