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Em

Em Morley

Welsh Tenant Fees Ban will Lead to Increased Costs for Landlords, Says NLA

Published On: July 13, 2018 at 9:18 am

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Categories: Landlord News,Tenant Fees Ban

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The proposal for a tenant fees ban, much like the one currently being discussed in England, is now being considered in Wales.

Members of the Welsh Assembly are being urged to reconsider this ban. Concerns that mirror those brought up in England have been voiced; mainly that such a ban will lead to an increase in costs for landlords.

Chris Norris, the Director of Policy Practice for the National Landlords Association (NLA), gave evidence to the Welsh Assembly committee on the possible impact that the Welsh Fees Bill could have. He highlighted: “The PRS [private rental sector] has a limited elasticity in the landlord’s or owner’s ability to absorb costs; supply in the PRS isn’t unlimited.”

The effectiveness of enforcement was also brought into discussion. Chris Norris questioned the extent to which the Bill would actually achieve its aims. This reflected the points made in his earlier statement about the Welsh Bill last month, when it was first introduced by Housing Minister Rebecca Evans AM: “Whilst tenants and applicants deserve to be treated fairly, and not unduly charged, it is disappointing that the Welsh Government seem to be adding to the enormous amount of change with which landlords in Wales are being expected to contend.

“With all of the uncertainty surrounding the introduction of the new Standard Contract from 2019, and ongoing debate about fitness for habitation in the private sector, the NLA would like to see the Welsh Government focus on getting the fundamentals right before moving onto new challenges.”

Chris Norris was asked by Assembly Member Jenny Rathbone AM about the possibility of increased difficulties for vulnerable renters due to landlords feeling the need to cherry pick their tenants. He responded: “From an admin perspective, you see a relatively straightforward process… or a more expensive, complicated process…

“It is reasonable to suggest that people will favour the simple case if you’re not allowed to recoup the cost of doing [a] longer, more burdensome process… guarantors would provide twice the work, therefore, if the cost is the same, would be easier to choose the prospective tenant without a guarantor”.

Rathbone also enquired as to why tenants should be paying fees to letting agencies, when landlords are the ones benefitting from the services, such as referencing. He responded: “There are some charges for which both the landlord and the tenant are beneficiaries” – avoiding pre-screening, referencing, and particularly checking-in – and where there’s a risk of harm for both parties if the process isn’t followed properly through poor service “there’s an argument for sharing that cost”.

In relation to security deposits, the NLA has stated that it does not believe that there should be a cap. Chris went on to say: “The security deposit never becomes the landlord’s money. The security deposit always remains the tenant’s money.

“The legislation already protects that… it’s not in the landlord’s interest, or the agent’s interest, to ramp up the security deposit that they can’t use as operating capital, because it becomes a barrier to getting people in the homes.”

A written response from the NLA to the Welsh Assembly on the Tenant Fees Bill can be viewed here.

Is Property Wealth Changing Lives?

Published On: July 13, 2018 at 8:58 am

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Categories: Property News

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Property investment is not a quick fix, but instead, a long-term financial solution to building wealth, as any experienced BTL landlord is aware of.

Despite rental yields being a priority for some landlords, other landlords far more concerned with capital growth to build wealth, specifically those who are investing in property in London and the southeast where rental returns are usually the lowest in the UK.

There is absolutely no doubt, that concentrating on capital growth is integral to ensure long-term success, as exemplified by growth in equity release levels, which is expected to rise later this year.

According to data provided by Key Retirement, in the past six months of 2018, retired homeowners released £1.7bn of property wealth.

Furthermore, £9.5m of property wealth was released each day in the six months with equity release plan sales increasing by 29% on the same period of 2017, shown by Key Retirement’s Equity Release Market Monitor.

Chief Product Officer at Key Retirement, Dean Mirfin commented: “Customer demand is driving the expansion in the market to new record highs enabling more retired homeowners to transform their finances.
“More money was released in the first six months of 2018 than in the whole of 2015 as records continue to be broken across the market with expert independent advisers playing a vital role.

“Property wealth is not just helping to transform an individual’s retirement planning but is also helping their families with their financial needs. The growth in gifting underlines how much can be achieved when the average amounts being released are as much as £78,000. The Bank of Mum and Dad, or Gran and Grandad are changing lives, and not just their own.”

Regarding the London area, retired homeowners on average, released £133,000 of property wealth every six months. This is the highest in the country, followed by the southeast on almost £90,000 and the southwest on £77,000.

However, each region witnessed a growth in the value of released property wealth. The total value of the property wealth released, increased by 65% in East Anglia in addition to plan sales which surged by 50% in the West Midlands.

Other areas with strong growth, included West Midlands at 62%, East Midlands at 56% and the North East at 1% below the East Midlands, at 55%. Northern Ireland and Wales were reportedly the highest performing areas for rising sales of plans.

Landlord Exodus Continues, as RLA PEARL Estimates Further Drop in Private Rented Homes

Published On: July 13, 2018 at 8:03 am

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The latest research report from RLA PEARL (the Residential Landlords Association) has been released, concerning key trends in the private rented sector (PRS).

It has revealed specifically that support from landlords for the sector is dwindling. As well as the estimated 46,000 private rented homes that have already been lost, it estimates a further net loss of 133,000.

The recent Government tax changes are thought to be the main reason for this drop, as they have dissuaded many private landlords from continuing their investments in the sector.

Previous research from RLA PEARL has shown that 62% of landlords believed that the profitability of their investments would be reduced by at least 20%. 67% responded that they were considering minimizing their investment due to these tax changes by the Government.

Within his post on the RLA website, Supporting Private Landlords not Pushing them out is Key for a Modern Sector of the Future, Dr Tom Simcock, the Senior Researcher for the RLA, states: “These changes make it easier for those who are wealthier and cash-rich to invest in the private rented sector, over those middle-income earners that may look to purchase a property with finance.

“While also limiting the access of the sector for the more vulnerable tenants and those who can’t afford to buy nor can’t access social housing.”

Dr Simcock also discusses the Government’s recent announcement for the consultation on three-year tenancies: “This could be beneficial for both landlords and tenants in the right circumstances and signifies a move towards an evolved modern private rented sector.

“However, in the international examples of private rented sectors, where there are longer-term tenancies, there is also smart taxation policies that support private landlords to provide long-term homes.”

He concludes: “We need to move to a broader but fair reform of private renting; with improved access to justice for landlords and tenants, expanded options for security of tenure, and reformed taxation policy that supports not penalise private landlords.”

Landlords Should Pay Letting Agents for their Services, Not Tenants, Government Whip Insists

Published On: July 12, 2018 at 9:54 am

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Categories: Landlord News,Tenant Fees Ban

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In response to questions raised over how successful the upcoming tenant fees ban will be, one Government Whip has insisted that landlords must be responsible for paying letting agents for their services, not tenants.

Nigel Adams, the Parliamentary Under-Secretary for Housing, Communities and Local Government, spoke out in response to concerns from Matthew Offord MP on how letting agents will cover their costs once they are prohibited from charging fees to tenants.

It has long been the suspicion throughout the housing industry that letting agents will simply pass on these costs to landlords in the form of higher fees.

Offord questioned Adams over what assessment has been made of how letting agents in England would cover the costs that are currently paid by tenants when the ability to charge such fees is abolished.

“The Tenant Fees Bill is not about driving letting agents out of business,” Adams stated in response. “Letting agents should be reimbursed for the valuable services they provide, but this must be by landlords rather than tenants.”

He insisted: “It is only fair that the party who contracts the service should pay for the service.”

However, he did have some slightly positive news for landlords: “We do not expect the full level of tenant fees that are charged currently by letting agents to be passed on to landlords. Currently, there is evidence of excessive charging by letting agents, such as double charging of both landlords and tenants, or charging more than the economic value of services provided.

“Good letting agents, providing services that represent value for money to landlords, will continue to play an important role in the market.”

Adams concluded with his belief that the ban will be successful: “This is what the provisions of the Bill will achieve – landlords will choose the agent that provides the quality of service that they are seeking at a price that they are willing to pay.”

The Government published an impact assessment to accompany the Bill, which can be accessed by clicking the following link: https://www.gov.uk/government/collections/tenant-fees-bill#impact-assessment

Do you agree that it’s the landlord’s duty to pay a letting agent for their services, rather than their tenant’s?

Stay up to date with all developments on the tenant fees bill through our dedicated page: https://landlordnews.co.uk/category/tenant-fees-ban/

How can Landlords Attract Families to Their Properties?

Published On: July 12, 2018 at 9:24 am

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Currently, in the UK’s PRS, families have outnumbered young couples, becoming the most common household type.

According to figures provided by the National Landlords Association,  (NLA), it is revealed that 48% of landlords are now letting to families. In particular, first time families have been the most frequent tenants in the rental market.

This is a stark contrast to six years ago, in 2012 when the largest group was young singletons. At this time, 53% of landlords were letting to this group.

According to Romans’ Letting Managing Director, Richard O’Neill: “Renting a home is a practical, flexible and beneficial option for thousands of families across the country. It offers a simple route for parents looking to live within a school’s catchment area or close to a support network of family and friends.

“Landlords should aim to appeal to this growing market by offering the type of homes families are demanding. Our evidence shows families are typically reliable, stable and long-term tenants – qualities that should make them highly desirable to landlords.”

Three central factors that each landlord should consider, prior to investing in a property which they are intending on letting to a family are as follows:

 

Location, Location, Location

The majority of families are seeking an area which is nearby to a reputable local school in addition to such amenities as a park, playground, leisure centres and shops. To maintain the continuity of a high rental yield, a family must feel as though these things are available to them and that a family-friendly area is guaranteed.

 

A Family Home

Prior to letting to a family, landlords should always be considering what families desire in a property. These include factors such as a spacious and well-maintained garden, two to three bedrooms with a generous amount of space and lastly, features such as parking and storage space. For tips on how to increase your rental yield, the specialist landlord insurance provider, Just Landlords has recently compiled a list of things you can do to ensure that you achieve the highest rental yield for your property.

 

Flexibility

When looking to move into a property, tenants want to feel as at home as possible – when they feel this way, the chances of them remaining in this property for a longer amount of time is far more likely. Due to this, it is advised that landlords should consider being flexible regarding permission for tenants to have pets in the house in addition to customised decoration. The most effective way to establish boundaries is through the landlord drawing up and addendum for their tenants in which they can explicitly state what they are willing to accept.

Call for Bank of England to have Set Targets to Control House Price Inflation

Published On: July 12, 2018 at 9:00 am

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Bank of England

The Institute for Public Policy Research (IPPR), a think tank based in London, believes that the Bank of England should be granted the ability to regulate house prices and freeze growth at 0% for the first five years.

This opinion has been stated in its recent publication, ‘On Borrowed Time: Finance and the UK’s current account deficit’. Grace Blakeley, author of the research in the document, includes that the Financial Policy Committee (FPC) of the Bank of England should be able to use a revised mandate set by HM Treasury in order to gain some control over house price inflation.

Blakeley states: “This would be equivalent to the remit the Monetary Policy Committee (MPC) has to control consumer price inflation. Under such a target, the Bank of England should aim to keep nominal house price inflation at (say) 0% for an initial period – perhaps five years – to reset expectations, and allow affordability to improve.

“It should then be increased to the same rate as the consumer price inflation target of 2% per year, meaning zero real-terms house price growth. The target should be implemented using macroprudential tools, such as capital requirements, loan-to-value, and debt-to-income ratios.

“Since lending is not the only driver of house price inflation, the government should accompany this target with active housing policies designed to increase housing supply and restrict overseas purchases of UK residential property.”

Discussing the issue of price inflation, it is also stated in the report: “In the fourth quarter of 2017, UK house prices were almost 10 times their value in the fourth quarter of 1979. Consumer prices increased just five times over the same period.”

“During this same period, housing grew from 53-66% of households’ net assets, creating a wealth effect that allowed households to borrow more, financed by cheap funds from abroad.

“Between the late 1980s and 2008, household debt increased from around 50 to 100 per cent of GDP and savings rates also fell to all-time lows by 2007. Equity withdrawal also grew every year from 1997 to 2007, peaking at £140 billion annually in 2006 before sharply declining during the financial crisis. Over this period there is a clear correlation, not only between mortgage debt and house prices, but also between consumer credit and house prices, showing this wealth effect in action.”

Responding to the proposals, Mark Hayward, chief executive of NAEA Propertymark, has commented: “Excessive house price growth is certainly not something we want to see, but home buyers make purchases on the basis of capital appreciation and the belief that their investment will be protected and enhanced.

“We encourage all measures to help first-time buyers get on to the housing ladder, but with property transactions at an already low level, this sort of tampering could have unintended consequences.”