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Em Morley

90% of Students Battle Housing Nightmares, Including Rats and No Water

Published On: March 21, 2019 at 11:13 am

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Housing nightmares like these aren’t confined to cut-price accommodation – in fact, almost as many students report problems with university properties and commercial halls of residence as in private rental rooms and houses.

Rip-off student accommodation is leaving tenants battling housing nightmares, unaffordable rents and poor mental health, according to the 2019 National Student Accommodation Survey.

The research, conducted by advice site Save the Student, surveyed 2,196 students in January 2019. Their responses highlight a UK-wide scandal of overpriced and unsafe student housing, with 90% reporting a problem with their accommodation.

While fellow residents are a top cause of complaints, the vast majority are maintenance issues that leave student tenants without basic services or living in unsafe conditions – despite paying an average rent of £125 per week (£541 a month).

Portsmouth student Adele describes having to live in shocking conditions: “On move-in day, we found there was no door on the front of the property, then we had no heating for two months. We had a broken toilet, broken shower and rats/mice/fleas. An open drain in the back garden would regularly overflow, just filling the garden with sewage.

“Got to the point where we called in the local housing association – turns out we had no gas certificate, no fire door in the kitchen, and even the bannisters on the stairs were unsafe!”

Housing nightmares like these aren’t confined to cut-price accommodation – in fact, almost as many students report problems with university properties and commercial halls of residence as in private rental rooms and houses.

Kerry, a student in Bournemouth, comments: “Halls were a terrible experience. Building work almost constantly, rats, and a very irritating flatmate who was loud and disgusting and inappropriate.”

Save the Student’s findings are particularly relevant, as the Homes (Fitness for Human Habitation) Act 2018 came into force yesterday (20th March 2019). The new law gives students, as well as other private tenants, a way to take action against landlords who ignore their legal responsibilities.

The ten biggest housing nightmares for students

  1. Noisy housemates (45%)
  2. Damp (35%)
  3. Housemates stealing food (33%)
  4. Lack of water/heating (32%)
  5. Disruptive building work (20%)
  6. Inappropriate landlord visits (16%)
  7. Rodents and pests (16%)
  8. Dangerous conditions (5%)
  9. Burglary (5%)
  10. Bed bugs (3%)

Asking for help with housing issues is no guarantee that anything will be done, however. Although half (45%) of students said that problems were resolved within a week, one in five waited more than a month. A handful (4%) said that their housing nightmares were never resolved.

Lily studies in Newcastle: “Last year, I had no hot water for the entire year. I had to boil the kettle and fill up the sink that way to wash my face.”

The cost of student accommodation

The pressure to find decent housing is so high that one in three students start looking for next year’s accommodation in or before November – that’s just weeks after the beginning of the academic year.

This is brutal on finances, as students pay an average of £970 in upfront housing costs: deposit (£311), admin fees (£119) and a month’s rent in advance (£541). The stress on students and their parents/guardians is even greater, as the typical maintenance loan – money the Government awards for living costs – is just £541 per month.

Housing charity Shelter deems housing affordable when costs are no more than 35% of a renter’s income. However, with the average student rent eating up 100% of the typical maintenance loan, tenants are left with no money to cover their other housing or living expenses.

As a consequence, half of all students struggle to pay the rent, while two-thirds borrow from family, banks or other lenders to cope with housing costs.

Parents/guardians who earn enough are expected to contribute towards university living costs. However, this latest study uncovers the burden on family finances. Parents/guardians contribute an average of £44 per week (£2,288 a year) to help students pay their rent, but one in five give more than £100 a week (£5,200 per year).

Banks are the next most common source of borrowing, with 40% of students turning to overdrafts, loans or credit cards to find the extra cash.

Students are therefore under immense pressure to make ends meet, yet many are rewarded with housing that isn’t fit for purpose. The consequences include stories of damp and mould-related illnesses, plus distress caused by money worries.

Two-thirds (63%) of students said that housing costs have affected their mental health, while 37% said that they have had an impact on their studies.

Mark, in Sheffield, is only part way through his course: “I have suffered from severe depression and anxiety at university, and have undergone counselling and CBT [Cognitive behavioural therapy] because of it. 

“My parents help as much as they can, but it is hard for me to afford my rent and living expenses on minimum student loan when my parents are putting two other children through university. I had a part-time job, but that, plus studying, was too much and made my mental health worse.”

Most troubling of all, the National Accommodation Survey shows a clear link between money and wellbeing at university. The more rent prices exceed the financial support on offer, the more students suffer mental and financial stress.

Jake Butler, a Student Money Expert from Save the Student, states: “Too many people – including students – seem to believe that poor living conditions are just a part of student life. Our investigation confirms how students are being unfairly treated as if second-class citizens, expected to put up with dire conditions throughout their studies. 

“It’s even more outrageous considering the sums of money being handed over to landlords. Rent swallows up the entire maintenance loan for many students, piling on added stress of having to make ends meet while living in squalor.”

He adds: “Whilst the laws around renting are constantly improving, there needs to be a much easier way for students to report and resolve problems with their accommodation.”

Kelly-Anne Watson, the Delivery Officer for student housing charity Unipol, continues: “It’s imperative for ourselves, universities and students’ unions to be educating students on their rights, and to give well informed advice on housing. 

“We must work collectively as a sector to improve standards and make sure that there are a range of varied rents for students to choose from, so there are not further barriers into education.”

She urges: “We’d encourage providers to voluntarily join one of three national codes: UUK, ANUK and Unipol. Within a code, it is unacceptable for landlords to ignore reported issues, such as the third of students (from this survey) who report living with damp, or without hot water and heating.”

Landlords, if you provide student accommodation, ensure that your tenants aren’t living with housing nightmares!

Annual House Price Growth Drops to Lowest Rate since 2013

Published On: March 21, 2019 at 10:29 am

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The average annual house price growth across the UK in January 2019 dropped to its lowest rate since June 2013, according to the latest House Price Index from the Office for National Statistics (ONS).

The average property value in the UK rose by 1.7% in the year to January, which is down from annual house price growth of 2.2% in December 2018. In June 2013, the average increase stood at 1.5%. 

Over the past two-and-a-half years, a slowdown has been recorded in annual house price growth across the UK, driven mainly by declines in the south and east of England.

In January, the lowest annual house price growth was recorded in London, where the average property value fell by 1.6%, which is down from a decrease of 0.7% in the previous month. The East of England followed, with a drop of 0.2% over the 12 months to January.

The average UK house price in January was £228,000. This is £4,000 higher than in the same month of 2018. On a non-seasonally adjusted basis, the typical property value in the UK dropped by 0.8% between December 2018-January 2019, compared with a decline of 0.3% during the same period of the previous year. On a seasonally adjusted basis, the average house price in the UK fell by 0.2% between December and January.

By country

The average property value in England was £245,000 in January, which marks an increase of 1.5% over the year – down from 1.9% in December 2018. House prices in Scotland grew at a slower rate than other countries of the UK, rising by 1.3% in the 12 months to January, which has fallen from 2.0% in the year to December. The typical house price in Scotland was £149,000.

Annual house price growth in January was strongest in Wales, at an average of 4.6%, taking the typical property value in the country to £160,000. This continues to be driven be strong house price inflation in southeast Wales, which is likely linked to the abolition of the Severn Bridge tolls, reports the ONS. 

House prices in Northern Ireland rose by an average of 5.5% in the year to the fourth quarter (Q4) of 2018. The country remains the cheapest in the UK to purchase a property, with an average house price of £137,000.

interest rates

By region

Property values in southern England (London, the East of England, South East and South West) dropped by an average of 0.2% in the year to January, which compares to growth of 4.2% in the Midlands and 2.8% in northern England (the North East, North West, and Yorkshire and the Humber). While the annual growth rates of the Midlands and the north have slowed slightly over the past three years, southern England has experienced a sustained slowdown, with values in January marking a decrease over the year.

At a regional level, the East Midlands recorded the highest annual house price growth in January, at 4.4%. The West Midlands was close behind, at an average of 4.0%.

The lowest annual increase was in London, where the average house price dropped by 1.6% in the 12 months to January, which is down from a fall of 0.7% in December. The East of England followed, where the typical property value was down by 0.2% – its first decline since October 2011.

While London house prices have decreased over the year, the region remains the most expensive place in the UK to buy a property, with an average value of £472,000. The South East and East of England follow, at £321,000 and £288,000 respectively. The North East continues to record the lowest average house price, at £125,000, and is the only English region yet to surpass its pre-economic downturn peak.

Comments

Conor Murphy, the CEO of fintech mortgage platform Smartr365, says: “Slowing house price growth is no surprise – we remain without a solution to Brexit and only nine days to go. However, the fundamentals of the mortgage market remain solid. Lenders are developing more innovative products and near record low interest rates are attracting demand, despite wider uncertainty. 

“Keeping up with this demand, while balancing existing client relationships, isn’t easy, though. Here is where end-to-end solutions can play a vital role. Not only do they improve a broker’s business, but the closer we can come to creating a frictionless mortgage journey for customers, brokers and lenders, the better the outlook for the market will be.” 

Ewen Bunting, the Head of Sales at independent estate agent James Pendleton, also comments on the index: “The market is plumbing near six-year lows and Londoners are feeling the worst of it, with the gap between house price growth and inflation widening to more than 3%.

“This represents a substantial real terms annual loss. No one was expecting fireworks after New Year while the clock runs down on Brexit, but things appear to be coming to a head rather earlier than we had initially expected.

“It’s no surprise slowing house price growth is swayed in a large part by downward trending prices in London and the South East. Uncertainty and an element of caution among those who don’t strictly need to move remains the order of the day, though, on the capital’s doorsteps, we’re seeing those who are prepared to adjust expectations continue to transact quite well. This is despite volume of sales remaining a major problem nationally.”

Shaun Church, the Director of mortgage broker Private Finance, gives his thoughts: “Property prices have experienced their weakest growth in almost six years, with London the chief culprit for the national lag. It’s becoming ever more apparent that continued uncertainty around Brexit and the wider global economy is depressing the capital’s property market.

“For the millions of aspiring homeowners that have long been priced out of London, now marks a time of opportunity. Between December and January, buyers saved £1,344 on average when purchasing a property in the capital. While not a windfall, this saving on purchase price, combined with Stamp Duty exemptions, near record low mortgage rates and Government initiatives, such as Help to Buy, are all helping to make homeownership incrementally more affordable and attainable.

“While buyers can currently expect to purchase at a reduced price in London, the opposite can be said for the rest of the UK, with continued growth across the majority of regions, suggesting there are plenty of investment opportunities elsewhere. The Midlands, in particular, stands out as a region for investment, with house prices growing by around 4%. Amongst the headlines of falling house prices, it’s therefore important not to overlook the fact that significant pockets of the UK continued to be poised for growth.”

Focus on Interest Rates Diverts Attention from other Issues in Housing Market

Published On: March 21, 2019 at 9:49 am

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"This apparent obsession with interest rates can mask more material problems in the housing market, particularly the scarce availability of property in parts of the UK."

Rob Clifford, Director at Stonebridge and CEO of SDL Mortgage Services, says it’s time to end unhelpful speculation about the impact of marginal interest rate rises in the future. 

“It is a decade since the Bank of England dropped its base rate to a historic low of 0.5% – but, with no change to the current 0.75% expected today, the latest announcement looks set to be another non-event.

“As tempting as it might be to say that homeowners will breathe a sigh of relief, the truth is, they are unlikely to base any future mortgage and housing decisions on interest rates alone. Like almost two-thirds of people who bought a property last year, their decision is more likely to be motivated by life circumstances than the economy or the political rollercoaster.

“What’s more, this apparent obsession with interest rates can mask more material problems in the housing market, particularly the scarce availability of property in parts of the UK, and the challenge some people still face in raising the substantial deposit typically required.

“If rates do happen to rise to 1% – as they are predicted to do later this year or early next – the prophets of doom will be quick to dramatise what impact this could have on household finances.  

“However, an increase of 0.25% on a £150,000 mortgage could equate to just £18 extra in monthly interest payments, which is hardly crippling. Most people will simply cut their cloth accordingly, possibly forgoing their gym membership or meals out if they are feeling the affordability strain.

“The cost increase facing a typical borrower is extremely small when you consider that mortgage lenders typically stress test applicants’ mortgage affordability for interest rates of up to 9%: an almost inconceivable rate in today’s world.

“Finally, we need to remember that competition in the market is continuing to drive mortgage choice and availability, even among those who would traditionally have struggled to get a mortgage. Banks and building societies have reacted to consumer demand for more certainty with fixed rate deals, while buyers today normally have their pick of five or six deals to suit their particular circumstances. On top of the zero deposit mortgages now available from some lenders, Virgin Money has just announced that it will consider applicants with satisfied CCJs [County Court Judgements] and defaults on their credit history – a sign of confidence, even in the current economic climate.”

Buy-to-Let Remains One of the Most Lucrative Investments in the UK

Published On: March 21, 2019 at 9:01 am

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Despite recent tax and regulatory changes, investment in buy-to-let has outperformed most other major asset classes over the past ten years, when considering the annual growth in house prices, along with the increase in rental yields.

An investment in the buy-to-let sector a decade ago would have delivered an average 92% return today, according to research by VeriSmart.

The combined inventory and property compliance specialist found that investing in the FTSE 100 would have brought the greatest return when considering the annual capital gain and the percentage yield, with a rise of 119%. Meanwhile, the value of a classic car is up by 94% over the same period. 

Therefore, a buy-to-let property is a very good next best option when considering capital growth and the increase in rental returns.

The average yield offered by buy-to-let is significantly higher than the 60% return that investing in gold would have delivered over this timeframe, and a world away from the 16% increase in cash or the 4% decline in fine art.

It is also important to note that the growth in the property market has been, by far, the most reliable investment option, with the FTSE 100, gold or cash providing a far more volatile opportunity, which is also open to a larger degree of impact from political and economic factors, as well as influence from other foreign countries. 

Jonathan Senior, the Founder of VeriSmart, insists that bricks and mortar remains one of the best and most stable investments available in the UK at present.

He explains: “Last week’s Spring Statement was a missed opportunity for the Government to backtrack on their previous attacks on the buy-to-let sector, attacks that have done little to solve the UK housing crisis and, if anything, have caused further restrictions in the level of suitable stock, while keeping rental prices buoyant as a result.

“However, the buy-to-let sector remains the backbone of the UK property market, helping to support aspirational homeowners as they work to overcome the sometimes impossible financial barriers of homeownership. The need for this support is clearly evident, as it remains one of the most lucrative investments one can make.”

Senior is confident in the future: “With little being done to address property supply or affordability on a meaningful scale, this is likely to continue going forward and, despite the Government’s best efforts, there will always be demand for a good, honest landlord providing above the board accommodation to those that need it.”

Tenancy Renewals Running at 90% in some parts of London

Published On: March 20, 2019 at 11:01 am

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London estate agent Benham & Reeves has recorded a growing shortage of good rental stock across the capital in recent months, as tenancy renewals peak at 90% in some areas. 

A major contributing factor to a lack of rental homes is that tenancy renewals are at a high at the moment, so stock is simply not coming back onto the lettings market. In some locations across London, renewals are running at a huge 90%. 

So, why is this? A few years ago, Benham & Reeves observed that a tenant might have moved to a new rental property because they fancied a change of scene. Today, however, budgets are uppermost in many tenants’ minds – as is the current political and, therefore, economic uncertainty – so stability and reducing costs are now priorities.

The estate agent is finding that, towards the end of a tenancy, most renters now contact their local branch, wishing to negotiate with their landlord and agree a new deal. It believes that there are real advantages in this for both parties.

For landlords, there is a huge benefit in maintaining continuity of income and eliminating any void periods – even a short void can cost thousands in lost rent in the capital. And, with rent prices fairly static across London, there is little to gain in holding out for a higher rent that probably won’t materialise. The cost of any void is therefore likely to outweigh any gain. 

There are also direct cost savings – most notably, there are lower fees for renewing a tenancy (rather than having to find and reference a new tenant) and reduced costs usually associated with re-letting a property, such as decoration, replacing worn furnishings and deep cleaning. And, of course, you cannot underestimate the importance of keeping a tenant who looks after your property and pays the rent on time.

For tenants, too, moving home is no longer a priority once they have found a home and an area that they like. Who would choose to incur the costs and hassle of moving if you’re happy in your home?

But, if your tenant is moving on – perhaps because they’re changing jobs – then finding a new tenant quickly is vital.

Benham & Reeves has provided a detailed look at the state of the lettings market across its London branches, including the rate of tenancy renewals:

Tenancy Renewals Running at 90% in some parts of London

West London

The estate agent’s branches are all experiencing high demand at present. In some locations, it is struggling for stock, and is waiting for some tenants to vacate in March/April. However, around 70% of renters are choosing to renew their tenancies.

As a result of the lack of stock, apartments are letting on first viewing, or even sometimes before a viewing takes place. One-bedroom flats, in particular, are in very high demand and are letting instantly. In certain developments, around 90% of tenants are renewing.

Central London

After a quiet few weeks in central London, tenant demand is picking up again. Benham & Reeves reports good stock levels, with accurately priced, well-presented properties letting quickly, particularly to applicants relocating from the USA, Australia, Italy, France and Germany. The areas bordering Hyde Park are extremely sought-after. Tenancy renewals remain at a very high level – about 90% of tenants are renewing their existing agreements. 

However, this is still a difficult market – applicants are knowledgeable and compare rent prices, expecting to do a deal with landlords, so flexibility is key to ensuring your property lets quickly. Many also request a six-month break clause in their agreement, in case their personal circumstances change.

With new developments setting the bar so high, in terms of presentation, another important consideration for landlords with older properties is refurbishment. Homes should be updated to a high spec to appeal to the tenants that are increasingly used to show-home standards.

Tenant demand in Nine Elms continues to go from strength to strength, with properties usually let within one or two viewings, at most. The agent is even letting apartments in advance, before the previous tenancy ends, so that the new tenant can move in immediately. And, of course, most renters renew their existing tenancies – the only ones vacating are those who are moving away.

The areas bordering Hyde Park are extremely sought-after

The City and east London

Properties in the City and east London continue to let quickly, especially those priced up to £750 per week. And, with tenancy renewals still running at over 60% (reducing the number of properties coming back onto the market), Benham & Reeves is seeing shortages of rental stock, particularly one-bed homes priced up to £550 a week.

The lack of this type of property in the City is pushing many young professionals to move east towards Canary Wharf, where there is a greater choice of good quality rental stock at affordable price points. 

At the upper end of the market, the agent has new stock of two-bed/two-bathroom properties priced at £750-£800 per week coming onto the market – these are popular with senior executives, as well as professional sharers. At this price point, sharers can find a high spec home with good amenities, which would be beyond their budget if they were to rent alone.

North London

Certain Benham & Reeves branches have a shortage of rental properties at the moment, especially one and two-bed apartments, so accurately priced flats are letting quickly, but presentation must be immaculate. Applicants are savvy, though, as they research the market and compare properties in detail, shopping around to find the right rental home at the right price. Many are looking to reduce costs, so negotiate hard to get a good deal, and, increasingly, they are requesting a break clause at six months, in case their job situation changes. 

The agent advises landlords to be prepared to be flexible in order to secure a tenant quickly. New developments in north London are setting the bar high in terms of décor and presentation, so it also recommends that landlords consider a refurbishment if their property has not been decorated for a while. Refurbished properties always let more quickly, so the cost usually pays for itself pretty quickly.

Benham & Reeves is receiving a lot of enquiries from relocation agents and professionals working for some of the large tech companies moving to north London at the moment. Being close to the Northern Line means that it is an easy commute to Kings Cross and nearby areas, where many of these firms now have headquarters. The availability of parking is also an important issue, with most applicants requesting an apartment with its own private parking space. 

Tenancy renewals are very high, at around 80%, which illustrates how popular these developments have now become.

Short-Term Lets in Liverpool Offering Yields of Up to 30.7%

Published On: March 20, 2019 at 10:32 am

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Landlords who own properties in Liverpool or Manchester could potentially achieve yields of up to 30.7% on short-term lets, according to Portico Host.

The short-term letting agency has conducted research on short-term lets in the two cities, finding that landlords in Walton, Liverpool are achieving the highest short-term let rental yields, at an average of 30.68%, which compares to 7.88% for those letting longer-term rentals.

Walton is located on the outskirts of Liverpool city centre, and is a diverse and longstanding residential area. House prices here are cheaper than in other Liverpool postcodes, which enables landlords to achieve stronger yields.

The highest long-term rental yield in Liverpool or Manchester can be achieved in Fairfield, Liverpool, at an average of 12.52%. 

The short-term lets return is based on an occupancy rate of 60% of the year, which is typical for this type of property, due to seasonal demand.

Of the top ten best performing locations for short-term lets in Liverpool and Manchester, the top five are in Liverpool postcodes L4, L6 and L7.

In Manchester, the highest short-term lets return can be found in Hulme (M15), at an average of 17.4%.

Rachel Dickman, the Regional Manager of Portico Host, says: “It perhaps isn’t surprising to find that the properties that are achieving the greatest returns are those that are situated in areas surrounding Liverpool and Manchester city centres. These places typically have excellent transport links, proximity to popular tourist attractions, employment hubs, and good restaurants and cafes.

“Liverpool is becoming increasingly popular on the tourist trail, with 1.34m people visiting the city in 2018, and with business travellers, students and young professionals. A growing number are wanting to stay in short-term let properties, and the increased demand for this type of accommodation is underpinning the rents that can be achieved.”

There are currently 10,200 active listings in the North West on Airbnb, according to the short-term lets site’s latest insight report. The study also found that Airbnb has brought in almost £37m for the North West’s economy.

Portico’s Emma O’Rourke comments: “Good news also for landlords is that mortgage lenders are waking up to the popularity in short-term lets, although they do remain cautious of the risk it poses to their balance sheets.

“Last year, one lender launched a mortgage aimed specifically at Airbnb hosts, and landlords who want to rent out rooms in their home for short and ad-hoc periods. We expect high street lenders to follow suit with more mortgage products for these types of properties coming to the market, making it easier for people to let a property in the short-term.”

Landlords, does this encourage you to invest in the short-term lets sector?