Written By Em

Em

Em Morley

Half of all Babies Now Born into Rental Accommodation

Published On: March 29, 2019 at 10:51 am

Author:

Categories: Lettings News

Tags: ,

Around half of all babies born in Britain – approximately 365,000 per year – are now born into rental accommodation, new analysis from Royal London reveals. More than half of these – around 200,000 a year – are born into private rental housing.

For the first time in living memory, a child is at least as likely to be born into a rental property as a home owned by its parents, which is up from around one in three babies in 2003/04.

The analysis, using data from the Family Resources Survey, suggests that parents are renting from private landlords for longer, with worrying financial, practical and emotional implications. There are now over 1.5m families in England with dependent children living in private rental housing.

Across the United Kingdom as a whole, the number of families with dependent children living in private rental accommodation has increased by 94% in the past decade, from 940,000 in 2006/07 to 1.8m in 2016/17. The greatest regional increases in England over this period were in in the North East, and Yorkshire and the Humber, with 138% and 120% growth in the amount of families renting privately, respectively.

Becky O’Connor, a Personal Finance Specialist at Royal London, says: “Renting is no longer something carefree young people do for a few years while they save up a deposit to buy and settle down. Renting is an increasingly long-term tenure and it’s increasingly impossible to escape from.

“For people in their late 20s and 30s, half of whom are starting families in insecure accommodation, not having a home of their own is fraught with practical and emotional issues. The main risk is eviction, which hangs threateningly in the background of normal family life.”

The analysis, published as part of Royal London’s latest policy paper, The Parent Rent Trap, also highlights:

  • A short-term rise in the risk of eviction for tenants, as landlords are dissuaded from the market by Government policy that makes buy-to-let less attractive

  • The 20% premium paid by private tenants, compared with those repaying a mortgage (an average of £844 per month, compared with £678 in typical mortgage repayments), and the impact of this on the ability to save for a deposit. Renting itself is becoming unaffordable, leaving renting families at particular risk of financial difficulty and even less able to save up a deposit

  • The gap between fairly static rent payments over a lifetime, compared with falling mortgage repayments. Owner-occupiers can, generally speaking, look forward to lower mortgage repayments as their house price rises and the loan-to-value limit they are eligible for comes down, bringing down their interest rate and, therefore, their repayments

  • The increased difficulty in obtaining a big enough mortgage once parents are paying for childcare

The growth of the private rental sector, coupled with the rising cost of renting, has put homeownership further out of reach for people aged 25-34, Royal London reports. The age at which most couples have their first child is 29 (mother) and 33 (father). The average age of a first time buyer is 34, which is up from 26 in 1997, according to the English Housing Survey.

The policy paper recommends measures to improve security of tenure for the increasing number of parents who are starting and continuing to grow their families in properties owned by private landlords:

  • Examine the impact of Section 21 of the Housing Act 1988. This piece of legislation enables landlords to evict tenants without giving a reason with two months’ notice, once their original tenancy agreement has come to an end. It has been abolished in Scotland and replaced with open-ended tenancies, as part of the Private Housing (Tenancies) (Scotland) Act 2016

  • Encourage lenders to give greater weight to the ability of tenants to meet rent payments which may be higher than the monthly repayments for the mortgage that they are applying for, when assessing their affordability

  • Assess the impact of current policy towards buy-to-let landlords on the tenants who rent from them and whether reduced incentives have created short-term instability for renters

  • Open up planning for institutional landlords to build, own and manage affordable rental accommodation that is suitable for families

  • Housebuilding that prioritises affordable family homes to buy 

David Smith, the Policy Director of the Residential Landlords Association (RLA), responds to the report: “Tenants are on average living in their private rented properties for over four years. However, the RLA recognises that the growing number of families living in the sector is increasing calls for greater security for tenants.

“The Government has argued that financial incentives could be quicker to implement than legislation to encourage the development of long-term tenancies. We agree. These should be matched by establishing a dedicated housing court, to ensure that landlords and tenants can get swift access to justice when something goes wrong in a longer tenancy agreement. This would provide the confidence needed to provide them.”

Homebuyers can Expect to Spend 7.8 Times their Annual Earnings on a Property, ONS Figures Show

Published On: March 29, 2019 at 10:31 am

Author:

Categories: Property News

Tags: ,

Homebuyers can expect to spend an average of 7.8 times their workplace-based annual earnings on purchasing a property, according to the latest housing affordability data in England and Wales from the Office for National Statistics (ONS).

In 2018, the ONS estimates that full-time employees could typically expect to spend around 7.8 times their workplace-based annual earnings on buying a home in England and Wales. This affordability ratio has increased by 0.8% since 2017, but the ONS claims that this change is not statistically significant.

This was the first time in five years that housing affordability remained at a similar level, following five years of decreasing affordability. While the 2017-18 change is not statistically significant, it is interesting to note that this is driven by the fact that median house prices increased faster than median gross annual full-time earnings (the price paid for properties rose by 3.3%, while earnings were up by 2.6%).

There were no significant changes in the ratio of median house prices to median annual earnings in either England or Wales between 2017-18. Housing remained significantly more affordable in Wales than in England, however. Despite this, the two countries had different changes in their house prices and estimated earnings over the year.

In Wales, house prices increased more than earnings in 2018. In England, house prices and earnings increased more than in Wales, but the difference between these was larger in Wales than in England. This suggests that affordability worsened more in Wales than in England. 

The ONS reports that housing affordability has worsened since 1997. Housing affordability in local authority districts in the south of England has worsened quicker than those in the north and Wales.

Over the last two decades, affordability has worsened the most in London, which is driven largely by increasing house prices. Over the past five years, more local authorities in London and the surrounding regions have fallen into the least affordable category. In 2018, eight of the ten least affordable local authorities in England and Wales were in London, with two being in the surrounding South East region. The most affordable local authorities in 2018 were in the North West, Wales and the East Midlands.

London was the only region to show some evidence of improving estimated affordability between 2017-18, with properties becoming 1.0% more affordable. These signs of improving affordability contrast with the longer-term trend of worsening affordability over the previous two decades.

Outside of London, estimates for all other English regions and Wales showed signs of worsening affordability between 2017-18.Copeland, in the North West of England, remained the most affordable local 

Councils are Failing to Tackle Bad Landlords, Insists the RLA

Published On: March 29, 2019 at 9:56 am

Author:

Categories: Landlord News

Tags:

Councils across England are failing to use the powers that they have been given to tackle bad landlords in the private rental sector, insists the Residential Landlords Association (RLA).

Figures given in a parliamentary answer reveal that, during the 18 months until the end of September 2018, local authorities made just three Rent Repayment Orders across England.

Where the rent covered by benefits is paid directly by a tenant, they have the same rights to apply for a Rent Repayment Order as councils, with 18 made over the same period.

Since April 2017, councils have had the power to reclaim up to 12 months’ rent from private landlords for a range of offences in instances where rent was paid through housing benefit or the housing element of Universal Credit. Tenants who pay their rent directly have the same rights. 

Offences include: those related to the licensing of rental property; a failure by a landlord to comply with an improvement notice served on them; seeking to evict tenants illegally; or engaging in harassing behaviour.

The figures arrive after research by the RLA has already shown that councils are also failing to use new powers to fine landlords up to £30,000 for providing inadequate housing. The new civil penalty powers were introduced in April 2017. 

Freedom of Information requests by the RLA have found that, in 2017/18, 89% of local authorities did not use these new powers. Half reported that they did not have a policy in place to use them.

David Smith, the Policy Director for the RLA, says: “Councils are failing tenants and good landlords. For all the talk about them needing new powers, the reality is that many are not properly using the wide range of powers they already have to drive out criminal landlords.

“Laws without proper enforcement mean nothing. It is time for councils to start acting against the crooks.”

Number of Landlords Selling in London 125% Higher than National Average

Published On: March 29, 2019 at 9:02 am

Author:

Categories: Landlord News

Tags: ,,

The number of landlords selling their properties in London in February was 125% higher than the national average, according to research by the ARLA Propertymark (the Association of Residential Letting Agents).

Landlords have faced continued legislative change, coupled with increasing costs, over the past few years, with many either having to pass the costs onto tenants or exit the market.

In February, London reported the highest number of landlords selling up, with ARLA Propertymark member letting agents reporting nine buy-to-let properties being marketed for sale per branch, compared to the national average of four.

David Cox, the Chief Executive of ARLA Propertymark, comments on the finding: “Back in December, more than three quarters (78%) of ARLA Propertymark members predicted that the number of landlords operating in the private rented sector would decline this year, as they are driven out by rising costs. This trend is snowballing in London, where, due to the capital’s higher costs, landlords are struggling to make ends meet. This means tenants will continue bearing the brunt, as competition for good quality properties increases, and rent costs rise.”

Yesterday, we covered ARLA Propertymark’s latest Private Rented Sector Report for February, which shows that the number of tenants experiencing rent rises neared record highs last month, as landlords continued to exit the market.

Although the report showed that, nationally, the amount of landlords leaving the market has risen, the new figures show that the situation is worsening in London, in particular.

ARLA Propertymark is disappointed in the Government for failing to deliver solutions to increasing supply in the private rental sector in the recent Spring Statement. It insists that it warned the Government that tenants would face rent rises, due to landlords leaving the market, and that the situation will only deteriorate if it fails to act now. 

Call to Action – Now is the Time to Buy Property

Published On: March 28, 2019 at 11:00 am

Author:

Categories: Property News

Tags: ,

By Paul Mahoney, the Managing Director of Nova Financial Group 

Brexit is first and foremost on every investor’s mind at the moment. What does it mean? Is it good or is it bad? How will it impact the market? Well, what it has done to the property market over the past few months is simply reduce transactions, due to the uncertainty it is creating. It hasn’t necessarily impacted prices, aside from in London, where prices were already cooling off.

Given all the uncertainty that Brexit has created, it makes sense to hold off buying, just to see what happens, right? WRONG! If you listen to the media and the general market sentiment, then I can certainly understand why you may feel that way, but, remember, we don’t do well in the market by following the market. Sheep do not prosper! 

A great example of why it’s worth buying now is to look back at all the doom and gloom predictions prior to and following the Brexit referendum. Some predicted price drops of 30% plus, and what has happened since then? Prices have risen by 8% on average across the UK since the referendum in June 2016. So, if you had waited for the uncertainty to pass over that period, you’ve missed out on 8% growth in property values or, with a 75% leveraged buy-to-let, you’ve missed a 32% uplift in the value of your equity (given the multiple return provided by the leverage). If you invested in Manchester in June 2016, then, on average, you’ve achieved an uplift of 15% on property prices or a potential 60% uplift on funds applied to a 75% leveraged property! Now, given the market hasn’t exactly been booming over that timeframe, that’s a great return on capital.

Investment Properties in Scotland are looking Desirable for English Landlords
Call to Action – Now is the Time to Buy Property

Warren Buffet is famous for excellent investment returns, and why? He is a contrarian, he buys when people are selling, and he sells when people are buying. So, how do I suggest you apply this to Brexit? BUY NOW! The uncertainty has created great buying opportunities, and it won’t last long. This is a short-term blip in the grand scheme of things when considering property is a long-term investment of seven to ten years plus. 

There is also strong evidence to suggest that we are about half-way through the commonly accepted 18-year property cycle, and we are currently in what is referred to as the “mid-term wobble”, which can be caused by any event, but, in this case, it’s Brexit. What happens after the mid-term wobble, you ask? A BOOM IN PRICES, followed by another dip in three to four years. Be bullish while we have this wobble, thank the politicians that have made a mockery of this whole process, because, what it’s done, is cause uncertainty and buying opportunities, so that you can buy good properties in good areas and benefit from the next boom, which isn’t far off.

What’s more is that regardless of the outcome of Brexit, the Government will likely provide stimulus to make it an economic success and justify their decisions. What happens when you combine a return in confidence with stimulus? A BOOM!

Ignore the media – they only print what sells papers and creates click bait, not the reality of the situation. All house price indices are positive for the current year-on-year 12 months, especially Halifax, which has a weighting to the north, and it is no secret that the major cities in the Midlands and North West are performing great at the moment, which is expected to continue.

So, what should you do? Be brave, buy now, target desirable properties in good areas using sound fundamentals for the long-term, and, once this Brexit malarkey passes, see what happens and you can thank me later.

If you have any questions or would like assistance with property selection, strategy or finance, contact Nova Financial Group on 0203 8000 600, www.nova.financial or info@nova.financial

Letting Agents must Remind Landlords of the Benefits of Buy-to-Let

Published On: March 28, 2019 at 10:32 am

Author:

Categories: Landlord News

Tags: ,

With the tenant fees banfast approaching, letting agents should be doing all they can to remind landlords of the benefits of buy-to-let for investors, along with the downsides of leaving the sector, an industry expert urges.

The warning arrives as research shows that a rising number of landlords are leaving the market, due to financial pressures and increased Government legislative changes.

Buy-to-let still attractive

ARLA Propertymark reports that its member letting agent branches experienced an average of four landlords exiting the buy-to-let market in February. 

Neil Cobbold, the Chief Operating Officer of rental payment automation platform PayProp, says that, despite a turbulent few years, landlords have many reasons to remain in the sector: “Firstly, recent figures show rents up in every region of the UK over the past year. This gives landlords the opportunity to secure solid rental returns, particularly in areas where property prices remain below the UK average.

“What’s more, demand for rental property remains high and consistent, with the latest English Housing Surveyshowing that the private rental sector has doubled in size since 2002 and now represents the largest housing tenure in London.”

He adds that, due to Brexit uncertainty, the sales market continues to underperform: “If landlords look to sell now, there is no guarantee that they’ll be able to secure a quick sale for the best possible price.

“And, in the event they sell up and then decide to revisit buy-to-let investment in the future, they’ll be required to pay an additional 3% in Stamp Dutywhen purchasing a property, and could be faced with stricter mortgage lending criteria.”

Buy-to-Let Remains a solid investment option, Broker Insists
Letting Agents must Remind Landlords of the Benefits of Buy-to-Let

Agents communicate the positives

Letting agents should, therefore, be proactive when it comes to reassuring their landlord clients about the positives of operating in the private rental sector, Cobbold insists.

“It could be beneficial to check in with landlords personally to discuss the current market and any concerns they may have,” he advises.

“On top of this, you can communicate with your existing database, showcasing recent local market statistics and explaining some positive market viewpoints for landlords to consider.”

He adds: “During challenging times, it’s important for landlords to know that they have a letting agent on hand who is a property expert with their best interests at heart.”

Client retention crucial

With the ban on tenant fees due to come into force on 1stJune 2019, many letting agents will experience a dent in their income. This means that it’s more important than ever for agencies to retain landlords’ business for the long-term, protecting their revenue in the process.

Cobbold explains: “The post-fees ban landscape will see competition between letting agencies intensify, as they look to replace lost revenue from tenants with increased revenue from landlords.

“With this in mind, it’s vital that agents do everything in their power to impress existing landlords, while attempting to attract prospective clients at the same time.”

He suggests: “This can be achieved by providing a combination of expert advice, a professional and personal service, and efficient proptech-enabled processes, which ensure compliance with industry regulations.”