The UK’s private rental sector is shrugging off the pre-Brexit jitters that are affecting seller and buyer activity in the property market.
Given the intensity of the debate around Brexit’s likely impact on UK house prices, the country’s rapidly growing private rental sector has been left rather overshadowed.
However, from the expansion of the build to rent offering, to the more discerning buy-to-let investors that we’re now seeing, the rental sector is alive and well.
Indeed, according to property firm Savills, “tightening access to mortgage finance and changing demographics is driving demand for privately rented homes at all price points”.
This makes it an exciting time to be a buy-to-let landlord.
Jonathan Stephens, the Managing Director of property investment firm Surrenden Invest, says: “As a whole, the UK has seen a reduction in the number of buy-to-let investors in recent years, as the Government’s tax changes have been felt across the sector. However, an interesting result of this is that those investors who do continue to build their portfolios have become more discerning about which properties they choose to put their money into. This is pushing developers to be more creative and ambitious with their property plans.”
In recognition of the continuing demand for premium investment properties, Surrenden Invest has produced a regional rental market report, which offers expert insight into the UK’s local rental markets. The guide covers five key areas (Birmingham, Liverpool, Manchester, Newcastle, and London/the commuter belt). It analyses everything from demographics and tenures, to average rent prices, yields and void periods.
Rent price growth has been rather subdued over the past two or so years. However, the average growth across Great Britain of 1.0% in the year to December 2018 was up from 0.9% in the previous month.
Savills expects things to get brighter over the coming five years. It projects rent price growth of 2.0% across the UK in 2020, 3.0% in 2021, and 3.5% in each of the following two years, resulting in total growth of 13.7% up to 2023.
Stephens comments: “The UK’s population is increasing rapidly, and this is supporting a thriving rental sector that seems unabashed by the same kind of pre-Brexit jitters that are slowing down house price growth. Add to that the reduction in stock that we’ve seen as amateur private landlords drop out of the market, and the overall rental sector has a very positive future ahead.”
Do you believe that now is a good time to be in buy-to-let?
By Marc Trup, the Founder and CEO of Arthur Online
Weather plays the biggest role in the amount of energy that gets used, and is one of the biggest impacts on energy bills. Bill-payers typically see their highest bills after the hottest and coldest months.
If you are paying the bills for your property, conserving energy will drastically increase the potential for savings. You may also find that you will face fewer maintenance issues, since older appliances are more likely to act up. Even if it is your tenants who pay the energy bills, making eco-friendly improvements will increase the overall value of your property. There is now a huge move to become more energy efficient, so new upgrades make a property more attractive to potential buyers.
There are many cost-efficient ways to improve your property’s carbon footprint during the wintry months. A good start would be to invest in low energy appliances. Energy star-qualified appliances use 10-50% less energy than their standard counterparts. With an Energy Star washing machine, you can also save up to 50% more water. Picking the right kitchen appliances can also have an impact. Kettles use a lot more electricity than you might expect; on average, it costs 2.5p to boil a kettle of water, so be sure to get the most energy efficient kettle you can find. Keeping your boiler serviced and upgrading it to a more efficient model every ten years will also reduce energy consumption.
Those with a bigger budget could consider swapping wall radiators to underfloor heating, which is much more efficient. While traditional wall radiators need to reach temperatures of between 65-75°C to heat up an entire room, underfloor heating only needs to run at 29°C, conserving energy and keeping bills down.
How can you Conserve Energy in your Property During the Colder Months?
A lot of energy is used when electrical devices aren’t even in use. According to the Clean Energy Associates (CEA), consumer electronics account for 13% of home energy use and can cost up to £145 a month by just being left to charged or on standby. There are several companies, such as Green Plug, that give devices the exact amount of power they need. Once fully charged, Green Plug automatically cuts the power, saving energy and money, and a worthwhile investment for the environmentally conscious. Using energy saving devices can help to reduce electricity consumption by 41%. For individual appliances, using a green plug with a bedroom TV could provide you with a saving of up to 53.6% and, for a lamp, you could save up to 40.2%!
Even your choice of furnishings can help with energy conservation. If you provide your tenants with furnishings, choosing curtains over blinds is good to keep the heat in when it’s colder. Similarly, placing rugs over wooden floors is another way of conserving heat and can save 4- 6% on energy bills.
Switching to energy efficient windows is a good way of keeping your property warm in the winter. If your windows need replacing, consider fitting double or triple glazing. This will reduce heat loss through the glass. Making sure your roof is insulated is another simple thing you can do, which means that your tenants are spending less on heating. Uninsulated homes lose a quarter of their heat through the roof.
While you may not be able to control how much electricity your tenants use, you can adopt some of the discussed measures to help conserve as much energy as possible, making your property more energy efficient and helping your tenants to save money on bills. One of the easiest ways to be more energy efficient is to replace your old halogen light bulbs with CFL or LED alternatives, which require a third less power to run.
Similarly, carrying out simple maintenance works can help to reduce the gas and electric bills. Some of the smallest things can make a big difference. Make sure that you seal up any cracks around windows and doors to keep heat in. Even if you have invested in triple glazing, if there are cracks around the front door, heat will still be able to escape. It is also recommendable that you regularly clean HVAC filters. A HVAC unit that is cleaned every month will run a lot more efficiently.
Marc Trup is the Founder and CEO of Arthur Online
After selling his business to BUPA in 1998, Marc started investing in rental properties in London. Over the next 15 years Marc grew his portfolio to over 85 properties. While successful, self-managing his portfolio became increasingly difficult. With technological advances and greater connectivity, he assumed there was software available that would allow him to manage his business from his smart phone, while sipping espresso at the local coffee shop. Following a long search, he found that nothing quite cut the mustard. So being an entrepreneur, he started Arthur Online to make not only his life easier, but also that of other property managers.
Arthur Onlineis a cloud-based platform that enables property managers to respond instantly and solve problems fast from anywhere in the world, be it with tenants, contractors, property owners or letting agents. Since launching in 2015, it has helped thousands of property managers like Marc run their portfolios in the cheapest, most efficient way possible by using the full potential of new technology and cloud computing. Start your free trial today by going to www.arthuronline.co.uk
The number of young professionals based in the UK searching for housing in Europe in December and January increased by 33% compared to previous months, according to booking platform HousingAnywhere.
HousingAnywhere analysed search volumes from the UK to shed light on the impact of the upcoming Brexit on young professionals’ accommodation needs.
Although it’s not yet clear what the impact will be for these young professionals, the results of the study suggest that potential post-Brexit scenarios are prompting them to consider leaving the UK for Europe.
The most searched for destinations in Europe were Munich, with an increase of 289%, and Geneva, which went up by 253%. The city of Helsinki experienced a rise of 191% compared to previous months.
The research also shows that, as Google searches for Brexit spiked on three occasions over the two months, so did the traffic of UK users searching on HousingAnywhere for accommodation in mainland Europe.
Djordy Seelmann, the CEO of HousingAnywhere, says: “It goes without saying that the ripple effects of the UK referendum have been unprecedented, and more is still to come. Our research shows that the uncertain outlook of a post-Brexit UK is causing young professionals to already look for accommodation in Europe. This, combined with the Google searches for the term Brexit, indicates that the speculative outlook of a post-Brexit scenario is leading young professionals to consider more stable alternatives to living in the UK.”
Should these young professionals leave the UK, the average rent price for housing in Europe will be much lower, especially compared to London.
An apartment in Munich costs around €1,300 per month, while Amsterdam is €1,500 and Brussels is just €900 a month for a flat.
Seelmann comments: “Some European cities have already reported their ongoing talks with UK-based companies looking to relocate their headquarters to Europe. We cannot predict how many young professionals will actually follow through with this platform trend and act on their search behaviour, but I think we can safely conclude that these sought-after cities must prepare for all eventualities, regardless of ongoing political negotiations. We’re seeing rents increase in these cities year upon year; in Berlin, for example, we have witnessed medium rent rise by 4.64% in Q4 [the fourth quarter of] 2018, compared to the preceding year. I expect, as a result of Brexit, more pressure will fall on these cities and their already strained rental markets.”
When examining the locations of the searches, HousingAnywhere found that the majority of UK users in the past two months were in London (45.5%). In second place, and by some distance, was Manchester (2.2%), followed closely by Birmingham (2.0%).
The platform used data from 1stDecember 2018-1stFebruary 2019, for the age group of 25-34-year-olds.
The wait-and-see approach used by potential homebuyers and sellers in these uncertain political and economic times is causing a slump in property market activity, according to the latest Household Lending and Deposits data from UK Finance.
In the trade body’s latest release, covering January 2019, it is clear that the upcoming Brexit is reducing the number of mortgage approvals, for both homeowners and landlords.
Gross mortgage lending in the residential market in January totalled £21.6 billion, which is down by 1.5% on the same month of 2018.
However, the number of mortgages approved by the main high street banks in January was up by 0.3% on an annual basis, while approvals for home purchases rose by 1.5%.
Nevertheless, remortgage approvals were down by 3.1% year-on-year, while approvals for other secured borrowing were up by 6.8%.
These figures follow several months of strong growth in the remortgaging sector in early 2018, as customers took advantage of a competitive mortgage market to lock into attractive deals. This was seen for both homeowners and buy-to-let landlords.
John Goodall, the CEO of peer-to-peer lender Landbay, explains what has caused this slump in the UK property market: “This dip in lending is unquestionably linked to homeowners and landlords putting off the decision to put their property on the market. This wait-and-see approach, entirely understandable in the current economic climate, is exacerbating the chronic undersupply of available housing.
“The current stalemate means that it falls to landlords, both private and institutional, to pick up the pieces and provide quality housing for those who would be buyers in more normal economic conditions.”
Have you adopted a wait-and-see approach to your property market activity due to the impending Brexit? If so, we’d be interested to find out under what conditions your buying/selling activity will pick up once again.
Living in a house share in the capital could enable London tenants to get themselves onto the property ladder sooner, according to analysis of rent prices by Ideal Flatmate.
Housing affordability is a serious problem, particularly in the capital, putting those wishing to buy their first homes under a great deal of pressure. Many prospective buyers face some tough decisions when trying to raise a deposit that go beyond simply cutting back on little luxuries.
High house prices and affordability constraints mean that many people living in London have little alternative but to rent their homes. However, those wishing to get onto the property ladder can typically do so in less than five years by opting to rent a room in a house share, over living in their own place.
The study by Ideal Flatmate looked at how much the average tenant could save in each London borough by living in a single room, instead of renting a one-bedroom apartment of their own, based on typical costs.
The room share platform then analysed the required mortgage deposit at 10% of the average first time buyer house price in each borough, before calculating how many years it would take to buy a home, due to the savings from house sharing to reach this deposit.
Across London, the average rent on a one-bed property is £1,300 per month, while a room will set you back just £600. This results in a saving of £700 a month, or £8,400 per year. With the average first time buyer house price in the capital currently standing at £412,679, it would take 4.9 years to save the £41,267 deposit required.
Living in a House Share Could get London Tenants onto the Ladder Sooner
Hounslow came out as the most cost effective borough to rent a room in a house share, at an average of £596 per month. A typical one-bed flat, in comparison, costs £1,000 a month.
Enfield, Ealing, Tower Hamlets and Newham all provided a large enough saving to ensure that tenants could save a deposit in less than five years by house sharing.
At the other end of the spectrum, it would take tenants in Kensington and Chelsea an average of 10.4 years to save for a deposit with their house share savings, due to the extortionate house prices in the borough.
Tom Gatzen, the Co-Founder of Ideal Flatmate, says: “The financial barrier of transitioning from a tenant to a homeowner in London is huge and, when coupled with a lack of suitable rental stock available, it’s currently one of the biggest factors putting a strain on the capital’s rental market.
“We completely understand that, for many, the only viable option when living in the capital is to rent a room in a house or flat share already, and there’s a very good chance that house prices in London will be higher than they are now in four to five years’ time.”
He adds: “However, while we know the idea of saving for a mortgage deposit seems impossible, we wanted to get people thinking outside the box on ways they can make a lifestyle adjustment in order to start tackling this mammoth task, without compromising the area in which they live or having to forsake avocado for breakfast.”
The number of buy-to-let mortgage products on the market has hit a post-financial crisis high, according to analysis by Moneyfacts.co.uk.
While the tax and legislative changes imposed on the buy-to-let sector over the past few years have increased the pressure felt by landlords, and even forced some out of the market altogether, the research shows that the amount of buy-to-let mortgage products currently available is at a post-financial crisis peak.
Today, landlords have the choice of 2,162 buy-to-let mortgage products, meaning that the number of deals has not been higher since October 2007, when 3,305 products were available.
Moneyfacts’ study also found that the average rate on a two-year fix increased from 2.96% in March 2017 to 3.12% today, while a typical five-year fixed rate deal dropped from 3.77% to 3.61% over the same period.
Darren Cook, the Finance Expert at Moneyfacts, says: “It is encouraging that buy-to-let landlords have more mortgage choice than they have had at any time in almost 12 years. Total product numbers have increased by 397 over the past year and by 706 over the past two years to stand at 2,162 products today.
“Despite ongoing uncertainty in the property market, providers are not shying away from offering landlords a greater choice of products, although it is also evident from our research that heightened competition to try and attract buy-to-let business has not resulted in a fall in interest rates, as has recently happened in the residential mortgage sector. Indeed, the average two-year fixed buy-to-let mortgage rate has increased by 0.20% to 3.12% since September 2018 and the average five-year fixed rate has increased by 0.15% over the same period.”
He continues: “As there appears to have been no sustained increases in interest SWAP rates since September 2018, a strong argument can be made that the recent increases to buy-to-let mortgages interest rates have been a result of buy-to-let mortgage providers attributing a little more to risk into their product rates, due to uncertainty over future economic conditions.
“The disparity in the direction of movement between buy-to-let and residential interest rates may be due to the way these two types of lending are primarily assessed. Buy-to-let mortgage providers generally consider the potential rental income and affordability during assessment, whereas residential mortgage providers typically look back at income earned by the borrower and affordability.”
