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Em Morley

Number of Families Calling Scotland’s PRS Home Increases

Published On: February 6, 2019 at 9:07 am

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Categories: Tenant News

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Buy-to-let landlords are being urged to demonstrate that they are complying with all of their legal obligations.

The number of families calling Scotland’s private rental sector home has increased, according to the latest Quarterly Report from Citylets, covering the fourth quarter (Q4) of last year.

The letting agent has revealed that rent prices on family homes in the country recorded the greatest growth during the quarter, as Scotland’s private rental sector has become a significant tenure for adults with children.

In Q4 2018, rent prices continued to rise on an annual basis across Scotland, at an average of 5.0%. Strong demand for properties of all sizes in major cities underpinned growth, with larger three and four-bedroom homes recording the strongest gains, as an increasing number of families settle in the private rental sector.

The average property to let in Scotland now costs £771 per month and takes just over a month to let, at 32 days.

Gillian Semmler, the Communications Manager at Citylets, comments: “It has been interesting to note that the largest rises in Scotland’s PRS [private rental sector] in recent quarters have been for the larger three and four-bed properties.

“With an estimated 90,000 families in Scotland, representing around a quarter of the rented sector, the PRS has become a significant tenure for adults with children.”

Edinburgh

Rent prices in Edinburgh once again moved upwards, recording a significant increase of 7.8% over the year to Q4, to an average of £1,095 a month. Citylets believes that tenants will almost certainly experience further rises over the course of 2019, however, it remains to be seen whether the growth of over 7% will be sustained.

The steepest rise was recorded for four-bed homes, at an average of 10.3% over the year and 48.6% on the ten-year view. Overall, Edinburgh has recorded average growth of 6.5% over five years and 4.3% over ten.

The market continues to move very quickly, with an average time to let of just 23 days.

Number of Families Calling Scotland’s PRS Home Increases

Glasgow

The private rental sector in Glasgow continues to experience strong demand, with larger properties, as per Edinburgh, recording the greatest gains. Overall, rent prices in the city rose by an average of 3.9% over the year to Q4, to £771 per month.

With Aberdeen continuing to fall, the gap between Scotland’s largest city and the Granite City widened to £56 a month, and is expected to widen further in 2019.

The market is moving swiftly, at an average of 25 days, with one and two-bed homes in particular letting quickly, at 20 and 25 days.

Aberdeen

The northeast posted several positive economic indicators for 2018, such as office space uptake, but, as yet, this has not fully stabilised the rental market. Rent prices continued to ease down in Q4, at -5.3% over the year. Private rental properties in Aberdeen now cost an average of £715 per month.

While falls have been steep in recent years, from the ten-year view, the Aberdeen rental market averages just -1.8% a year on the whole. Three-bed homes recorded a 2% increase in rent prices over the year, to an average of £972.

The time to let remains high, at an average of 53 days.

Dundee/West Lothian

Dundee had a strong end to 2018, with annual growth of 4.7% continuing a year that saw positive increases throughout. Properties are also letting faster, at just 25 days on average, and it remains to be seen whether this represents a step change in a hitherto predictable and stable market.

Two thirds of homes in Dundee now let within a month, at an average price of £578.

Properties to let in West Lothian again recorded positive annual growth, of 5.1% in Q4, to hit £699 a month. A substantial reduction in the time to let was witnessed over the same period, to 26 days – 13 days faster than the previous year.

Adrian Sangster, of estate agent Aberdein Considine, comments on the figures: “2018 was very much a year of transition for the Scottish PRS. Agents, landlords and tenants were continuing to adapt to changes brought about by the new PRT [Private Rental Tenancy], which went live at the end of 2017.

“Agents also had to prepare for the introduction of the Letting Agent Register during Q4. Any agent who has not applied and continues to trade, does so illegally. Therefore, landlords and tenants need to carry out due diligence to ensure the agent they’re using is fully compliant. All this took place at a time when more landlords left the sector, in part due to the phased tax changes announced in the 2015 UK Budget.”

Mixed Picture on Outlook for Buy-to-Let Mortgage Rates

Published On: February 5, 2019 at 11:13 am

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Categories: Finance News

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The latest Mortgage Tracker from online broker Property Master, for February 2019, presents a mixed picture on the outlook for buy-to-let mortgage rates.

As the Bank of England (BoE) prepares for its first Monetary Policy Committee (MPC) meeting on interest rates of 2019 on Thursday (7th February 2019), the latest report shows that the costs of three out of six categories of fixed buy-to-let mortgage rates have increased compared to last month, but the remaining three categories have fallen in cost.

Five-year fixed rate mortgages, which have been steadily gaining in popularity among buy-to-let landlords, remain the best value for investors, with declines in costs year-on-year of up to £24 per month.

Property Master’s February 2019 Mortgage Tracker shows that a five-year fixed rate mortgage for 65% and 75% of the value of a property are all down annually. Savings for each of these mortgages, respectively, were £24 and £15 a month.

The cost of most two-year fixed rates was up year-on-year, with the cost of a two-year fix for 50% of the property’s value up by as much as £40 per month.

Property Master’s Mortgage Tracker follows a range of buy-to-let mortgages for an interest-only loan of £150,000. Deals from 18 of some of the largest lenders in the buy-to-let market (including Barclays, BM Solutions, RBS, The Mortgage Works, Godiva, and Precise) were tracked.

Figures for this month’s report were calculated on deals available on 1st February 2019.

Angus Stewart, the Chief Executive of Property Master, says: “Brexit continues to cloud the outlook for interest rates, but many commentators are pencilling in a move upwards in May. The situation is more confusing still for landlords, given that it is the start of the year and there is a flurry of new deals out from lenders – some better than others.

“Landlords shopping around need also to remember some lenders set higher interest cover ratios, requiring rents to cover at least 145% of their mortgage payments. Others are wary of lending to landlords with more than three properties. Then there is the need to factor in product fees, which our research shows can average between £658 and £1,212.”

Will the Fees Ban Help Letting Agents Stay on the High Street?

Published On: February 5, 2019 at 10:33 am

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Categories: Lettings News,Tenant Fees Ban

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The upcoming ban on lettings fees charged to tenants, which is due to come into force on 1st June 2019, could help traditional letting agents to stay on the high street, according to proptech provider PayProp.

Although the ban will affect the revenue that agents can generate, it could reduce competition from companies who have been subsidising rock-bottom management fees with earnings from tenant fees, the firm believes.

This will remove a major differentiator for these agencies, putting all companies on a more equal footing with regard to the total fees that they charge.

Level playing field

In recent months, there has been a trend of agency branches closing, as businesses look to cut costs and consolidate. According to figures from the Local Data Company, 211 agency branch offices closed in the first half of 2018.

However, this needn’t be the fate that befalls high street letting agents, insists Neil Cobbold, the Chief Operating Officer of PayProp UK.

He says: “The ban on fees – while representing a clear bump in the road for letting agencies – could indirectly help businesses to stand firm on the high street.

“With many agencies expected to increase management fees as a consequence of the ban, those charging the lowest fees will have to raise their prices, reducing the gap between the top and bottom end of the market.”

Cobbold believes: “With a more level playing field in terms of management fees, high street letting agents providing first-class property management will be able to thrive.”

Pay for quality

As average management costs are likely to rise following the fees ban, landlords will be on the lookout for the best service, and will be increasingly prepared to pay for quality.

“As costs rise and value for money becomes more important, a letting agency which is on top of crucial issues, such as payments, rent arrears and property maintenance, will become more indispensable than ever to landlords,” Cobbold explains.

Ready for change

Despite the June start date for the fees ban only recently being announced, the top-performing letting agents will have been prepared for this market shift for some time now.

Cobbold says: “Of course, agents need to cut costs accordingly to replace lost revenue, but that doesn’t mean they necessarily have to reconsider their high street presence.”

He adds: “The landscape of the rental sector will change considerably this year, but there remains a whole host of opportunities for savvy high street letting agents to remain profitable and grow their businesses.”

Rental Returns in PCL Negative, but still Outperforming other Assets

Published On: February 5, 2019 at 10:02 am

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Rental returns in prime central London were negative in January 2019, but property continues to outperform other asset classes, according to Knight Frank’s latest Prime London Lettings Index.

The real estate consultant found that average rental returns in prime central London during January stood at -1.4%, due to declining sales values and rising rent prices.

However, this means that investments in prime central London residential property outperformed a range of other asset classes last month, including gold, stock markets, commodities and Bitcoin.

The Prime London Lettings Index analyses the performance of rental properties in the second-hand prime central and prime outer London markets costing between £250-£5,000 per week.

Prime central London

The average rent price in prime central London rose by 1.3% in the year to January, compared to a decline of 0.6% on a quarterly basis.

Prime outer London

No change was recorded in the average rent price on an annual basis in January, while rents dropped by an average of 0.5% on the previous quarter.

However, Knight Frank reports that declining levels of supply continue to put upwards pressure on rent prices in prime London markets. The number of new listings in both prime central and prime outer London was 13% lower in 2018 than in 2017, according to Rightmove data.

Meanwhile, the total number of listings fell by a fifth over the 12 months to January.

The firm believes that a decrease in supply is due to more landlords leaving the buy-to-let sector, following tax changes. This reflects a separate study by ARLA Propertymark (the Association of Residential Letting Agents).

As a result, the average rent price increased by 1.3% in prime central London in the year to January, but prices were flat on an annual basis in prime outer London, suggesting that positive growth will return in the short-term.

Marylebone outperformed the rest of prime central London in January, with average rent price growth of 7.0% over the year. Rents in the area have been supported by declining second-hand stock, while Marylebone’s revitalisation and arrival of new build developments have attracted tenants, in particular, students from nearby universities.

Although landlords appear to be leaving the prime London markets, it is positive to see that rental returns continue to outperform other investment options on offer.

Number of London Landlords Leaving the Market Double the National Average

Published On: February 5, 2019 at 9:00 am

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The number of London landlords leaving the buy-to-let market is double the national average, according to figures from ARLA Propertymark (the Association of Residential Letting Agents).

In addition to the data contained in its recent Private Rented Sector Report, for December 2018, ARLA Propertymark questioned its member letting agents over how many of their landlords are leaving the market.

In December last year, letting agent branches in the capital each saw an average of six London landlords sell their properties and exit the buy-to-let sector.

This compares to a national average of four per member branch over the same period, and is double the number of landlords leaving the market in the North East, East Midlands, West Midlands, East of England and the South West, which all averaged three sales per ARLA Propertymark member branch.

David Cox, the Chief Executive of ARLA Propertymark, assesses the reasons for this: “Over the last few years, landlords across the country have been pushed out of the market by increasing costs and legislation, and new investors have been deterred from entering. Last month’s Private Rented Sector results show that the issue has particularly intensified in the capital, which may be the result of landlords starting to receive their first tax bill incorporating the increase in taxes from the mortgage interest relief changes, which came into force last tax year.”

He looks ahead to what effect this might have in the future: “If this trend continues, coupled with the Mayor of London, Sadiq Khan’s, recent pledge to introduce rent controls, it will only serve to make the situation worse for London’s renters, as more landlords are forced to sell up.

“As the supply of rental accommodation falls further, tenants will face more competition for properties, which will push up rents on good-quality, well-managed properties, and leave the vulnerable and low-income people, which rent controls are designed to help, in the hands of rogue and criminal operators.”

London landlords, have you sold your rental properties off recently?

Affordability is Most Important Factor for Private Tenants, Study Finds

Published On: February 4, 2019 at 10:30 am

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Affordability was named as the most important factor in a rental property by private tenants of all ages, according to a survey of more than 2,000 UK renters.

Almost two thirds of those who responded to the study said that affordability was their main concern when looking for a home, compared to location or space in the property.

Intus Lettings, which conducted the research, aims to present a clear picture for landlords of which characteristics could make a property stand out to prospective tenants.

Young tenants, in particular, are more than four times as likely to prioritise finding a cheap rental home, than one with access to nightlife, shops and restaurants.

Positively for these tenants, new Government research has found that the proportion of private renters’ income spent on rent has dropped over the past decade.

Just 8% of tenants prioritised nearby amenities, bars and restaurants, or public transport links as a driving force behind their decision on a tenancy, compared to more than 40% naming low costs as the most important factor.

In terms of the individual features of a home, the most common characteristic that tenants look for is outdoor space, with almost half (46%) identifying a garden, terrace or balcony as the feature that they would most desire in a property.

Meanwhile, over 40% of tenants would be put off a property without a parking space, while nearly a quarter (24%) were deterred by dated interiors.

Hope McKendrick, the Lettings Manager at Intus Lettings, says: “Our figures seem to suggest that renters first and foremost seek practicality over certain features which have traditionally been seen as desirable – especially to younger tenants – such as nearby shops and restaurants or a vibrant nightlife.

“With high rental costs across the UK, many young renters may be forced to prioritise a property which works around their budget and daily routine, as tenants flock to homes which provide ample parking or easy access to city centre jobs or studies.”

She adds: “We’re seeing a clear trend towards a generation of practical renters – those looking for a convenient, modern-feeling home, rather than exciting but potentially costly surroundings.”

Landlords, bear this information in mind when marketing your properties!