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Em Morley

Young Tenants Spend Half of Their Wages on Rent

Published On: June 15, 2016 at 11:20 am

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Young tenants in Britain are forced to spend around half of their wages on rent, a new report has claimed.

Young Tenants Spend Half of Their Wages on Rent

Young Tenants Spend Half of Their Wages on Rent

A single working tenant aged between 22-29 and renting a one-bedroom property spends an average of 48% of their taxed income on keeping a roof over their head, according to the study by Countrywide.

The property firm found that the amount of income that tenants spend on rent is up by 3% on 2007. However, in London, young tenants typically pay 57% of their earnings on rent, up by 16% over the same period.

The average cost of renting a one-bedroom home in Britain is £749 per month, while in the capital it soars to £1,133.

A spokesperson for Countrywide comments: “In London, rents have risen much faster than wages, stretching affordability. Many have adapted by moving to cheaper areas or sharing.”

However, away from the capital, the proportion of income taken up by rent is lower than it was in 2007 in many parts of the country, found Countrywide.

In the North East, the cost of a one-bedroom property accounts for 35% of a young tenant’s post-tax income, down from 42% in 2007.

Young renters in Scotland, Yorkshire and the Humber, the East Midlands, South East and South West have also experienced falls in the proportion of income being eaten up by rent.

Positively, new data also shows that the amount of tenants in serious rent arrears has dropped, as employment levels remain high. However, the private rental sector continues to grow, meaning that supply levels and the Government’s crackdown on buy-to-let could push rent prices higher.

Tenants may be facing some good news, however, as the proposed Renters’ Rights Bill was unopposed in the House of Lords on Friday. The bill plans to abolish letting agent fees charged to tenants, making the renting process cheaper.

Third of landlords undecided on EU referendum vote

Published On: June 15, 2016 at 10:58 am

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Categories: Landlord News

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New research from the National Landlords Association has revealed that 30% of buy-to-let landlords are still undecided on how to vote in next week’s EU referendum.

Findings from the report show that landlords are evenly split on how to vote, with 35% intending to vote leave and 35% voting remain.

EU membership

In addition, residential landlords were found to be divided on whether of not EU membership would be beneficial to their future business ventures. 53% said that membership would assist them, while 47% said it would be detrimental.

By region, London has more landlords looking to vote remain in the EU than anywhere else in the UK. In comparison, more landlords in the North East wish to leave than any other British region, with 44% intending to back the leave campaign.

Third of landlords undecided on EU referendum vote

Third of landlords undecided on EU referendum vote

Divisions

Richard Lambert, Chief Executive Officer at the National Landlords Association, observed, ‘landlords, much like the rest of the British public are divided on how they will vote in the EU referendum which means the decision looks to go down to the wire.’[1]

‘The Remain and Leave campaigns have both had difficulty persuading the public on the benefits or hazards of a Brexit vote and they have struggled to provide any clear analysis about the impact exiting the EU would have on the buy-to-let market,’ Lambert continued.[1]

Concluding, Mr Lambert feels, ‘as a result, landlords appear more likely to vote in this referendum based on their attitudes to issues such as national security, trade and immigration, rather than the effect on the UK property market or their business.’[1]

[1] http://www.propertyreporter.co.uk/landlords/third-of-landlords-undecided-on-brexit-vote.html

Bill to Abolish Letting Agent Fees Unopposed in House of Lords

Published On: June 15, 2016 at 10:10 am

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Categories: Property News,Tenant Fees Ban

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A new bill that seeks to abolish letting agent fees charged to tenants had an unopposed second reading in the House of Lords on Friday.

The Renters’ Rights Bill, supported by Labour and introduced by a Liberal Democrat peer, would amend the Landlord and Tenant Act 1985 by stopping letting agents charging tenants or prospective tenants the following fees for: registration, admin, inventories, reference checks, renewals or exits.

The new bill also proposes an amendment to the new Housing and Planning Act 2016, by opening up the register of rogue landlords and letting agents to tenants and prospective renters.

The register, which is not yet in operation, is currently only intended to be available to local authorities and the Government.

The new bill also proposes that any landlord or agent on the rogue database would not be granted a House in Multiple Occupation (HMO) license.

The private member’s bill would apply in England only and has been introduced by Baroness Grender, a former director of communications for housing charity Shelter. Labour has offered its full support.

Bill to Abolish Letting Agent Fees Unopposed in House of Lords

Bill to Abolish Letting Agent Fees Unopposed in House of Lords

While the bill would normally be considered unlikely to become law without Government backing, a petition to the Housing Minister, Brandon Lewis, to ban letting agent fees, has now achieved over 250,000 signatures.

Grender claims that private tenants are being failed by a housing market that is stacked against them.

She said: “Unlike purchasers of high street goods or services who are generally covered by well-developed consumer rights, consumers of private sector housing lack the protections they need. They are often at the mercy of landlords and lettings agents, and have little recourse to take action in the case of poor quality or rip-off housing.

“A case in point is letting fees that agents charge tenants: Registration fees, credit check fees, reference check fees, renewal fees, name change fees, admin fees, exit fees… the list goes on. Almost all of them are arbitrary and disproportionate to the service provided.”

However, she added: “Yet tenants are powerless to do much about it, in a market where demand for homes relentlessly grows and options are limited. It is time for Government intervention to address this imbalance of power and build up the consumer rights of renters.

“Letting agents should not be able to get away with double charging fees – imposing them on both tenants and landlords – when in fact it is only the landlord that is the client, and therefore the one that should be paying.

“Tenants are charged fees because agents know they can get away with it. These fees are already banned in many countries, including Scotland and the US, because the pro-consumer case for doing so is clear.”1

The Government spokesperson, Viscount Younger of Leckie, responded: “The Government is clear that the vast majority of letting agents do provide a good service to tenants and landlords, and that most fees charged do reflect genuine business costs.

“I note [Lady Grender] did acknowledge this briefly in her comments. I do not believe a blanket ban on letting agent fees is the answer to tackling the small minority of rogue letting agents who exploit their customers by imposing inflated fees for their service.”

He pointed out existing laws prohibiting landlords and letting agents from “unfair terms or fees”1, adding that letting agents must publicise their fees.

1 http://www.theyworkforyou.com/lords/?id=2016-06-10a.972.0

Serious rent arrears down by 4% in Q1 of 2016

Published On: June 15, 2016 at 9:48 am

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Encouraging new data has revealed that 3,100 less households were in serious rent arrears in the first quarter of this year, in comparison to the final quarter of 2015.

This represented a fall of 4%, believed to be a direct result of the improving employment market.

Falling arrears

In absolute terms, 86,200 tenants in Britain are in excess of two months behind in paying their rent. This is in comparison to 89,300 in quarter four of last year.

Since 2008, there have been an average of 92,600 tenants in serious rental arrears during the first quarter of each year. This underlines the positivity of the most recent figures.

Adrian Gill, director of estate agents Your Move and Reeds Rains, noted, ‘fewer tenants in serious arrears reflect the health of the jobs market. With an extra 44,000 jobs created in the first quarter of this year, thousands of tenants have been able to get their finances back on track and pay down late rent. Serious rent arrears peaked in Q3 2012 when 124,800 households owed more than two months’ rent-and when unemployment in the UK stood at 7.9%. Since then a boom in employment has been responsible for lifting many of the most precarious tenant households out of serious rent arrears and onto a more sustainable course. The direction of travel looks very positive.’[1]

‘A reduced risk of serious rent arrears will be welcome news for existing landlords, facing so many artificial challenges posed by government meddling. But no-one should be complacent – managing a property is never simple.  Some landlords are being held back from buying property by the Stamp Duty Surcharge. If this stems the flow of new homes into the rental market, then shortages in some areas could push up rents – hitting affordability,’ Gill continued.[1]

Serious rent arrears down by 4% in Q1 of 2016

Serious rent arrears down by 4% in Q1 of 2016

 

Drops

The total number of tenants more than two months behind with their rent has dropped by 16% since just before the financial crash in Q2 of 2008. Then, the total number of tenants struggling with serious arrears stood at 102,900.

This is particularly encouraging when looking at how the sector has grown during the same period. In 2008, there were 3.6m households living in the private rental sector in Britain. After just 8 years, this has grown by 62% to hit 5.8m households.

Gill observed, ‘the massive growth in the number of homes available to rent – driven by both deliberate landlords and accidental landlords coming into the market – has ensured that rents have not outpaced the ability of tenants to pay. The affordability of renting and the number of tenants falling behind on rent also needs to be seen within the context of the rapid expansion of the private rented sector and the addition of millions of extra houses and flats to rent.’[1]

Eradicating evictions

More positivity came with the news that the number of eviction orders has dropped considerably. In Q1 2016, there were 26,230 court orders made for eviction as a result of possession claims by landlords, down from 26,964 in the final three months of 2015.

Concluding, Gill said, ‘the evidence is clear – landlords’ finances are the healthiest they’ve been for nearly a decade. Back in 2009, with a distressed purchase market, many owners didn’t want to sell their properties if they inherited or no longer wished to live in their old home – which led to more accidental, DIY landlords. As a result of this, and with more tenants in financial difficulties, buy-to-let mortgage arrears were far higher.’[1]

‘Since then the private rented sector has changed. Now, with the rise of deliberate landlords with a professional attitude to their investment, the average property investor is more likely to have a business plan and a more professional approach to letting their property.’[1]

[1] http://www.propertyreporter.co.uk/landlords/serious-tenant-arrears-fall-4.html

EU Referendum Has Little Effect on House Price Growth

Published On: June 15, 2016 at 8:39 am

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Categories: Property News

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The forthcoming EU referendum is having little effect on house price growth across the UK, according to the Resolution Foundation.

In response to the Government’s latest house price data, the organisation reports that there is little sign of a slowdown in growth, despite uncertainty surrounding the EU referendum and concerns over whether a housing bubble could burst.

The house price index found that the average UK house price rose by 8.2% in the year to April. The Resolution Foundation believes that the rush to purchase buy-to-let properties ahead of the introduction of the 3% Stamp Duty surcharge on 1st April has only marginally reduced the rate of growth, down from 8.5% in March.

EU Referendum Has Little Effect on House Price Growth

EU Referendum Has Little Effect on House Price Growth

Similarly, signs of property market confidence declining, particularly in London, have not yet fed through into house prices.

The Resolution Foundation has found that across the UK, house prices have increased by more than 2.5 times the rate of average weekly earnings growth since April 2011. The average house price rose by 24% over the last five years, while weekly earnings have increased by just 9% in the same period.

London continues to dominate when it comes to the difference between incomes and house prices, with property values rising by 15% in the last year alone. However, the body warns that the contrast between incomes and house prices is not unique to the capital, with other parts of the country, such as the East of England, also under stress.

The Senior Policy Analyst at the Resolution Foundation, Lindsay Judge, says: “Despite the turbulent political background, house prices continue to rise sharply. Hopes that the house price hare would slow down and allow tortoise-paced income growth to catch up are not showing up in today’s data.

“The wedge between house prices and incomes continues to grow with real implications for living standards for many households. Large parts of the UK remain unaffordable for below-average earners hoping to buy.”

The Director of e.surv chartered surveyors, Richard Sexton, also comments on the data: “There has been a noticeable stumble ahead of the EU referendum, but the housing market remains in great shape. UK house prices have certainly come a long way over the last couple of years, and in this era of flexibility and adaptability, there’s little sign of a sustained let-up. This growth has not just centred around London; it’s spilling out across the nation, with the East and South East looking to challenge the capital’s housing prowess.

“Despite the short-term uncertainty of next week’s EU referendum, regional property markets are receiving a pre-summer swell, giving homebuyers more choices. And whilst a lift in prices doesn’t spell completely bad news – marking real demand and strong local housing momentum – it does mean more work is needed for first time buyers. As deposits climb alongside asking prices, the housing market demands a new flexibility from lenders in assessing affordability and creditworthiness.”

Sexton adds: “But whilst this is already happening, driving growth out to the regions around London, many prospective buyers are looking further afield. The North East is a land of opportunity, with lower growth and prices just over half of the UK average. Small-deposit lending totalled 18.4% across the UK in May, so for those prepared to take a leap of faith and venture out of the capital, lenders are keen to help.”

Buy-to-Let Landlords to Pay Extra £10,000 in Mortgage Crackdown

Published On: June 14, 2016 at 11:21 am

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Buy-to-let landlords could be forced to pay an extra £10,000 to get a mortgage after a crackdown on dangerous debts by UK lenders.

The new clampdown on dangerous debts by lenders is driving up mortgage costs for investors to around £10,000. It is expected that banks and building societies will start implementing new hefty charges from September this year.

Buy-to-Let Landlords to Pay Extra £10,000 in Mortgage Crackdown

Buy-to-Let Landlords to Pay Extra £10,000 in Mortgage Crackdown

The Prudential Regulation Authority, the financial services watchdog, is concerned that some landlords are overstretching themselves and will face difficulties when interest rates finally rise. As a result, it is forcing mortgage lenders to introduce stricter tests to determine whether an investor can afford the loan.

At present, buy-to-let landlords must prove that they will earn enough from rental income to cover their mortgage repayments. However, the new plan will demand proof that they would still be covered if interest rates rose by at least 2%.

Under the crackdown, banks and building societies will require evidence of a yield of at least 5.2% to qualify for a 25% deposit loan. This would mean that landlords must earn £7,800 per year from rent on a £150,000 property before paying the mortgage.

To pass the tests, investors will have to either raise rents to ensure they would be covered if interest rates soared, or reduce borrowing.

Armistead Property’s Peter Armistead believes that savvy landlords can absorb the new charges by buying cheaper properties with higher yields.

He explains: “Clearly the investors most at risk are those with smaller deposits who buy property in parts of the UK where rents are low compared with house prices. This is a particular problem in places such as London and the South East, where the average annual returns between 2010-15 were just 4.86% in outer London and 4.71% in the city, according to LendInvest. House prices in London are about five times what they are in parts of the North West, but salaries are only 30% higher.

“Manchester and Liverpool deliver some of the best rental yields, with Manchester recording average annual rental yields of 6.02% over five years, followed by Liverpool, with 5.15% yields. An average residential property in Manchester is just £155,000, while a flat in a good area costs as little as £120,000. A property in Manchester can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper.”

He adds: “Landlords will find the best returns in urban areas with a concentration of students and young professionals. If investors can purchase cheaper properties with better yields, they will have the opportunity to protect and boost their profits in the longer term.”