Renting now cheaper than buying according to Hamptons International

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Hamptons International is the trading name of Countrywide Estate Agents, a group which carries out regular research into the UK property market.

The firm’s recent analysis suggests that the average private sector tenant is currently better off than a buyer with a 10% deposit, to the tune of £71 per month and this it puts down to the pandemic effect.

Many things have changed in the UK property market since the onset of the pandemic last March, and one of these changes has been that renting has now become cheaper than buying, an encouraging sign for buy-to-let investors.

The research identified only four areas in the UK where it is cheaper to buy than it is to rent: the North East, North West, Yorkshire and Humber, and Scotland.

Pre the pandemic it was cheaper to buy that to rent in every UK nation and region. But the sudden drop in demand for renting last year – as young people gave up their tenancies and returned to living with parents – changed the financial metrics dramatically. City living became considerably less attractive.

It’s the price rises what did it!

Just over a year on from the initial shock of Covid we’ve seen unprecedented house price rises, helped along by the successive Stamp Duty (SDLT) holidays and deadlines introduced by the chancellor.

So, despite a 7.1% rise in average rents over the past 12 months, there’s been a dramatic switch between the costs of renting verses buying as the exceptionally strong house price growth coupled with increases in higher loan-to-value (LTV) mortgage rates have outpaced the rental market.

With more young people being forced to stay in the rental market, being priced out of buying properties for themselves, the demand for rental properties has about-turned in city centres from 12 months ago. Rents are now on the rise again encouraging more landlords to stay in the rental market.

The renting market bounces back

Many young people are more inclined to move around with jobs and locations, they are even prepared to move and live abroad or travel, and the prospect of being tied to long-term mortgage commitments just does not compute with them – therefore for a fairly large section of the working population, renting has become a lifestyle choice.

With more and more young people less focused on purchasing their own property and more on a convenient and flexible renting lifestyle, the demand for rental property in the right locations has made a strong recovery and looks set to remain strong for the foreseeable future.

On the other hand, city centre properties, for those landlords who can afford to buy now, offer relative affordability while prices remain depressed; mortgage deals remain competitively priced and affordable, both offering the prospect of strong profits through healthy rental yields and future capital appreciation.

As might be expected, London has seen the biggest turmoil in the market since the start of the coronavirus pandemic last March, but with things beginning to turn around again and with the cost of renting becoming cheaper than buying, it creates a window opportunity for new and existing buy-to-let investors. The Hampton’s research shows that city centre rents are creeping up again and void periods coming down.

Where should landlords buy?

Young people tend to favour city locations and as workers drift back to their offices, as we all learn to live with the Covid threat, they will want to maintain their pre-pandemic vibrant social lives close to amenities and close to good restaurants, bars, and clubs.

UK hotspots for city centre locations outside of London include vibrant and growing cities such as Manchester, Liverpool and Leeds, cities where prices and rental demand remains strong. These large university cities with great social scenes, strong transport links and relative affordability offer great investment opportunities when compared to London.

However, other regions may offer even better value for buy-to-let investors, such as those identified in the research, the North East, North West, Yorkshire & Humber, and Scotland. These regions still offer excellent rental yields, with the prospect of future capital growth.

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Short-lets rental sector bounces back strongly as Covid rules relax

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London’s short-term rental sector has bounced back more quickly than hotels and serviced apartments since the UK’s re-opening.

Short-term rentals occupancy in the capital went up from 43.1% in May 2020 to 64.1% in May 2021 – a 48.8% increase and a 12.5% rise between April and May this year.

The latest comparable data available across the sectors is to the end of April 2020, showing that hotel occupancy stood at 28%, serviced apartments was 39.9% and short-term rentals outpaced both at 57%.

The study, conducted in partnership with the UK Short Term Accommodation Association (STAA), reveals that average daily rates for the year ending April 2021 increased 9.4% for short-term rentals, but fell by 14.9% for hotels and saw a massive 63.1% drop in serviced apartments. Rates increased for short-term rentals by 16.5% from April to May this year.

Short-term rentals saw the highest growth (44%) in revenue per available room in the same period, while serviced apartments was up 25.2% and hotels fell by 2.6%.

The month-on-month picture was even brighter for short-term rentals, with a huge 40.8% increase from April to May this year.

The average length of stay for short-term rentals rose from 11.9 days in May 2020 to 13.3 days by December 2020, hitting a high in November of 14.3 days.

STAA chair Merilee Karr (pictured) says: “Whilst a hole will still exist from the absence of international visitors to London, customer confidence and the strength of the staycation trend are likely to fuel further the London accommodation recovery.

“The ease at which guests can socially distance themselves from others and benefits such as the high standards of cleanliness and safety, should cement short-term rentals as a mainstream option for tourists and holidaymakers.”

Read more about short lets.

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Jump in BTR planning approvals signals boom for growing housing sector

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The build-to-rent (BTR) sector has been booming during the pandemic including a record 11,975 planning applications submitted, up 52% year-on-year.

Of these, 58% received full approval, a rise of almost 6% since the start of the pandemic, while 42% were either rejected or withdrawn, a drop of nearly -6%, according to BTR specialists Ascend Properties.

It says the sector is becoming a driving force in the UK new-build market and that Covid has failed to impact the positive momentum.

Ascend’s research shows that the pre-pandemic peak for BTR planning application approval came in Q2 2019 when 6,682 applications were submitted.

Of these, 4,151 – an all-time high of 62% – were granted full planning consent, while 2,531 – an all-time low of 38% – were either rejected or voluntarily withdrawn. By the time the pandemic began, applications had risen to 7,900 submissions but the amount being granted was down to 52%, while rejections and withdrawals rose to 48%.

Q2 2020 brought a predictably significant slump for the sector; while the total number of applications only fell slightly to 6,530, the approval rate dropped significantly to just 39%, while rejection and withdrawal jumped to almost 61%.

Predictable slump

Ascend MD Ged McPartlin (pictured) says build-to-rent is becoming the go-to choice for developers, with projects popping up both in major cities and smaller regional towns.

He adds that there’s also greater willingness from local planning authorities to grant permission for developments.

“While developers sense high yield, low-risk opportunities, local authorities sense an opportunity to simultaneously meet the demand for new homes while rejuvenating and reinvigorating their economies and communities by introducing this new, dynamic way of living,” says McPartlin.

Read more about build to rent.

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Here’s a lesson for overzealous landlords

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A Portsmouth buy-to-let landlord thought he would take advantage of the renovation efforts on his Victorian house in Southsea to meet the government’s projected minimum EPC rating targeted for 2030.

The local council thought otherwise. It is now demanding that the new triple-glazed windows he has installed be replaced at a possible cost of £10,000. It will mean getting custom made-to-measure sliding sash front windows fitted and scrapping the new windows at the four-storey rental property.

Landlord Mike West has replaced his single-glazed sliding sash windows with modern UPVC triple-glazed ones whilst carrying out his renovation works, which perhaps understandably he thought would future proof the Victorian property and meet the projected band C rating.

However, this thought clashed with the council’s thinking as the property is in a conservation area, subject to the many restrictions that implies when it comes to alternations, windows being one of the controlled elements.

What is a conservation area?

These are designated areas of historic and architectural interest, areas in which there are legal restrictions on what changes can be made to buildings, gardens and street furniture in order to preserve the unique character of the place. 

There are now around 10,000 conservation areas in the UK since they were introduced into the planning system in 1967 comprising housing estates, parks, canals, historic town centres and some entire villages.

Local conservation restrictions vary depending on the local authority’s vision. Examples might include things like the prevention of changes to railings, street lighting, trees, windows, extensions, and even including such things as the colour of paint that can be used on front doors and windows.

Always consult before you buy

Most local councils have their own Conservation Officer. This person should always be consulted before carrying out any renovation work or changes to properties in conservation areas. A site visit should be arranged at an early stage in the process of planning your changes, to establish exactly what is and is not acceptable to the council.

The Minimum Energy Efficiency Standard (MEES) came into force in England and Wales on 1 April 2018 and applies to private rented residential and non-domestic property. It is aimed improving the energy efficiency of rental properties by legally restricting the granting and continuation of existing tenancies where the property has an Energy Performance Certificate Rating of F and G. Currently the Minimum Energy Efficiency Standard Rating is E and above.

However, the government recently stated that it wants to upgrade as many private rented sector homes as possible to EPC Band C by 2030 at this it would seem motivated Mr West to go for the ultimate in windows energy efficiency, with modern triple blazing. 

Unfortunately, standard design UPC windows rarely meet the requirements in a conservation area, and because older sliding sash windows are rarely made in standard sizes, their replacement means having them specially made at considerably higher cost than normal.

Mr West has learned about conservation restrictions the hard way as Portsmouth Council has ordered him to remove his triple glazed windows and replace them with windows more in keeping with the style of the originals, as the authority says, to prevent any further “erosion” of the area’s heritage.

Mr West had had comented:

“We put in triple glazing. It’s very energy efficient and also very comfortable for the tenants.

“We’re not conservation cowboys… anybody walking casually up and down the street would not notice the difference.”

However, Mr West’s view was not upheld when it came to his appeal. The Planning Inspectorate upheld the council’s decision.

A spokesperson for Portsmouth City Council said: 

“Unfortunately, there are other UPVC windows on the street. We can’t do anything about these, because we didn’t know about the changes at the time, and legally too much time has passed for us to take action.”

The lesson here perhaps is that with planning matters it rarely pays to make assumptions, especially when it comes to conservation areas and listed buildings. The fact that other properties in the area do not meet the requirements, it does not necessarily follow that any new alterations will – always start off any project by consulting your local authority.

Of course, there are other ways of improving the energy efficiency of traditional sliding sash windows without drastic changes to the outside appearance, possibly with secondary glazing or by fitting double or triple glazing into the wood frames.

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‘Eviction delays to get worse when furlough scheme finishes’

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Landlord Action’s new head of legal Paul Sowerbutts fears the protracted delays around the eviction process are going to get worse before they get better.

The eviction service took 707 calls from landlords looking for advice in June, up from 439 calls in April, and Paul Sowerbutts predicts that once the furlough scheme ends in October there will be more job losses, leading to even more landlords needing to evict tenants who’ve built up large rent arrears.

Review hearings have created an extra hurdle that leads to delays too, which Landlord Action is petitioning to remove.

He tells LandlordZONE: “There’s a lot of frustration directed at local authorities who landlords feel aren’t supporting them because they want tenants to stay in properties for as long as possible.”

Loopholes can sometimes be found to expedite the process, says Sowerbutts, who cites the six-month notice period facing landlords in Wales.

Issuing a notice on the grounds of anti-social behaviour along with rent arrears means the courts should prioritise a case, he advises.

In England, relying on a county court bailiff is taking at least three or four months. Consequently, Landlord Action had been advising clients to apply directly to the high court to get a high court enforcement officer to carry out a much speedier eviction in a couple of weeks. However, this is proving less effective as an application now takes several months.

An experienced solicitor with many years working in local government, as well as with tenants using legal aid and social landlords, he believes the market will evolve once Section 21 is abolished, leading to fewer landlords in the PRS but with larger portfolios, where his expertise in housing management – maintaining relationships with tenants – will be useful.

Paul’s rounded knowledge of all aspects of housing law and the strategies needed to bring successful evictions will also be key. “I’m getting my sleeves rolled up and using my understanding of all sides in the process,” he adds.

Visit Landlord Action.

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BREAKING: Rents hit record £1,000 a month as tenants return to city centres

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A significant revival in the city centre private rental market ahead of Covid restrictions being lifted next week has pushed up rents to a record £1,000 a month per property, says Rightmove.

The portal says this is the first time rents have reached this figures outside London on average after a 2.6% quarterly jump. Overall rents are 6.2% higher than this time last year.

These rises are being generated by a surge of tenants returning to their former urban haunts after spending the pandemic living with parents or renting in more rural areas, says Rightmove, with eight out of ten of the largest cities seeing rent increases.

For example, in Nottingham city centre asking rents are up year-on-year by 6.8% and in Liverpool (pictured) by 3.8%.

The rises are also being driven by a shortage of rental property in the market; year-on-year there are 36% fewer properties on the market, and properties that are advertised are being snapped up.

10% more tenants

Rightmove’s Quarterly Rental Trends Tracker, based on over 470,000 properties, reveals that the number of prospective tenants contacting agents about properties for rent is currently 10% higher than in July 2020.

London is the only region with rents lower than this time last year (-6.8%) though rents in the capital have increased this quarter for the first time since before the pandemic

Rightmove’s Director of Property Data Tim Bannister said: “At the start of this year the impact that tenants leaving cities had on rents was clear to see, but with restrictions continuing to lift we’re seeing signs of the city centre comeback.

“As businesses settle into a more structured balance between home and office time, we expect this to continue for the rest of the year.”

Read more about how Covid has impacted the rental markets.

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EXCLUSIVE: What’s in the next episode of Nightmare Tenants, Slum Landlords

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Eviction expert Paul Shamplina helps a landlord couple confront their evasive letting agent on the latest edition of Evicted! Nightmare Tenants, Slum Landlords.

The Channel 5 programme features landlords Suketu and Minesha Patel who signed a guaranteed rent agreement with an agent to manage their three-bedroom East London property.

But after receiving only one month’s full rent, payments became sporadic, before stopping altogether. They are now owed more than £7,000 and the agent is avoiding them.

“I would call the agent to follow up on where the rent was and suddenly he would transfer a nominal amount, sometimes £300, sometimes £100, but never the full £1,800 owed,” says Suketu.

“He claimed he was paying us from his own pocket as the tenants had not paid rent. However, the agreement we had was supposed to guarantee our rental income regardless of whether or not the property was occupied, or the tenants had fallen into arrears.”

The Patels call in Shamplina for help, who decides to confront the agent in his office (see below) to try and get their property and money back.

The agent claims he’s the victim and the tenants haven’t been paying any rent, but when the Patels meet the tenant, they hear a different story. With rent arrears still escalating, the couple have no alternative but to start the eviction process.

Shamplina says the prospect of guaranteed rent can seem attractive to landlords, saving them the trouble of dealing with voids, rent arrears, and eviction. 

He adds: “However, across each series of the show, I always make sure I expose the problem of guaranteed rent rent-to-rent, and try to educate landlords about this sector of the industry, because significant pitfalls remain for landlords if they choose the wrong company. At present, it is still like the Wild West with far too many landlords being duped.”

Evicted! Nightmare Tenants, Slum Landlords is on Thursday at 10pm.

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Court refuses to alter terms of a commercial lease on renewal

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When terms of a renewal lease cannot be agreed between the parties, according to the provisions of the Landlord and Tenant Act 1954, which governs the statutory requirements of a commercial lease, a court can have oversight and decide.

Section 35 of the Act provides that a Court shall have powers to vary the terms of the current tenancy, taking into account all relevant circumstances.

Poundland, in Poundland Ltd v Toplain Ltd, argued that its lease on renewal should include a clause stipulating that rent should be reduced by half during any “use prevention measure”. This was taken to include government legislation due to subsequent waves of Covid, changes which Poundland said would “modernise” the lease.

The high street discount goods retailer argued that such a provision inserted into the lease would be in both parties’ best interests – it would allow the tenant to continue to trade and meet its ongoing obligations to the landlord, they claimed.

However, the judge in the case did not agree. The decision went against Poundland to the relief of the commercial landlord community. The County Court refused the tenant’s request to include a clause in its business renewal lease which would reduce the rent by half should the government impose further lockdowns.

As authority for its decision in relation to Section 35 of the Landlord and Tenant Act 1954, the court referred to the test case of O’May v City of London Real Property Co Ltd (1983) which established the principle that a court should not sanction a departure from the terms of the current lease “unless the burden of changing the terms of the current tenancy falls on the party proposing the change” and the change proposed is fair and reasonable.

The landlord Toplain Ltd had argued that there was no market precedent for such a change, an inserted clause that would “fundamentally change the relationship between the parties.” It argued that any future lockdown would be controlled by government legislation and that “the proper course for the tenant would be to take advantage of any benefits or grants offered by the Government.”

In his Judgment District Judge Jenkins, presiding at Brentford County Court on 2 July 2021, followed the principles laid down in O’May and refused to sanction the change. The judge said that it would not be fair and reasonable to expect the landlord to share the risk (with the tenant) in circumstances over which the landlord would have no control and where the tenant could avail itself of reliefs or schemes offered by the Government.

District Judge Jenkins said that the case was different from the recent decision in WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellschaft mbH (March 2021) as the parties in the WH Smith case had already previously agreed that a pandemic rent suspension clause should be included in the renewal lease – here the court was simply required to determine the mechanics of how that provision would operate.

The landlord was successfully represented by Ms Cecily Crampin at Falcon Chambers, a barrister regularly instructed by PDT Solicitors.

Lessons to be learned from the case:

The Poundland case is a County Court decision without binding effect on future cases, though it does give a guide as to how judges may apply current guidance to pandemic-related decisions.

PDT Solcitors relayed Ms Crampin’s comments:

“This case shows judicial thinking on the inclusion of Covid-clauses, and how the guidance in O’May may be applied in the specific context of lease terms sought as a result of the Covid-19 lockdowns.”

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Another council brings in huge fines for landlords who ignore electrical safety standards

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Bury Council in Manchester has adopted new measures to fine landlords up to £30,000 if their properties don’t meet the recently-introduced electrical safety standards.

Although the standards came into force in June 2020, they had not been adopted and implemented by the council which has now agreed to introduce the civil penalties after a report to the council’s cabinet said unsafe electrical installations in rented homes ‘will not be tolerated’.

Regulations now apply to all tenancies in England and require landlords to have the electrical installations in their properties inspected and tested by a qualified and competent person, at least every five years, and to give a copy of the electrical safety report to their tenants, and local authority if requested.

Councils can decide the level of penalty for landlords who don’t comply – up to £30,000 – and can spend the proceeds on enforcement purposes.

Civil penalties

It’s not known how many councils have adopted the civil penalties or how many landlords have been fined so far, says the Local Government Association.

Last December, LandlordZONE reported that East Riding Council had signed off civil penalties of up to £30,000 as an alternative to taking landlords to court.

Bury councillor Clare Cummins says: “The additional provision to impose a fine up to £30,000 sends a strong message to any rogue landlord that substandard property conditions and unsafe electrical installations will not be tolerated. We as a council want to send out a clear message that we expect all homes to be safe and of a decent standard within the PRS.”

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Landlords are now bribing tenants to quit properties, claims report

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Landlords faced with lengthy court waits have resorted to bribing tenants to get them out of their properties, it has been reported.

Many are so desperate that they are willing to cut their losses and write off arrears to gain vacant possession and avoid a long and expensive court process, reports The Telegraph.

A recent report by the University of York found landlords who were worried that increasingly restrictive regulations would hamper eviction had paid problematic tenants to leave.

Exhaustion

Author Dr Julie Rugg said the practice most often applied in cases of anti-social tenants or where huge arrears had accumulated. “A landlord won’t ask a good tenant to leave, so payments like this can represent exhaustion on the landlord’s part,” said Rugg.

One anonymous landlord who has about 200 tenants told the newspaper: “I have two tenants that I have offered to pay to leave. One was £20,000 in arrears, the other was £12,000 in arrears, and I offered to find them each a place to live and pay the first month’s rent and the deposit. I was going to write off their arrears.”

He expected to pay £2,000 to £2,500 on each case to cover the costs, but both offers were rejected because they wanted to be rehoused by the council and were told to wait for the bailiffs.

“If a tenant is in receipt of benefits, offering an incentive to leave is a problem because the council then deems them intentionally homeless,” the landlord added.

Paul Shamplina, founder of Landlord Action, said: “If a landlord is faced with choosing an eviction process, which could take up to 14 months, or writing off existing arrears but re-letting the property much sooner, the landlord has to weigh up which makes most financial sense and is the least stressful.”

Read more about evictions.

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