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Housing market shows signs of improvement

The region’s housing market has shown signs of improvement, as sales activity and house prices grow.

According to the RICS Residential Market Survey for July, demand for rental properties in the region picked-up to post the strongest reading since the beginning of 2018 and landlord instructions fell once again, extending a run of continuous decline stretching back over the past 12 quarters.

Near term rental growth expectations were therefore driven up, with the net balance of plus 55 per cent in July representing the most elevated reading in 11 quarters, and the UK.

In more positive news, the West Midlands’ sales market hasn’t been drastically impacted by the introduction of new government. This month, six per cent more respondents saw a rise rather than fall in enquiries from new buyers in July. This marks the first month of positive growth in interest from would-be buyers since September 2018.

While buyers seem to be picking up, newly agreed sales also improved in July.

The net balance rose to plus 24 per cent, from minus 14 per cent in June. Some areas did see a stronger sales trend, in a slightly mixed regional picture, with only respondents in the region and the North East reporting a reasonably solid pick-up during July. Looking at the picture ahead, near term predicted sales also picked up, with a net balance of plus 20 per cent.

Again, while new buyer enquiries are picking up, the number of new properties being listed for sale also improved. This follows a string of 13 consecutive monthly declines in fresh listings. It seems there is little prospect of a sustained rise in supply coming onto the market in the immediate future.

Price wise, 21 per cent more respondents in the West Midlands reported price rises across the region. Elsewhere, prices were seen to be rising at a solid pace in Northern Ireland, Scotland and Wales. But prices continue to fall in London, the South East and East Anglia.

Simon Rubinsohn, RICS chief economist, said: “The latest RICS results will provide little comfort for the market with all the key indicators pretty much flatlining.

“Indeed, the forward-looking metrics on prices and sales also seem to losing momentum as concerns, clearly voiced in the anecdotal feedback, both about Brexit and political uncertainty heighten.

“Some support may be provided by an easing in the cost of money which could feed through into lower mortgage finance costs, but this may be insufficient to provide a spur to lift activity given the clouds hanging over the economy.

“Meanwhile, the lettings market data continues to send a very strong message that institutions need to upscale their build to rent pipeline to address the shortfall resulting from the decline in appetite from buy to let investors. It is significant that the near-term rental expectations indicator has climbed to a three-year high.”

By James Pugh

Source: Express and Star

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Lack of homes to rent supporting growth in London lettings markets

A scarcity of lettings stock is supporting rental growth in the prime property market in London, but high levels of renewals resulted in fewer new lets in the second quarter of 2019.

The LonRes prime London lettings index recorded a 2.3% rise in achieved rents in central London, a 1.4% increase in prime fringe, and a 0.9% fall in prime London overall compared with the second quarter of 2018.

The data also shows that 34% of properties let had a rent reduction before securing a tenant, down from 39% in the second quarter of 2018 and 47% in the second quarter of 2017.

In the prime central London market the average rental value in the second quarter of 2019 stood at £50 per square foot.

Looking ahead, 50% of respondents to the LonRes agent survey expect rents to rise over the coming 12 months while 5% thought rental values would stay the same and 15% expect them to fall.

The report also reveals that gross rental yields have been increasing annually since the fourth quarter of 2017 across the three prime areas. Over the past five years rents in prime central London have risen 6% while house prices have fallen by 13.4%.

Demand from prospective tenants is rising. Some 47% of respondents to the survey reported an increase in applicants registering in the second quarter of 2019 while 13% saw a fall, compared with the first quarter of the year.

Properties priced at £1,000 per week or below were most in demand while agents reported less interest for homes priced at £3,000 per week or more.

Stock remains scarce. In the second quarter of 2019 new instructions across the three prime areas fell 4.3% compared to the second quarter of 2018 and compared to the second quarter of 2016, new instructions have fallen by 22.9%.

New lets agreed over the first three months of 2019 fell 12% compared to the same period a year ago. In prime central London they were down by 3%, in prime they were down 11% and in prime fringe by 20% compared to 2018.

‘This year, with a Tory leadership contest and Brexit negotiations stalled, many would-be movers could have postponed their decision to transact. In some areas they did, yet in prime central London more properties changed hands this year than last, with sales up 3% on the second quarter of 2018,’ said Marcus Dixon, head of research, LonRes.

‘In the lettings sector, agents reported an increase in demand this quarter. This, coupled with an ongoing lack of stock, meant rents rose again this quarter, up 2.3% on the same three months last year. But, with renewal rates remaining high, less stock came back to the rental market, resulting in another fall in the number of new lets this quarter,’ he added.

Source: Property Wire

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Buying in to build-to-rent

Corporate landlords are tapping into healthy demand for rented property in the UK.

Professional landlord Tipi is urging people to “join the rental rebellion”. Its Soviet-style advert shows a clenched fist holding a key, and the tagline boasts that it is “throwing the rental rule-book out of the window and making renting better for everyone”. Its competitors have similarly utopian slogans. Get Living offers people “a new way of renting”, while Fizzy promises that it is “reinventing renting” with “zero faff”.

These companies are part of the fast-growing build-to-rent sector in the UK, where corporate landlords, often institutional investors, rent out flats in purpose-built towers. These flats are a cut above your typical grotty flatshare: they often come with access to posh gyms, cinemas and additional security. The build-to-rent model is already very popular in the US, but until recently it had been slow to take off in the UK.

The build-to-rent trend crosses the Atlantic

At the end of March there were more than 30,000 completed build-to-rent properties in the UK, according to estate agent Savills. This is an increase of 34% on the same time last year. When you include properties under construction or in planning, the total number of build-to-rent homes increases to 140,000, with the average scheme in planning comprising more than 320 flats.

There are several reasons why build-to-rent is becoming more popular in the UK. Clearly there is a shortage of affordable housing, whether for people to buy or rent, with housebuilding not keeping up with demand. In an effort to level the playing field between landlords and private buyers, the government cracked down on the buy-to-let sector, making it increasingly difficult for landlords to make money from it. As a result, landlords have left the sector in droves, further reducing the supply of rental properties (the number of landlords has fallen by 120,000 in the past three years, according to estate agent Hamptons International).

Yet, over the past ten years the number of rental households has increased by 74% to 4.7 million. So American-style corporate landlords are entering a market with healthy demand – either from people who might have accepted they’re not in a position to buy property, or who don’t want the commitment of home ownership but will pay for a slick rental flat in a fancy block. And it is a lucrative business. On average, the rent on build-to-rent flats is 11% higher than surrounding rented homes, according to an analysis of 25 rental schemes by real-estate services firm JLL. And investment in this sector is going mainstream. For example, investment bank Goldman Sachs recently made its first foray into build-to-rent, putting £184m into what is set to be Birmingham’s largest residential tower. By 2025, investors will have allocated £75bn to the professionally managed private-rented sector, says estate agent Knight Frank.

One way to invest in the build-to-rent trend is through Grainger (LSE: GRI). Grainger is the UK’s largest private landlord with 8,237 units in cities such as Manchester, Birmingham and London. In April it signed a deal with Transport for London to build 3,000 properties above and around Underground stations. Between 2017 and 2018, the group’s earnings grew by 26% to £94m, partly driven by like-for-like rental growth of 4%. Grainger’s shares currently trade at a discount of around 20% to net asset value.

By: Sarah Moore

Source: Money Week

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Letting agents warn tenants that period of slow rental growth is ending as supply falters

Letting agents and broker groups are warning tenants not to be fooled by current slow rental growth.

ARLA Propertymark has warned that rental property supply has hit a seven-month low as agents warn of more landlord exits and subsequent rent hikes.

Its Private Rented Sector (PRS) report found the supply of properties available to rent fell to 183 in November from 198 in October.

This is down 4% annually.

The warnings come despite the number of tenants experiencing rent increases falling for the third month running in November, with 21% of agents reporting that landlords increased rents, compared with 24% in October and 31% in September.

However, year-on-year the number of tenants experiencing rent rises is up from 16% in November 2017.

Agents also reported that demand from prospective tenants decreased in November, with the number of applicants registered per branch dropping to 55 on average, compared with 71 in October.

David Cox, chief executive of ARLA Propertymark, said: “It looks like tenants are starting to take control, with the number of landlords hiking rents falling for the third month in a row.

“However, as we look ahead to 2019, things don’t look as positive for tenants.

“Our members expect more landlords to be driven out of the market by rising costs, which will increase competition and push up rent costs. If we want to secure market stability in the new year, we need to increase stock, and making the market more attractive for buy-to-let investors is the only way this can be done.”

It comes as ONS data showed that annual rental growth in the UK remained at 0.9% for the fourth consecutive month during November.

In England, private rental prices grew by 1%, Wales experienced growth of 0.9%, while in Scotland rents increased by 0.5% in the 12 months to November 2018.

Rents in London were unchanged at 0.0%, but this was up from the 0.2% decrease in October 2018.

The UK annual growth figure was 1.4% when you exclude the capital.

Commenting on the data, Kate Davies, executive director of the Intermediary Mortgage Lenders Association, said: “Rental prices continue to be subdued and below the rate of consumer price inflation across much of the UK. Unfortunately, this disguises the fact that not all is well in the private rented sector.

“Buy-to-let lenders continue to sharply reduce their new investment in rental property as more landlords withdraw from an increasingly unprofitable venture. This isn’t a new phenomenon.

“Our 2017 white paper, ‘Buy to Let: under pressure’, showed that the series of tax and regulatory changes imposed on the buy-to-let market were stunting rental property investment, and this trend has continued through 2018.

“We continue to raise concerns that this will eventually work its way through to higher rents for tenants, which will in turn make it still harder for those who are trying to save for deposits to buy their own homes.”

Source: Property Industry Eye

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Rental growth showing signs of a sustained recovery

The average rent has risen by 0.13%, the highest monthly increase since April 2016, Landbay’s Rental Index has found.

The increase pushes the average rent paid for a property up to £1,209 per month, dropping to £767 if London is excluded. Rental growth on an annual basis also showed signs of a sustained recovery, with rents across the UK increasing to 0.97%, the highest level seen since May 2017.

John Goodall, chief executive and co-founder of Landbay said: “The figures point to a possible start of sustained rental rises in the UK. Following a slowdown in rental growth the changes are likely influenced by a number of regulatory and tax changes introduced over the past two years.

“As landlords begin to feel the pinch from these changes, combined with a reduction in the supply of new homes, the inevitable consequence is an upward pressure on prices.

“The government must start to see landlords as a vital part of the UK housing market, rather than an easy target for raising the coffers. Any further changes to regulation or taxation will only end up on the tenant’s door.

“For brokers, this provides them with the opportunity to give expert advice to their clients about changing elements of the housing market and which areas have the most potential in the coming months.”

Annual rental growth in London, which had been in negative territory for more than a year before the first positive movement in April 2018, also showed a marked uplift.

Rents in the capital increased at the fastest pace in almost two years, rising to 0.44% in the year up to August 2018. However, it is still some way off the average annual growth rate of 1.36%.

At a London borough level, rents have risen in 27 of the 33 boroughs over the course of the last 12 months. Four of the London boroughs exceeded the average annual rental growth rate, including the City of London (2.25%), Bexley (1.48%), Southwark (1.48%) and Lambeth (1.44%)

Further signals of a strengthening rental market have begun to emerge. The East Midlands posted the highest monthly rise (0.32%) for an English region in 40 months, and the third highest monthly regional rise since the index began.

Additionally, eight of the 30 bottom performing areas experienced positive movements on an annual basis.

These include Slough (0.26%), Kingston upon Thames, Surrey (0.22%) Kingston upon Thames (0.21%), Surrey (0.14%), County Durham (0.12%), Haringey (0.09%), Hammersmith and Fulham (0.08%) and Blackpool (0.03%).

Source: Mortgage Introducer

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Six London boroughs rank in 10 worst areas for rental growth in England

London boroughs were among the worst performing areas for rental growth last year, with Kensington and Chelsea taking the wooden spoon.

According to research from buy-to-let mortgage lender Landbay, six of the bottom ten ‘rental fallers’ over the past year were all in London, including Kensington and Chelsea , Kingston upon Thames, Hammersmith and Fulham, Tower Hamlets, Barnet and Harrow.

In total half of London’s boroughs (17 out of 33) have seen rents fall year on year. Only Bexley, Havering and the City of London saw rents rise by more than 1 per cent.

Bottom 10 areas for rental growth in England

Rank Region Geography YoY change (per cent) Average rent (£)
1 London Kensington and Chelsea -1.40 3,024
2 North East Hartlepool -1.19 404
3 East England Luton -1.15 768
4 South East Windsor and Maidenhead -1.07 1,252
5 London Kingston upon Thames -0.98 1,272
6 London Hammersmith and Fulham -0.81 1,884
7 London Tower Hamlets -0.79 1,725
8 South East Wokingham -0.78 1,031
9 London Barnet -0.69 1,481
10 London Harrow -0.68 1,317

The study showed that the average rent for a property in England grew by 0.64 per cent in the year to April, with London’s falling rents weighing down otherwise resilient growth.

Hotspots for rental growth over the last year include Leicester (3.02 per cent), Nottingham (2.96 per cent) and Northamptonshire (2.44 per cent), with eight of the top ten ‘rental risers’ situated in either the east midlands or east of England.

Top 10 areas for rental growth in England

Rank Region Geography YoY change (per cent) Average rent (£)
1 East Midlands Leicester 3.02 647
2 East Midlands Nottingham 2.96 663
3 East Midlands Northamptonshire 2.44 732
4 South West Bath and North East Somerset 2.35 976
5 East England Peterborough 2.24 639
6 East England Cambridgeshire 2.21 948
7 East England Suffolk 2.15 734
8 East England Norfolk 2.06 709
9 East England Southend on Sea 2.06 762
10 South West Bournemouth 2.04 821

John Goodall, CEO and co-founder of Landbay said: “Falling rents in some parts of the country, especially expensive prime London locations, distort the picture for the rest of England where rents are continuing to grow at a steady pace.

“Partnered with the fact that rental demand shows no signs of giving up, prices will continue to rise over the coming years unless the government takes action. Without a radical house building plan for both first-time buyers and purpose-built rental properties, there is no way supply will ever be able to catch up with demand.”

The average rent paid for a property in England now stands at £1,232, or £768 if you exclude London, according to Landbay. The lowest average rent is found in the north east (£552), where rents have shown very modest long-term growth over the past five years.

Source: City A.M.

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Leicester, Nottingham and Northamptonshire are best areas for rental growth

Leicester (3.02%), Nottingham (2.96%) and Northamptonshire (2.44%) were found to be hotposts for rental growth over the last 12 months, Landbay’s Rental Index has found.

The index, powered by MIAC, also found the average rent for a property in England grew by 0.64% in the year to April. This is as falling rents in London (-0.27%) continued to weigh down on otherwise resilient rental growth in the rest of England (1.19%).

John Goodall, chief executive and co-founder of Landbay, said: “Falling rents in some parts of the country, especially expensive prime London locations, distort the picture for the rest of England where rents are continuing to grow at a steady pace.

“Britain will always need homes, and the growing cohort of people that can’t buy, or don’t want to, will more than ever rely on the private rental sector to house them in the years ahead.

“Rental growth may not be what it used to be, but the pace of change varies wildly between regions. Prospective landlords need to be astute to maximise their profits, using variations in rental growth and yields over the past year to pick out some of the most promising regions for buy-to-let.

“Consistent rental demand will obviously drive returns in the long-term, but by selecting the right location yields will be even greater.”

And eight of the top 10 hotspots for rental growth were situated in either the East Midlands or East of England. These two regions, as well as the South West, continue to lead the way in terms of rental growth, with annual increases of 2.06%, 1.50%, and 1.54% respectively.

Six London boroughs feature in the UK’s bottom 10 places for rent falling over the past year, including Kensington and Chelsea (-1.40%), Kingston upon Thames (-0.98%), Hammersmith and Fulham (-0.81%).

Also Tower Hamlets (-0.79%), Barnet (-0.69%) and Harrow (-0.68%), and in total half of the London boroughs (17 out of 33) have seen rents fall year on year.

Meanwhile, Bexley (1.37%), Havering (1.30%) and City of London (1.19%) have all seen rents rise by more than 1%, with just six boroughs exhibiting growth ahead of the 0.64% average in England.

The average rent paid for a property in England now stands at £1,232, or £768 if you exclude London.

The lowest average rent is found in the North East (£552), where rents have shown very modest long-term growth over the past five years, increasing by just 1.8% during this time. Despite a year-on-year increase of 0.26%, rents in the North East have been falling since the start of 2018.

Source: Mortgage Introducer