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Em Morley

Panellists Discuss the Profits and Ethics of HMOs

Published On: May 2, 2015 at 6:50 pm

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At the Property Investor and Homebuyer Show at London ExCel, from 17th-18th April, panellists debated Houses in Multiple Occupation (HMOs).

Landlords are struggling with decreasing yields on their single occupancy buy-to-let investments and are looking to HMOs for higher returns. But do investors have the knowledge and expertise to run HMOs ethically and still make a profit?

HMOs can make strong incomes for landlords, but they must be operated ethically for the tenants. Limited knowledge of HMO regulation can cause problems for both investors and renters.

So how do landlords make money whilst catering for tenants’ need of quality yet affordable housing?

Panellists Discuss the Profits and Ethics of HMOs

Panellists Discuss the Profits and Ethics of HMOs

SpareRoom’s Matt Hutchinson discussed the matter, stating that there has been a 33% increase in the amount of people searching for rooms in shared accommodation, but just a 0.3% rise in the number of people offering these rooms in the first quarter (Q1) of 2015, compared with Q1 2013.1

This indicates the huge potential for investors to move to a market with huge demand. However, this data also proves that attitudes are changing for tenants. Young people may be aspiring to homeownership, but this may not be their only reason for renting.

Platinum Property Partners has recently undertaken research with SpareRoom’s assistance. They found that for people in their mid-20s to early 30s, many do not want the restraint of a mortgage or location and would prefer to travel and work in different areas before deciding where they want to settle down.

So HMOs not only offer attractive yields, but also provide young people with places to live. Tenants who share can save lots more money than if they rent alone, meaning that they have more to put towards a deposit.

The demand for this housing from tenants is for high quality, affordable and well managed homes, not the poor standard, expensive and unsafe HMOs that are run by rogue landlords.

Investors should therefore educate themselves on HMOs to make strong returns and provide quality accommodation to tenants.

Panellist Ash Zuberi says: “An HMO portfolio can be a big beast and you have to learn to control it.”1 

Landlords should be aware of where is best to buy, what they should look for, how to refurbish if needs be, and how to fund their project. They may also need planning permission, should always be tax-efficient, and understand the legislation and licensing that applies to HMOs.

HMOs can deliver great returns, but demand hard work and compliance.

1 http://platinumpropertypartners.co.uk/articles/the-hmo-debate-can-shared-houses-be-both-profitable-and-ethical/

Don’t Forget Generation Rent, CBI Urges

Published On: May 2, 2015 at 12:36 pm

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The Confederation of British Industry (CBI) is warning that renters could be forgotten, as the housing debate seems to be focusing more on ownership. CBI estimates that one in five households will be privately rented by the year 2018. As a result, they believe that £57 billion worth of investment in the private rented sector is necessary to meet this demand.

Support

CBI Chief Policy Director Katja Hall, suggests: “While it’s right to support first time buyers, we must make sure people who rent are not forgotten.”

She says: “The rental sector offers huge opportunities for growth and more large-scale institutional investment is needed.”

Hall believes: “A VAT reduction on repair and renovation would help push investment decisions over the line.”[1]

Don't Forget Generation Rent, CBI Urges

Don’t Forget Generation Rent, CBI Urges

Initiatives

The CBI has outlined a number of initiatives that they believe will sufficiently benefit renters. These include:

  • Speeding up the complete roll-out of the Private Rented Sector Guarantee Scheme.
  • Councils having to outline their plans on tackling rising demand for accommodation.
  • Utilising the buy-to-let fund to show how private rented sector investment provides profitable returns.
  • The introduction of build now, pay later schemes to quicken up land use.
  • Changing legislation to find a balance in protecting tenants and not creating too much work for landlords.

The confederation believes that the amount of people residing in the private rented sector will continue to thrive, due to three main areas:

  • Population growth.
  • Inflated prices of housing due to lack of supply.
  • The cost of living.

[1] http://www.rman.co.uk/latest-news/article/employers-plea-not-to-forget-generation-rent

 

 

Most expensive places to rent outside London

Published On: May 1, 2015 at 4:39 pm

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Research from Rightmove suggests that the London commuter belt is home to the most expensive areas in which to rent outside of the capital.

With prices reaching record levels in a number of places, Esher was found to be the most expensive area, with a two-bed property commanding rent of almost £2,000. This was a substantial rise of 4.1% in comparison to last year.[1]

Oxford was next highest on the list, and rents for Esher and Oxford both averaged more than the outer-London norm of £1,493 per month

The top-ten most expensive areas to rent outside of the capital are:

  • Esher
  • Oxford
  • Weybridge
  • Marlow
  • Ascot
  • Henley-on-Thames
  • Egham
  • Windsor
  • Bushey
  • Guildford
Most expensive places to rent outside London

Most expensive places to rent outside London

Double-digit growth

Sam Mitchell, Head of Lettings at Rightmove, believes that, ‘people moving out of the capital to places in the south east has contributed to double-digit growth in rents in some of the most expensive places like Oxford and Henley-on-Thames.’ She continued by saying that, ‘factors like being close to good schools and transport links will always come at a premium’ and that the figures indicate that, ‘it’s wrong to think that anywhere outside of London will definitely be cheaper than in London.’[2]

Rightmove has reported that it has passed on 73% more email inquiries from would-be renters to their landlords this year in comparison to last.

[1-2] http://www.independent.co.uk/property/top-20-most-expensive-areas-to-rent-in-britain-that-arent-london-10218491.html

 

Just 43 Homes in London are Affordable for First Time Buyers

Published On: May 1, 2015 at 3:36 pm

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The shocking fact that only 43 properties in London are affordable for first time buyers defines the housing crisis. But who is to blame for this?

Housing charity Shelter released a study this week that found just 43 homes in Greater London are still affordable for the average first time buyer.1 They analysed the salaries of people in different regions, found out how much the banks would lend them, and compared these numbers to the cost of a family home.

In areas such as the North East only 42% of homes are affordable, which is worrying in itself.

Just 43 Homes in London are Affordable for First Time Buyers

Just 43 Homes in London are Affordable for First Time Buyers

But when you look at London, the findings are appalling. Only 0.1% of properties with two or more bedrooms are affordable for the average first time buyer. If you are a Londoner who doesn’t own a home, and doesn’t have parents who will give you £30,000, then buying a home is not a likely option.

The reasons for this are clear. London does not have enough homes. The amount of people living in the capital has risen by almost a fifth in only 15 years. The number of homes has not. Therefore, prices have soared.

Many people have blamed property developers who are supposed to be doing the building. They fight to get out of obligations to include affordable housing in the huge blocks they do build. But the term affordable housing has been given a new meaning; now, it can mean up to £2,800 per month.

However, it’s the Government who sets the rules for the developers. The new affordability definition was handed to the developers and means up to 80% of market rents.

Developers also have to react to Government policy in other ways. The price of homes correlates to the price of land in the areas people might want to live. The property price boom means that houses can be sold at higher prices, but the developers need to pay more for the land to put new homes on.

This is why building in London is so difficult. For those that do build, huge amounts are apartments in skyscrapers. Unless something happens to make building in the capital less expensive, developers won’t be interested in the measly profits.

If the developers aren’t to blame, could it be the Government’s fault? Going back decades, the Government has made it more difficult for councils to build, introduced limiting planning rules and excused developers.

Some are arguing that if the private sector isn’t creating enough homes, then the state should be. Some people believe the only way out of the crisis is for the Government to fund a large building programme. But none of the political parties have proposed this in their election manifestos.

Could it even be down to the public? With campaigns against skyscrapers, less are built. With protests against freeing London’s greenbelt, less is made available, despite there being more land in Surrey offered to golf courses than housing.

Buyers want prices to come down, but don’t realise what must happen to make that possible. Homeowners don’t even want values to fall. So what can politicians do?

1 http://www.theguardian.com/commentisfree/2015/apr/30/housing-crisis-first-time-buyer-affordable-homes-london

 

 

 

 

Gross Mortgage Lending in UK On Rise

Published On: May 1, 2015 at 2:56 pm

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Encouraging new figures suggests that mortgage lending within the UK may be showing signs of a recovery.

The statistics from the Council of Mortgage Lenders (CML) indicate that total mortgage lending hit £16.5bn in March. This was 21% higher than results recorded in February.

However, lending is down 12% in the first quarter of 2015, in comparison to the final three months of 2014. Additionally, lending is down 3% on a year-on-year basis.[1]

More positively, lending in March was up 7% on the same month last year.

Stabilising

CML chief economist Bob Pannell believes that the results suggest that the market is beginning to become stabilised. Pannell said that, ‘sentiment and activity are showing early signs of improvement, and should be further supported by the effects of stamp duty reform.’ He went on to state that, ‘we expect to see lending strengthen over the next few months, albeit from a relatively sluggish start in 2015.’[2]

Buy-to-let lending however continues to go from strength-to-strength. Data released from the Bank of England indicates that gross overall lending for buy-to-let investment purposes during 2014 was £27.4bn.[3]

Gross buy-to-let advances for remortgaging have also substantially increased during recent years. When figures for overall mortgaging are considered, buy-to-let advances went from having a 32% in 2002 to 52% in 2014.[4]

Gross Mortgage Lending in Uk On Rise

Gross Mortgage Lending in Uk On Rise

Fighting the nerves

David Whittaker, managing director of Mortgages for Business, believes that buy-to-let is not experiencing the pre-election jitters seen elsewhere in the housing homeowner market. Whittaker said that, ‘election uncertainty might be putting some people off buying a home, but in the meantime millions of tenants still need somewhere to live and landlords are investing in new properties, as buy-to-let mortgage rates reach new lows.’[5]

Whittaker also believes that, ‘rents are picking up on the back of a strengthening jobs market, supporting yields while steady price growth is still providing an additional bonus of capital growth to many landlords.’[6]

Uncertainty

However, Mr Whittaker suggested that there might be clouds on the horizon, saying that, ‘the latest noises from the Bank of England indicate how the powers that be seem as unsure about the future path of interest rates.’ He remains confident however that, ‘when rates do rise, landlords will be in a better position to stand up to headwinds than a year ago as their tenant’ financial health improves.’[7]

 

[1-7] http://www.propertywire.com/news/europe/uk-home-lending-march-2015042310427.html

 

 

Where is the Most Expensive Place to Buy a Home in the UK?

Published On: May 1, 2015 at 2:45 pm

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New research has found that Kensington and Chelsea is the most expensive place to buy a property in the UK.

In the London borough, one square metre will cost buyers up to £10,854. The same amount of space in the cheapest place to buy in Britain, Stanley, County Durham, is just £818. This emphasises the wide price gap around the country.

Using Halifax’s property price index, the study divided the average house price by the size of the property in each location.

These figures arrive as concerns grow over the shortage of housing compared to the huge demand for homes.

Westminster, and Hammersmith and Fulham came second and third respectively. In fact, the top 20 most expensive places were all boroughs of London.

Where is the Most Expensive Place to Buy a Home in the UK?

Where is the Most Expensive Place to Buy a Home in the UK?

Mortgages Director at Halifax, Craig McKinlay, says: “House price per square metre is a useful measure for house price comparison because it helps to adjust for differences in the size and type of properties between locations.

“While there are areas in central London that are more expensive than anywhere else in the country, there are notable pockets outside the South East where property also has a high price per square metre.”1

Outside the South East, the most expensive places to buy a property are: Edinburgh, Altrincham, Solihull, Leamington Spa and Aberdeen. The cheapest, after Stanley, are: Pontypool, Wishaw and Accrington.

The findings highlight just how spiralling prices are in London, where boroughs such as Lambeth have experienced a 61% rise in just five years.

Concerns of a housing bubble have been around for months recently, and the Bank of England (BoE) has reacted by introducing a stricter mortgage application process to avoid risky lending.

BoE boss Mark Carney revealed the tougher affordability tests, but says they are unlikely to have an immediate affect on soaring house prices.

Last week, Countrywide released a report that ranked the UK as the third worst place to build homes in Europe in regard to population growth. In the last decade, housing development dropped by 35% and Britain built the least amount of houses of all relative countries in Europe.

Countrywide’s Chief Executive, Grenville Turner, comments: “The 2008 downturn in construction should not disguise the fact that the UK has failed to build the required number of new homes over a much longer period of time.

“A long-term lack of house building has meant that the UK was amongst the least well prepared countries to deal with the fall in house building in 2008.”1 

Halifax’s research discovered that house prices per square metre have risen by 13% in the past five years with prices increasing by 34% in London. However, prices in Scotland and the North of England dropped by 5% and 3% correspondingly.

1 http://www.huntersnet.co.uk/lse-blog/most-expensive-place-to-buy-a-house-in-the-uk-is-revealed