Written By Em

Em

Em Morley

Demand for HMOs rising sharply

Published On: July 28, 2016 at 11:20 am

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An interesting new report has indicated that a growing number of landlords are looking to invest in HMO properties to improve their rental income.

A rise in investment in student property in particular has driven a 150% year-on-year increase in multi lets and HMO’s at Multi-Let UK.

In addition, Multi-Let’s sister company Portfolio-Builder.co.uk has seen a 300% yearly rise in investors joining a waiting list for the acquisition of HMO properties.

HMO yields

Buy-to-let landlords have been hit by the additional 3% stamp duty surcharge and are likely to be affected further by changes to mortgage interest tax relief scheduled for next year. For those in London and the South East, vanilla lets are simply not producing enough yields.

Daniel Hill, Managing Director of Multi-Let UK, believes that letting a single property to a number of tenants can boost total rental incomes. Hill said, ‘experienced investors are recognising the opportunity to raise the monthly rent earned from a property by housing multiple occupants, all of whom pay rent separately.’[1]

‘The tax hikes have forced landlords and investors to review their portfolios and look at ways to boost rental income and protect profits. The beauty of HMO’s is that the rent does not need to be raised because the profitability of multiple tenants is much higher than comparable, standard buy-to-let property. Usually, landlords rent a property on the basis that one person or household is responsible for paying the rent, even where there may be a family of five residing in the property,’ he continued.[1]

Demand for HMOs rising sharply

Demand for HMOs rising sharply

Complexity

Continuing, Hill noted, ‘HMOs are more complex to manage as they can require licenses and generally need more maintenance and repair. Despite this, they can be very profitable. For example, a three-bedroomed, single let property in the Midlands may typically achieve a gross rent of £650 per calendar month for a family. It is usual that, once converted, the gross rent on the same property will exceed £2,000 pcm as HMO. This represents a significant profit opportunity for buy-to-let investors who have the required expertise to generate sustainable returns in this increasingly competitive market.’[1]

‘Many standards properties can be successfully converted to HMOs with the introduction of C4 building regulations. If a high quality refurbishment is undertaken, the property can attract working professionals in the right location, who are prepared to pay more for a shared property, with a superior finish. Luxury ensuites, large TV’s premium kitchen appliances and furnishings are the type of features that help to generate a high yielding HMO, where the market conditions accommodate,’ he concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/demand-for-hmos-sees-150-year-on-year-rise.html

House Price Growth Steady in July, but Future Uncertain

Published On: July 28, 2016 at 10:51 am

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House price growth remained at a steady 0.5% in July, according to the latest House Price Index from Nationwide. However, the data suggests that the future of the property market is uncertain following the Brexit.

In the first month’s data following June’s EU referendum, Nationwide reveals that monthly house price growth stands at 0.5%, compared to 0.2% in June, while annual inflation is virtually unchanged, at 5.2% from 5.1%.

The average house price in the UK is now £205,715, up from £204,968 in June.

House Price Growth Steady in July, but Future Uncertain

House Price Growth Steady in July, but Future Uncertain

Although the figures could be used to determine the effects of the Brexit vote on the property market, the Chief Economist at Nationwide, Robert Gardner, explains that the data used in this report is from the mortgage offer stage. This means that any impact from the vote may not be fully evident yet, as there is a short lag between a buyer’s decision to purchase a property and applying for a mortgage.

In addition, the index states that a slowdown in activity was expected over the summer months, following a surge in property sales ahead of the 1st April Stamp Duty deadline for buy-to-let landlords and second homebuyers. It adds that it will be difficult to determine how much of the fall back in activity is the result of these tax changes and how much is due to the referendum.

Gardner also points out that the future of the property market looks unusually uncertain at this time.

“In the near term, increased economic uncertainty may lead to weaker demand for homes. Leading indicators are consistent with softening ahead. Household confidence fell sharply in the wake of the referendum result, especially attitudes towards making major purchases, which in the past has correlated with mortgage activity, though less closely in recent years. In the run up to the vote, the Royal Institution of Chartered Surveyors (RICS) reported declines in new buyer enquiries and expectations of weaker price growth amongst surveyors, though these trends pre-date the vote and are likely to have been impacted by the recent tax changes, as well as the referendum.”

He continues: “How the labour market evolves will be crucial in determining the demand for homes in the quarters ahead. It is encouraging that conditions were robust in the run up to the vote, with the unemployment rate falling to a ten-year low in the three months to May. The decline in long-term interest rates to new all-time lows in recent weeks should also help to keep borrowing costs low and provide some support for demand.

“Even if there is a fall back in demand as a result of economic uncertainty, the impact on house prices is not certain, as potential sellers may also hold off from placing their properties on the market. The stock of homes on estate agents’ books is already close to its lowest levels for 30 years, and surveyors have reported a decline in new instructions to sell alongside a fall in buyer enquiries. Moreover, housebuilders may react to the uncertainty by delaying construction, even though home building is already failing to keep up with the natural increase in the population.”

Gardner concludes: “The outlook for the housing market remains unusually uncertain and it may take several months for the underlying trends in the market to become evident.”

The founder and CEO of eMoov.co.uk, Russell Quirk, also comments on the new data: “The first evidence of the post-apocalyptic Brexit property market and on the face of it, not a lot to worry about, with prices up 0.5% monthly and 5.2% annually.

“Yes, this isn’t a huge rate of growth, but prices are still continuing the upward trend enjoyed since 2012. That’s not to say there won’t be any impact, as the likes of Nationwide and Halifax usually report on somewhat of a lag, due to the use of mortgage offers data, not cold hard completions.

“This said, the UK property market is one of the strongest in the world and historically, house prices are higher than July 2014 and July 2015, so it’s looking pretty healthy across the board.”

He notes: “It’s important UK home sellers take any Brexit doomsayers and their forecasts with a pinch of salt and avoid acting irrationally where the sale of their home is concerned.

“We are entering a traditionally slower time for the property market, and so this cool in price rate growth is always likely to happen during the summer months. Once September rolls around again, we predict things will start to pick up and prices will continue their sharp ascent.”

New training programme for N.I landlords

Published On: July 28, 2016 at 10:08 am

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Buy-to-let landlords in Northern Ireland can now obtain recognition for their ongoing commitment to professionalism and training. This comes as the Chartered Institute of Housing, in conjunction with the Department for Communities, launched a brand new scheme, aimed at enhancing the Private Rental Sector in the country.

Training programme

The new scheme, entitled, ‘Learning 2 Let,’ is a programme offering all registered private landlords and property professionals in Northern Ireland the chance to gain CIH’s Level 2 Award in Letting and Managing Residential Property at a cut rate. This is a result of bursary support received from the Department for Communities.

Paul Given, Minister for Communities, said, ‘I am delighted to be officially launching the Learning 2 Let programme, which the Department for Communities has committed bursary support to over the next three years.’[1]

‘Private rented accommodation is an important and growing sector in Northern Ireland and while much of the accommodation is very good, this programme aims to assist in making the private rented sector a better place to live more generally, by promoting professional standards in both the management of accommodation and delivery of quality services to tenants in Northern Ireland, he continued.[1]

New training programme for N.I landlords

New training programme for N.I landlords

Qualification

Given continued by saying, ‘Learning 2 Let offers all registered private landlords and letting agents in Northern Ireland the chance to get this fully accredited CIH qualification at a cost of just £100, so getting qualified has never been easier.’[1]

During the next three years, the programme will be available in different locations around Northern Ireland.

CIH director for Northern Ireland Nicola McCrudden, said, ‘we are delighted to be rolling out the Learning 2 Let programme right across Northern Ireland over the next three years. The funding which the Department for Communities has committed to this programme means that not only can we help private landlords and letting agents to gain a recognised industry qualification at a minimal cost to them, but we can also make private rented accommodation a better option for everyone.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/7/new-training-programme-for-landlords-in-northern-ireland

Rogue Landlord Found Renting Out Shack in Wembley

Published On: July 28, 2016 at 9:20 am

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A rogue landlord has been renting out a Slumdog Millionaire-esque shack in the garden of an over-crowded property in Wembley.

The shack, made from wood offcuts, pallets and tarpaulin, was discovered in a raid by Brent Council’s enforcement team and was featured on BBC London News earlier this week.

The shack in the property's garden

The shack in the property’s garden

The search also uncovered 31 people living in what was originally a four-bedroom house on Napier Road.

The shack, in the garden of the house, is unheated and unlit, and was being used to house the only woman living at the address.

The rogue landlord that owned the property now faces prosecution, a criminal record and an unlimited fine. The home has been converted from its original state to have nine bedrooms, each stuffed with bunk beds in order to cram in as many tenants as possible.

It is thought that the sheer number of people living in the property would earn the landlord around £80,000 a year in rent.

Councillor Harbi Farah, the council’s Lead Member for Housing, says: “We’ve seen pest-ridden slums and even beds in sheds before, but this is a new low. The shack looks like something you would expect to see in a Hollywood depiction of a shantytown, not Zone 4 of London. Criminal landlords cannot and will not get away with this.

“Our ground-breaking licensing scheme is helping us to tackle poor standards in the private rented sector and focus on the minority of unscrupulous landlords who refuse to comply with the law.

“The people who pay the heaviest price in the worst rogue landlord cases are their tenants, who pay over the odds for substandard accommodation and live in cramped, hazardous conditions. We will prosecute any landlord or agent we find treating their tenants in such a despicable way.”

Since the start of the year, Brent Council has ramped up its enforcement activity, with between two and five prosecutions each week and many more expected in the coming months.

If you are a landlord in Brent and let shared accommodation, you can apply for a license at www.brent.gov.uk/prslicensing.

Landlords, remember that you must stick to the law and provide safe, secure and suitable accommodation for tenants. Keep up to date with your responsibilities at LandlordNews.co.uk.

Build To Rent sector will shake off Brexit uncertainty

Published On: July 28, 2016 at 9:01 am

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The Build to Rent sector is likely to see out the uncertainty surrounding Brexit, according to Legal & General’s Build To Rent fund manager.

Mr Dan Betterton believes that while Brexit could lead to people putting off large personal decisions, such as purchasing a house, they will still need somewhere to live. As such, he believes the rental sector in Britain will benefit.

Renting resilience

Betterton said, ‘anecdotally, following the referendum, we are hearing demand from more people wanting to rent and not wanting to buy. When we look round the world to established build to rent markets, such as the US, the rental sector provides consistent demand to the construction industry regardless of market conditions-it is less cyclical than building for sale.’[1]

Mr Betterton also believes that there could be less competition for land between now and the end of 2016, with traditional housebuilders pausing land acquisition programmes. This will let Build To Rent investors to make their move.

‘The one downside is that a falling pound means construction materials purchased overseas become more expensive-a lot of cladding comes from abroad. But other overseas investors are seeing the exchange rate as an investment opportunity,’ he continued.[1]

Build To Rent sector will shake off Brexit uncertainty

Build To Rent sector will shake off Brexit uncertainty

Schemes

In January, Legal & General put forward plans to become a major player in the Build To Rent sector. The firm currently has three schemes underway.

The first is a scheme of 225 apartments in Salford, with residents slated to move in by May 2017.

In addition, there are two schemes at the planning stage. These are plans to build 168 apartments next to Bristol Temple Meads station in Bristol and further plans for 44 apartments at Walthamstow in north east London.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/7/build-to-rent-sector-riding-out-brexit-uncertainty-says-legal–and–general-chief

The Best Locations for First Time Buyers Revealed

Published On: July 28, 2016 at 8:41 am

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In its latest analysis of the UK property market, hybrid estate agent eMoov.co.uk has highlighted the best locations for first time buyers in England, and where they should avoid.

Using Land Registry figures, eMoov has mapped the average first time buyer house price across each English county and each of London’s boroughs, as well as calculating the average increase in value since 2012.

The study found that first time buyers are now paying an average of just over £196,000 for their home. However, in the last four years, the average price paid across England by those getting onto the property ladder has risen by £42,451.

This substantial 28% increase beats the average rate of growth for England as a whole, where the typical house price has risen by 26% over the same period, highlighting the ever-growing obstacle facing first time buyers.

But it’s worse news for those hoping to get onto the ladder in London, where the average first time buyer house price is a whopping £462,602, up by 54% on 2012.

So where should first time buyers look to buy, where should they avoid, and which location has seen the greatest increase in house prices in the past four years?

England 

Average first time buyer prices across England

Average first time buyer prices across England

At just £86,116, County Durham is home to the lowest house price for first time buyers. Although low demand has caused price drops in the area, this has benefitted those trying to buy their first home.

However, those thinking of buying in County Durham should be aware that its poor performance is notable – prices have risen by just 3% (£2,600) since 2012, the lowest rate across England and a far cry from the national average.

Naturally, the City of London and Greater London are the most expensive counties for first time buyers. However, the capital’s commuter zone also proves out of reach for many buyers. Surrey (£323,973), Hertfordshire (£305,043), Berkshire (£292,227), Oxfordshire (£286,962) and Buckinghamshire (£286,511) make up the top five most expensive counties for first time buyers outside of London, with each location seeing house price growth of between £80,000-£96,000 since 2012 – the greatest increases outside of the M25.

London 

London's first time buyer house prices

London’s first time buyer house prices

Living in London comes at a high price, even in the most affordable boroughs. First time buyers looking for a home in the capital will find that the average price across even the cheapest boroughs is still much higher than the UK average.

At £254,600, Barking and Dagenham is the most affordable borough for first time buyers. Havering comes in second place (£281,836), followed by Bexley (£285,464), Croydon (£301,001) and Sutton (£312,978). In 2012, the average first time buyer house price for these boroughs came in at under £200,000, but each location has experienced an increase of between £95,000-£118,000 in the last four years.

Unsurprisingly, Kensington and Chelsea (£1.1m) is the most expensive spot in the capital for first time buyers. Westminster (£906,882), the City of London (£711,009), Camden (£669,020) and Hammersmith & Fulham (£690,296) complete the top five.

The founder and CEO of eMoov, Russell Quirk, comments on the findings: “First time buyers are paying almost as much as second and third steppers in actual price terms, yet the percentage increase in first time buyer properties is tracking at even greater than regular house prices. It really does highlight the issue facing the nation’s next generation of aspirational homeowners.

“How the Government expects anyone to get on in life when the first hurdle they face is all but unobtainable, to begin with, is beyond me, especially in London. Over 90% of the capital’s boroughs have seen the price paid by first time buyers increase by more than £100,000 in just four or so short years.”

He urges: “We must address this issue and find a way to bring homeownership back in reach of the average homebuyers, not just in London, or the surrounding commuter counties, but to the whole of England.”

Landlords, remember that many young people in the UK are stuck in rental properties. Ensure that you offer a safe and suitable home to hopeful first time buyers, and set a reasonable rent price.