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Build to rent market is better value for money for renters

Considering renting? Build to rent developments are popping up all over the UK, with the Government encouraging the expansion of build to rent, while making buy to let more difficult. Some worry that this new emphasis will make renting even more unaffordable for Generation Rent – but how do build to rent homes stand up to the traditional rental sector in reality?

Working out how much more expensive build to rent homes really are has to take into account the quality of this housing (often much, much better than the private rental sector accommodation), as well as the many additional costs that are often included in the rent, such as bills, gym memberships, internet, and even parking.

Once these benefits have been taken into account, build to rent properties turn out to be no more than 15 per cent higher than the average cost of comparable cost of renting in the buy to let market – £868 on average compared to £752.

In some parts of country, there is virtually no difference in renting a traditional flat or a build to rent one; in Manchester, for example, renting a flat in the gorgeous Way of Life development (below), which features a spectacular gym and swimming pool is actually £2 cheaper than the average cost of an ordinary flat in the same area. Even renting in a build to rent development in London can work out cheaper – a flat in the JLL development in Greenwich (top) will come in 18 per cent cheaper than equivalent flats in the area.

This value-for-money ratio does not hold up everywhere, though. Renting in a build to rent development in Salford will set you back 14 per cent more than the area’s average; Lewisham’s build to rents are 35 per cent more expensive, and if you want to rent in a built to rent in Tower Hamlets, be prepared to fork out a whopping 44 per cent more in rent than the area’s average. Again, although these figures seem very high, they partly reflect the difference between the amenities on offer and what’s generally available in the area. Given how hard it can be to find a property with a garden, private parking, and a gym in central London, for example, the price comes to seem more justified (if still very high).

Tom Gatzen, co-founder of Ideal Flatmate, who have exclusive listing rights for all UK build-to-rent properties, comments, ‘Build to rent has come under scrutiny due to the higher rental costs, but when you consider the additional benefits there is a very strong argument that these developments provide much better value for money.

‘For a start, they are new builds so the quality is very good and they have a much more professional management structure in place to support tenants when compared to the traditional communication chain of the tenant, letting agent and landlord.

‘They also offer a lot more for your money in terms of amenities included in the price, with many providing Wi-Fi, bills and a gym as standard. This comes on top of other benefits such as parking and private gardens and while you pay more as a lump rental sum for these benefits, the convenience of paying for everything in one go is something that appeals massively to today’s generation of tenants.

‘We are crying out for more rental stock across the UK and the number of us reliant on the private rental sector is only going to increase. Build to rent provides a great solution when it comes to providing more homes at scale and while change will always be met by a degree of criticism by the industry, we must surely focus on the need of the tenant first and embrace anything that helps provide more roofs over heads.’

BY ANNA COTTRELL

Source: Real Homes

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Private rental sector continues to grow amid buy-to-let market uncertainty

The proportion of privately rented homes has fallen below 20% of all tenure types for the first time in three years, despite the number of rental properties actually increasing.

Government housing data shows that 19.9% of dwellings in England were rental properties in the year to March 2018.

This was down from 20% in 2017, 20.4% in 2016 and 20.4% in 2015.

However, despite the proportion decreasing, the amount of rental properties still increased by 10,000 between March 2017 and March 2018, the Government figures show.

This is despite ongoing concerns about landlord exits amid extra Stamp Duty charges and the withdrawal of buy-to-let tax reliefs.

Meanwhile, the proportion of owner-occupied dwellings increased for the second year in a row, increasing by 226,000, and representing 62.8% of all stock.

The total property stock in England as of March 2018 was 24.2m.

Of this, 15.3m were owner-occupied, 4.8m private rented, 2.5m rented from housing associations and 1.6m rented from local authorities.

By MARC SHOFFMAN

Source: Property Industry Eye

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London Buy To Let Investment In Recovery

The London buy to let property market is showing signs of recovery according to the latest data released from buy to let finance broker Commercial Trust.

London buy to let took a bit of a battering over the last year, largely due to the uncertainty caused by the Brexit fiasco. However, positive signs have been seen in the first quarter figures for 2019 from Commercial Trust.

According to the latest figures, the number of submitted purchase mortgage applications for the capital rose by 4 per cent on the previous quarter, propelling London back to its position as the leading region for buy to let business applications – 15.8 per cent of overall business, closely followed by the South East at 14.5 per cent.

This followed the last quarter of 2018 which had seen the South East overtake the capital for the first time, with London buy to let in second place.

Strong results were also shown for the East of England and the North West, enjoying an increase in the proportion of buy to let applications submitted during the first quarter. The same two regions shared top billing for buy to let completions over the quarter, with each contributing 13 per cent of overall completions.

Remortgaging continued to dominate buy to let applications, with 60 per cent of business coming from landlords looking to refinance.

Chief executive at Commercial Trust, Andrew Turner, commented: ‘The effects of Brexit have been keenly felt in London and perhaps the stalling of house price growth has to some extent created a buyers’ market for buy to let.

Our latest figures underline the importance of London and the South East within the buy to let market. For the first quarter of 2019, these two regions contributed over 30 per cent of our buy to let purchase applications, an increase from the 26 per cent recorded in Q4 of 2018.

Whilst it is good news to see increased activity in London, movement is not restricted to that area and both the North West and East Anglia have also increased their proportion of overall purchase business during the quarter.

With Brexit now pushed back to later in the year, the combination of low interest rates, a wide variety of mortgage product choice, stalling house prices and soaring tenant demand, many investors are of a mind to invest in the private rental sector.’

Source: Residential Landlord

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Buy To Let Investors Contribute £16.1 Billion To Economy

Buy to let investors in the private rental property sector contribute a huge £16.1 billion to the UK economy.

Through their spending over the year, landlords in the UK contribute towards thousands of jobs from builders and tradesmen through to accountants and letting agents. This figure has nearly doubled from £8.5 billion a decade ago, following the long-term expansion of the rented sector and rising costs per property.

Property maintenance and servicing represents the largest running cost for landlords across the private rental sector (PRS), totalling £5.8 billion. The next largest outlay is for those landlords that use a letting or management agent and contribute a collective £5 billion.

Investors spend a total of £567 million on accountancy and legal fees, £341 million on administration and registration costs, contributing an additional £908 million of spending solely dependent on the PRS’ existence.

Landlords also contribute £2.3 billion on service charges and ground rents, £848 million on utilities, £791 million on insurance, and £618 million on other associated costs of running a property.

The average landlord now spends £3,571 per property in annual running costs, before tax or mortgage interest – equivalent to 32.9 per cent of rental income. These costs have risen by 5.6 per cent in the last two years without factoring in increasing taxes. Since the start of 2009, costs have jumped by 28 per cent, a rise of £771.

£1,086 is currently spent on maintenance, repairs and servicing, and £935 spent on letting agent fees per property. A typical landlord spends £426 per property each year in ground rents and service charges. Insurance typically costs £149, and legal and accountancy fees £107, while administrative and license fees add another £64 per year.

A further £528 is lost in void periods each year, a figure that has climbed in recent years as a result of higher rents, and a slightly longer gaps between tenancies.

Faced by rising costs, and higher tax bills following the recent changes to mortgage interest tax relief, landlords are now looking to cut the amount they contribute.

36 per cent of landlords, surveyed by BVA BDRC on behalf of Kent Reliance, are already reducing or planning to reduce their spending. Overall, a typical landlord reviewing their outlay would cut spending per property by around 6 per cent. If replicated across the PRS, this would reduce their total spending by nearly £1 billion each year, reducing the revenues of the industries that depend on the PRS.

Sales Director of OneSavings Bank, Adrian Moloney, commented: ‘The political discourse around the private rented sector has been one-sided to say the least. Overlooked is the significant economic contribution landlords make, supporting thousands of jobs through their spending and housing a large portion of the country’s workforce. Instead, landlords have faced punitive tax and regulatory changes, at a time when running costs are climbing.’

Source: Residential Landlord

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Nationwide Buy To Let Review Of The Year

The private rental sector nationwide has remained robust through 2018, despite dour predictions as last year drew to a close. The theme of 2018 has been regulatory impact, ranging from the imminent implementation of the Tenant Fees Bill to the persistent teething problems with the notorious Right to Rent.

Criminal landlords have found it increasingly hard to operate; a London landlord checker and a £2 million rogue landlord fund have vowed to clean up the sector. While Brexit has been a looming spectre over the year, ‘uncertainty’ remains the key descriptor and its likely that ascertaining its true impact will be a job for next year’s review.

A quieter housing market was seen throughout the year. House price rises have slowed, according to Nationwide, dropping to their slowest pace since May 2013 in October. Economic uncertainty, stemming largely from Brexit but also a nationwide tightening of the purse strings, encouraged a slump in house prices.

The Tenant Fees Bill has been a cause of controversy nationwide throughout the year.

June 5th saw the first sitting of the bill. It was at this point that the issue of the deposit requirement was first raised. MP Sarah Jones argued that currently, the majority of landlords require a 4-week deposit. However, should a 6-week cap be imposed, it is likely that the majority of landlords would raise their deposits to match this figure.

In contrast, the National Landlords Association (NLA) argued that a limit of just one month limits flexibility in tenancy requirements. They took the unlikely angle of defending the nation’s pets – suggesting that properties who permit furry friends should be entitled to demand a larger deposit to cover potential damage.

The bill was generally met with discern by landlord bodies, with ARLA Propertymark citing its own research as saying tenants nationwide will end up worse off with a fee ban due to raised rents, rather than seeing a more affordable private rented sector. The RLA complained that by taking months to become law, the bill is inefficient and suggested that far quicker changes could have been made.

In spite of criticism, the bill pressed on and towards the end of November, the second reading for the tenant fees bill saw it pass through the House of Lords without amendment. The third and final reading will come after the report stage, although the deposit cap remains a contentious issue.

While the Tenant Fees Bill has been a steady presence throughout the year, it has been all but overshadowed by the constant controversy surrounding Right to Rent, an issue amplified by the Windrush Scandal which saw a number of British subjects who originated from Caribbean countries as part of the ‘Windrush Generation’ wrongly deported and denied citizenship rights such as medical care. The issue arose as a direct result of Theresa May’s ‘Hostile Environment’ policy, the same policy which saw the implementation of Right to Rent.

Right to Rent requires that landlords determine whether their tenants have the right to remain in the UK, facing criminal charges if they fail to do so. As a result, research from the Joint Council for the Welfare of Immigrants (JCWI) found that 51 per cent of landlords are now less likely to let to foreign nationals. 2018 saw over 400 fines issued to landlords, amounting to £265,000 by the end of March, although this figure included fines from the previous year.

The policy has seen two separate legal challenges launched against it in 2018, following claims that the legislation forces landlords to ‘act as border guards’.

The first case was launched by the JCWI. Legal policy director at JCWI, Chai Patel, said: ‘The right to rent policy is designed to encourage irregular migrants to leave the country by making them homeless. The problem with it, apart from the inhumanity of that proposition, is that there’s no evidence it works. The Home Office hasn’t shown that the scheme will do anything to increase voluntary departures, which have actually reduced since the scheme came into force. Worse, the scheme causes discrimination against foreign nationals even if they have immigration status.’

He continued: ‘It also causes discrimination against British citizens who don’t have passports. Faced with our evidence, the Home Office has buried its head in the sand and refuses to review the scheme before forcing it onto Scotland, Wales and Northern Ireland. We have no choice now but to challenge this pernicious and ineffective policy through the courts.’

This was met with support from landlords, who have condemned the policy. The RLA supported a judicial review of Right to Rent, arguing that landlords nationwide should not shoulder these responsibilities.

A second challenge comes from a woman who faced eviction after her landlord was told she did not have permission to reside in the UK after the Home Office lost her passport when she applied to extend her visa. The woman’s lawyers are in the process of arguing that the ‘right to rent’ policy is not compatible with the Human Rights Act.

Finally, independent chief inspector of Borders and Immigration David Bolt has condemned the scheme, writing in a foreword to his report that the policy has ‘yet to demonstrate its worth as a tool to encourage immigration compliance’.

However, while it appears universally accepted that the policy has brought little good to the sector, it served its creator James Brokenshire well when he was promoted to Secretary of State for Housing following Amber Rudd’s resignation during the Windrush Scandal and Sajid Javid’s promotion to Home Secretary.

While the Tenant Fees Bill and Right to Rent might have dominated the headlines during 2018, there has been plenty of lower profile legislation adding to the regulatory landscape for landlords.

Councils have been granted new powers to crackdown on rogue landlords while a new fund has been launched to combat bad practice in the sector. The second part of this review in the New Year will focus on those regulations that were introduced to protect tenant rights, as well as investigating predictions for the coming year.

Source: Residential Landlord