Posts with tag: London

Rental Returns in PCL Negative, but still Outperforming other Assets

Published On: February 5, 2019 at 10:02 am

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Rental returns in prime central London were negative in January 2019, but property continues to outperform other asset classes, according to Knight Frank’s latest Prime London Lettings Index.

The real estate consultant found that average rental returns in prime central London during January stood at -1.4%, due to declining sales values and rising rent prices.

However, this means that investments in prime central London residential property outperformed a range of other asset classes last month, including gold, stock markets, commodities and Bitcoin.

The Prime London Lettings Index analyses the performance of rental properties in the second-hand prime central and prime outer London markets costing between £250-£5,000 per week.

Prime central London

The average rent price in prime central London rose by 1.3% in the year to January, compared to a decline of 0.6% on a quarterly basis.

Prime outer London

No change was recorded in the average rent price on an annual basis in January, while rents dropped by an average of 0.5% on the previous quarter.

However, Knight Frank reports that declining levels of supply continue to put upwards pressure on rent prices in prime London markets. The number of new listings in both prime central and prime outer London was 13% lower in 2018 than in 2017, according to Rightmove data.

Meanwhile, the total number of listings fell by a fifth over the 12 months to January.

The firm believes that a decrease in supply is due to more landlords leaving the buy-to-let sector, following tax changes. This reflects a separate study by ARLA Propertymark (the Association of Residential Letting Agents).

As a result, the average rent price increased by 1.3% in prime central London in the year to January, but prices were flat on an annual basis in prime outer London, suggesting that positive growth will return in the short-term.

Marylebone outperformed the rest of prime central London in January, with average rent price growth of 7.0% over the year. Rents in the area have been supported by declining second-hand stock, while Marylebone’s revitalisation and arrival of new build developments have attracted tenants, in particular, students from nearby universities.

Although landlords appear to be leaving the prime London markets, it is positive to see that rental returns continue to outperform other investment options on offer.

Number of London Landlords Leaving the Market Double the National Average

Published On: February 5, 2019 at 9:00 am

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The number of London landlords leaving the buy-to-let market is double the national average, according to figures from ARLA Propertymark (the Association of Residential Letting Agents).

In addition to the data contained in its recent Private Rented Sector Report, for December 2018, ARLA Propertymark questioned its member letting agents over how many of their landlords are leaving the market.

In December last year, letting agent branches in the capital each saw an average of six London landlords sell their properties and exit the buy-to-let sector.

This compares to a national average of four per member branch over the same period, and is double the number of landlords leaving the market in the North East, East Midlands, West Midlands, East of England and the South West, which all averaged three sales per ARLA Propertymark member branch.

David Cox, the Chief Executive of ARLA Propertymark, assesses the reasons for this: “Over the last few years, landlords across the country have been pushed out of the market by increasing costs and legislation, and new investors have been deterred from entering. Last month’s Private Rented Sector results show that the issue has particularly intensified in the capital, which may be the result of landlords starting to receive their first tax bill incorporating the increase in taxes from the mortgage interest relief changes, which came into force last tax year.”

He looks ahead to what effect this might have in the future: “If this trend continues, coupled with the Mayor of London, Sadiq Khan’s, recent pledge to introduce rent controls, it will only serve to make the situation worse for London’s renters, as more landlords are forced to sell up.

“As the supply of rental accommodation falls further, tenants will face more competition for properties, which will push up rents on good-quality, well-managed properties, and leave the vulnerable and low-income people, which rent controls are designed to help, in the hands of rogue and criminal operators.”

London landlords, have you sold your rental properties off recently?

Mayor of London Sets out Blueprint for Rental Housing

Published On: January 25, 2019 at 9:04 am

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Prime London Lettings Report is showing that demand is outstripping rental supply.

The Mayor of London, Sadiq Khan, has set out his blueprint for rental housing in the capital as part of his 2020 re-election bid, including a proposal for rent controls.

Khan is hoping to gain Government support to give the Greater London Authority (GLA) the power to combat increasing rent prices in the capital.

The Mayor wants to create a blueprint for an overhaul of the law for private rental housing, to allow new restrictions on rent prices to be imposed. For this to happen, he would require approval by central Government.

Khan told the Guardian: “London is in the middle of a desperate housing crisis that has been generations in the making. I am doing everything in my power to tackle it – including building record numbers of new social homes – but I have long been frustrated by my lack of powers to help private renters.”

Labour’s London Assembly Housing Spokesperson, Tom Copley AM, has welcomed the Mayor’s rent control plans.

He says: “Londoners have faced continuous and exorbitant rent increases for far too long, paying out an increasing amount of their income without seeing any improvements to conditions or their rights within the private rented sector.

“However, with this announcement, it is clear that City Hall is listening to the vast majority of Londoners, fed up of being ignored by the Government and keen to see rent controls implemented as a matter of urgency.”

Copley also expressed his satisfaction in Khan’s proposal to scrap Section 21 notices.

He adds: “Roughly, a third of Londoners will rent from a private landlord by the end of this decade. So, I hope that the Government will get behind this and other measures that will bring London’s private rented sector into line with European capitals, such as Paris and Berlin.”

Mayor of London Sets out Blueprint for Rental Housing

However, John Stewart, the Policy Manager for the Residential Landlords Association (RLA), is unimpressed by the Mayor’s blueprint for rental housing: “It is curious that the Mayor is considering introducing rent controls at a time when rents in London are falling in real terms, according to official data.

“The Labour Party in Wales has previously rejected rent controls, arguing that they reduce incentives to invest in new property when we need more and lead to a reduction in the quality of housing. The same would be the case in London.”

He explains: “All evidence around the world shows that, where forms of rent control are in place, decoupling prices from the value of properties hurts both tenants and landlords.

“In the end, what is needed is a relentless focus on boosting the supply of housing.”

The latest data from the Office for National Statistics shows that, in the year to December 2018, rent prices in London increased by an average of 0.2%, which was well below the rate of inflation.

Alexandra Morris, the Managing Director of online letting agent MakeUrMove, agrees with Stewart: “The main problem for tenants is a lack of supply in the housing market, meaning it does not meet demand, particularly when it comes to social housing. Rent controls do not deal with this problem; they merely seek to address a symptom of the problem.

“Most good landlords don’t regularly increase rents, because they want to provide a service their tenants can afford. This means most landlords experience a real terms reduction in their rental income year-on-year.”

She continues: “Rent controls would represent another burden for landlords who are already facing interest rate rises, tax relief changes and increasing regulation. This could become a further barrier to landlords covering their costs or making a small profit.

“As smaller landlords often have one eye on getting out of the market, rent controls could prove to be the final straw. This would further reduce capacity in the private rental sector.”

Morris goes on: “In addition, there will also be some landlords who wouldn’t have increased rents, but who now feel they have permission to put rents up in line with the rent control measures.

“All of these factors will lead to more rapidly increasing average rents, because the fundamental issue – that we aren’t building anywhere near enough homes in the UK – has yet to be adequately addressed.”

4 in 10 Right to Buy Homes in London Now Owned by Private Landlords

Published On: January 24, 2019 at 10:01 am

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Sheffield Landlords

More than four in ten (42%) homes in London sold by local authorities under the Right to Buy scheme are now owned by private landlords, according to a report by Tom Copley, a Labour London Assembly Member.

Tenants living in these Right to Buy homes now pay more than twice as much in rent as when local authorities owned the properties, the study reveals.

Ever since Margaret Thatcher declared her belief in a “property-owning democracy” and introduced the Right to Buy scheme in 1980, the UK changed into a country that saw homes as something to make money from, not just to live in. This was illustrated by the buy-to-let boom of recent years, which has fed the stereotype that Britons are obsessed with property.

However, very few people expected so many Right to Buy homes to be owned by private landlords, especially in the capital.

Copley stresses: “Something has gone very wrong when tens of thousands of homes built to be let at social rents for the public good are now being rented out at market rates for private profit, sometimes back to the very councils that were forced to sell them.

“The Right to Buy is failing London and should be abolished.”

The report also found that 466 individuals or companies have the lease for at least five Right to Buy homes each.

The Government’s commitment to build a replacement for every social rental home sold through Right to Buy is currently unfulfilled; Copley argues that it shouldn’t be, if they are simply going to be sold off.

He has called on the Government to exempt new build council homes from Right to Buy and create legislation that prevents Right to Buy homes being let on the private rental market.

He says: “Many councils are building new council homes again for the first time in a generation. But we risk treading water or even going backwards if we continue to lose precious existing homes to Right to Buy.

“At a time when the need for homes at social rent level far outweighs the numbers being built, it’s reckless to continue to force the discounted sale of council homes.”

40% of UK Housing Stock is Private Rental, Report Shows

Published On: January 22, 2019 at 9:00 am

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In the last quarter (Q4) of 2018, 40% of the UK housing stock was private rental, increasing to 50% in cities such as Newcastle upon Tyne and Manchester, according to a new report from TwentyCi.

The marketing consultancy’s Property & Homemover Report for Q4 reveals a steady increase in the percentage of rental properties available over the previous 12 months.

However, the study confirmed an overall property market slowdown in 2018.

Despite a 4% rise in new instructions year-on-year in Q4, there was a 1.2% decline in exchanges, with 20% of property sales falling through, which might explain why rental stock has increased.

Overall, the data suggests that the north-south divide is very much still in existence, despite higher salaries in the south. For example, the 25% of highest earners in London will be spending between 40-60% of their take-home pay on their mortgage to buy a home of equal standing with a 40% deposit.

Meanwhile, the 25% of lowest earners in the capital would not be able to afford to buy a property of equal standing, as it would mean spending between 70-131% of their take-home earnings on their mortgages.

For the lowest earners, the cost of renting a property of equal standing would be between 57-90% of their take-home pay.

However, the figures show that there are many locations in the Midlands and north of England where the 25% of lowest earners can afford to rent or buy.

In Nottingham, for instance, to rent a home of equal standing would cost 35% of take-home pay, while buying with a mortgage would eat up 37% of take-home earnings.

Colin Bradshaw, the Chief Customer Officer at TwentyCi, says: “Q1 2019 and the outcome of the Brexit process will determine the outturn for the next 12 months.”

With such a high proportion of private rental properties in the UK housing stock, demand from tenants looks set to remain high.

London House Prices to Recover, Thanks to Booming Rental Yields

Published On: January 21, 2019 at 10:00 am

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Government Publishes Key HMO and Selective Licensing Changes for Rental Properties

London house prices are set to begin a recovery this year, due to booming rental yields in some boroughs, according to analysis by Home.co.uk.

The property website expects the slump in the capital’s housing market to come to an end in 2020, thanks to improving rental yields making property more attractive to investors.

Home’s data suggests that this recovery is likely to begin in Newham, where, in December 2018, the average rental yield was 4.9%, compared to 3.6% in the same month of 2017. This 1.3% increase is the greatest rise in any London borough, apart from the City of London, where a 1.5% increase was observed.

The average rent price is Newham was £1,671 at the end of last year, which is up by 7.6% on December 2017.

The next hotspot for investors is set to be Hammersmith & Fulham, where the average rental yield rose by 1.2% over the year to December, from 3.9% to 5.1%. This promising increase comes amid growth of 6.2% in rent prices in this west London borough over the same period.

Other emerging areas for investors include Hackney and Southwark, where yields increased by 0.7% between 2017-18.

Outside of the City of London, Southwark recorded the greatest uplift in rents over 2018, at an average of 20.2%. A typical monthly rent price in this borough was £2,532 in December.

A 0.6% rise in yields was recorded in the City of Westminster and Tower Hamlets in the year to December last year.

Rents in Westminster increased by an average of 12.1% in the 12 months to December, taking the typical monthly price to £5,505, while rent prices in Tower Hamlets grew by 10.1%, to £2,350 per month.

Housing market recovery is set to take longer in many outer London boroughs, according to Home.

In Hounslow, Hillingdon, Harrow, Croydon, Waltham Forest, Richmond upon Thames, and Barking and Dagenham, rental yields remained unchanged between 2017-18.

Enfield, in north London, was the only borough to experience a decline in rental yields over the same period, of 0.2%.

The Director of Home, Doug Shephard, says: “You just can’t ignore the London property market’s remarkable ability to bounce back. History has shown us time and time again how the UK’s leading property market can burst back into growth after a period of correcting prices. The rate of rental yield rises is surely the best analytical tool to pinpoint where the first green shoots will emerge.

“Whilst it is encouraging that 32 out of 33 London boroughs are showing increased yield year-on-year, it is where they are growing most quickly that is of keen interest to investors. When they approach 6% in 16 or more boroughs, demand in the London sales market will reignite.”

Are you more inclined to invest in the London property market, now that it is due to recover?