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Rental values down year-on-year in Prime Central London

Published On: August 8, 2016 at 10:39 am

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Prime central London rental values have slipped by 3.6% year-on-year to July, but activity in actually greater than last summer, according to latest figures.

A new report from international real estate firm Knight Frank shows that values were down due to increased stock levels and uncertainty surrounding Brexit.

Ups and downs

The number of tenancies agreed in the second quarter of the year actually increased by 3% in comparison to 2015. Viewings were also up by 15.8%.

However, the number of prospective new tenants fell by 6.8% in the same period, while rental yields remained flat at 3.1%.

Tom Bill, head of London residential research at Knight Frank, said that the Brexit vote had served to reinforce existing pricing trends.

Bill noted, ‘demand has been relatively flat since the start of the year due to uncertainty surrounding the state of the global economy, particularly in the financial services sector, which contributed towards a slowdown in rental value growth from its last peak of 4.2% in May 2015.’[1]

‘This trend has been compounded by higher levels of supply as stock has moved across from the sales market, with more vendors becoming landlords due to weaker conditions in the prime sales markets,’ he continued.[1]

Rental values down year-on-year in Prime Central London

Rental values down year-on-year in Prime Central London

Selective

Mr Bill observed that, ‘in the three months to the end of June this year, the number of new rental properties placed on the market rose by 49%, compared to the same period last year. As a result, landlords are reducing asking rents to prevent void periods and tenants are becoming more selective.’[1]

Properties where asking rents are seen as too high are struggling to receive viewings. Bill believes that the result of the referendum has highlighted this dynamic. Landlords are now taking a pragmatic approach to rents, with a background of rental uncertainty and increasing stock levels. Rental volumes are expected to increase into the Autumn.

‘The uncertainty ahead of the Brexit vote could be an explanatory factor for weaker registrations, although early signs are positive with no significant announcements that companies are pulling back from relocating staff to London following the referendum,’ Bill explained.[1]

Budgets

The investigation also found that relocation budgets have risen due to the effects of the falling Sterling price. This means tenants are searching in higher-value regions.

Indeed, the number of would-be tenants registering with Knight Frank with a budget of £1,500 per week rose by 11% in the three months to the 24th July, in comparison to 2015.

Bill concluded by saying, ‘combined with the fact that rental values have been declining, it means tenants are widening their searches to higher value areas. For example, senior executives are increasingly able to rent in areas like Mayfair while some young professionals are looking in areas like Kensington rather than east London.’[1]

[1] http://www.propertywire.com/news/europe/prime-central-london-rents-2016080512232.html

Rent Controls Would Spell Disaster for Tenants, Warns RLA

Published On: August 8, 2016 at 9:41 am

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Rent Controls Would Spell Disaster for Tenants, Warns RLA

Rent Controls Would Spell Disaster for Tenants, Warns RLA

Jeremy Corbyn’s plans to introduce rent controls and secure tenancies in the private rental sector would spell disaster for tenants, warns the Residential Landlords Association (RLA).

The Labour leader has vowed to implement rent controls and secure tenancies if he is elected Prime Minister at the next general election. However, the RLA has spoken out against Corbyn’s plans, saying that they would deter many landlords from investing in the buy-to-let sector, which would reduce the supply of homes to let.

Last week, Corbyn announced ten pledges in his bid to become the prime minister, but the RLA believes his plans would worsen the UK’s housing crisis.

The Chairman of the RLA, Alan Ward, explains: “Jeremy Corbyn’s call for rent controls would be a disaster for tenants. He is ignoring all history and experience, which shows that where such controls are applied, they choke off the supply of homes to rent, making it more difficult for tenants to access decent and affordable housing. This has previously been acknowledged by Labour’s former minister responsible for housing in Wales.

“Rather than playing the populist tune, Mr. Corbyn would do well to consider the facts. Figures in the English Housing Survey show that private sector tenants are spending an average of four years in their current property, up from 3.7 five years ago. Such tenants are also more satisfied with their accommodation than those in the social rented sector, according to the same survey.”

The RLA has long opposed the introduction of rent controls, insisting that the Government should address the issue of housing supply by encouraging greater levels of housebuilding in order to stabilise rents in the long-term, rather than penalising landlords.

The RLA’s objection to Corbyn’s plans arrives as the Society of Licensed Conveyancers calls for the Government to scrap Stamp Duty.

The group believes that abolishing Stamp Duty, particularly the 3% surcharge for landlords, would create a more “buoyant and vibrant” property market.

Do you agree with these recent calls?

Most ill-affordable rental regions in England revealed

Published On: August 8, 2016 at 9:37 am

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A new investigation has found that tenants spend over a third of their disposable income on rent across many areas of England.

Analysis from the BBC shows that the typical rent of a one-bedroom property in nearly half of districts, boroughs and cities costs more than 30% of the average take-home salary in the area.

Unsurprisingly, this problem is most prominent in London and the South East.

Problems

BBC England’s data unit looked at average rents for varying property types in each local authority area, alongside the average wage in these regions. The unit looked at Office for National Statistics figures to ascertain their information.

Shelter and the Joseph Rowntree Foundation found that spending more than one-third of your disposable income on rent or a mortgage could lead to difficulties affording other basic amenities. What’s more, would-be homeowners are being more and more priced out of the market.

Looking at average rents and typical weekly wages, the investigation discovered:

  • renting a studio flat costs more than 30% of take-home pay in all bar one London borough
  • the average cost of renting a room or flat in London is £607 per month, in comparison to £424 in the South East
  • In the South East, the most expensive places to rent are Surrey, Oxfordshire and Tunbridge Wells in Kent
  • Renting a room in a house or flat would take more than 30% of disposable income in 15 of 32 London boroughs

The investigation found that the most expensive places to rent (where average rents exceed 30% of net pay) are:

  • Kensington and Chelsea
  • Westminster
  • City Of London
  • Camden
  • Islington
  • Hackney
  • Tower Hamlets
  • Hammersmith and Fulham
  • Lambeth
  • Southwark
Most ill-affordable rental regions in England revealed

Most ill-affordable rental regions in England revealed

Crowded

Dan Wilson Craw, policy manager at Generation Rent, noted, ‘across London and the South East, the only option for average earners is to squeeze themselves into ever more crowded flat shares. This might work for some, but it’s a completely unsustainable situation for anyone who wants to settle down. Unless rents start coming down, the capital and its hinterland will start losing workers and that will weaken the national economy.’[1]

Experts suggest that housing should cost no more than 30% of take home pay. The BBC investigation found that 30% of average monthly take home wage in England is £550. However, the typical rent for a one-bedroom flat is £694. This figure rises to £760 for a two-bed and £867 for three-bed.

North-South divide

Data from the report shows that 142 of 324 regions in England have average rents for a one-bedroom property over the 30% take-home wage for that area. Interestingly, only Manchester, Salford and York were Northern regions in this total.

Renting a one-bedroom property in the North falls within recommended limits, except in Salford, Trafford and Manchester. In the East and West Midlands, renting property falls within recommended limits.

Campbell Robb, chief executive of Shelter, said, ‘our chronic housing shortage means private renting is no longer a stepping stone for people starting out in life-it’s where a quarter of families have to live. And with sky high rents eating up a huge chunk of people’s monthly income, it’s sadly no surprise that at Shelter we’re hearing from growing number of families who are struggling just to cover the cost of the basics and keep a roof over their heads.’[1]

Henry Gregg, assistant director of communications and campaigns at the National Housing Federation, noted, ‘these figures provide yet more evidence of how seriously unaffordable renting is in this country. Sky-high rents mean unstable and uncertain living situations are becoming the norm.’[1]

Stretching pay-packet

Analysis shows that the median monthly take home pay in England is around £1,833, after tax and national insurance payments.

The regions with the most left over cash between take-home pay and rent were found to be:

  • Copeland
  • Derby
  • Fylde
  • Barrow-in-Furness
  • North Lincolnshire
  • Selby
  • Darlington
  • Hartlepool
  • Amber Valley
  • West Lindsey

Alan Ward, chairman of the Residential Landlords Association, observed that there is a ‘supply crisis,’ with the Government focusing on home ownership.

Meanwhile a Department of Communities and Local Government spokesman said, ‘more than 300,000 people have been helped in homeownership through government-backed schemes since 2010, while almost 900,000 more homes have been delivered since the end of 2009.’[1]

‘But we know there is more to do. That’s why we’ve doubled the housing budget, including investing £8bn in an extra 400,000 quality affordable homes to rent and buy. We’re also extending shared ownership, giving more people the chance to buy a home with a deposit of as little as £1,500,’ they added.[1]

[1] http://www.bbc.co.uk/news/uk-england-36794222

Government Should Scrap Stamp Duty, Insist Conveyancers

Published On: August 8, 2016 at 8:36 am

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The Government should scrap Stamp Duty Land Tax to create a more “buoyant and vibrant” property market, insists the Society of Licensed Conveyancers (SLC).

Government Should Scrap Stamp Duty, Insist Conveyancers

Government Should Scrap Stamp Duty, Insist Conveyancers

Since the 3% Stamp Duty surcharge for buy-to-let properties and second homes was introduced on 1st April, the number of landlords purchasing properties has dropped significantly.

Additionally, with the amount of tax relief that landlords can claim on their mortgage interest payments falling to the basic rate from April 2017, there is widespread concern in the industry that many more landlords will be deterred from investing in the buy-to-let sector, which would reduce the stock of much-needed rental homes.

The SLC believes that scrapping Stamp Duty would not only create a more stable and lively property market, but would also lead to a “marked hike in investment and building of new homes” along with creating a “much more straightforward and quicker home buying and selling process”.

The Chairman of the SLC, Simon Law, says: “Stamp Duty Land Tax is perhaps the most inaccurately named tax in existence. There is no stamp involved, it is not a duty, and it is on assessed property values rather than land. In fact, the only word that is in any way accurate is tax. In reality, SDLT is a direct property transaction tax.

“It is ironic that the Government is engaged in a review to improve the home buying process, when it has introduced legislation that actually makes the process more complicated and tortuous. It is an insult on top of this that HMRC looks to conveyancing lawyers to act as tax collectors.”

Just two weeks ago, the TaxPayers’ Alliance also urged the Government to slash Stamp Duty rates by 50% immediately, with a view to abolishing the charge altogether.

The think tank warns that tenants will end up bearing the brunt of the latest tax hikes for landlords, as the additional tax will result in a reduction of homes on the rental market, which will in turn push rents up.

When the reduction in mortgage interest tax relief comes in from next year, many landlords will be left with no alternative but to pass extra costs onto their tenants. The TaxPayers’ Alliance believes that the Government still has a chance to undertake real reform to tackle the housing shortage in the UK and stop rents from soaring, by either revising or abolishing Stamp Duty and tax relief changes.

The full story can be found here: /think-tank-calls-stamp-duty-scrapped/

Is There a Solution to the Housing Crisis?

Published On: August 6, 2016 at 8:36 am

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It’s well known that homeownership is in decline. In fact, it’s at the lowest level for three decades. But is there a solution to the housing crisis?

Claire Carponen, of the HomeOwners Alliance, has taken a look at the main problems and possible solutions to the UK’s housing crisis.

The average wage in the UK is £26,500, while the average house price is over £200,000. It doesn’t take a mathematician to work out that the odds of buying a house for a first time buyer are pretty slim.

Is There a Solution to the Housing Crisis?

Is There a Solution to the Housing Crisis?

Carponen claims that the gap between wages and house prices is one of the main barriers to homeownership.

According to a report from the Resolution Foundation, homeownership has dropped to its lowest level for three decades. After hitting a peak of 71% in 2003, the number of households that own their home has now dropped to just 64%.

But don’t be fooled into thinking this is a new trend. Four years ago, the HomeOwners Alliance published a report named The Death of Dream: The Crisis in Homeownership in the UK, which found that homeownership has been in decline for years.

Although the recession did accelerate the rate of decline, it is not a short-term blip caused by financial difficulty, but rather a long-term trend.

Carponen reports that affordability remains an issue in the south of England, but is now spreading to other parts of the country. The Resolution Foundation’s report warned that while the news focuses on the housing crisis in London, those living in Manchester are actually facing greater difficulty in getting onto the property ladder.

While the south has typically had higher house prices, the north is catching up, with both Manchester and Yorkshire experiencing steep drops in homeownership.

The CEO of the HomeOwners Alliance, Paula Higgins, recently said in an article in The Telegraph: “The decline of homeownership and the lack of affordable housing is having – and will increasingly have – profound, long-lasting and adverse economic and social consequences.”

Although housing has become so unaffordable, Carponen has found that most people still aspire to own their own homes.

Being a homeowner is much more than just owning a pile of bricks and mortar, she insists. Those that own their own home are more likely to have a better quality property, a sense of stability and permanence, and a financial safety net for old age.

And while the Government is trying to help with its first time buyer initiatives, its schemes aren’t reaching enough people, believes Carponen. Although it proudly announced in March that its Help to Buy scheme has helped 180,000 first time buyers get on the property ladder, this was over a three-year period.

The fact that not enough homes are being built has been well documented. But Carponen warns that more homes may not necessarily solve the housing crisis. In central London, thousands of new homes are currently under construction or in the pipeline, yet most will be unaffordable for the majority of people who are living and working in the capital.

Higgins insisted: “We must make sure that the homes being built are of the right quality and meet the needs of the ultimate owners – last time buyers as well as first time buyers – and not the housebuilder.”

While many young people are struggling to get a foot on the property ladder, landlords must remember to provide safe, suitable and secure homes for those forced to live in the private rental sector.

Buy-to-let mortgage activity plummets year-on-year

Published On: August 5, 2016 at 11:29 am

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The latest data released by Connells Survey and Valuation reveals that first-time buyers and remortgagors have received a post-Brexit boost.

However, the same cannot be said for buy-to-let, with a sharp fall in the number of valuations.

Rise and falls

Data from the report reveals that overall property valuations slid by 2% between June and July. This said, first-time buyer and remortgage valuations increased 12% year-on-year.

On the other hand, home mover valuations fell by 8% on a yearly basis, while buy-to-let saw a substantial drop of 41% over the same period.

John Bagshaw, corporate services director of Connells Survey & Valuations, observed, ‘judging the Brexit effect might take years-but in the meantime the first full month after the vote already looks encouraging.’[1]

‘Change has mainly been confined to the mixture of activity, rather than the overall volume of variations,’ he continued.[1]

Buy-to-let mortgage activity plummets year-on-year

Buy-to-let mortgage activity plummets year-on-year

Uncertainty

Bagshaw went on to say, ‘any clouds of uncertainty are showing their silver lining for first-time buyers, if anything dealt an advantage as some other buyers paused for thought in the weeks immediately after the result. If longer-term economic issues are on the horizon, first time buyers aren’t feeling the effects yet.’[1]

‘It won’t be until the coming months and years that real trends will start to emerge for the post-Brexit property reality. But in the meantime, people will still need properties and the housing market is proving resilient,’ Bagshaw concluded.[1]

[1] http://www.propertyindustryeye.com/buy-to-let-mortgage-activity-plummets-by-over-40-in-a-year/