Average home let within 20 days as rent rises go on

Countrywide logoBritain’s largest letting agency says rents grew by an average of 3.1 per cent in 2015, taking the average monthly rent to £919pcm. 

Rents rose in every region of Britain with the East of England seeing the highest growth – 6.5 per cent – and Central London the lowest with a mere 0.5 per cent.

Some 34 per cent of tenants who renewed their tenancies faced higher rents, an increase of seven per cent from 2014. However, the average rent for renewing tenancies only grew by 1.3 per cent, much less than for those moving into a new home.

The continuing imbalance between supply and demand has intensified competition for homes in the market, says Countrywide.

The average property is now let within 20 days of being instructed – two days quicker than it was in 2014.

Greater London as a whole saw a slowdown in rental growth in 2015 compared with 2014 yet rents still rose by 4.7 per cent on average. Affordability issues have kicked in across London; the proportion of under 25s living in the rental sector in the capital fell by four per cent in 2015, the continuation of a longer term trend.

Surrounding regions in the South of England have seen small growth in the proportion of under 25s in their market, as Londoners look further afield for more affordable markets.

“2016 looks to be a complicated year for landlords as the government focuses its efforts on boosting homeownership. The additional 3% stamp duty charge, stricter regulation and changes to tax relief from 2017 onwards will all take their toll on investor sentiment and impact behaviour” admits Johnny Morris, research director at Countrywide.

“With stock at a premium, the smaller landlords who decide to sell up will add upward pressure to rents, although any rises will be tempered by affordability pressures” he warns.

Source: Letting Agent Today


One in four households privately renting by 2025

New HousesOne in four households in the UK will be privately renting by 2025 – that’s the conclusion of research by respected business consultancy PwC. 

As house prices have risen much faster than earnings and social housing supply remains constrained, the number of households in the private rented sector has more than doubled since 2001, says the consultancy.

This trend is predicted to continue with an additional 1.8m households becoming private renters by 2025. This would take the total to 7.2m households – almost one in four of the UK total by that time.

The trend is particularly strong in the 20 to 39 year old sector where more than half will be renting privately by 2025, according to PwC.

“Driven by a decade of soaring house prices pre-crisis and lower loan-to-value ratios post-crisis, the deposits needed by first time buyers have risen significantly. As a result, a generation of private renters have emerged and this will increasingly be the norm for the 20 to 39 age group” says Richard Snook, senior economist at PwC.

“There is also a rising dichotomy in the market between those (mostly older) households who own outright and those (mostly younger) households who still have a mortgage or rent to pay” he says.

John Hawksworth, chief economist at PwC, says only long-term increases in housing supply will allow greater housing affordability for would-be buyers.

“We expect housing supply shortages to persist for at least the next decade and realistically expect to see a continuing rise in Generation Rent until at least 2025” he adds.

Source: Letting Agent Today

Supply unable to meet rental demand – report

The private rental market in London is set for enormous change and growth.

A new report from Cluttons says that with a growing proportion of London households living in private rental accommodation, tenants will find themselves renting for longer, often well into the family-rearing stages of their lives.

The property firm says that as a result, the higher pace of rental growth will make the private-rented sector an increasingly attractive investment opportunity.

But the report also says that demand for homes in London will rise over the next decade, and will not be matched. The report says there is no sign of the supply side being able to match future demand, and that both rents and house prices will rise.

Since 2000, an extra 400,000 jobs have been created in London, says Clutton.

There are now more people employed in the capital than at the 2007 economic peak. The report argues that employment is expected to rise further over the next decade but jobs growth will be held back by a lack of housing.

Private renting in the capital has already doubled in the last 20 years, it says.

Julian Briant, head of residential consultancy division at Cluttons, said: “Decision makers have to question whether London’s potential to maintain its position as a world city is being curtailed by such a limited supply of housing stock. The answer can only be yes.

“Despite this, a growing and vibrant London offers a wide range of residential opportunities for both investors and developers. Small private landlords will continue to play an important role in the capital, including creating more units from the existing stock.”

The research paper, ‘Renting in London: the coming boom’, was written on behalf of Cluttons by Professor Michael Ball from Henley Business School at the University of Reading.

Source: LandlordToday


Calls for ‘massive increase’ in homes for rent

There needs to be a tenfold increase in the number of homes that are built for private rent, and new home builders need to be relieved of their obligations to include ‘affordable homes’ on their schemes.

The calls have come from Sir John Banham, chairman of the Future Homes Commission, speaking at a Housing Market Intelligence conference.

He said that in a generation’s time, Britain needs to be building three times as many new homes as today, including a ‘massive increase’ in build-to-let schemes and in the shared ownership sector.

He called for private rental homes to be built in ‘sustainable communities’ on brownfield sites close to towns, and on schemes with mixed tenure.

He also said that social housing and market housing need to be de-coupled because Section 106 is ‘not working’. Under Section 106 agreements, developers are legally obliged to provide typically 40% of affordable homes for social housing.

Sir John said it is essential to find new sources of mortgage lending, because financial regulators are set to make ‘a real mess’ of the lending sector.

Source: LandlordToday

Record rise in UK rents

Landlords saw rents rise for a fifth consecutive month as tenant arrears fell for the first time in three months, according to the latest Buy-to-Let Index from LSL Property Services.

In England and Wales the average rent rose by 1.2% to £734 per month in August, surpassing July’s record high of £725. Rents climbed by 2.9% compared to August 2011.

Tenants saw rents reach record highs in five regions in August, hitting new peaks in London, the South East, the East of England, the North West and Yorkshire & the Humber. On a monthly basis, rents rose in eight regions. The South East saw rents climb the fastest for the second month, rising by 2%, while rents in both London and the East of England rose by 1.6%. Rents decreased in Wales and the West Midlands.

London and the South East have seen the fastest rent rises compared to August 2011, with rental inflation at 4.9% and 3.9% respectively. On an annual basis rents fell in two regions, decreasing by 1.9% in the South West, and by 1.8% in Wales.

David Newnes, director of LSL Property Services said: “The rental market is right in the thick of its peak season, and the demand from graduates and those starting new jobs has added a new layer of competition on top of the existing pool of frustrated buyers. London and the South East may be the powerhouses of the national rental market, but rent rises haven’t been limited to these areas by any means. In fact, rents have hit record highs in five regions as tight mortgage finance criteria and large deposit requirements for new buyers continue to ramp up the pressure on the limited stock of rental homes available.

“Some relief for tenants may be found if the Funding for Lending scheme begins to feed through into greater lending to borrowers with smaller deposits. But any improvement to the first-time buyer mortgage market will need to be significant and sustained to dent rental demand markedly in the long-term.”

Landlords saw an average total annual return of 5.3% on a rental property in August, up from 5% in July. This represents an average return of £8716 with rental income of £7853 and a capital gain of £863.

If rental property prices maintain the same trend as the last three months, an average investor in England and Wales could expect to make a total annual return of 9.2% per property over the next 12 months – equivalent to £15,191 per property. The average yield on a rental property remained steady at 5.3%, as slightly higher property prices were matched by higher rents.

Newnes said: “The Government’s response to the Montague Report recognises the need to expand the supply of rented property, and supporting the building of new rental properties and encouraging institutional investment to the sector marks a step forward. However, it’s equally vital that lenders continue to support individual investors, who are being drawn in by the healthy yields, historically low mortgage rates, and strong tenant demand.”

Tenant finances improved for the first time in three months in August, with 9% of all rent late or unpaid at the end of the month, a decrease from 9.3% in July. In total, late or unpaid rent amounted to £288m, 2.2% less than in the previous month.

Newnes said: “It’s encouraging to see tenant arrears fall for the first time in three months, despite the summer holiday season. A surprisingly resilient labour market, alongside a more stringent approach to referencing and credit checking by landlords, has helped prevent further rental arrears. However, rental inflation is still outstripping the growth in wages, and this will keep up the financial pressure on many tenants’ monthly budgets.”

Source: propertytalklive!

1.7million more privately rented homes required by 2016

The Private Rented Sector (PRS) in the UK has grown 47.9% since 2007 and will continue to grow, according to Jones Lang LaSalle’s (JLL) latest research on home ownership and the housing market.

JLL estimates that an additional £57bn of funding will be required per annum if the PRS is to continue to provide sufficient homes to meet demand.

However, changes introduced by the government – alongside wider economic and social shifts – could lead to institutions and other large-scale investors entering the sector, according to Jones Lang LaSalle’s MultiFamily research report.

Over the five years from 2006, the number of households renting privately increased by 47.9%, or 8.2% per annum. If this rate of growth continues, it will mean some 1.7m additional privately rented homes will be required by 2016 equating to an annual investment of circa £285bn – over eight times the size of the current buy-to-let market.

Jon Neale, director of residential research at Jones Lang LaSalle, commented: “For most young people, high prices and unrealistic deposit requirements make homeownership unachievable and as a result many households are now finding themselves in private tenancy. Given that the mortgage market is likely to remain constrained in the near term, it is not unfeasible that the expansion of the sector could accelerate.

“Much of the historic growth of the sector has come from individual private investors, resulting in highly fragmented ownership with significant management overheads; rental returns, at least, are proportionately lower than in the commercial sector. There is now an opportunity for institutions to enter this market, perhaps incentivised by some of the recent changes outlined in the Government’s Montague Review.”

The Montague Review suggests that planning authorities specify that a certain proportion of schemes – perhaps ones that struggle to be viable in the current climate – remain in the private rented sector for a set period of time, with no affordable housing requirements attached to these units. This would allow the creation of a separate asset class valued in a different way to conventional owner-occupied housing.

The Government has also announced £200m of funding and £10bn of debt guarantees to help support the emergence of the sector.

Source: propertyinvestortoday.co.uk

Rental income for landlords set to soar to £70bn

Total rental income to UK landlords in the private sector is set to soar to £70bn in the next five years.

The prediction comes from Savills, which has been running its 24th annual ‘financing property’ presentations in the City.

Savills say that the shift to renting from home ownership creates a need for significant investment.

Lucian Cook, director of residential research at Savills, said: “Rental growth and more renting are forecast to push the amount of rent paid to private sector landlords from £48bn to £70bn over the next five years

“We estimate that over the same period, £200bn needs to be invested in the private rented sector to keep pace with demand. We only expect £50bn of that to come from buy-to-let finance.

“Institutional investment backed by new sources of finance is critical to filling the gap.”

Savills says that larger investors buying in bulk should see good returns for their money.

Source: LandlordToday.co.uk

Renting set to be ‘the only game in town’

Renting is set to be ‘the only game in town’, with an extra 1.5 million 18 to 30-year-olds going into private rented accommodation over the next eight years.

An additional half a million young people will be forced to stay with their parents into their thirties, taking the total number of young people still at home to 3.7 million by 2020.

The influential Joseph Rowntree Foundation says that one risk is that pressures on private rental accommodation could force young families out of the sector and into homelessness. The foundation forecasts that around 310,000 more young families will be looking for private rented housing in 2020 compared with today.

In a new report, ‘Housing options and solutions for young people in 2020’, it warns that the influx of youngsters chasing a private rental home will see young families, poorer and vulnerable people finding it hardest to compete for tenancies.

The report is just the latest in a welter of similar documents warning of the growing pressures on the private rented sector as increasing numbers of people are locked out of home ownership.

It warns of a three-tier race to find rented accommodation, with those at the top who can afford to pay rents, a ‘squeezed middle’ group who struggle to pay, and a bottom rung of 400,000 who risk being excluded completely.

Kathleen Kelly, programme manager at the Foundation, said: “Our badly functioning housing system will see those on the lowest incomes really struggling to compete in the competitive rental market of 2020.

“Renting is likely to be the only game in town and young people are facing fierce competition to secure a home in what is an already diminished supply of housing.

“With 400,000 vulnerable young people, including families, on the bottom rung of a three-tier private renting system, we need to avoid turning a housing crisis into a homelessness disaster.”

The Foundation wants to see more homes built, longer tenancies at affordable rents – with the incentive of tax breaks for landlords – and the expansion of local letting agencies to find suitable homes for vulnerable young people.

David Clapham, lead author of the report, added: “With 1.5 million more young people no longer able to become home owners by 2020, it’s vital we take the opportunity to make renting work better.”

Source: LandlordToday.co.uk

Euro mortgage directive lifts threat to buy-to-let

The European directive on credit agreements relating to residential property (CARRP) has had its final amendments voted through – leaving the UK buy-to-let industry heaving a sigh of relief.

The UK will be allowed to exempt buy-to-let mortgages from the directive, lifting the threat that all buy-to-let lending would have to be assessed without taking rental income into account.

It had been proposed that buy-to-let lenders would have to assess mortgage applications in exactly the same way as residential mortgages. The idea prompted fears that the buy-to-let mortgage market would be crippled as a result.

A spokesperson for the Council of Mortgage Lenders said: “We’re pleased to see that many of the long-standing issues we have been lobbying on have reached a positive outcome for the UK in the EU Parliament.”

None of the changes are quite a done deal, as the legislation still has some way to go, but pundits took encouragement from yesterday’s decisions.

The UK government will actively have to enforce the buy-to-let exemption, and can only do so if they are convinced there is no detriment to consumers. The Government will now come under renewed pressure to make the exemption.

Alan Ward, chairman of the Residential Landlords Association, said: “We look to the Government to support the private rented sector and use the exemption. The RLA has argued a strong case for the last year and believe that our meetings with the Treasury would give us confidence that the exemption can be applied.”

Average UK rent reaches £745.97 p/m

According to the National Landlord Association’s first Quarterly Tenant Index, an overwhelming 79 per cent of tenants are satisfied with their current landlord.

The length of time tenants remain in the same rental property also indicates high satisfaction levels; the results show that 46 per cent of tenants have lived in their current rental home for four or more years and a further 24 per cent have lived in their current accommodation between two and four years.

Furthermore, results show that 36 per cent of tenants still reside in their first rental property. And of the 64 per cent of tenants who have terminated previous tenancies, the majority have done so for personal reasons; 27 per cent wanted to up or down size, nine per cent were relocating for work or study and 17 per cent had experienced a change in circumstances.

The research also reveals that, whilst the majority (71%) of tenants rent because they can’t afford to buy, for some renting is the tenure of choice; nine per cent of tenants prefer the flexibility that renting offers and a further nine per cent say that they can afford to rent properties that they couldn’t afford to buy.

Further research highlights include:

  • The average rent in the UK is £745.97 per month
  • 63 per cent of tenants report that their rent remains the same as this time last year
  • 76 per cent of tenants have met their current landlord
  • 42 per cent of tenants chose their letting agent based on location

David Salusbury, Chairman of the National Landlords Association says: “Tenants have high expectations of their rental experience and so I’m delighted to report that the majority are satisfied with their landlords. There are many landlords who take great professional strides to ensure they are doing the best by their tenants – it’s good to see their efforts come to fruition.

“The research shows that most (63%) landlords have not increased their rents in the last 12 months. With the cost of living increasing for everyone in the UK, it’s encouraging that many landlords are not seeking to impose an additional financial burden onto their tenants.

“Tenants who are looking for rental properties should ask if the prospective landlord is a member of a professional organisation like the NLA. Professionally accredited landlords are aware of their obligations and understand the rules and regulations governing the letting of their property”.