Written By Em

Em

Em Morley

What can the UK Rental Sector Learn from the USA and Europe?

Published On: March 26, 2019 at 11:03 am

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Categories: Lettings News

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Renting is on the rise in the UK, however, research suggests that we are still behind on the build to rent trend, compared to the USA and Europe. So, what can the UK rental sector learn from its neighbours?

Broadband and utilities provider Glide has looked into the recent trends in renting in the UK, Europe and the USA, including the countries’ differing attitudes towards housing, to see if our nation is keeping up.

Although the amount of young adults (aged 25-34) renting their homes has almost doubled in a decade, from 24% in 2004 to 46% in 2014, the UK as a whole is still way behind Europe’s leading renting country, Germany. Nearly a fifth (19%) of the UK now lives in private rental housing, which is much lower than the amount in Germany (54%).

This is not just a European trend, however, as the USA has been utilising the build to rent market for the past 20 years, which is expected to grow to $317 billion this year.

The USA, in particular, has become more open to renting, with households of all education levels now more likely to rent than ten years ago, rather than just those considered of a lower social status. It is also interesting that 32% of US citizens rent as a matter of choice, compared with just 9% of the UK rental population, which has no aspiration to buy their own homes.

When looking into the reasons why the UK rental sector is behind on the build to rent trend, it seems to be down to the nation’s attitudes towards housing compared to the USA and Europe.

There are many reasons why people are starting to rent more than ever before, and it isn’t only due to finances. For many millennials who are just starting out on their career paths and are looking to progress in their chosen fields, being able to relocate for better opportunities is essential, thus, renting is the most convenient option.

Renting also provides peace of mind for tenants that, if something in the home breaks or goes wrong, then it is up to either the landlord or property management firm to fix it. This makes it a lot easier for those professionals who perhaps don’t have enough spare time to fix things themselves.

It is clear to see why there are question marks surrounding whether the UK should be looking to its neighbours on embracing the build to rent lifestyle and keep the UK rental sector strong, by providing properties for all different areas of society.

Property Investment Tips for Beating Brexit

Published On: March 26, 2019 at 10:29 am

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Categories: Property News

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Property firm Knight Frank has found that Brexit-related uncertainty is causing a wait-and-see approach in some property markets across the UK. Investment agency Surrenden Invest has its top property investment tips for beating Brexit…

Despite this wait-and-see attitude amongst property buyers, the UK’s chronic undersupply of rental properties and rising rents mean that property investors want to act now, rather than waiting to see what happens with the ongoing political saga.

As such, if you’re looking to invest, Surrenden Invest has shared its Brexit-beating tips for those who want to make their money work for them, sooner rather than later.

The Managing Director of the firm, Jonathan Stephens, says: “The extension to Article 50 is just the latest twist in the ongoing Brexit uncertainty. We’re finding that many investors are tired of waiting to see how it all settles. After all, the current wrangling is only over the withdrawal agreement – there’s still an incredible amount to actually sort out once the 29thMarch/12thApril/22ndMay deadline has passed. As such, we are working with investors to find Brexit-beating property investment opportunities right now, not in some distant future when the political upheaval has finally settled.”

Surrenden Invest’s first tip is to focus on existing pockets of demand. City centre living has recently come back into fashion with a vengeance, meaning that stylish homes with attractive amenities can generate excellent yields, when located in the right areas. 

As investment firm JLL observes in its 2019 Northern England Residential Forecasts: “Manchester, Leeds and Liverpool have all seen significant supply shortfalls in the face of an increase in demand from people wanting to live in the core city centres.”

For investors, this provides an opportunity to identify key city centre hotspots.

However, Surrenden Invest’s second Brexit-beating tip is to focus on the medium to long-term.

Part of this is to identify a top location, with desired amenities within a walking distance. Nevertheless, it’s about more than just location – some areas are undergoing significant redevelopments, which will appeal to tenants for the long-term. Surrenden Invest reminds landlords to look past the cranes and see what the future holds for a certain district.

Finally, the firm is encouraging investors to look at areas where both rents and house prices are rising fastest – especially, a select group of the UK’s regional cities. Birmingham, Manchester, Liverpool and Newcastle all have the right credentials, according to Surrenden Invest, meaning that landlords who focus their attention on the best-placed developments look well positioned to beat the continuing Brexit uncertainty. 

Will your investment strategy beat Brexit? If not, follow these top tips! 

First Time Buyers Take Advantage of Reduced Competition in Market

Published On: March 26, 2019 at 10:00 am

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Categories: Property News

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- 26,700 new first-time buyer mortgages have been completed during April, which was 3.5% more than in the same month last year.

First time buyers are taking advantage of reduced competition in the UK property market, as demand for housing dropped in February, according to the latest Housing Report from NAEA Propertymark (the National Association of Estate Agents).

Housing demand

The number of home hunters registered per NAEA Propertymark member estate agent branch dropped by 15% in February, from an average of 297 in the previous month, to 252.

This is the lowest figure recorded since July 2013, when agents registered an average of 250 prospective buyers per branch.

Annually, demand for housing has dropped by a fifth (18%), from an average of 209 potential buyers in February 2018, alongside a decline of more than two-fifths (41%) from 2017 and 46% from 2016, when 463 home hunters were registered per branch.

First time buyer sales

First time buyers took advantage of reduced competition in the market last month. As demand fell, sales to this group rose, hitting a seven-month high of 30%.

The last time that first time buyers experienced this rate of sales was in July 2018, when they benefitted from the annual summer lull.

Month-on-month, the number of sales to first time buyers increased by four percentage points, from 26% in January.

Property supply

The supply of available properties for sale fell from an average of 36 homes per member branch in January to 34 in February.

This figure has not changed significantly from February last year, when 35 properties were available to buy per branch.

Agreed sales

The amount of sales agreed increased in January and remained high in February, with an average of seven recorded per branch.

Year-on-year, this dropped slightly, from an average of eight in the same month of 2018. 

Mark Hayward, the Chief Executive of NAEA Propertymark, says: “With demand at a seven-year low, buyers are approaching the market with caution. As we move into spring, we would usually expect to see an increase in activity, but house hunters are evidently delaying their plans until the impact of Brexit is clearer. Over the last seven months, however, we’ve seen periods where first time buyers have taken advantage of reduced competition and driven their transactions forward, and this really picked up in February.

“The next few months will be very telling – will activity pick up once there’s further clarity on what Brexit means, or will it push the housing market into a deeper pool of uncertainty? Time will tell, but, in the meantime, both buyers and sellers should feel positive. There are still house hunters searching for properties and there are still new homes coming onto the market.”

Tenants with Pets Facing Rent Hikes after Fee Ban

Published On: March 26, 2019 at 9:00 am

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Categories: Tenant Fees Ban,Tenant News

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Private tenants with pets could face rent hikes after the letting fee banis introduced on 1stJune 2019, according to real estate firm JLL.

The investment management company believes that tenants with pets could suffer rent hikes of as much as 3-4% per week once landlords and letting agents are banned from charging fees.

The warning comes after JLL recorded a 25% increase in the number of tenants with pets over the past five years.

Lucy Morton, the Head of Residential Agency at JLL, says that landlords and agents typically charge a higher deposit to cover any damage and additional cleaning required from having animals in a property. However, this will be more limited once the Government introduces its five-week cap on security deposits.

She explains how tenants with pets may be affected: “With the five-week deposit cap, landlords may be deterred from letting to tenants with pets or forced to charge higher rents to cover any potential losses. The increase would depend on the rental value, but we anticipate approximately an additional 3-4% per week.

“For example, a rent of £700 per week would potentially rise to £725 per week to make up for the shortfall.”

Morton looks at the situation from a landlord’s perspective: “With a host of regulations that landlords must adhere to, as well as the changes to mortgage interest relief, the fee ban and five-week deposit cap is adding yet another cost.

“This gives landlords no choice but to increase rents in order to see a return on their investment, and they will need to hold firm on asking or renewal prices.”

She adds: “However, tenants will only be happy to pay more if the property is of high quality and well-presented. It’s the properties in the best locations offering quality amenities that will attract tenants willing to pay a premium.”

Landlords, how will you let to tenants with pets following the fee ban? 

Professional Landlords Switching to Limited Company Status for Purchases

Published On: March 25, 2019 at 11:01 am

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Categories: Landlord News

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New research from Precise Mortgages shows that landlords with bigger portfolios have swung dramatically to using a limited company status for new property purchases, highlighting the ongoing switch in the buy-to-let market, as investors reshape their portfolios.

The specialist lender found that almost two out of three (64%) landlords with more than four properties who plan to invest further this year would use a limited company status, compared with just 21% who intend to buy as individuals.

Across the sector as a whole, 44% of landlords planning to buy will use a limited company status, but that drops to 17% among those with one to three properties. Around two in five (37%) landlords with smaller portfolios will purchase as individuals, the study shows.

Precise Mortgages also found that more than six in ten landlords planning to fund new purchases this year will use buy-to-let mortgages. However, 73% believe that lending criteria and portfolio application process changes, introduced by the Prudential Regulation Authority, are making it more difficult to secure loans, while 57% say that the changes will slow applications down.

Limited company status is growing in popularity, as the phased reduction in mortgage interest tax relief does not affect limited company landlords, who can continue to offset mortgage interest against their profits, which are subject instead to Corporation Tax of 19%, rather than Income Tax rates.

The interest coverage ratio on limited company applications is also lower than for most individual landlord mortgages.

Alan Cleary, the Managing Director of Precise Mortgages, comments: “The buy-to-let market is changing and the switch to greater use of limited company status is one aspect of the development underlining the increasing maturity of the sector.

“There are good reasons why limited company buy-to-let is dominating the purchase market, and we expect that will continue to be the case this year and next. Brokers and customers, however, need expert specialist support when buying as a limited company or considering switching to limited company status, as there are considerable costs involved.”

The Current Best Postcodes for Buy-to-Let Yields Revealed

Published On: March 25, 2019 at 10:30 am

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Categories: Landlord News

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Estate agent Benham & Reeves has revealed the current best postcodes across the country and in London for buy-to-let yields. 

Despite a number of tax and legislative changes making it harder to make strong buy-to-let yields, there are still pockets of the country where landlords can find decent returns on their properties.

The top postcode is currently L7 in Liverpool, according to the research, where a combination of low house prices – at an average of £105,000 – and a large student population result in strong buy-to-let yields, at an average of 10.7%.

The neighbouring L6 postcode is close behind, where buy-to-let yields currently average 10.4%, while Middlesbrough, Manchester, Bradford, Sunderland, Newcastle, Sheffield and Nottingham are also home to some of the best postcodes for rental returns.

Top ten postcodes for buy-to-let yields

PositionPostcodeAverage yieldAverage house price
1L710.7%£105,000
2L6 10.4%£85,000
3TS110.2%£61,000
4M1410.2%£163,000
5BD19.9%£58,000
6SR19.7%£68,000
7L59.4%£69,000
8NE68.5%£123,000
9S28.5%£109,000
10NG78.5%£137,000

Marc von Grundherr, the Director of Benham & Reeves, says: “There are a whole host of factors that mean the rental desirability of a property can literally change from one street to the next, but one of the best starting points to work from is the rental yield available.

“Despite the Government’s attempts to dampen the appetite of the sector, it remains a lucrative business and, for those with the time to commit to it, there are plenty of buy-to-let honey pots out there that will bring a great return on your investment.”

Landlords looking to invest in London will find that the E6 postcode in the east, along with IG11, which is located a little further east covering Barking, top the charts in terms of buy-to-let yields in the capital, both offering an average return of 5.0%.

This eastbound stretch of London actually dominates the top ten, with RM8, RM9 and RM10 also among the most lucrative postcodes in the capital, at an average of 4.9%.

N18, which straddles the North Circular, is one of the only postcodes outside of east London to make the list, with buy-to-let yields averaging 4.8%.

RM13 ranks next, with SE28 the only postcode south of the river to appear. E15 and EN3 complete the top ten.

von Grundherr comments: “Of course, London’s more prime postcodes are always a safe bet, attracting investment due to their prestigious image and positioning. While we may have seen some decline in price growth, due to political uncertainty, they remain very much in demand from a rental point of view and so, for those with the budget to buy there, a return isn’t hard to come by.

“They also offer better capital growth than London’s peripherals and, for those not completely dependent on yield, but preferring to opt for more long-term growth, inner London is still the go to place to invest in the capital’s buy-to-let market.”