UK rents are expected to rise by an average of 11.4% over
the next five years, according to a prediction by CBRE.
Alongside fairly moderate growth of 1.8% in the average UK
house price this year, the property group expects rents to rise by 1.3% during 2019.
The report, which looks at how economic, political,
financial and technological trends could affect the property market, foresees
further growth in rents leading up to 2024, supported by a drop in housing
supply in the private rental sector, amid “dampened investor demand for
buy-to-let”, and growing demand for rental homes, particularly from
lower-earning young people.
CBRE estimates that UK rents will rise by 1.3% in 2019,
followed by growth of 1.9% in 2020, 2.5% in 2021, 2.7% in 2022, and a further
2.6% in 2023. This equates to total growth of 11.4% during the whole period.
House prices, on the other hand, are expected to increase by
1.8% this year, followed by growth of 2.3%, 3.4%, 3.7%, and 1.3%, equating to
13.1%.
Miles Gibson, the Head of UK Research at CBRE, says: “We expect rather
weak house price and rental growth over the next year, but we think that the
lack of supply and low interest rates for mortgages will hold prices up.”
He adds
that weak supply and strong demand is “creating a lot of interest among
investors” in the student accommodation and build to rent sectors, especially
in terms of institutional capital.
Some £2.1
billion of institutional funds have been invested in the year to the third
quarter (Q3) of 2018, which is 51% higher than in the same period of 2017.
Investment
is on a firm upwards trajectory, with volumes in 2019 likely to exceed 2018’s
total, according to CBRE.
Do you
believe that UK rents will rise by 11.4% by the year 2024?
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There has been increased demand for buy-to-let in prime
central London in recent months, and this trend looks set to continue in 2019,
as rental yields improve, according to Black Brick.
The independent buying agency points to the latest
data released by Knight Frank, which shows that rental yields in prime
central London are currently at a six-year high – an attractive proposition for
buy-to-let landlords.
The average rental yield in prime central London in December
was 3.35% – the highest level recorded since April 2012 – as a result of rising
rents and downwards pressure on prices, reports Knight Frank.
The property firm found that lettings activity across prime
London markets has remained firm, despite the current uncertain political
backdrop, with the number of new tenancies in November increasing by 12.3% on
the previous year.
Knight Frank’s report shows that the average rental yield in
prime central London increased by 1.1% in December, in response to falling
levels of supply, prompted by landlords seeking to sell their properties in
response to recent tax reforms.
But, while supply continues to decline, the number of new
prospective tenants registering in prime central London has been on an upwards
trajectory since the start of the year, suggesting that rents will rise further
in 2019.
There has been similar upwards pressure on yields in prime
outer London, as rent price decreases bottom out. An average gross yield of
3.5% in December was the highest recorded since March 2015.
Caspar Harvard-Walls, a Partner at Black Brick, comments: “We are seeing
something of a resurgence in buy-to-let enquiries compared with a year ago, and
we are sourcing deals offering yields between 4-5%.”
However,
he adds that, with reductions in mortgage interest
tax relief, such investments are considerably more attractive to landlords
who can buy mostly or entirely with cash.
“With
rents set to rise perhaps 15% over the next five years, this part of the
market should see a bounce,” Harvard-Walls concludes.
The Residential Landlords Association (RLA) is welcoming
planned changes to the Universal
Credit system.
Responding to reports that the Work and Pensions Secretary, Amber
Rudd MP, will announce reforms to Universal Credit today, Chris Town, the Vice
Chair of the RLA, has spoken out in support.
The plans include a new online system for private landlords
to receive rents paid directly to them.
Town says: “Our most recent research has shown
that 61% of landlords with tenants on Universal Credit have seen them go into
rent arrears, up from 27% in 2016.
“Improving, and speeding up, the process by which
payments can be made directly to the landlord has been a central part of the
RLA’s campaign on Universal Credit. Anything that helps this will give
landlords much greater confidence in the system and ensure tenants have greater
security in the knowledge that their rent payments will be met.”
With further reports that Rudd will announce that the current benefits freeze will not continue beyond next year, Town adds: “Independent research commissioned by the RLA has recently warned that the freeze in housing benefit rates has been a key driver of homelessness from the private rented sector.
“Unfreezing them will enable benefits to keep up with the reality of market rents.”
These findings are
based on an RLA survey that was conducted last year amongst 2,234 landlords.
We look forward to
seeing whether these new planned changes will improve some of the issues that
both landlords and tenants have faced at the hands of Universal Credit over the
past few years.
Stay tuned at
LandlordNews.co.uk for the latest stories from across the lettings and property
sectors: https://www.landlordnews.co.uk
Landlords are being warned that Wirral Council is extending
its selective licensing scheme, after a family of landlords was fined more than
£16,000 for failing to comply with the system.
From April 2019, streets in Birkenhead, Hamilton Square and Seacombe
will become subject to selective licensing, which means that all landlords with
properties in these areas must apply for a licence to let their property.
David Kirwan, a Managing Partner at Kirwans law firm, is
warning landlords to ensure that their properties aren’t affected by the
extension, as he is concerned that councils are routinely pursuing the most
serious enforcement option open to them.
He says: “There are a number of ways in which
councils can penalise landlords who fail – for whatever reason – to comply with
the rules of selective licensing. These range from providing advice, guidance
and support, or issuing a simple caution to prosecuting landlords through the
courts, and refusing or revoking licenses.
“A trend is emerging of councils choosing to enforce
the harshest options, as they seek to make an example of landlords who don’t
abide by the rules.”
Kirwan explains that he has acted for clients
investing in property to raise additional income or to provide a pension in
retirement, who he says are “utterly devastated” to find themselves hauled
before the courts for failing to apply for a licence.
Using selective licensing legislation introduced by
part three of the Housing Act 2004 in areas affected by poor quality rental
housing, irresponsible landlords and anti-social behaviour, local authorities
are able to introduce penalties that go well beyond the mandatory Government
landlord licensing rules.
Wirral Council Extends Selective Licensing Scheme
“It is heart-breaking to watch some landlords going
through completely unnecessary criminal proceedings, simply for failing to
apply for a licence,” Kirwan says.
In worst-case scenarios, landlords could be handed a
criminal record, an order to repay 12 months’ rent or be banned from letting
property in the future.
Indeed, the latest court action taken by Wirral
Council saw fines of over £16,000 last year for a family that let a flat in
Egremont for failing to obtain a licence, failing to provide documents and
providing false information.
The prosecution was the 22nd successful
case by Wirral Council against landlords and property managers who have failed
to licence their properties.
Selective licensing schemes apply to a designated area
for a period of five years and landlords have to apply for a licence for each
property affected.
They are then awarded a licence to operate a property
only after an assessment that must deem them a fit and proper person, as well
as satisfying stipulations around the management and funding of the property,
and health and safety considerations.
The schemes, which opponents claim are a way of boosting council funds, have faced criticism for both the cost of licences, which are usually hundreds of pounds, and for the fact that they may drive the very rogue landlords that they are supposed to weed out further underground.
They have also proved confusing for landlords, who are
often unaware that their properties even lie in a selective licensing area.
For those operating numerous properties across
different areas, the situation can be more bewildering, as each council can
create its own set of rules for each scheme.
Rogue landlords, ironically, may simply choose to
avoid the licensed areas, moving their poor practices to locations where such
schemes are not currently in place.
In June, the Government announced a review of
selective licensing and how well it is working, with the findings due to be
published this spring.
Kirwan says: “While we would all agree that unethical
landlords must be weeded out to ensure protection for society’s most vulnerable
tenants, councils must be careful that they don’t throw the baby out with the
bath water.
“Rogue landlords operate in an entirely different
manner to the many decent men and women, some of whom are only just entering
the rental sector, who are finding their way in the rental market and may be
unaware that such schemes have even been introduced in their area.”
He continues: “To suddenly find themselves in a
situation where prosecution with outrageous penalty fines is a distinct possibility
is absolutely terrifying.
“It’s also counter-productive, as landlords are now
telling me that, rather than face this sort of frightening action, they will
either sell up, or choose not to invest in property in affected areas in the
first place. This will then reduce the choice of accommodation on offer for
those renting, leading to a lose-lose situation for all.”
Kirwan concludes: “My advice to all landlords would be
to check with their local council as to whether their property requires a
licence, and to seek legal advice immediately if they receive a letter from
their local authority threatening fines or prosecution.”
The
Tenancy Deposit Scheme (TDS) has become the first of the three
Government-approved tenancy deposit protection schemes to appoint a new
external, independent complaints reviewer.
With 20 years’ experience in adjudication and dispute
resolution, Margaret Doyle has taken up the new role.
Doyle is a Visiting Research Fellow with the UK
Administrative Justice Institute at the University of Essex.
She has also served as a non-executive director of several
ombudsman schemes, and is currently an independent member of the Ombudsman
Association’s Validation Committee.
Doyle is also the independent complaints moderator for the
British Acupuncture Council and formerly served as an independent complaints
reviewer for IDRS Ltd and Ombudsman Services Ltd.
In addition, she is a consultant trainer on the Queen
Margaret University Certificate in Ombudsman and Complaint Handling Practice
course.
Doyle says: “Having
an independent and impartial outside reviewer is a key process for
demonstrating robust arrangements exist for ensuring that customer complaints
are dealt with well, and that complainants have the opportunity for review by
someone outside of TDS.
“It is
also designed to help TDS learn lessons from complaints and to help improve
service provision.”
Doyle’s
appointment was introduced to bolster the scheme’s transparency to members and
the wider private rental sector.
The role
of the independent complaints reviewer will be to look at the way the TDS has
investigated complaints about its service, in order to ensure that the process
has been fair and transparent, and that the issues raised have been properly
considered.
In its
2018 Annual Review, the TDS reported that less than 1% of its tenancy deposits
ended in a dispute – a total of 14,430.
Of these 14,430
disputes, just 2.65% resulted in a complaint being made about the adjudication
decision or the service received.
The
average number of complaints received in 2018 was 32 per month, which was split
fairly evenly between tenants (36%), letting agents (23%) and landlords (41%).
Steve
Harriott, the Chief Executive of the TDS, says: “We take any complaints about
our service very seriously and strive for the highest standards of complaints
handling practice. If a complainant remains unhappy about TDS’s response to
their formal complaint about an adjudication decision or other aspect of TDS’s
customer service, they can escalate it to the independent complaints reviewer.
“This
role does not make Margaret a TDS staff member, but someone who is appointed by
the TDS board to take an independent view of complaints and report annually to
the board on their work.”
He adds: “As
the only not-for-profit deposit protection scheme operating in England and
Wales, TDS is committed to a programme of continuous investment in our systems,
processes, people and service. Margaret’s appointment is part of that ongoing
strategy and we are proud to have her on board.”
