Written By Em

Em Morley

Rents Return to Growth Across London and the Rest of the UK

Published On: February 16, 2018 at 10:13 am

In January, every region of the UK, including London, experienced a rise in the average rent price. However, the rate of rent price growth has not been consistent across the country, the latest Rental Index Report from Landbay reveals.

While the average UK rent now stands at a record £1,198 per month (up by 0.66% on an annual basis), rents in the capital (£1,876) remain around 2.5 times the rest of the UK (£760).

In England, rent prices have increased by an average of 0.6% in the 12 months to January, to hit £1,230 per month. In London, rents dropped year-on-year, by 0.54%, to £1,876. In Northern Ireland, prices rose by 0.99% to reach £565 a month. Meanwhile, in Scotland, rents increased to £731, following average annual growth of 1.26%. Wales saw growth of 1.45%, taking the average rent to £645 per month.

However, on a monthly basis, rents nationwide experienced the first rise across every UK region in January, for the first time in almost two years. At 0.18%, the East Midlands saw the greatest month-on-month growth of the UK, followed by the East of England, at 0.13%. Even London, after 19 months in negative territory, witnessed an increase of 0.03%, with the greatest change occurring in Bexley (0.18%).

Tenants renting properties in London now spend an average of £1,453 a month for a one-bedroom home, £1,921 for two-beds and £2,672 for three-beds. Conversely, tenants renting in the rest of the UK pay an average of £600 per month on a one-bedroom property, £716 for a two-bed and £828 for a three-bed.

At a country level, Wales incurred the highest average rental growth over the month (0.10%), while Northern Ireland (0.01%) fell behind.

Following several market and Governmental legislation changes, including higher Stamp Duty and new Prudential Regulation Authority (PRA) guidelines, which have increased landlord costs, the pressure on rent prices has been strong. And, according to predictions, January’s widespread rise is only the beginning of a drive in rental growth.

John Goodall, the CEO and Founder of Landbay, comments: “With all the tax and regulatory changes landlords have shouldered over the past couple of years, an uplift in rents has been on the cards for a while, and is likely to continue into 2018. Stamp Duty changes pushed up transaction costs for landlords back in 2016, as have a raft of new regulations from the PRA landing in 2017. Furthermore, the Bank of England’s Term Funding Scheme comes to an end this month, pulling away one of the crutches that has allowed many mainstream lenders to keep mortgage rates so low. This, together with gradually rising interest rates, will eventually push up borrowing costs for banks and, consequently, for landlords, who will have to pass some of these costs onto tenants in the form of higher rents.

“Landlords who turned their backs on London when rents started to dwindle may now want to reconsider. House prices have declined in the capital for four consecutive months and, combined with positive rental growth of 0.03% in January, yields will now be climbing.”

Number of First Time Buyers Reached Decade High in 2017

Published On: February 16, 2018 at 9:05 am

Author: Em Morley

Categories: Property News

The number of new first time buyers entering the market reached the highest level (365,000) since 2006 in 2017, according to the latest mortgage trends update from UK Finance.

However, mortgage lending to first time buyers, home movers and buy-to-let landlords dropped in December last year compared to the previous year.

There were 30,800 new first time buyer mortgages completed in December – 5.2% fewer than in the same month a year earlier. The £5.1 billion of new lending in the month was 1.9% down on an annual basis. The average first time buyer is now 30-years-old and has an income of £41,000.

2017 overall saw 365,000 first time buyers – the highest number since 2006. This is an annual increase of 7.4%, from 340,000 in 2016.

There were 30,700 new home mover mortgages completed in December – 4.7% fewer than in the same month of 2016. The £6.5 billion of new lending in the month was down by 3% year-on-year. The average home mover is 39-years-old and has an income of £55,000.

There were 30,500 new homeowner remortgages in the month of December – 7.4% more than in the same month of the previous year. The £5.2 billion of remortgaging was 8.3% more on an annual basis.

Number of First Time Buyers Reached Decade High in 2017

In the buy-to-let sector, there were 5,300 new property purchase mortgages completed in December – down by 17.2% on the same month a year earlier. By value, this was £0.8 billion of lending – 11.1% down year-on-year.

9,900 new buy-to-let remortgages were completed in December – 11.6% fewer than in the same month of the previous year. By value, this was £1.6 billion of lending – down by 11.1% on an annual basis.

Paul Smee, the Head of Mortgages at UK Finance, comments: “2017 saw the number of first time buyers reach its highest level in a decade, which is welcome news for those getting started on the housing ladder.

“But, although the market remains competitive, there is no room for complacency, with weaker December figures consistent with our market forecast of subdued growth this year.”

He adds: “We are also seeing a less buoyant buy-to-let market, which continues to be impacted by recent tax and regulatory changes. This will continue to flatten gross lending volumes this year.”

Shaun Church, the Director of mortgage broker Private Finance, also responds to the figures: “First time buyer numbers hit an 11-year high in 2017, thanks to a combination of affordable mortgage rates and a sustained effort from Government to help new buyers. Lenders keen to get a slice of the first time buyer action have been consciously improving their product range to target this group, with features such as allowing multiple borrowers to take out a loan becoming more commonplace. The recent change to Stamp Duty is likely to lead to heightened competition, with first time buyers set to benefit from an even greater product range as a result.

“The remortgage market also performed well last year, with existing homeowners motivated by rock bottom rates to lock into new deals. However, other areas of the market – such as the upper end of the housing market and the buy-to-let sector – continue to suffer from tax and regulatory changes, resulting in a flatter overall outlook for mortgage lending.”

He continues: “Affordability issues also stubbornly remain. Annual house price growth hovered around 5% in 2017 – an improvement from the significant annual gains seen in 2016, but sufficient to cause concern for some would-be buyers. Large regional variances also remain and, despite house prices slowing in some London boroughs, the affordability gap between the capital and the rest of the country remains vast. However, the industry remains hopeful that the Government’s promise of greater housebuilding and therefore improved affordability will start to be realised in 2018.”

The CEO of the National Association of Commercial Finance Brokers, Graham Toy, adds: “The highest number of first time buyers in more than a decade is excellent news, as it shows generation rent’s wait-and-see mentality is gradually becoming a thing of the past. Clearly, mortgages are available to those who are young enough, can command good salaries and want a place of their own.

“Elsewhere, the buy-to-let market is now showing more modest signs of growth, due to recent tax changes, as landlords’ appetite to add to their portfolio using finance is lower. We saw this in the 17.2% fewer new buy-to-let mortgages completed in December than in the same month a year earlier. While we have to take the seasonal slowdown into account, the signs point to all mortgage lending in 2018 being somewhat subdued.”

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Almost 90% of Landlords would be Happier Letting Direct to Tenants

Published On: February 15, 2018 at 10:16 am

Author: Em Morley

Categories: Landlord News

Almost nine out of ten (87%) landlords said that they would be happier letting their properties direct to tenants, rather than via a traditional letting agent, according to a new survey by online lettings platform HomeRenter.

The research comes following a study by the National Landlords Association (NLA), which found that, last year, the number of landlords using a letting agent to manage their properties rose to around 61%.

Indeed, HomeRenter’s survey shows that nearly nine out of ten landlords (88%) reported being happy with letting their properties. But frustrations included high fees and poor service provided by letting agencies (52%), bad tenants (50%), managing repairs and maintenance (42%), new tax rules and regulations (37%), and general admin headaches (33%).

The draft Tenants’ Fees Bill will see letting agents banned from charging upfront fees to tenants, but some expect the quality of service from agents to go down with their profits. The prospect of landlords self-managing their properties as a result and avoiding paying higher rates to agents appears a more attractive prospect and could benefit tenants.

James Kent, a landlord from Surrey, comments on his experiences of using online lettings platforms to self-manage his own properties: “I initially went through the lettings team of the nearest high street agent before being introduced to an online renting platform. My partner and I felt the high street fees weren’t aligned to the service on offer, especially as we were prepared to go down more of a do-it-yourself approach to managing our properties.

“The main benefit of using an online renting platform is cost saving. There are other benefits too, such as streamlining the admin and getting a better idea of exactly who is renting your property from you. It’s important to meet tenants in person to round out the referencing process and to establish a rapport, which helps ensure a successful tenancy.”

In contrast, less than half (45%) of tenants reported being happy renting. Apart from the cost of renting their properties, the survey by HomeRenter found that the top gripes making people feel most unhappy about renting are: unreasonable letting fees (42%), having to chase for repairs and maintenance (41%), paying security deposits (36%), and the poor service experienced from letting agents (33%). Seven in ten (70%) tenants said that they would prefer to rent directly from a landlord.

Catherine Connolly, a tenant from southwest London, explains: “For me, the biggest advantage of using an online renting platform has been not having to pay anything extra when I moved in. Speaking directly with my landlord to organise the lease took less than a week. Dealing directly with a landlord has saved me time, money and hassle. When I have dealt with estate agents in the past, I often found I had to wait for a couple of days to hear back.”

When looking at how to improve transparency and accountability in the rental market, both tenants (81%) and landlords (88%) expressed a desire to be able to rate and review their counterpart on a TripAdvisor-style platform.

Will Handley, the CEO of HomeRenter, says: “There is a clear dissatisfaction from both landlords and tenants towards traditional estate agents. The majority from both groups feel the service provided is not up to scratch, and would rather cut out the middle man and connect privately with their landlord.

“HomeRenter’s mission is to deliver a fairer, happy renting experience for both parties. Connecting private landlords and tenants via an online platform removes the need for a conventional agent. Saving both parties time, money and hassle.”

Buy-to-Let Lending Margins are being Squeezed, Data Shows

Published On: February 15, 2018 at 9:33 am

Author: Em Morley

Categories: Finance News

The fourth quarter (Q4) of 2017 saw lenders absorbing more costs to keep their rates competitive, according to the latest Buy-to-Let Mortgage Costs Index from Mortgages for Business.

The analysis shows that the underlying cost of funds rose in Q4 2017. In particular, swap rates remained elevated, coinciding with the increase in the base rate. By the end of the year, two, three and five-year swaps, on which fixed rate mortgages are typically based, were higher than at the start of 2017.

Buy-to-let lenders, whose margins have been diminishing since July 2016, chose not to pass on the increases to borrowers. Instead, it seems that they opted to squash their margins further, as they vyed for customers in light of fast-approaching year-end lending targets. The data shows that, between the beginning and end of 2017, average lender margins over swaps had declined by 0.4%.

Steve Olejnik, the COO of Mortgages for Business, comments: “I doubt that lenders will consider lowering rates again. If anything, I would expect them to find ways of making up for the lost margins, particularly given that overall buy-to-let lending looks set to dip this year.”

The index also reveals that the effect of fees remained largely unchanged quarter-on-quarter, adding an average of 0.58% to the headline rate advertised to borrowers – the lowest amount since the beginning of 2013, when the index started tracking this data. Fees include lender arrangement fees, valuation fees and legal costs.

To the detriment of products with fees calculated as a percentage of the loan amount, lenders increased the number of buy-to-let mortgage products without arrangement fees, probably as part of their drive to meet targets. Fee-free products accounted for 16% of the market in Q4, up from 14% in Q3, while the proportion of products with percentage-based fees dropped from 44% in Q3 to 42% in Q4.

At 42%, the proportion of products with a flat fee structure remained the same, although the average fee charged by lenders rose by £53, to £1,423.

Olejnik, continues: “Looking back over the last couple of years, flat fees have actually come down in price from over the £1,500 mark. The fact that they increased in Q4 could be a sign that borrowers are about to experience price hikes, not only on the underlying costs, but also at the point of sale. Now is definitely a very good time for landlords to review their borrowing arrangements

“If I were in the market for a buy-to-let mortgage, for either a purchase or a refinance, I would consider fixing for five years. And I would be asking my broker about fee-free products whilst there are more of them around.”

Government Approves New Licensing Scheme for Nottingham Landlords

Published On: February 14, 2018 at 10:17 am

Author: Em Morley

Categories: Landlord News

A proposal to introduce a new licensing scheme for private rental homes owned by Nottingham landlords has been given the green light by the Secretary of State for the Department for Housing, Communities and Local Government.

The city council scheme covering around 31,000 properties owned by Nottingham landlords is the largest outside of London to be given approval by the Government.

A recent report by the Building Research Establishment Group (BRE) estimated that 21% of private rental properties in Nottingham are likely to have category 1 hazards, such as exposed wiring, a dangerous boiler, bedrooms that are cold, a leaking roof, mould on the walls or ceiling, and vermin infestation.

The council hopes that the new selective licensing scheme will help to make sure that these issues are addressed.

Councillor Jane Urquhart, the Portfolio Holder for Planning, Housing and Heritage at Nottingham City Council, says: “I’m pleased that Nottingham’s selective licensing proposal has been approved by the Government. In areas that are covered, it will help to improve standards for private tenants, and landlords will know exactly what they must do to be able to rent their properties out.

“Having a selective license will allow landlords to demonstrate that they provide good accommodation for tenants. The cost of licensing will be reduced for responsible landlords who gain Nottingham Standard Accreditation via DASH or Unipol. Tenants will also be able to check on both licensing and accreditation, which will help to drive up private rented standards.”

She adds: “This is a major step forward in improving living standards for many city residents.”

The new license for Nottingham landlords is expected to cost those with accreditation around £400, while those without accreditation will pay about £650 for their license.

If you’re a landlord with properties in Nottingham, make sure to find out whether you need a license.

Rent Linked to Inflation would leave Tenants Worse Off, RLA Warns

Published On: February 14, 2018 at 9:49 am

Author: Em Morley

Categories: Tenant News

Proposals to link rent price increases to the rate of inflation would actually leave tenants worse off, the Residential Landlords Association (RLA) has warned in response to new, official data.

According to the latest rent price index from the Office for National Statistics (ONS), private sector rent prices across Great Britain rose by an average of 1.1% in the year to January 2018. In London, they increased by an average of just 0.2% over the same period.

During the same timeframe, inflation, as measured by the Consumer Prices Index (CPI), was 2.7% and was 4% as measured by the Retail Price Index (RPI).

Following the announcement of these figures, the RLA is arguing that the data shows that calls by many in the Labour Party and elsewhere for rent prices to be linked to inflation (or controlled), would actually leave many tenants worse off.

The statistics further highlight that social sector rent increases, currently based on CPI plus 1%, are growing proportionally more than those in the private rental sector.

The Policy Director of the RLA, David Smith, comments: “Today’s figures show that rent controls are unnecessary and would act against the interests of tenants by making them worse off.

“Rent rises would be even lower if it was not for the punitive tax increases which the Government has imposed on the sector and which will begin to bite far more over the coming years.”

Landlords, what are your opinions on linking rent price growth to the rate of inflation, which is designed to control increases for tenants and keep prices at a comfortable level?

Furthermore, how do you currently set your rent prices and decide when to increase them for your tenants? Do you believe that linking rent rises to the rate of inflation is a good idea, or would it make matters worse for tenants?