Written By Em

Em Morley

Buy-to-Let and the UK Housing Crisis

Published On: February 13, 2017 at 9:21 am

Tags: Buy-to-Let,buy-to-let landlords,housing crisis,property investors

We are now within a few months of tax changes within the buy-to-let scheme pricing a lot of potential investors out of the property market. Thanks to a rise in Stamp Duty and an ill-advised reduction in mortgage interest relief, private landlords are set to be getting squeezed more and more. When the market opened up in the mid-90s, it was hailed as being a great opportunity for those who wanted to build a pension pot out with the savings accounts being offered by banks.

Buy-to-Let and the UK Housing Crisis

This became especially pertinent in the financial world after the global market crash, when a combination of sustained low interest rates and a lack of trust with financial institutions, led people to put their money elsewhere. The buy-to-let scheme made a lot of sense for the people who felt they’d been bitten by the banks and wanted to have a greater amount of ownership with their money, rather than leave it in a low interest account.

As the market grew, the pool of experience grew deeper. Thanks to online communities such as Landlord News, and resources from the banks themselves there was a point where, with enough research and financial security, most people could consider getting into the property letting business. Now, with the new tax year looming, and the Government sticking to plans to change regulations originally set out by the former chancellor, George Osbourne, we are likely to see the end of the era whereby investors with less disposable income will bet met with more barriers to the market.

The planned changes were almost met symbolically by one of the country’s biggest private landlords, Fergus Wilson, announced plans to sell 1,000 of his properties as he is of the opinion that the cost of running a buy-to-let property is not worth the potential profits. When that kind of outlook is coming from the country’s biggest property investor, one can only imagine what it might mean for those who have much smaller ambitions within the market.

Another compounding factor within these changes to taxation is what this could mean for the so-called housing crisis, which Britain is currently in the midst of. It has been reported that consumer demand for rental property is on the rise, in part due to the fact that many young people are not at the stage where they have enough money saved to be able to buy their own property. Looking at London, the worst affected area in terms of the housing crisis, experts have predicted that rent is set to rise by 25% over the next five years, as the supply of property continues to be outstripped by demand.

In terms of addressing the lack of housing, the Government’s recently announced white paper has a number of different tactics designed to ease the pressure on the demand for affordable housing. A great number of proposals and concepts are covered, including the use of public land for housing developments whilst still protecting greenbelt areas. Critics have said that the White Paper isn’t going into enough detail, so the Government will have to think about how they plan on tackling this problem, especially when landlords are being discouraged from entering the market.

Many tenants and councils unaware of new Section 21 rules

Published On: February 10, 2017 at 2:11 pm

Author: Em Morley

Categories: Property News

Tags: Buy-to-Let,landlords,revenge evictions,Section 21,tenancy agreements

A concerning new BBC survey claims that powers to tackle so-called ‘revenge evictions’ are not being utilised by the majority of councils in England.

Since October 2015, it has been law that a Section 21 notice can no longer be served during the first four months of a tenancy agreement.

In addition, a further piece of legislation now prevents agents or landlords from ending a tenancy with a Section 21 notice, should they fail to address a complaint about the state of repair in a property made by their tenant to a local authority.

Unaware

However, research conducted by BBC Radio 1 Newsbeat, which used Freedom of Information requests, shows that over half of local councils in England have not taken advantage of these powers.

This suggests that tenants either did not know about the new provisions, or that councils were unaware of their responsibilities after being informed.

At the time of the amendments to the law, a separate report from the National Landlords Association found that 90% of tenants had no clue of these changes.

Many tenants and councils unaware of new Section 21 rules

Labour MP, Clive Betts, chair of the Communities and Local Government select committee, told the BBC: ‘I can’t believe there are that many local authorities where no-one has been the subject to a revenge eviction. We’re talking about landlords here who are trying to avoid carrying out their responsibilities.’[1]

‘They’re the landlords we’ve got to get at – and they’re going to be in the worst properties, with people living in the worst conditions. That’s the biggest challenge for everybody,’ Mr Betts added.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2017/2/section-21-few-tenants-and-councils-use-new-powers–claim

New flatmate finder available with a free trial for landlords

Published On: February 10, 2017 at 12:33 pm

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,Ideal Flatmate,tenants

Buy-to-let landlords in the capital are currently being invited to list available rooms for rent free of charge online via a new compatibility based site.

The platform, Idealflatmate.co.uk, was designed by Cambridge professors and is based on an algorithm similar to that found on dating websites. It works to prioritise tenant compatibility to attempt to secure longer-term relationships and tenancies.

Habits

Technology used in the algorithm, functional after the respondent has completed a 20 question survey, focuses on the living habits and sociability of users.

A study from two professors, Dr Paula Banca and Professor Mark P Haggard, found that the relevance of questions asked were of paramount importance.

Founders of Ideal Flatmate, Tom Gatzen and Rob Imonkihe, came up with the idea for the platform after being continually frustrated with the ever-changing flatmates that had found through listing websites.

Mr Gatzen said: ‘Both myself and Rob have lived in flat shares that ended up in disaster because we didn’t get along with our flatmates. We thought that there must be an easier way.’[1]

‘For landlords and agents, it’s the perfect solution as the site is free and offers a great opportunity to get more visibility in alternative areas of the market, particularly amongst tenants in search of long term relationships which ultimately facilitates longer term contracts,’ he added.[1]

New flatmate finder available with a free trial for landlords

Reducing Turnover

The founders are hopeful that the emphasis on compatibility will cut the rental turnover rates in properties.

Gatzen also noted: ‘We’ve tried to make the site as user friendly as possible, which will make it more attractive to prospective tenants as well.’[1]

Ideal Flatmate is offering the free trial for landlords and letting agents until Spring, with the platform also offering assistance in achieving their optimum websites.

Since the soft launch phase in November, Ideal Flatmate has seen over 30,000 users, 3,000 people register and more than 1,000 properties listed.

Mr Imonikhe observed: ‘We’ve had overwhelming positive feedback from letting agencies thus far. We recently heard from a letting agent who had a property listed on a well-known listing site for three weeks with no interest, he put it on our site and after two days had found a full group of tenants and a 12 month contract.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/2/new-flatmate-finder-launches-with-a-free-trial-for-landlords

Residential rents becoming unaffordable in some regions

Published On: February 10, 2017 at 11:23 am

Author: Em Morley

Categories: Property News

Tags: annual rental growth,Buy-to-Let,rents,residential rents,White Paper

A new report has revealed that residential rents are continuing to rise across the UK, with 20 regions seeing increases of more than 3% during the last year.

Data from the most recent Landbay rental index shows that Luton saw the fastest growing rents with a rise of 6.5%. This was followed by Northamptonshire (5.1%), Peterborough (4.8%) and Edinburgh (4.6%).

Other prominent rises were evident in Medway (4.5%), Bristol (3.62%) and Nottingham (3.25%).

Average Rents

Taking the UK as a whole, the average rent is now £1,189pcm-a rise of 1.08% year-on-year and 0.06% month-on-month.

When London is taken out of the figures, typical rents cool to £750pcm, up by 1.92% and 0.12% respectively. In the capital, the average rent stands at £1,883pcm, down by 0.42% year-on-year and by 0.04% month-on-month.

By country, average rents differ. In England, the average rent stands at £1,221, up by 1.06% year-on-year and by 0.06% month-on-month. In Scotland, rents average at £721 and in Wales, £635.

The Landbay Index shows that in the 20 regions with annual rental growth of 3% or more, rents are becoming unsustainable. As such, the firm has called for the Government to prioritise affordability in these areas.

White Paper

This week’s long-awaited Housing White Paper further underlined the growing proportion of income tenants are spending on rent. Data shows that around half of tenants’ take-home pay is being given to their landlord in the form of rental payment.

Landbay’s analysis has revealed that tenants in nine out of twenty areas with the fastest growing rents are currently spending over 60% of their take-home pay on rent.

For example, a tenant in Luton presently spends an average of 68% of their disposable income on rental fees. Renters in Brighton and Hove, Bristol and Thurrock spend an average of 69%, 64% and 63% respectively.

Residential rents becoming unaffordable in some regions

Affordability

John Goodall, chief executive officer of Landbay, noted: ‘There are currently 4.3 million tenants in the private rented sector but affordability is becoming an issue across many parts of the UK. Whether tenants are renting as a stepping stone on the way to home ownership or, increasingly, renting for life, people rely on a well-served buy to let market to ensure rental growth doesn’t become unbearable.’[1]

Mr Goodall acknowledged that the White Paper has pledged to provide more affordable housing and more rental properties and believes the sector could finally be getting the investment it requires. However, he feels that the Paper failed in certain regards.

‘Further institutional investment in large scale developments, specifically designed to rent rather than buy, should go some way to professionalise the sector, improving living standards and helping control further rental growth.’[1]

‘While private rented sector schemes are already on the way in many of the areas facing the fastest pace of rental growth, the Government’s white paper missed an opportunity to highlight where in the country this type of investment is needed the most. For those in the top 20, experiencing rental growth above 3% a year, the clock is ticking,’ he concluded.[1]

[1] http://www.propertywire.com/news/uk/rents-across-uk-apart-london-rise-3-areas/

Mortgage Industry Key to Fixing Housing Market, Believes Firm

Published On: February 10, 2017 at 10:16 am

Author: Em Morley

Categories: Finance News

Tags: finance,housing crisis,Housing White Paper,mortgage industry

A responsible mortgage industry is key in fixing the housing market, believes Computershare Loan Services.

Mortgage Industry Key to Fixing Housing Market, Believes Firm

The CEO of the firm, Andrew Jones, spoke out in response to Tuesday’s Housing White Paper from the Government.

The property sector has already been keen to express its opinions of the already controversial White Paper, with many experts unimpressed with the measures announced. However, Jones is the only professional to insist that the mortgage industry is vital in fixing the housing market.

The Residential Landlords Association urged the Government to show more support for small-scale landlords, who it says are crucial in providing the homes that UK tenants desperately need.

The Association of Residential Letting Agents and the National Association of Estate Agents gave a thorough run-down of the measures announced in the paper, including plans for three-year tenancies.

And while Jones did support the Government’s plans to get institutional investors building more homes to rent, he insists that this is not enough, and how the mortgage industry is key.

“A simply shortage of decent places to live is one of the root causes of homelessness and many other housing problems, and polices that aide their construction are very welcome,” he says. “But as well as creating more extensive building programmes and practices, to tackle housing in the UK, we must also have a diverse and responsible mortgage sector that provides routes into homeownership for those who seek it.”

He explains how this could be put into practice: “This work must start at a young age, with pupils and students being taught how to manage money and make informed financial decisions, and continue into adulthood, with the lending industry working with Government and charities to provide genuine borrowing options and support for anyone facing financial difficulty.”

Computershare Loan Services has already donated £20,000 to The Money Charity to help deliver over 100 hours of money management classes across Yorkshire in 2016.

Do you believe that the mortgage industry is a key part of solving the housing crisis?

Rents to Rise Faster than House Prices Over the Next Few Years

Published On: February 10, 2017 at 9:41 am

Author: Em Morley

Categories: Property News

UK rents will rise faster than house prices over the next few years, bringing yet more misery to the country’s private tenants, according to a recent survey by the Royal Institution of Chartered Surveyors (RICS).

The organisation has predicted that rents will rise by more than 25% in the coming years, while house prices are set to grow by less than 20%.

Rents to Rise Faster than House Prices Over the Next Few Years

In the three months to January, tenant demand continued to increase, the RICS study found. With landlords expected to scale back their portfolios over the next 12 months, renters will have fewer properties to choose from, which is likely to push rents even higher.

RICS claims there was a lack of new listings coming onto the lettings market for the fourth quarter in a row, and its members expect this to worsen.

The past few months have seen a number of buy-to-let landlords sell up, including the country’s most notorious investor, Fergus Wilson, who insisted that the age of the small-scale landlord is over, following the Stamp Duty increase last year and other forthcoming tax changes, along with stricter lending criteria.

The RICS survey was conducted before the release of the Government’s Housing White Paper on Tuesday, which promised measures to help private developers build large-volume rental homes for tenants and more long-term tenancies. Tenant lobby group Generation Rent criticised the fact that these were limited to new, purpose-built rental accommodation, arguing that renters on stagnant wages need homes costing no more than a third of their income.

However, the Head of UK Policy at RICS, Jeremy Blackburn, says ministers have listened to the organisation, and stresses that the fledgling Build to Rent sector needs a “turbo-boost”.

He adds: “At the same time, we need to stop punitive measures against our bedrock small landlords. The detail on the ban on letting agent fees is yet to come and, along with any overt forcing of longer tenancies, [it] could dampen investment in buy-to-let overall. The Government must be careful about signalling both stop and go at the same time.”

According to the RICS survey, a net balance of 25% of surveyors reported rising house prices in January. Property values are expected to continue their upward trend across the UK over the next 12 months, except in London, where they are forecast to fall. North West and South West England and Northern Ireland are seeing stronger growth, however.

Nevertheless, supply and demand are stagnant, the organisation claims. RICS reports that the number of properties for sale across the country remained close to historic lows, while a net balance of 5% of surveyors reported an increase in demand from homebuyers – the lowest level since last August.

Brian Murphy, the Head of Lending at the Mortgage Advice Bureau, believes that rent rises in many areas over coming months are “potentially a good outcome for landlords who are staying in the buy-to-let game, but not so great for tenants in the private rented sector”.

The Managing Director of The Deposit Protection Service (DPS), Julian Foster, also comments on the survey: “A diverse rental sector that suits differing ages, lifestyles and pay-packets is vital to creating housing choices that work for everyone, whether they are hoping to buy one day or are happy renting long-term.

“When there are too few homes, people are denied real options over where they live, and the strain created in the market can lead to expensive house prices and soaring rents.

“The Government’s recent Housing White Paper quite rightly recognised the importance of the private rented sector in the housing market and, by encouraging the construction of property for rent or ownership, we can alleviate the burden and allow more people to find a home where they can be happy.”

Earlier this year, a survey of tenants by The DPS found that around two out of five renters did not expect to buy their own home in the near future.