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Em Morley

One in Five to be a Private Tenant in just Two Years

Published On: October 23, 2014 at 4:57 pm

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The two million buy-to-let investors in Britain have almost doubled their property assets in ten years.

Private landlords now hold around one in five properties in the UK, and it is expected that they will purchase another million in the next five years, says new research.1

This figure highlights the shifting housing market in Britain, as less people own their homes, and more are renting.

One in Five to be a Private Tenant in just Two Years

One in Five to be a Private Tenant in just Two Years

The report, from mortgage lender Paragon, indicates that 18% of households are now renting from a private landlord. This figure is increasing, as investors continue to view property as a secure asset, providing income and profit.1

The Government’s statistics estimate that by 2032, over one in three properties will be owned by private landlords.1

The Government’s 18 Years of Buy-to-Let report focuses on information from the period since the beginning of buy-to-let. 1996 was the first year in which specific mortgages were available for private landlords.1

During this time, the amount of properties bought for this purpose has doubled and is now worth £1 trillion.1

The sector grew in the housing boom of 2005-07, when property investment clubs thrived, and thousands of landlords bought new build flats, without even seeing them first.

The expected crash never followed. The banking disaster created a lack of mortgages for the younger generation, who moved into the private rental sector. Dropping interest rates made mortgages cheaper, and this allowed amateur landlords to hold onto their properties, despite being in negative equity.

The past few years has seen a rise in the buy-to-let sector, with mortgage lending increasing at over 20% per year, and the amount of landlord loans available is now over 700.1

Paragon support the market, saying: “The creation of buy-to-let has very much been a force for good. It has helped to shape a private rented sector that is fit for purpose and provides choice, value and flexibility for tenants.”1

The younger generation, however, do not agree. Dan Wilson Craw is from Generation Rent, a lobby group for tenants and housing reform. He says: “This sort of data shows how the market isn’t operating properly and has become a vicious cycle.

“More people are attracted to buy-to-let which drives up property prices, in turn trapping more tenants into renting for longer.

“There are parts of the country now where there really is no prospect of home ownership for many people, and it is difficult to see how that will change.”1

1 http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11179073/Buy-to-let-boom-one-in-five-homes-now-owned-by-landlords.html

 

 

 

 

 

 

 

Government housing policies under fire

Published On: October 20, 2014 at 5:06 pm

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The inaugural Great Buy to Let Debate in Westminster saw landlords, agents and lenders all voice their concern and confusion over upcoming Government proposed schemes aimed at aiding the housing market. Many of these industry figures suggest that more thorough streamlining of the policies is needed before they become law. Others have described them as contradictory to what regulations already in place.

 

Lack of strategy

Speaking at the event, vice president of the Association of Residential Landlords Valerie Bannister, said that the Government had no clear vision of their housing strategy. Bannister argued that, ‘successive governments without a long-term housing strategy have got us into this situation we are now in, and the private rental sector is supposed to pick up the shortfall.’[1]

Lenders at the event gave their opinion that the Government’s primary schemes for improving the housing industry, such as NewBuy and Funding for Lending, will actually serve as hindrance.

 

Schizophrenic

John Heron, managing director of lender Paragon Mortgages, is one figure confused at the Government’s planned reforms. Heron said, ‘Politicians are tinkering around at the edges and seeking headlines.  They are being schizophrenic.  On the one hand, they are doing everything they can to drive lenders away from high-risk lending.  One the other hand, they are coming up with initiatives encouraging 95% on new-builds to first-time buyers.’[1]

Government housing policies under fire

Government housing policies under fire

 

Landlords are also confused by the Government policies. The Government suggests that landlords are to help with vulnerable tenants, however, landlords believe that outlines in new welfare reforms will actually make this more complicated.

With the introduction of Universal Credit, tenants in receipt of housing benefit will see their payments given directly to them in one lump sum. As a result of this, landlords are concerned that rental arrears will rise as they believe many tenants lack the budgeting skills in order to stay out of the red.

Landlords are also concerned that rent arrears may have a knock-on affect which may lead them to alter their insurance policies. It seems inevitable that landlords will have to increase their rent prices, which again will leave vulnerable tenants feeling the pinch.

[1] http://www.justlandlords.co.uk/news/Lenders-criticise-Government-housing-policies-1653.html

 

 

 

 

Rising Rents and Lack of Affordable Homes Lead to Thriving Illegal Subletting

Published On: October 11, 2014 at 2:54 pm

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Rising rents and lack of affordable homes lead to thriving illegal subletting market, says Let Risks

Oxford Council cautioned last month that tenants who are illegally subletting should give back the keys to their rental properties during a two-month amnesty period, or they will risk prosecution for fraud.

This scheme aims to eliminate tenancy fraud, which is mostly illegal subletting. The campaign warns that illegal subletting is now a criminal offence, and is punishable by imprisonment and a fine.

Rising Rents and Lack of Affordable Homes Lead to Thriving Illegal Subletting

Rising Rents and Lack of Affordable Homes Lead to Thriving Illegal Subletting

Around 3.3 million people are living in the UK as unauthorised tenants; this affects one in every ten rental properties.1 Around half of letting agencies have discovered extra residents living in a property, says Direct Line.1

Managing Director of LetRisks, Michael Portman, says: “Although the problem is more prevalent in the social housing sector, it is a risk for private landlords. When there is multiple occupancy in a property, wear and tear and damage is dramatically accelerated; a big problem for landlords and agents.

“Very often, the obvious damage to the property are: iron burns on carpets; cigarette burns; heat damage to polished wooden furniture; scuffs, marks and dents to walls; stiletto heel imprints on wooden floors and vinyl.

“There can also be considerably more mould and condensation with more occupants. Landlords can also face expensive repairs for damage and redecoration costs, to bring the property up to the standard it was at check in.

“Illegal subletting falls under tenant fraud and it’s undoubtedly a growing problem. Renting a property makes landlords vulnerable to fraud. Hence it is vital that landlords and agents carry out thorough pre-letting checks. The purpose of referencing a tenant is threefold: to check the person is who they say they are; that they can afford the rent; and that they have honoured past commitments.

“Information collected on the tenancy application can be used to trace them, should they abscond, or leave owing money. In addition, should the applicant make false statements, this document provides evidence for eviction.

“It is important not to take everything at face value. Don’t believe anything that you are told or what you read in on the application. It is vital that prospective tenants provide employment references and if there is in any doubt, the applicants should be asked to provide further proof, for example, copies of payslips or sight of bank statements.

“Extra precautions, such as asking for three months’ bank statements can help catch out potential fraudulent tenants. Also take the time to compare addresses shown on the application with those shown on the ID documents.

“Ask for previous utility and telephone, including mobile phone, bills and statements, and check if the name and address and other information matches up with the information on the application form.”

LetRisks’ tips for which evidence to look for are:

  • Pay regular visits to the property; every three to six months is ideal.
  • Look out for signs of other people living in the property, for example, excessive rubbish or extra toothbrushes.
  • Carry out thorough checks before taking on a new tenant.1

1 http://www.landlordtoday.co.uk/news_features/Unauthorised-subletting-“a-major-problem”-facing-landlords-and-agents

 

 

Progress in the Property Market will Benefit Landlords

Published On: October 9, 2014 at 4:40 pm

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Progress in the Property Market will Benefit Landlords

Around one million people are expected to move house due to an improving property market, it was recently announced.

The Ernst & Young ITEM Club have used the Treasury’s economic models to predict that the amount of housing transactions will increase by 7.5% this year. They have also referred to Chancellor Osborne’s plans to guarantee £130bn of mortgages leading to housing transactions rising by another 7.8% next year.

The chief economic advisor to the ITEM Club, Peter Spencer, has discussed the predictions. He says: “With export markets continuing to disappoint, the Chancellor has focused his firepower on the home front. And the timing couldn’t have been better. Real incomes are already starting to recover, mortgages are becoming more readily available, and homes are more affordable, as the house price-to-earnings ratio continues to fall. Although it’s not a long-term strategy, stimulating the housing market and the high street will keep GDP growth positive. Unbalanced growth is better than no growth.”

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The Government’s new Funding for Lending Scheme (FLS) will allegedly lead to more people being able to buy a property, as it will decrease costs of mortgages, according to the Club. They have also supported the controversial Help to Buy scheme.

Spencer explains: “We expect [the scheme] to boost the number of housing transactions, particularly at the lower end of the market where the deposit and low equity have been a major constraint.

“We should start to feel slightly better off this year, which will help to loosen the purse strings. Consumer spending added 0.7 percentage points to GDP in 2012, and the Chancellor’s budget will help ensure the tills continue to ring for some time yet. Consumers have been burnt by the experience of the recession, and are much more cautious with their finances. Households are likely to continue paying down debt rather than racking up huge credit card bills.”1

Progresses in the property market will benefit landlords, as there will be less pressure on the private rented sector.

Additionally, should the property market become steadier there is the chance of landlord insurance policies to become cheaper, as there would be less risk of tenants falling into rent arrears.

The next few months will uncover whether the ITEM Club’s forecasts are accurate, and whether the housing market will bounce back to pre-recession status.

1 http://www.justlandlords.co.uk/news/One-Million-People-to-Move-Home-this-Year-1698.html

 

 

 

Home ownership slips further out of reach

Published On: October 7, 2014 at 2:55 pm

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New research suggests that a growing number of British renters are sceptical about the chances of ever owning their own home.

Bleak

According to the survey of more than 10,000 users by flat and house share site SpareRoom.co.uk, 18% of renters believe that they will never be in a position to own their own home. This shows a rise from 12% in SpareRoom’s 2011 census, indicating that more people feel owning their own place is unlikely.[1]

A bleaker outlook seems present for people in their 40’s renting a property. 49% of people questioned in this age bracket said that they never expect to own their own place, having been priced out of the market. This is concerning, considering that people in this age bracket earn on average 17% more than the U.K average wage. It can be suggested that figures gauged from people of this age paint a more accurate picture of future home-ownership percentages, with them being at their maximum earning potential.[1]

Taking into account all-age groups questioned in the survey, 49% answered that it would be five-ten years before they would be in a position to consider entering the market. 23% said that they would need at least a decade.[1]

UK divide

The figures indicate that 49% of renters spend between 30-50% of their income on rent, with 23% spending in excess of 50%.[1]

A quarter of Londoners suggest that it will be at least ten years before they can get onto the property ladder, with escalating house prices and rising rent making it harder for them to save. In addition, in one four renting Londoners said that they paid more than 50% of their income on rent. That figure was almost matched by Scots (23%) with renters in the East Midlands (14%) least likely to spend that much of their income on rental payments.[1]

Londoners (37%) are also most likely to suggest that their rent is unaffordable, with renters in Yorkshire and Humberside (15%) least likely to complain. [1]

Slipping away

Average rents in London have risen to £691 per calendar month, with an average of 39% of Londoners’ take-home pay being spent on rent.[1]

Director of SpareRoom.co.uk Matt Hutchinson said that the findings of their report pointed to a bleak future for would-be homeowners. Mr Hutchinson said, ‘for nearly one in five of Britain’s ever-growing population of renters, aspirations of home ownership are slipping away.’[1]

He went on to say that, ‘price rises seem to be unstoppable,’ and that, ‘prices for first-time buyers are rising faster than prices for owner-occupiers.’ Hutchinson believes that this, ‘coupled with rising rents eroding savings,’ means that it is, ‘hardly surprising that such a significant proportion of renters have resigned themselves to never owning their homes.’[1]

Hutchinson also issued a stark warning for the future of the property market, saying, ‘the reality is that many young professionals will never own their homes. Attitudes to renting for life will have to change as, like it or not, we are heading towards a European approach towards property, where so called ‘lifestyle tenants’ are the norm. Given the British love-affair with property ownership, this is going to be a major cultural change.’[1]

[1] http://www.landlordtoday.co.uk/news_features/Home-ownership-slips-further-out-of-reach-for-UK-renters

 

 

 

Landlords must get up to speed on Universal Credit

Published On: October 3, 2014 at 4:56 pm

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Work and Pensions Secretary Iain Duncan Smith recently announced that Universal Credit will be effective in all Jobcentres and local authorities from February 2015.

Universal Credit

As Ducan Smith explains, ‘Universal Credit is a vision for a new welfare settlement; a welfare state fit for the 21st century; a testament to the hard work of Jobcentres and local authorities that we are now implementing it. It has now rolled out in the north west of England – to couples, shortly to families, to more than one in eight jobcentres by Christmas – safely and securely as I always said.’[1]

In his address, Duncan Smith said, ‘I can announce that we are going to accelerate the delivery of Universal Credit from the new year, bringing forward the national rollout through 2015/16 to every single community across Great Britain. Secure national delivery, yet at the same time, delivering that life change at a local level; strengthening community partnerships, helping vulnerable households. Not just helping the economy but reducing child poverty as well.’[1]

This announcement surprised many who thought the scheme would be introduced later and has led to calls from the Residential Landlords Association to get organised ahead of the changes.

Important

Universal credit is already available in more than 50 Jobcentres across the U.K, with that figure rising to over 100 by Christmas. The Residential Landlords Association recognised the announcement as very important for both landlords and housing associations.

Bill Irvine, RLA Universal Credit trainer, dealt with the Bolton branch that was part of the pilot scheme and has a warning for landlords. Irvine believes the time for planning is over and landlords must ensure that they are in a position to be immediately able with the demands of Universal Credit.

 

Optimistic

Mr Irvine is concerned that the Department of Work and Pensions are not yet ready for the scheme to be rolled out across the U.K. Universal Credit will have an impact on around 1.6m tenancies and Mr Irvine is not yet convinced that the DWP is able to handle such a demand.

Taking his experience in Bolton into account, Irvine said that the team in this particular branched struggled to understand some of the, ‘housing costs’ requirements. Irvine expresses that if DWP are experiencing such basic problems in their Bolton branch, then an accelerated roll out across the U.K seems too fast.

Landlords must ensure that they are comfortable with the scheme to avoid experiencing any rent arrears.

[1] http://www.landlordtoday.co.uk/news_features/Landlords-advised-to-get-up-to-speed-on-Universal-Credit