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Em Morley

Will Regional Property Markets Catch the Capital?

Published On: July 23, 2018 at 9:26 am

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The latest UK Cities House Price Index from Hometrack predicted a narrowing of the price gap between regional property markets and the capital over the next year or two.

For landlords, the general consensus is clear: regional property markets are the places to be if you’re looking to profit from buy-to-let. But are we at risk of completing the same cycle that we saw just over a decade ago, or has the market learned from its mistakes?

Jonathan Stephens, the Managing Director of property investment firm Surrenden Invest, says: “While many factors mirror the housing market’s performance back in the early 2000s, there are some substantial differences that look set to bring about different outcomes from this state in the cycle. Tax changes are playing a key role in this, as are the rising quality and security standards of regional city developments.”

At present, according to Hometrack, house price growth stands at an average of 4.3% for the UK as a whole on an annual basis. For London, this figure drops to just 0.4% over the same period. Edinburgh has experienced the greatest increase in values, at an average of 7.1%, closely followed by Manchester, at 7.0%. Birmingham has also fared better than average, at 6.5%, as did Liverpool, at 5.9%.

The success stories of regional property markets stands in stark contrast to the price falls experienced in 20 of London’s 33 boroughs.

The same trend of regional property markets racing to catch up with London’s inflated prices was seen between 2002-05, when the capital recorded weak growth after a period of strong performance from 1996-2000. Regional property markets had lagged behind, but began reporting solid growth from 2001 onwards, thus narrowing the price gap.

Nevertheless, Surrenden Invest is quick to highlight that the current market has a number of significant differences to that of the early to mid-2000s. While the cycle appears similar, secondary cities may actually stand a more realistic chance of catching up to London’s prices than they did previously.

“People have been saying that London is too expensive since before Black Monday in 1987, yet, over the last 30 years, property prices there have grown enormously,” Stephens explains. “Still, there comes a point when a market becomes too expensive to bounce back quickly, even when there are chronic underlying supply issues, as is the case with London.”

He adds: “The city remains one of the world’s most significant and sophisticated property markets, but that doesn’t mean that it can’t suffer a sharp, swift price correction – or that it could quickly recover from such an occurrence.”

In past property market cycles, regional property markets have narrowed the price gap between their cities and London, only for the capital’s prices to race ahead once more. This time, though, the quality, security and corporate governance of nationwide developers are far stronger than they were even ten years ago. Previously a concern for risk-averse buyers, these strong credentials – and the attractive rental yields on offer – mean that regional cities stand a good chance of catching up to London’s prices outside of the standard cycles that we’ve seen over the last 20 years.

Another contributing factor is the new Stamp Duty regime. Many of the capital’s properties are located in prime and super prime locations, costing upwards of £1m. The sale of these properties has been significantly hampered by the higher tax rates, as well as the additional 3% charge on second and buy-to-let homes. With regional properties available for significantly less money, the tax burden is reduced sufficiently to make property purchases outside of London more attractive in the eyes of many investors.

Stephens concludes: “Are we likely to see the regions catch up relative to London in terms of their property prices? Probably not, as London remains a uniquely appealing market. However, what we are likely to see is a sustained and significant narrowing of the price gap, as regional cities hold fast in the wake of London’s price correction.”

Fergus Wilson to Evict Single Mums with Babies

Published On: July 23, 2018 at 8:54 am

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One of the most controversial – and largest – landlords in the UK, Fergus Wilson, has made the news yet again, this time by saying that he will evict single mums with babies, as well as those that become pregnant.

Last year, he made the headlines when he claimed to be banning “coloured” people from renting his properties. He was subsequently issued with a three-year injunction from discriminating against tenants on racial grounds.

Wilson, 69, who runs a property empire in Kent with his wife Judith, has now caused further controversy by stating that he plans to evict single women who become pregnant and single mums with newborn babies.

He is due to be taken to court by the Equality and Human Rights Commission for the second time.

However, he insists that he is not a “bad guy” and blames his decision on the “strict” new enforcement rules being imposed on landlords by Ashford Borough Council, which has announced plans to adopt new powers to crack down on rogue landlords.

Wilson believes that the council’s new policy on landlords having to fix boilers within four days if the tenant is a single mum with a baby is “too restrictive”.

Landlords who miss targets face being fined if they do not comply with the emergency maintenance policy.

Wilson told the Kentish Express: “I just can’t risk something going wrong and not being able to get a plumber there in time – have you ever tried to get a plumber, there’s a national shortage.”

In a letter to Gerald White, Ashford Borough Council’s Cabinet Member for Housing, Wilson claimed: “It is heartbreaking to terminate the contracts, but we cannot recruit staff and service the tenants. The landlord has proved to be a controversial figure (Picture: PA) ‘The council has brought this decision on itself’.

“We know we will not be able to comply with that expectation so (I) have brought these tenancies to an end.”

He confirmed that he had already given four single mums with babies two months’ notice to vacate his properties.

Speaking earlier this month, White said that he was delighted at the new enforcement powers: “I’m supportive of the proposed implementation of the civil penalty policy to allow the council to consider imposing fines on landlords who fail to comply with housing law, as an alternative to prosecution.

“Implementing the policy will hopefully deter landlords from failing in their responsibilities in providing safe homes and ensuring that they comply with the relevant housing law.”

A Spokesperson for Ashford Borough Council argued that it would only use enforcement action against landlords as a “last resort”.

They continued: “We have duty to ensure decent standards for tenants who are renting privately. We always work with landlords to ensure those standards are met and try to assist them as much as possible.

“Formal enforcement action is very much a last resort, but we will take action where necessary.”

Electrical Safety Checks to be made a Mandatory Requirement for PRS Homes

Published On: July 23, 2018 at 8:11 am

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Progress has been made in order to improve the standards of electrical safety in the private rented sector (PRS). The Government has now agreed to back the idea of introducing mandatory electrical installation inspection requirements for landlords in England. These will occur every five years.

The hope is that, by bringing in this change, it will provide protection for tenants by reducing the risk of fires caused by electrical faults.

Housing Secretary James Brokenshire announced this plan last week. The launch of a separate consultation on building regulations, following Dame Judith Hackitt’s Independent Review of Building Regulations and Fire Safety, was also announced. This consultation will close on 11th October 2018.

James Brokenshire commented: “There is nothing more important than ensuring people are safe in their own homes.

“That is why I am announcing a package of measures focused on improving building safety, having listened carefully to the concerns which have been raised.

“Dame Judith’s report sets out the right framework to improve safety, but I will not hesitate to go further than the recommendations where I deem it necessary.

“That is why I am going further than my original commitment to simply clarify the guidelines, by commencing an end-to-end technical review of the fire safety aspects of building regulations in the autumn.”

Electrical Safety First, a charity working to raise awareness of electrical safety, was happy to hear this news. Phil Buckle, director general of Electrical Safety First, said: “We are delighted the government has finally recognised the importance of regular electrical checks in the PRS, which protects both tenants and landlords.

“Electrical Safety First has led the charge for this to be made a legal requirement for UK homes and successfully lobbied for these to be introduced in the PRS in Scotland – with Wales and Northern Ireland set to follow suit. And our campaign for the introduction of these checks has been supported by 71% of MPs from all parties.

“The recent Hackitt Review has left no doubt that regular electrical checks are an essential – not just in the PRS but also in the social housing sector. And particularly in high-rise blocks, whatever the tenure.

“It is time private renters in England enjoy the same level of protection as elsewhere in the UK.”

Hampshire Fire and Rescue Service carried out research for Electrical Safety First, with conclusions indicating that electrical fires in PRS homes are expected to increase by as much as 17% by 2025.

If you would like to do more as a landlord to ensure your properties stay safe for your tenants, register for free to take a look at Landlord News’ fire safety fact sheet.

Gender Pay Gap Highlighted by Knight Knox Property Investment Survey

Published On: July 20, 2018 at 9:54 am

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Gender pay gap research from Knight Knox has highlighted that the received income from property investment is lower for women than it is for men.

Knight Knox received its data from a yearly survey of landlords across the UK, which has revealed that male landlords receive an average of £24,050 annually, whereas female landlords receive £22,550.

Looking at the results from last year, this now shows an increase in the gap from 1% to 6%. These results fit in with the current trend of the overall gender pay gap apparent as an issue in Britain, which stands at 9.1%.

Andy Phillips, commercial director at Knight Knox, commented: “Inequality and gender pay gaps have been a huge topic across the media over the past year and these figures seem to signal that similar issues may have made their way into the investment and buy-to-let market.

“That being said, the income does seem to be aligned with experience – male landlords have almost two years more experience on average, and this is likely to have some impact on the returns generated by renting out property.”

The latest statistics from Knight Knox went on to show that renting out a property is main source of income for 31% of female landlords, whereas this is only the case for 17% of male landlords.

It has been pointed out that women were underrepresented in the results, with the gender breakdown showing 40% female participation.

Andy added: “Property investment is clearly a male-dominated market and there is potentially more to be done to attract female investors to level out the playing field.

“Research by YouGov recently showed that women take less risk and are more focused on avoiding losses than generating gain from investments. They will dig deeper to understand the market before diving into the unknown, so accurate and jargon-free advice tends to be more important than when dealing with male investors.”

Rightmove’s Keyword Sort Allows for More Specific Searches

Published On: July 20, 2018 at 9:32 am

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When you’re after a new property to add to your portfolio, what do you look for in the listings? Rightmove has now introduced its Keyword Sort feature, which allows homebuyers to search more precisely. Now you can have a look for properties that have exactly the features you feel are a necessity.

Do you believe a garage or a downstairs washroom is a must to add appeal to your rental property? Is a bigger garden a feature that will mean a better yield? From now onwards, it will hopefully be easier to locate such properties with this keyword feature.

It was added to the portal at the end of May, organising listings showing the most relevant results first based on the keywords used, as well as the other search terms.

During the initial couple of months since the launch, Rightmove saw the most popular keywords searched for to be a garage, garden and swimming pool. Homes with a sea view were also searched for, as well as detached properties.

There is also the option to search for a specific phrase, but, as this sorts the results to exact matches, you need to make sure you don’t miss any words out.

Rightmove has stated on its blog announcing the feature:  “We’ll prioritise your search results for you to show you the most relevant properties based on those that match your desired keywords.

We won’t hide any properties that fail to match one or more of your keywords, as they may still be of interest to you, but we will de-prioritise them for you. This allows you to see the properties that most closely match what you’re looking for first without missing any properties that you may still be interested in viewing.

Firstly, we filter the properties by any criteria you’ve used, such as location, price, property type etc. When you apply keywords, we then prioritise those that most closely match the keywords.

If you enter more than one keyword, the first keyword will be prioritised as the most important.”

House Price Growth Drops to Lowest Level for Five Years

Published On: July 20, 2018 at 8:55 am

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Average house price growth in the UK has dropped to the lowest level for five years, according to the Office for National Statistics’ (ONS’) official House Price Index.

In the year to May 2018 (for which the latest data is available), the average UK house price rose by 3%, which is down from 3.5% in April. This is the lowest rate of growth since August 2013, when it was also 3%. Annual house price growth has slowed since mid-2016 and has remained under 5% throughout 2017 and into 2018, with the exception of October 2017.

Slowdown in London

This drop in UK house price growth was driven mainly by a slowdown in the south and East of England. The lowest annual growth was recorded in London, where the average price dropped by 0.4% over the year to May. This is the fourth consecutive month that house prices in the capital have fallen.

The average UK house price was £226,000 in May. This is £6,000 higher than in May last year and unchanged from April.

By property type

Across the UK, all property types showed an increase in average prices in May when compared to the same month of 2017.

Detached houses recorded the greatest rise, at an average of 4.6% in the 12 months to May, to a typical value of £344,000.

House Price Growth Drops to Lowest Level for Five Years

House Price Growth Drops to Lowest Level for Five Years

The average price of a flat or maisonette was unchanged, at £203,000 – the lowest annual growth of all property types. Weaker growth in the value of UK flats and maisonettes was driven by negative annual growth in London for this type of property. The capital accounts for around 25% of all UK flat and maisonette transactions.

Across the UK

The main contributor to the increase in UK house prices in May was England, where the typical value of a property rose by 2.9%, to £244,000. Wales saw house prices increase by an average of 1%, to stand at £149,000. The average value in Scotland also stands at £149,000, following growth of 4.9%. In Northern Ireland, the average house price is £130,000, after a 4.2% increase was recorded in the year to the first quarter (Q1) of 2018.

Region-by-region

On a regional basis, London continued to boast the highest average house price of the UK in May, at £479,000, followed by the South East and East of England, which stood at £322,000 and £289,000 respectively.

The lowest average price continued to be found in the North East, at £129,000.

The East Midlands recorded the highest annual growth in May, with prices up by an average of 6.3%. The West Midlands followed, at 5%.

The lowest annual rate of growth was seen in London, where prices dropped by 0.4% in the 12 months to May. The capital has shown a general slowdown in its annual growth rate since mid-2016. This is the fourth consecutive month that London house prices have dropped. The second lowest annual growth was in the North East, where prices increased by an average of 1.3%.

Comments

Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, responds to the findings: “Persistent regional disparities are evidence that this market is still as tight as a drum. Yet there are signs of momentum shifting as regional growth rates begin to fall back down to Earth.

“London’s figures are skewed down by places such as Westminster remaining 10% down annually, but the gap in growth rates between the capital and places such as Scotland, and the East and West Midlands, have narrowed in the past few months.

“Since February, the gulf between growth in London, and the East and West Midlands has slimmed from 7.3% and 8.3%, to 6.7% and 5.4% respectively.

“Scotland has been doing incredibly well, yet there are also only 5.3 percentage points between the growth rates of homes in the capital and those north of the border in May, compared with 7.4% in March. These disparities remain excessive in the tightly woven market we have in the UK, but a slowdown in the regions is now underway, even if prices continue to climb.

“The Help to Buy scheme is still fuelling price growth of new build homes, but, even there, latest figures show a sharp monthly contraction of more than 2%.

“The headline figures in London will continue to make disturbing reading for some, but, privately, estate agents are cheering a cooling that has already begun to deliver a recovery in transaction levels.”

Shaun Church, the Director of mortgage broker Private Finance, also comments: “The average London home saw its value drop by £1,916 in May 2018. With property prices having reached their ceiling limit in many areas of London, it was only a matter of time before we saw the market ease.

“For first time buyers in London struggling to make their first step onto the housing ladder, these figures will be welcomed, helping to make the dream of homeownership that bit more attainable. However, for those that already own a property, news of negative house price growth will be met with concern, as hopes of making a quick and easy profit from their properties will be dashed.

“A decline in house prices is never a vote of confidence for the UK economy; this downward trend we are witnessing in London, however, is a correction, not a crash. House prices in the capital have soared in the past few decades to prices well beyond affordable for the majority of its residents. We could be seeing property prices finally nudging back to levels that Londoners can afford.

“The easing of house price growth across the UK, combined with near record low mortgage rates, means market conditions are firmly working in the borrower’s favour. Buyers should therefore consider locking into a long-term fix to allow them to enjoy the rock bottom interest rates of today, well into the future.”