Third of new lets are agreed before existing tenant moves out

Increasing numbers of landlords and investors are able to re-let their property before the existing tenant moves out, according to Countrywide. 

The UK’s largest estate agency group reports that so far in 2015, 33% of all new lets were agreed while the property is still occupied, up from 27% last year.

The average let agreed while tenants are in place is equal to 105% of the asking rent, or an average of £35 a month more than the asking rent.

In London, 51% of new lets are agreed while there is still a sitting tenant in the property, up from 41% in 2014.

Where a deal is agreed before the existing tenant leaves the property, there is an average of just six days between the existing tenant moving out and a new one moving in.

Where a property hasn’t been let prior to a tenant leaving the property, the first week of marketing is when landlords are most likely to achieve the highest rent, says Countrywide.

During the first seven days, the average let is agreed at full asking price; a figure which unsurprisingly falls the longer a rental property is on the market.

The first weekend after coming onto the market is when the majority of the most motivated would-be tenants view the property.

Countrywide says that in 98% of the cases where a landlord accepts an offer below the asking rent are after the property has been on the market for more than a week.

In slower rental markets, generally outside of cities, the average landlord has to wait an extra 15 days to find a tenant willing to pay the full asking price compared to those letting a property in the city centre.

“In larger rental markets, more new lets are being agreed well in advance of the current tenant leaving. As a result we’ve seen void periods fall, with a growing number of landlords having a new tenant lined up over a month before their existing tenant leaves. While leaving some time for maintenance between tenancies is advisable, increasingly there’s just a matter of hours between a tenant moving out and one moving in,” says David Fell, a research analyst at Countrywide.

“The buzz around a new property coming onto the market is usually the landlord’s best chance of securing the tenant willing to pay the most rent. In more competitive markets, the first tenant to view a home is often willing to pay a small premium to ensure the landlord takes the property off the market and that no further viewings take place. Proactive tenants who are looking to move quickly are frequently willing the pay the most,” he adds.

Source: Property Investor Today

Strong yields tempting investors

One in ten properties in the UK is delivering gross rental yields of 10% or more, while average yields across the country are 6.2%.

The figures are from Countrywide, the UK’s largest property and mortgages chain, which says that of all properties purchased and rented out through Countrywide last year, approximately half achieved gross rental yields of more than 7%.

Countrywide also reports that for a second consecutive year, the number of new tenants registering for private rented accommodation increased by 25%, with more than 340,000 new tenants signing up in 2012, up from more than 275,000 in 2011.

Buy-to-let mortgage lending in the first nine months of 2012 amounted to £11.8bn, up 19% when compared to the same period in 2011.

Nick Dunning, group commercial director at Countrywide, said: “The availability of more competitive buy-to-let mortgage products, along with fantastic yields, is creating a good opportunity for investor landlords to expand their portfolios to match the high demand for rental accommodation, as renting for longer is becoming the new norm.”

Regionally, the South of England recorded the highest volume of new tenants registering with Countrywide in 2012 – the 116,000 applicants represented a 27% rise from the previous year. However, the growth of new tenant applicants was highest in the North of England, where Countrywide recorded a 49% increase to almost 63,000.

Countrywide figures also show that the average rent in England, Scotland and Wales in 2012 was £827 per month, and in London more than £1,600 per month.

Source: LandlordToday

UK rents accelerate to a new high

Rent rises have accelerated to hit a new high – and tenant arrears have crept up.

According to LSL this morning, owners of the Your Move and Reeds Rains chains, the average rent in September across England and Wales reached £741 per month.

That represented a rise of 1.1%, surpassing the previous record high of £734 set in August. Annually, rents went up by 3.2% across England and Wales, accelerating from an increase of 2.9% in August.

Monthly rents in London and the South-East went up the most, with rents rising by 1.7% and 1.9% respectively. Average rents across London are now a record £1,092 pcm, 6.2% higher than a year ago.

There were rent falls in three regions last month: the East of England, Yorkshire & the Humber, and the West Midlands.

Average tenant finances deteriorated slightly, with 9.1% of all rent late or unpaid at the end of September.

Source: LandlordToday

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


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!

60% of landlords planning to expand portfolio in next 6 months

60% of landlords are planning to increase their property portfolios over the next six months, according to specialist mortgage broker Mortgages for Business. 

84% of investors looking to expand said they are planning to purchase more houses and flats (vanilla buy to let) by the end of the year, thereby increasing the supply of rental properties to help cater for demand which continues to outstrip supply.

Encouragingly, only 3% of investors are planning to reduce their portfolios over the next six months, down from 6% last quarter.

David Whittaker, managing director at Mortgages for Business, explained: “Landlord appetite for buying residential property is high. This will support the private rented sector and ease the strain on would be renters chasing too few properties.”

The research, which polled the views of 159 investors, showed complex buy to let property is becoming increasingly popular probably due to the more attractive yields compared to vanilla buy to let properties. 25% of respondents said that they were considering purchasing either HMOs, multi-units or semi-commercial property (or a combination of the three).

More than three quarters of landlords feel that lenders need to do more to support them and whilst it will come as no surprise that their main gripes were with rates, fees and LTVs, more interestingly landlords are looking for buy to let mortgages that cater for more specialist scenarios including more products for limited company applicants, products for holiday lets and more lending to ex-pats. Landlords were also interested in seeing more case-by-case underwriting rather than computer based lending decisions.

Just over half (54%) of investors who are planning to expand revealed they will need to refinance their existing properties. Of these, 20% are likely to struggle to secure finance because of a lack of equity, reflecting the dearth of high LTV mortgages in the market. As of June this year, there were only four 85% LTV mortgages available (from Kent Reliance).

8% of investors revealed they have been asked by lenders to refinance elsewhere, largely as a result of RBS which is looking to reduce its exposure to property and Bradford & Bingley which is looking to exit the market entirely.

David Whittaker commented: “Landlords are bullishly confident about the prospects of the buy to let market over the next six months. There are a huge number of would-be owners being displaced into the rental market every year, which has kept tenant demand sky high and pushed yields on private rental property over the 6% threshold.”


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.


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.”


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”.


Tenant demand pushes rental prices up

Rents rose further in the three months to April, as fresh tenant demand continued to exceed new instructions, says the latest RICS Residential Lettings Survey.

13 percent more chartered surveyors reported rents rose rather than fell in the three months to April.

This growth was largely driven by increasing demand as a net balance of 15 percent more respondents reported rises in prospective tenants, with houses in greater demand than flats.

Rental values in the UK have now grown consistently since 2009 as the problem of unaffordable mortgage finance and large deposits required by lenders remain a barrier to home ownership, with many potential buyers forced to turn to the rental market.

Significantly, supply of property to the market continues to grow, albeit at a slower pace, with seven percent more surveyors reporting increases rather than decreases in landlords looking to let their properties.

Unsurprisingly, with rental values steadily increasing, landlords gross yields also continued to grow during the early part of the year, although the pace of growth has begun to slow. This was the case in every part of the UK with the exception of London where tenant demand also saw a slight downturn.

Looking ahead, surveyors remain positive that the market will remain buoyant over the next three months, with 13 per cent more predicting rents will rise rather than fall. Across the UK , all areas expect rents to continue to increase with the exception of Scotland where expectations entered negative territory for the first time since October 2009.

Peter Bolton King, RICS Global Residential Director said: “The rental market is still fairly buoyant and this looks likely to continue, given the challenges facing the sales market. Indeed, mortgage finance may become even harder to access particularly for first-time buyers if the euro crisis continues to deepen.

“This points to tenant demand continuing to outpace supply. As a result, rents will remain on an upward trajectory, adding to the pressure on many households whose incomes are already being squeezed.”

Source: Propertytalklive