Tenants experiencing rent rises neared record highs in February, as landlords continued to exit the market, reports ARLA Propertymark (the Association of Residential Letting Agents).
The organisation has issued its Private Rented Sector Report for February.
Rent rises
The number of tenants experiencing rent rises increased in February, with 34% of ARLA Propertymark member letting agents witnessing landlords putting prices up, compared to 26% in January.
This is the highest figure seen since August, when 40% of tenants experienced rent rises – the highest on record.
Annually, this is up by 14 percentage points, from just 20% in February last year.
In line with this, the amount of tenants successfully negotiating rent reductions fell to 2.3% in February, from 2.5% in the previous month.
Landlords selling
Last month, the number of landlords exiting the buy-to-let market rose to an average of four per letting agent branch, after falling to three in January. This has also risen on an annual basis, from three in February 2018.
Supply and demand
Demand from prospective tenants dropped in February, as the amount of home hunters registered per branch fell to an average of 65, compared to 73 in January.
The number of properties managed per branch remained at an average of 197 in February, with no new rental homes coming onto the lettings market.
David Cox, the Chief Executive of ARLA Propertymark, says: “According to data from the Office for National Statistics, private rent costs rose by 1% in the year to February, and our data shows that the number of tenants successfully negotiating rent reductions fell. We warned this would happen, as landlords continue exiting the market and increasing legislation deters new ones from entering.
“The Chancellor’s Spring Statementincluded a number of initiatives aimed at growing housing stock for buyers, but it didn’t offer any solutions to increase the supply of properties in the private rented sector. Unless the Government commits to making the prospect of investing in the private rented sector more attractive, and introduces measures to increase supply, tenants will only continue to feel the burn.”
Rent price growth slowed to almost zero in February, according to the latest Rental Tracker from Your Move.
The estate agent found that the average rent price in England and Wales increased by just 0.4% in the year to February, to hit £861 per month. This is significantly lower than the 1.4% rate of growth recorded in the previous month.
The South West of England recorded the fastest rent price growth in the 12 months to February, at 4%, taking the typical rent to £703 a month.
This growth was attributed to landlords looking beyond London for higher rental returns, and a boom in tenant demand in cities such as Bristol.
Other beneficiaries of this shift away from London were the West Midlands (3.1%), and Yorkshire and the Humber (2.1%). The average monthly rent in the West Midlands was £636 in February, while Yorkshire’s stood at £588.
Yorkshire is the second cheapest region to rent a property in England and Wales, just ahead of the North East, where the average rent price is £540 per month (up by 1% year-on-year).
Meanwhile, London and the East of England registered a decline in rents in February, taking the average price in the capital to £1,260 per month. Tenants in the East experienced the greatest fall, of 1.8%, taking the typical price to £878 a month.
Your Move also revealed the highest annual rental return in February was found in the North East, at an average of 5.0%. The North West closely followed (4.8%), while investors in London experienced the smallest percentage yields, at an average of just 3.2%.
The returns recorded in each of the ten regions included in the report were the same in February as in January, but the average yield across England and Wales (4.3%) was down from 4.4% in February 2018.
Martyn Alderton, the National Lettings Director at Your Move, comments on the report: “Renters have been drawn to Bristol, not only because of its vibrant arts and cultural scene, but also its strong job prospects. This has been accompanied by a boom in build to rent in the city, which has driven up demand and the average rent across the region.
“Private landlords, meanwhile, have tended to prefer the charms of the north of England, a region where yields are significantly higher than elsewhere.”
He adds: “But returns in all regions have remained steady compared with January, meaning landlords across the country have enjoyed solid yields.”
The Your Move data also shows that tenant rent arrears remained below 10% once again in February, with 9.4% of all tenancies behind on payments. This is up on the 8.8% recorded in January, but is down on December’s 10.5% figure.
Landlords, are you looking beyond London for rental returns? Let us know where you’re interested in!
The mortgage market across the UK remained resilient in the face of economic and political uncertainty in February, reports UK Finance in its latest Household Lending and Deposits report.
The study shows that gross mortgage lending across the residential market in February 2019 totalled £19.1 billion, which is up by 2.5% on the same month of 2018.
The number of mortgages approved by the main high street banks in February was down by 2.2% on the same month of last year, however. Despite this, approvals for home purchases were up by 1.5% year-on-year.
Remortgage approvals, on the other hand, dropped by 6.6% over the same period, while approvals for other secured borrowing were down by 3.1%.
This follows several months of strong growth in remortgaging in 2018, as customers took advantage of a competitive mortgage market to lock into attractive deals.
Comments
Vikki Jefferies, the Proposition Director at mortgage network PRIMIS, says: “A mortgage is often the biggest financial commitment a person will make during their lifetime, and, now more than ever, it is vital that advisers are contacting their customers to ensure they’re on the most suitable and cost-effective product for them.
“The last few months have shown that the mortgage market has remained particularly resilient – something that we have seen mirrored within our network and a trend that we hope to see replicated in the coming months. There’s no reason this can’t be achieved if brokers and lenders keep up the immensely hard work they’ve been putting into the sector, which is reflected in today’s positive home purchase stats.”
Matt Andrews, the Managing Director of Long-Term Mortgages at Masthaven Bank, also comments: “The upward trend in home purchases is a sign that the mortgage market is remaining resilient against the current economic and political backdrop.
“What would be interesting to see included in these stats are the number of mortgages approved by non-high street banks. More and more individuals are looking outside of the traditional realms of secured borrowing. In fact, our most recent Broker Beast research found that 61% of specialist lending intermediaries found the main reason for customers approaching them for advice was because they have specialist lending needs – often which cannot be met by the traditional high street banks.”
The limbo caused by the impending Brexit is having a “suffocating effect” on the London property market, according to the latest Residential Index from London Central Portfolio (LCP).
The property investment firm has looked at prices, sales and new build developments across London, and the rest of England and Wales, in February 2019.
Prime central London
The average house price in prime central London (excluding new builds) stood at £1,812,051 in February, which marks a decline of 6.2% on January. On a quarterly basis, property values fell by an average of 12.7%.
Annually, transactions in this market remain just above historic lows, at a total of 3,405. This follows a decrease of 16.5% in sales over the year to February.
The average new build home in prime central London was worth £2,268,219 in February, which represents a 61.4% premium over existing stock. However, prices in this market fell by 29.6% on a quarterly basis.
Over the same period, new build transactions dropped by 46.1%, to just 73.
Naomi Heaton, the CEO of LCP, says: “Transactions continue to limp along in prime central London, with only 3,405 over the year – fewer than 66 sales a week. This marks an unprecedented period of suppressed activity, lasting longer than that seen during the Global Financial Crisis in 2008.
“On a more optimistic note, there has been evidence of a pick-up in interest as investors seek to capitalise on extremely soft prices. However, with Brexit rolling on beyond March 29th, and neither the Prime Minister nor EU leaders able to state what is going to happen, investors may now wait to see if sterling weakens further. This limbo continues to have a suffocating effect on prime central London and is now extending to the whole of the UK property market.
“Transactions in the new build sector also continue to fall, with a drop of 46.1% in the last quarter, which does not auger well for housebuilders.”
Greater London
The average house price in Greater London (excluding new builds) was £610,708 in February, following a monthly decrease of 1.1%. On a quarterly basis, the typical property value was down by 1.9%.
Year-on-year, transactions fell by 4.8%, to just 87,233.
The average price of a new build home was £661,677, representing a 20.4% premium over existing stock and following an annual rise of 14.9%.
However, new build transactions continue to suffer, with a decline of 18.2% over the 12 months to February – the lowest level seen since 2015.
Heaton comments: “The tax changes over recent years have been aimed at higher value properties. Due to the concentration of these in London, the impact has been felt most acutely here.
Brexit Limbo is Having “Suffocating Effect” on London Property Market
“Transactions in the capital continue their downward trend, with an annual fall of 4.8%. They have now dropped 28.8% since the introduction of additional rate Stamp Dutyin April 2016.
“The circus that is Brexit also continues to derail many people’s plans to move or invest. Some positive news may provide the impetus to get the Greater London housing market moving again.
“Annual transactions in the new build sector continue to struggle, with a fall of 18.2% over the year. Although annual prices for new builds have increased, Brexit has not done anything to improve the flow of new developments. In all likelihood, this sector will take longer to recover than that of existing stock, due to the time lag to completion of new projects.”
England and Wales (excluding Greater London)
The average property value in England and Wales (excluding new builds) was £257,260 in February, following a monthly decline of 0.9% and quarterly decrease of 2.4%.
Annually, transactions continue to decline, by 1.6%, to stand at 796,431.
The average value of a new build property was £304,423, following an annual increase of 3.6% and representing a 15.0% premium over existing stock.
New build transactions totalled 95,715 in the year to February, marking an annual rise of 5.6%.
Heaton says: “Average prices in England and Wales (excluding Greater London) stand at £257,260 for February – a fall of 0.9%, which is the fifth consecutive monthly drop. February also sees the lowest level of annual growth since 2013, at 3.1%.
“Transactions continue a downward trajectory, with a fall of 1.6% over the year and now stand at 796,431, again the lowest level since 2013.
“The low level of transactions throughout the UK is already having a damaging effect on estate agents. With sales figures so low, many rely more and more on their lettings departments to keep the lights on.
“With the imminent ban on tenant feescoming into effect on 1stJune 2019, agencies are going to suffer reduced revenue at a time when many are already struggling. It is also likely that many tenants will hold back any move until this date passes.
“The combination of low sales volumes and reduced revenue may well bring further agency consolidation and closures throughout the rest of 2019.”
The majority (58%) of landlords saw an increase to their tax bills in 2017-18, according to the latest PRS Trends Report from Paragon, for the first quarter (Q1) of 2019.
The survey tracks the opinion and experience of over 200 landlords across the UK.
Landlords with three or more properties were more likely to report an increase in their 2017-18 tax bills than those with smaller portfolios, with an average rise in tax of £3,039 for those reporting growth.
While more than 60% of landlords confirmed that the change in their 2017-18 tax bills was as expected, one third (33%) said that it was either a little or a lot more than estimated.
Almost half (49%) of landlords who reported a higher than expected increase said that they would make changes to their portfolios as a result, with the most popular measures including: selling property (24%), raising rent prices (20%), and reducing borrowing (19%).
Mortgage interest tax relieffor buy-to-let landlords is being phased out over a four-year period and replaced with a basic rate tax credit.
In the 2017-18 tax year, landlords could deduct 75% of their finance costs from their rental income. This was reduced to 50% in 2018-19. It will fall to 25% in 2019-20, and then to 0% in the following tax year.
John Heron, the Director of Mortgages at Paragon, says: “These figures provide early insight into how the tax changes impacted landlords in the first year of implementation. The January tax deadline was the first real data point for measuring change, and it’s clear that landlords are continuing to adapt their approach as the transition progresses.
“The fact that almost one quarter of landlords intend to respond by selling property is bad news for tenants, impacting supply to the sector, driving rental inflation and, ultimately, making it more difficult for those that rely on the UK’s private rented sector for a home.”
Almost four in ten (39%) landlords are planning to add to their portfolios this year, according to a new study by Experience Invest.
With buy-to-let continuing to deliver healthy returns, which outstrip many other asset classes, the research shows that 39% of buy-to-let landlords are planning to add to their portfolios this year, compared to the 11% who intend to reduce theirs.
The survey, of more than 500 buy-to-let landlords, also found that London, Manchester and Liverpool are the most popular cities for buy-to-let investment in the UK at present.
In terms of the most popular cities, London (35%) just beat Manchester (33%) to take the top spot.
Liverpool (25%) and Nottingham (15%) came in third and fourth, followed by Bristol and Leeds, at 14% and 13% respectively.
The rest of the top ten consisted of Birmingham and Newcastle (both 12%), Luton (11%) and a four-way tie between Brighton, Edinburgh, Glasgow and Sheffield (all at 8%).
When looking at the types of property that investors were considering buying this year, houses (67%) were the most popular, followed by flats (54%).
New build homes also look set to receive a lot of attention, with 39% of landlords keen to invest in this market, as do student properties, at 24%.
Commercial (34%) and semi-commercial (21%) properties were the other leading asset types among UK property investors.
Jerald Solis, the Business Development and Acquisitions Director at Experience Invest, says: “In light of tighter tax regulations on landlords and on-going Brexit uncertainty, there have been some doom and gloom predictions about the future of the UK property market. But, today’s research shows that, as an investment asset, real estate is still hugely popular, with a significant number of property investors looking to grow their portfolio further in 2019.
“It’s interesting to see that, while London remains the most popular location for property investment, other regions across the UK are very close behind. In particular, the North West has established itself as something of a hotspot for buy-to-let investors, with cities like Liverpool and Manchester providing strong rental yields and healthy capital growth.”
Landlords, are you planning to add to your portfolios this year? If so, which locations are you interested in?
