Posts with tag: rents

London rents at least affordable level for ten years

Published On: July 5, 2017 at 8:51 am

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New research released by property market analysts Hometrack has shown that increased demand and growing unaffordability has pushed the cost of renting in London to a ten-year high.

Since 2007, typical rental values in the capital have risen by 45%, which has married with heightened demand due to strong growth in employment. In addition, more migration from the rest of Britain and overseas and constraints in the accessibility of mortgages for first-time buyers have also led to this growth.

Rental Growth

In contrast to figures seen in London and other regions of southern England, rental growth elsewhere has been largely constant over the last decade. Yorkshire and Humberside have seen average rents remain stagnant, while rents in the North West and North East have slipped by 7% and 4% respectively.

The reason for this difference is that job growth following the financial crisis-when rents slipped between 5% and 12%- has been 2/3 times faster in London.

Rental growth in the capital has averaged at 4.5% per year since 2010 and has majorly outpaced earnings, which in turn has led to the current levels of unaffordability. However, rental growth at national levels, excluding London has been averaging at just 2.7% per year.

What’s more, southern parts of England and the Midlands have seen rental growth start to outpace earnings from 2013, as a result of improved economic conditions. In fact, these regions have seen an overall 20% increase in average rental values since 2007.

Trends

Richard Donnell, Insight Director at Hometrack, observed: ‘This new report aims to provide an important long run context for the current trends in rents and rental affordability and what this means as we look forward. Rents fell by between 5% and 12% in 2008/09 and this explains why rents in parts of the country outside of London, where rental growth has been subdued, are only just back to where they were a decade ago.’[1]

‘London has the largest and most liquid rental market. Demand in the capital has been buoyed by employment levels rising 2-3x times faster than other regions, as well as the much higher deposit and household income required to buy making the transition from renting harder than in the past,’ he added.[1]

view of the city life with the big ben as background

London rents at least affordable level for ten years

Continuing, Mr Donnell said: ‘Another important factor is the growth in sharing amongst renters which means in many parts of London there are multiple incomes combining to pay the rent. This is a particularly strong trend in in inner London where a high percentage of rented homes are fully occupied.’

‘Outside London the drivers of rental demand have been more muted and the resulting impact on rents is less pronounced. However, increased economic activity is feeding into demand and resulting in increased levels of rental growth, at a rate more in line with earnings growth. Our analysis shows that over the long run tenants spend between 32% and 37% of earnings on rent at a national level.’[1]

Concluding, Donnell noted: ‘Ultimately rental levels need to reflect affordability and the buying power of tenants. In London affordability is stretched and demand is weakening on concerns over the outlook, which we expect will lead to average rents in the capital falling by 1-2% over 2017. Conversely, rental growth outside of London is set to continue to track earnings growth with rents rising at 2-3% per annum. The greatest upside for rents is in the midlands and northern regions where rental affordability is the best it has been for a decade.’[1]

 

[1] http://www.propertyreporter.co.uk/landlords/london-rents-at-least-affordable-levels-for-ten-years.html

 

One in seven tenants spend half of their income on rent

Published On: July 4, 2017 at 10:06 am

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Nearly one in seven private renters are spending more than half of their total income on rents, according to new research. This comes in contrast to just 2% of homeowners spending the same on their mortgage.

These figures have been released by the Local Government Association (LGA) and suggest that renters are facing difficulty in not just finding an affordable home to live in, but to save up for a deposit.

Indeed, the average deposit is now 71% of a first-time buyer’s annual income.

New Wave

The LGA believe that the Government should start a new wave of rental properties that reflect what families can afford, which seemingly is no more than one-third of total income.

In addition, the research suggests:

  • 43% of private sector tenants spend more than 30% of their income on rent
  • 37% renting from a local authority also spend over this amount on rents
  • Rents currently average at £852 across the country

While affordable and social rents are lower typically than private rents, the high number of social tenants spending in excess of 30% of their income on rent shows low total household incomes.

One in seven tenants spend half of their income on rent

One in seven tenants spend half of their income on rent

Deposits

Greater house prices and rents are making it more difficult for UK youngsters to save up for a deposit for their own property.

In the South East, deposits are 85% of the average household income, but in the North West, this figure relaxes to 55%. London however is seeing the highest price, with 133% of a household’s average yearly income.

The LGA has called for councils to be given powers and access to funding to resume their historic role as a key builder of affordable homes- including those for social and affordable rents.

 

Large decline in homes to rent over the last six years

Published On: June 22, 2017 at 8:51 am

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New research has revealed that there has been a sharp decline in the number of homes listed for rent over the last six years.

Figures from Home.co.uk reveal that there has been an 11.6% decline in available rental stock since July 2011. This was led by a 34.7% fall in properties to rent in Scotland.

Falls

In Wales, there have been falls of 28.1% while the South West of England also saw a substantial decline of 26.5%.

Overall, seven out of eleven regions in the UK saw a fall more than the UK wide average. More prominent falls included a 24.6% slip in the East Midlands, 20.8% in the South East and 16.7% in the West Midlands.

Only one region, the North East of England, experienced a rise in supply, with a substantial increase in rental stock of 33.4%. This is owed in part to the number of accidental landlords, with many would-be sellers looking to let out there properties as opposed to selling at a loss.

Demand

While supply in the PRS has fallen, demand from tenants continues to rise, with many would-be buyers mean priced out of the market.

A number of tax changes, such as the phasing out of mortgage interest tax relief and Stamp Duty rises, have led many landlords to leave the market – further exacerbating the imbalance.

In turn, this is moving to drive up rents across many regions of the UK.

Large decline in homes to rent over the last six years

Large decline in homes to rent over the last six years

Wales has seen rents rise by 113% during the last year, while Yorkshire has seen increases of 8.4% over the same period. Scotland too has seen rises, of 5.4% on average.

The South West saw rents rise by 5.7%, while there was a less profound rise in the South East, of 0.9%.

London however has actually seen rents fall by 5.3% in the last twelve months, largely as a result of the rush in investment seen before the Stamp Duty changes came into force in April 2016.

Backfired

Director of Home.co.uk, Doug Shephard, observed: ‘It is ironic that the government’s justification for tax changes in the PRS was to ‘level the playing field’ for wannabe homeowners. The result of this barrage of red tape and taxation, at both local and national government levels, has meant that the supply of rental properties has fallen behind demand in most regions thereby driving up rents. Of course, it’s not the first time that government tinkering and tax grabs have backfired but the upshot for Generation Rent is appalling.’[1]

‘The ‘elephant in the room’ for the government is that record low mortgage interest rates have driven unprecedented investment in the PRS over recent years. Simply put, those already with significant home equity have been able to come up with deposits for properties intended to let whilst aspiring homeowners are as cash-strapped as ever as they pay out huge sums in rent. However, ultra-low interest rates and the associated pain for renters look set to persist for the foreseeable future,’ he added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/6/sharp-decline-in-homes-to-let

 

Retiree renters paying much more than one decade ago

Published On: June 12, 2017 at 9:39 am

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A new report from Countrywide has revealed that retiree tenants are paying a lot more in rent than they were ten years ago.

During the last twelve months, retiree renters paid a total of £3.7bn in rent – a rise of 216% on the £1.2bn paid in 2007.

This rise means that £1 in every £14 paid by tenants in the UK comes from a pensioner. In fact, the total amount of rent paid by private tenants in Britain during the last year hit £50.6bn.

Rent Rises

In 2017, pensioners paid an average of £810 per month – a rise of 0.3% on last year and 19% since 2007. However, the typical retiree actually paid 12% less than the average tenant, as they were likely to rent a smaller property.

75% of retiree tenants rent a one or two-bedroom home, in comparison to 66% of all tenants.

Pensioners now make up 8% of the total number of tenants, in comparison to 5.2% in 2007. The greatest proportion of retiree tenants can be found in Wales, where almost 1 in 5 tenants are of pensioner age. The South West and North East have the next greatest proportion.

However, London has the fewest, with just 3.5% of retiree tenants.

In Britain as a whole, 53% of tenant pensioners live alone, while 81% are over 65.

Retiree renters paying much more than one decade ago

Retiree renters paying much more than one decade ago

Slow Growth

During May, the cost of renting a home was just 0.1% higher than it was in May 2016. In the capital, rents fell for the seventh straight month.

Johnny Morris, Research Director at Countrywide, observed: ‘The rental market can no longer be typified by the image of carefree, young professionals.  More than half of tenants are over 30 and the number of pensioners renting has reached record levels.  And with younger generations growing up much less likely to be homeowners, tenants are getting older with an ever more diverse group of people calling the rented sector home.’[1]

‘Seven consecutive months of falling rents in the capital are starting to show signs of rippling out across the country with rents down in over half of regions outside London. The number of homes on the market remains well up on last years’ levels, softening rental growth,’ he added.[1]

[1] http://www.propertyreporter.co.uk/landlords/retirees-rent-triples-in-10-years.html

 

Rental growth was subdued in May

Published On: June 7, 2017 at 11:50 am

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The most recent report from Landbay has shown that UK rental growth rather flat-lined during May.

Rental growth increased by 0.02% over the month – the slowest pace in more than half a decade. In addition, this was a fraction of the five-year average growth total of 0.14%.

Slowdown

The capital continues to be the main region driving the slowdown. Rents in London dropped by -0.94% year-on-year to May, in comparison to growth of 1.62% for the rest of the UK.

Rents have now slipped for a whole year in London – a 12 month decline in demand but greater supply- with homeowners opting to rent out properties until the sales market picks up.

In fact, London was the only region to see rents fall in May, with seven of twelve regions ending the month with a slower rate of growth than in April.

Rental growth was subdued in May

Rental growth was subdued in May

Delays

John Goodall, CEO and founder of Landbay, observed: ‘The election is one of many external factors influencing activity in the buy to let market at the moment. Yes, uncertainty about the future of the UK will cause some people to delay a decision to move, but affordability pressures are also starting to pinch the pockets of renters across the country. Wage growth is now lagging behind inflation for the first time since mid-2014, and with less money to spend on such a major monthly outlay, renters will be factoring this into their tenancy decisions.’[1]

‘On the supply side, a wave of new rental properties caused by last spring’s hike to Stamp Duty, together with falling house prices, will no doubt both be playing a small part in the ongoing softening of rental growth. Nevertheless, barring a major surprise from either the election or the Brexit negotiations, long term population and construction trends suggest that rents will soon be growing faster than inflation again,’ Mr Goodall added.[1]

[1] http://www.propertyreporter.co.uk/landlords/rental-growth-flat-lines-in-may.html

 

Calls for £30,000 fine for larger agents who flaunt proposed fees ban

Published On: June 6, 2017 at 1:17 pm

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The more larger letting agents found to be in breach of the proposed ban on letting agent fees should receive fines of up to £30,000 to ensure compliance.

That is the view of the Chartered Institute of Environmental Health, which has revealed what was in its submission under the Government’s consultation process around the ban.

Ban on Fees

The proposed ban on fees was outlined in last year’s Autumn Statement. The CIEH has given its backing to the ban on all letting agent fees, arguing that this would get rid of some barriers facing tenants in moving out of a sub-standard home.

Representing the workforce of environmental health professionals that undertake inspections in the private rental sector, the CIEH has recommended fines of up to £30,000 for big property managing agents.

In addition, the membership body has recommended that holding deposits should not be exempt from any ban, as this could cause issues with loopholes to exploit tenants. An example of this could be agents holding onto more than a single tenant’s deposit for the same property.

It notes that holding deposits pose an extra barrier to tenants wishing to move home, as they heighten the amount of money required to secure a new tenancy. Should these be allowed, the CIEH wants to see them registered under a mandatory client money protection compensation scheme in order to avoid any abuse.

Tenant Rights

Also in its submission, the CIEH suggests that tenants should be given accessible information surrounding their rights and obligations on letting agents. These should include information on how to lodge a complaint with the correct enforcement body.

CIEH believe that the ban on agent fees should apply to landlords and third parties, in order to avoid any additional charges to the tenant through a different route. It suggests that premium sections of the market should not be exempt.

The only reason for exclusions to the ban, the organisation suggests, should be due to malicious tenant actions.

Calls for £30,000 fine for larger agents who flaunt proposed fees ban

Calls for £30,000 fine for larger agents who flaunt proposed fees ban

Standards

Tamara Sandoul, CIEH policy manager, feels that the underlying point behind the suggestions is to help improve standards and conditions in the sector, while protecting tenants at the same time.

Sandoul said: ‘The private rented sector is such an important part of the housing market, providing homes for people who otherwise cannot afford to buy their own, especially the vulnerable and those on low incomes.’[1]

‘While the vast majority of letting agents are responsible, there are those who exploit tenants by charging them extortionately high fees. A comprehensive ban on letting agents’ fees is a very positive step forward. It will give tenants greater freedom to move out of properties that are hazardous and in poor condition, which in-turn should drive up standards and quality of rented housing,’ she continued.[1]

Concluding, she noted: ‘We do not expect to see higher rents because of the ban as the cost of referencing new tenants is likely to be small in comparison to the costs of maintaining a property to a good standard. At the moment managing agents are charging both the landlord and the tenant fees, but this ban should help to increase competition between letting agents and help to drive the total costs down.’[1]

[1] http://www.propertywire.com/news/uk/call-fines-30000-flout-upcoming-lettings-fee-ban-england/