Written By Em

Em Morley

Buy-to-Let Landlords have Flooded London Property Market

Published On: April 28, 2016 at 9:10 am

Tags: buy to let investors,London,London property market,second homes,Stamp Duty

Three in five property purchases in prime London in the first quarter (Q1) of the year were made by buy-to-let landlords and second homebuyers. This has boosted the number of cash buyers in the capital, reports estate agent Marsh & Parsons.

Accounting for 36% of all property sales between January and March, buy-to-let investors were the most prolific type of buyer across prime London. This comes as no surprise, however, as many landlords rushed to complete on purchases ahead of the 1^st April 3% Stamp Duty surcharge deadline.

The number of buy-to-let purchasers in the capital is up from 26% on the previous quarter, representing a sudden reversal of the recent trend of lower investor confidence. Investor share of the market was in slow decline last year, since peaking at 37% in Q4 2014.

Those buying a second home became the second most prominent type of buyer in prime London in Q1 2016. This buyer saw an even greater surge in market share over the quarter, with second homeowners accounting for almost a quarter (23%) of all Q1 property purchases, up from just 14% in Q4 2015.

Combined, buy-to-let landlords and second homebuyers accounted for three-fifths (59%) of all sales in prime London. In prime central London, this figure was even higher, at 76%.

Second homebuyers overtook landlords as the most common type of buyer in prime central London in Q1, accounting for 41% of all property purchases. Buy-to-let investors were not far behind, however, completing on 35% of all sales.

Buy-to-Let Landlords have Flooded London Property Market

This rush has caused a much higher proportion of cash purchases in prime London. Two-fifths (40%) of sales were made by cash buyers in Q1, up from 34% in Q4 2015. In prime central parts of the capital, this rose to almost half (46%).

The CEO of Marsh & Parsons, David Brown, says: “Investors will always be the stalwarts of the prime London property market – it’s the golden goose of capital returns, and people are still clamouring for a slice of the action. But second homeowners really jumped to it this spring too, and were much more prominent in the market than we would typically expect.

“But this was by no means a typical quarter. Sales activity in the opening three months of this year has been exceptionally skewed by the additional layer of Stamp Duty for both buy-to-let and second home purchases. Naturally, the knee-jerk reaction among these groups has been to hurry through property purchases before the deadline, and make savings while they can.”

He adds: “Now that the ruckus has passed, we’ll see much more orderly transactions over the summer months, as the market rebalances towards first time buyers and other owner-occupiers, for whom it will just be business as usual.”

Over the past 12 months, buyer demand has jumped by 9% in prime London, taking the number of registered buyers for every available property to an average of 14.

However, levels of supply and demand are moving in vastly contrasting directions in the capital. In outer prime London, buyer demand has soared by almost a fifth (19%) since March last year, while in prime central London, it has dropped by 4%. Similarly, the supply of homes for sale in outer prime London has fallen by 12% annually, while supply is up by 11% in prime central locations.

Due to this chronic contrast in supply and demand, outer prime parts of London are experiencing the highest levels of competition in the capital, with 16 buyers registered per property. In hotspots such as Balham, this rises to 21.

This fierce competition has fuelled a significant surge in house prices in outer prime London, greatly surpassing the price growth recorded in other parts of the capital. In Balham, prices have risen by 7.2% over the last year, and by 3.4% in the last three months alone.

Brown concludes: “The market is brimful of buyers, and nowhere more so than the poplar addresses of outer prime London. There’s still a significant price premium to be paid for living in the central confines of our capital, and this has drawn certain geographical battle lines for the next generation, who are increasingly focusing their efforts in outer prime territories.

“For first time buyers and young professionals, these are the places where they can afford bigger properties that offer them room to grow, and for savvy investors, these are the places where prices still have room to grow too.”

Despite this latest research, there have been reports of the London property market running out of steam.

Agency cuts fees to 0.5% ahead of Brexit vote

Published On: April 27, 2016 at 2:02 pm

Author: Em Morley

Categories: Finance News

Tags: Buy-to-Let,estate agents,EU referendum,landlords

A top City investment consultancy has said that one leading private agency chain has cut fees to 0.5%, ahead of the upcoming EU referendum.

Despite not revealing the name of the agency, Jeffries said that it had slashed fees in order to build up instructions before the vote in June.

Bullish

Jefferies made the reference to the unknown agency following the bullish trading statement released by Countrywide yesterday.

Countrywide stated that house sales were up by 30% during the first quarter of this year. This was not unique however, with many agents reporting similar rises, as investors rushed to beat the additional stamp duty deadline on April 1^st.

In both Jeffries note to investment clients and in the Countrywide statement, concerns are raised about the economic impact of the Brexit vote.

Agency cuts fees to 0.5% ahead of Brexit vote

Cuts

Anthony Codling, Jefferies’ analyst Anthony Codling noted, ‘price competition remains strong and we are aware that one of the private majors has been cutting fee rates to around 0.5% in order to firm up a pipeline ahead of the EU referendum.’[1]

Noting that Countrywides’ trading statement yesterday was shorter than in previous months, Mr Codling also said that this was a hint of falls in trade.

Codling observed, ‘we would not be surprised to learn that one of the reasons Countrywide has trimmed it’s trading update disclosures is to reduce the risks of analysts extrapolating Q1 performance across the full year. We did find the trading update somewhat brief and somewhat short on numbers, although Countrywide disclosures are in-line with their peers.’[1]

[1] https://www.estateagenttoday.co.uk/breaking-news/2016/4/major-agency-has-cut-fees-to-0-5-in-case-market-slumps–claim

Put rogue tenant list in Housing and Planning Bill-AIIC

Published On: April 27, 2016 at 11:49 am

Author: Em Morley

Categories: Landlord News

Tags: buy-to-let landlords,Housing and Planning Bill,landlords,rogue landlords,rogue tenants

The Association of Independent Inventory Clerks (AIIC) has called for amendments to the Housing and Planning Bill, to address the issue of problem tenants.

With the ‘Bill already including features to tackle rogue landlords and letting agents, the AIIC is now calling for measures aimed at rooting out rogue tenants to be included.

Alterations

Proposals already existing in the Bill include those to both ban and fine criminal landlords and letting agents. What’s more, there are also proposals to introduce rent repayments orders and create a database of blacklisted agents and landlords.

It has been mooted than this blacklist will be created and maintained by local authorities, with them also having to apply for offenders to be included on this register.

Currently at the report stage, the Bill will have to pass through a third reading and consideration of amendments before finally reaching Royal Assent and becoming law.

Put rogue tenant list in Housing and Planning Bill-AIIC

Work to be done

Despite welcoming the measures aimed at rooting out so called rogue landlords, the AIIC said there is much more to be done to underline the problem of rogue tenants.

Patricia Barber, chair of the AIIC, stated, ‘we’re well aware that there are criminal landlords and letting agents out there and blacklisting them and banning them from letting property is a necessary step. That said, the measures in the Housing Bill are very one-sided and suggest that it is only landlords and agents that cause problems during tenancies. We know from experience that this is not true and I personally have come across many horror stories in my time where tenants have trashed a landlord’s property or refused to pay rent for long periods of time.’[1]

‘It would only be fair if troublesome tenants who repeatedly offend could be blacklisted in the same way as landlords or agents. The threat of being blacklisted or a fine would hopefully discourage a minority of tenants from misbehaving and help to improve the relationship between landlords, agents and tenants.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/4/housing-bill-should-also-include-rogue-tenants-list-says-aiic

Which London Mayor Candidate is Best for the Housing Market?

Published On: April 27, 2016 at 10:24 am

Author: Em Morley

Categories: Property News

Tags: London,London property market,Mayor of London

As the race to become the next Mayor of London heats up, online estate agent eMoov has released its study into what each candidate will mean for the housing market.

On 5^th May, Londoners will vote for their next mayor. With the current mayor, Boris Johnson, choosing not to run, the race is down to Labour candidate Sadiq Khan and Conservative Zac Goldsmith, the two front runners.

eMoov has analysed the two parties’ housing pledges:

Conservative

To build 50,000 new homes by 2020.
To give Londoners that have lived and worked in the capital for over three years the first chance to buy new properties built on Transport for London-owned land.

Labour

To introduce the Homes for London scheme, working with City Hall, local councils and property developers to address the housing shortage.
To help existing London homeowners by improving energy efficiency, helping with service charges and the renewal of existing leases.

At present, London is experiencing a chronic shortage of housing supply, causing the huge amount of aspiring homeowners hoping to get on the property ladder to be forced into the private rental sector.

Which London Mayor Candidate is Best for the Housing Market?

eMoov has found that historically, a Labour mayor has led an almost continuously increasing level of property construction in the capital. Between 2001 and 2008, there was a rise in housing stock of 186,000 homes under a Labour mayor.

However, under a Conservative mayor between 2008 and 2014, the level of housing stock dropped significantly, with just 152,000 new properties being built.

With London house prices continuing to spiral beyond the reach of hopeful buyers, a reduction in demand by way of a growth in supply will go some way to cool the London housing crisis, helping those desperate to buy.

For those already on the property ladder, the value of their property will be their primary concern ahead of the election.

During Labour’s Ken Livingstone’s eight years as mayor, there were four occasions between 2002-05 when house prices in London rose at a lower rate than the rest of the UK. Up until 2008, when Johnson was elected, London house prices grew by 89%. However, the UK average was a huge 113% – bucking the trend of the capital driving the national housing market.

Under the Conservative mayor, however, there were six years in which London surpassed the rest of the UK. With Johnson as mayor, prices rose by 41% between 2008-15, compared to 30% nationally. Values in half of UK towns and cities are said to still be below the peaks seen before the financial crash.

eMoov concludes that under Labour, house prices increased at a faster rate, but failed to outperform the rest of the UK, while the Conservatives oversaw a slower pace of growth, but the London market exceeded the rest of the UK.

The CEO of eMoov, Russell Quirk, comments: “It’s always hard to pick a side when we, the UK public, are subjected to the onslaught of smoke and mirrors deployed in the run up to an election. We’ve seen the monumental failure of the Help to Buy scheme over recent years, which was supposed to be the answer to our first time buyer woes, so it’s always hard to decide which candidate to trust.

“However, historic data doesn’t lie and so this research shows it’s pretty clear cut on who to vote for, depending on whether you’re an aspiring or existing London homeowner.”

He explains: “Yes, Boris and the Conservatives have generally seen London property values increase at a higher rate than the UK, but one might argue that having inherited a pretty raw deal in 2008 after the market crashed, the only way for things to go were up. As the capital and crown in the UK market, London was always going to see a healthier rate of growth than the rest of the UK, as the market found its feet again.

“But on the face of it, if you do own a London property, a Conservative mayor is going to be better for you in terms of your property price, so a vote for Goldsmith is probably the way to go.

“However, the capital is in the tight clutches of a housing deficit at present. I’ve highlighted time and time again that the lack of London supply is fuelling a dangerously artificial bubble in the capital. It’s only a matter of time before it pops again. Therefore, Labour’s superior record where building is concerned will not only help stabilise the market but will also help cool prices and give aspirational homeowners in the capital a better chance of getting on the first rung.”

Who do you think should win the race?

Greatest Monthly Fall in Scottish Rents on Record

Published On: April 27, 2016 at 9:13 am

Author: Em Morley

Categories: Property News

Tags: average rent,rent arrears,rent prices,Scotland,tenants

Rent price data for March shows the greatest monthly fall in Scottish rents on record, according to the latest Scotland Buy-to-Let Index from Your Move.

The average private rent in Scotland dropped by 0.7% in the month to March, the sharpest monthly fall since the index began. It is also the first monthly decline in rents recorded since September 2015, when average rents decreased by 0.3%.

The £4 drop in rents between February and March takes the average rent in Scotland to £544 per month – Scottish rents have not been this low since May 2015.

The monthly drop also takes annual rent price growth down to 1.1% – a significant downturn from the 2.1% inflation seen in February. The annual price change is now at a 13-month low, equal to the 1.1% increase recorded in February 2015.

The Lettings Director at Your Move Scotland, Brian Moran, comments on the figures: “Those who signed a new tenancy in March will be feeling confident they snapped up a competitive deal, and will be enjoying a little extra cash in their pockets at the end of every month. It’s been a rare break for cover and it’s unlikely to hang about for long, as the Scottish rental market begins to gear up towards the annual autumnal peak.

Greatest Monthly Fall in Scottish Rents on Record

“Tenants in big cities like Edinburgh haven’t enjoyed the same reprieve at all, with the ratio of supply and demand still stacked greatly against them. Investment from landlords needs to follow the tune of the jobs market and economic activity.”

He continues: “Affordability is the main warning light to watch out for on the dashboard, and with the frequency of arrears on the rise once again, this reminds us of the considerable obstacles ahead. With landlords now facing an additional 3% Stamp Duty on property purchases, and the Private Tenancies Bill passed through Scottish Parliament, we’re entering unchartered territory. What we do know is that if landlords hit the brakes and cause a roadblock of supply in the private rented sector, tenants will be the casualties paying higher rents in the longer term.”

Rents in March were down in the majority of Scotland, with just Edinburgh and the Lothians recording a monthly rent rise. Rent prices in the region grew by 0.2% (or £1) to hit a new peak of £645 per month.

The greatest monthly decline was seen in Glasgow and Clyde, where rent prices dropped by 1.5% between February and March. This represents an £8 fall, taking the average rent to £544 a month.

The Highlands and Islands experienced a similarly sharp 1.4% fall, with rents in the East down by 0.8% on a monthly basis. The South of Scotland saw a more modest 0.2% downturn in rents over the same period.

Despite widespread monthly decreases in rents in March, the proportion of rent arrears in Scotland has risen for the first time since October 2015.

The level of rent arrears increased to 11.3% of all rent due in March – up from a seven-month low of 10.9% in February. On an annual basis, the proportion of late rent is up from just 8.6% in March 2015.

Moran says: “March has seen a very unwelcome about-turn in the direction of tenant finances. Up until now, Scottish tenants have been making good ground over the spring months, and paying down levels of late rent – but there’s still a mountain to climb for many households.

“External factors and the wider economic climate obviously have a vital impact on tenants’ bottom line and the delicate balancing act between monthly income and outgoings, but landlords on the ground can help keep a lid on affordability pressures too. Good management of buy-to-let properties and regular communication between landlords and their tenants is crucial to signpost any early concerns and avoid the likelihood of rental arrears.”

He adds: “Tenants need properties they can afford, and landlords need tenants with a healthy grip on their household expenses, so it’s about striking a fair deal for both.”¹

¹https://www.landlordtoday.co.uk/breaking-news/2016/4/biggest-monthly-drop-in-scottish-rents-on-record

Good Landlords Will be Protected by Changes to Right to Rent Scheme

Published On: April 27, 2016 at 8:31 am

Author: Em Morley

Categories: Landlord News

Tags: immigration checks,landlord law,landlord responsibilities,Right to Rent,tenants

Good Landlords Will be Protected by Changes to Right to Rent Scheme

Members of Parliament have confirmed that good landlords will be protected by changes made to the Right to Rent scheme.

Measures to provide greater protection for responsible landlords looking to evict illegal immigrant tenants have now been approved, reports the Residential Landlords Association (RLA).

The changes to the Immigration Bill, proposed by the Government and approved on Monday, will defend those landlords that take reasonable steps in an appropriate timeframe to terminate tenancies of those living in the UK illegally.

Previous under Right to Rent law, landlords or letting agents would face immediate criminal sanctions upon discovery that they had failed to ensure their tenants had the right to rent property in this country, before having the opportunity to evict them.

The RLA campaigned for the change, which was approved by the Government last month.

Additionally, it is believed that further changes will be made to the Right to Rent scheme, after confusion was raised in the House of Lords. We will continue to keep you updated on all changes to landlord law.

The Policy Director at the RLA, David Smith, says: “The RLA warmly welcomes the Government’s pragmatic changes to its Right to Rent scheme that will provide protection for good landlords from the unintended consequences of the policy. It is particularly helpful that the changes were approved by MPs without a vote; a sign of cross party support for the measure.”

Landlords and letting agents are obliged to conduct immigration checks on all prospective tenants. It is vital that you understand your legal duties and comply with the Right to Rent scheme. For more advice, we have tips on how to carry out the checks: /remember-comply-right-rent-rules/