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Demand For Rental Property At Five-Year High

Demand for private rented housing in England and Wales has reached a five-year high, a survey of landlords undertaken for the National Residential Landlords Association has found.

Yorkshire and The Humber was the area shown to have the highest rental property demand, followed by the South East and the South West.

Some 65 per cent of private landlords in Yorkshire and The Humber reported demand had increased in the second quarter of 2021: a figure that compared to a national average of 39 per cent.

Even so, the survey, conducted in partnership with BVA/BDRC, concluded that while 13 per cent of landlords in Yorkshire planned to increase the number of properties they rent out over the next year, 20 per cent planned to cut the number of properties they rent.

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In the South East, 63 per cent of private landlords reported demand had increased in the second quarter of 2021. Some 16 per cent of landlords said they planned to increase the number of properties they rent out, while the same proportion intended to reduce the number.

In the South West, 60 per cent of private landlords reported demand for their properties had increased. Some 14 per cent said they planned to increase their letting portfolio, which again was the same proportion that said they intended to cut the number of properties they let.

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The survey confirmed a continued pattern of tenants leaving London in response to the trend towards home working, said NRLA. Just over half of landlords in central London (53 per cent) reported a fall in tenant demand with only 15 per cent of landlords saying it had increased.

But overall, the picture revealed was one of increasing demand with little enthusiasm from landlords for new investment in rental properties.

‘Across Yorkshire and The Humber, the supply of homes is not keeping up with fast rising demand. The only losers will be tenants as they struggle to find urgently needed rental homes. The government needs to change direction and, instead of introducing measures to deter investment in the private rented sector, it must put in place policies which encourage it’, said NRLA Yorkshire and The Humber regional representative Ruth Millington.

Source: Landlord Knowledge

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Landlords invest £839m a year upgrading new rental property

Landlords spend an estimated £839m each year upgrading newly purchased rental property before letting it out to tenants, research from Paragon Bank has revealed.

A survey of approximately 900 landlords showed that nearly four in five (77%) invest in upgrading property after purchase, spending an average of £8,720 each.

Based on the average number of buy-to-let mortgages granted each year since 2015, this spend would equate to a £839m annual investment in upgrading private rental stock.

The most common work undertaken is general painting and maintenance (67%), electric or plumbing work (44%), and laying new flooring (37%). A third of landlords (32%) install a new kitchen or bathroom, with nearly a quarter (24%) installing a new boiler or upgrading windows (23%).

Richard Rowntree said: “Landlords typically will make significant improvements to a property before letting to tenants, helping to improve standards across the private rented sector.

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“Landlords will of course benefit from this investment through capital appreciation, but it always results in better quality homes for tenants.

“There is a clear correlation between buy-to-let investment and improving standards in the quality of private rental homes. Standards of property in the PRS have increased significantly over that period.

“Overall homes in the sector are newer, larger, warmer and more energy efficient than they were 10 years ago and tenants have more choice.

“Whilst we recognise more needs to be done to improve standards, since 2009 there are nearly three times the number of properties with an energy rating of C or above, a 100% increase in the number of homes built after 1990 and a substantial expansion in the types of property available to rent in the PRS.”

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Paragon’s new report, Driving Standards in the Private Rented Sector, highlights how the standard of property in the sector has improved over the past 10 to 15 years.

Since 2006, the portion of homes in the sector classed as ‘decent’ under government standards has increased from 53.2% to 76.7%. Overall, 3.6 million homes are now classed as decent, compared to 1.4 million in 2006.

Over that same period, 1.4 million buy-to-let mortgages for house purchase have been approved.

Conversely, the number of homes classed as non-decent in the PRS has not reduced significantly, with 1 million homes categorised as non-decent today compared to 1.21 million in 2006. This suggests that the growth in new properties coming into the PRS over that period is driving up standards for the sector overall and diluting the stubborn proportion that remains non-decent.

Source: Mortgage Introducer

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June lettings activity matching 2019 levels

The first fortnight in June has seen new and completed lettings applications surge above 2019 levels in some cases, research from Goodlord has found.

Demand for rental properties has steadily gained paced since 13th May, when restrictions on moving house were lifted.

The busiest day for new applications was 2nd June, when they hit 112% of the volumes recorded on the same day in 2019.

Meanwhile the busiest day for completed lets to date was the 10th June, when activity levels reached 124% of that recorded on the same day in 2019.

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Tom Mundy, chief operating officer at Goodlord, said: “It’s been an incredibly busy few weeks for letting agents, landlords and tenants.

“They’ve risen admirably to the dual challenges of a surge in demand coupled with a totally new way of working and doing business.

“We are starting to see some much needed stability and consistency in the market.

“Alongside this, we’re seeing agents embrace new tools, processes and strategies to ensure lettings can continue safely across the UK.”

Since 1st June, completed lets have been running at an average of 94% of 2019 levels.

On each day between 7th June and 13th June, completed lets have remained higher than the 2019 average.

BY RYAN BEMBRIDGE

Source: Property Wire

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Uneven rise in rental stock as housing market restarts

The number of rental properties reaching the market has increased 5 per cent on average since the government announced the restart of the housing market last week but not all areas have fared the same, according to property management platform Howsy.

The platform analysed the number of available rental properties listed on Rightmove and Zoopla on May 13, when renters and buyers in England could resume moving home.

It found a 5 per cent growth on average in the number of properties available to tenants across 23 major UK cities, when compared to the number of properties listed on April 1.

While the increase was prominent in seven cities, including Edinburgh, Oxford and London, other places saw stocks decline.

The largest rise, based on the number of properties, was in London where an extra 6,838 rental properties were listed by May 13, rising 15 per cent from April 1.

Meanwhile, the largest percentage change was in Edinburgh, despite the property market in Scotland remaining effectively closed.

Callum Brannan, founder and CEO of Howsy, said: “Many in the rental sector will be breathing a sigh of relief with such immediate green shoots of market activity returning to a number of cities following an ease in lockdown market restrictions.

“Of course, other pockets of the market will take longer to see this positive trend emerge as agents and landlords find their feet operationally.”

Kat Tymon, director at Mansfield Money, said the buy-to-let mortgage market was also bouncing back during the coronavirus due to LTV requirements being lower than for residential mortgages.

She said: “Lenders have quickly re-entered this market to make the most of the opportunities out there.

“Demand for renting will still be high as people who previously wished to buy may no longer be able to do so due to lower income or lack of savings due to Covid-19.”

Separately, research by rental deposit replacement scheme Ome found the buy-to-let market declined 1 per cent every year in the past five years.

The latest data from UK Finance found a total of 640 buy-to-let mortgaged properties were repossessed in Q1 2020, marking an 8 per cent rise on the same quarter last year.

Earlier this month Citizens Advice warned that 2.6m private renters were at risk of eviction and possible homelessness when the government’s stay on evictions of residential tenants is expected to end on June 25.

By Chloe Cheung

Source: FT Adviser

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Warning sounded on rental market as numbers plummet

Landlords are warning of a crisis in the private rental market as figures show a sharp drop in new rental properties becoming available.

The latest Residential Market Survey from RICs, published yesterday (December 12), showed surveyors reported a fall in the number of rental properties entering the rental market in November.

The November rating stood at -29 per cent — more than twice the -14 per cent recorded for November 2018.

In the RICs survey a negative net balance means more respondents were seeing a fall in new rental properties than seeing an increase so the lower the number, the worse things are in respect of rental property supply.

As tenant demand continues to increase, RICs predicted this would lead to rent increases of around 2 per cent over the next year and 3 per cent over the next five years.

Concerns have been raised about a dwindling buy-to-let market over the past few years since a series of tax and legislative changes had hit landlords’ pockets.

How the rules changed:

An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

Some landlords have opted for owning property through a limited company to bypass the tax hike.

Meanwhile the Bank of England’s rule changes will mean fewer are able to borrow money to purchase a buy-to-let property than before.

David Smith, policy director for the Residential Landlords Association, said: “If the decline in the supply of new homes to rent continues to fall whilst demand is still rising, this is going to lead to a crisis in some areas as tenants desperately search for somewhere to live.

“This is all the result of increased taxation and other measures over the last three years and the result has been highly predictable as we said it would be.”

Carl Shave, director at Just Mortgage Brokers, said: “Following the onslaught of new legislation in the buy-to-let sector together with the recent tax changes for income and stamp duty, this shortage of supply will come as no great surprise.

“Changes by the government to try and assist the home ownership housing market have sadly been implemented without heed to the wider housing needs of the country.”

Alan Lakey, director at Highclere Financial, said clients were often turned away from the idea of buying a buy-to-let property once the true cost was explained to them.

He said: “Once they’ve considered stamp duty, the solicitor and valuer fees, the tax on the rental income and the capital gains tax when they come to sell, they usually no longer want to go through with it.”

By Imogen Tew

Source: FT Adviser

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A third of landlords looking to grow portfolio

Although landlords are pessimistic about the economy, a third are looking to grow their portfolio, Monmouthshire Building Society has found.

Nearly half (45%) of landlords believe the economy will worsen and 53% think legislation around tenancy and eviction will get worse for landlords.

However, nearly two-thirds (71%) think demand for rental properties will increase and a fifth (20%) are considering growing their portfolios.

Holiday lets were highlighted as a growth area with 64% of new landlords having a holiday let property in their portfolio.

Dan Goulding, product development manager at Monmouthshire Building Society, said: “It’s been a difficult time for landlords recently, and our survey has highlighted that the majority don’t expect things to improve anytime soon.

“However, the survey also shows that many landlords believe there are opportunities to be found in the market, such as investing in holiday lets and diversifying their portfolios.

“At Monmouthshire Building Society we will continue to support landlords by offering a wide range of buy-to-let mortgage products, including holiday let, portfolio and limited company mortgages.”

By Michael Lloyd

Source: Mortgage Introducer

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More homes let by company landlords since 2016

The proportion of homes let by company landlords have risen steadily since the removal of mortgage interest tax relief for non-company landlords was announced in 2016, Hamptons International has found.

It estimated that company landlords own 641,480 homes in Great Britain this year. This is 42% more than in 2015, when 452,600 homes were let by company landlords.

Aneisha Beveridge, head of research at Hamptons International, said: “More than one in 10 rental properties are now owned by private companies, an indication that the sector continues to professionalise.

“Increasing taxation for private landlords combined with the growth of the build to rent sector has meant that more companies are letting homes than at any time since our records began.

“London, where landlords tend to have higher levels of debt and often the most to gain from corporate ownership, has the largest proportion of homes let by a company.

“However, it’s not always more profitable to put a buy-to-let into a company as other associated costs come into play.

“Strong rents in the South drove rental growth in Great Britain in June.

“Low stock levels, particularly in the South, continue to put pressure on rents. Rents rose in six out of eight regions in Great Britain, with the East and Wales recording small falls.”

The increase is partly due to the rise in the proportion of homes let by company landlords, but also due to the increase in the overall size of the rental sector.

London landlords are most likely to own a buy-to-let property in a company structure. In H1 2019, 13% of new lets were owned by a company landlord, up from 12% in 2015 and 2018.

Meanwhile landlords in Wales are least likely to own a buy-to-let in a company name. Scotland has seen the biggest increase in the proportion of homes let by a company landlord since 2015 (+6%), followed by the North (5%) and South of England (3%).

Rental Growth Rental growth continues to accelerate, reaching the highest level since April 2016. The average cost of a new let in Great Britain increased to £986 per month in June, up 3.1% year-on-year.

The South West recorded the strongest rental growth, with rents rising 4.5% annually. Rents in London increased 4.3% year-on-year.

By Michael Lloyd

Source: Mortgage Introducer

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Number of rental properties to be increased through £43 million fund

The Scottish Government has announced it will provide £30 million of funding to help boost the number of properties being built for private rent.

Investment will be provided to Edinburgh property group Sigma through the Building Scotland Fund, which was set up last year to provide loans at commercial rates as a precursor to the Scottish National Investment Bank.

The £30 million will contribute towards a £43 million Scottish Private Rental Sector Fund set up by Sigma to increase the number of rental properties in Scotland.

It is estimated the funding will enable an additional 1,800 properties to be built for private rent across the country.

Communities Secretary Aileen Campbell said: “Renting accommodation is becoming a long-term option for many people, at many stages of life, for example when starting a family or when retiring.

“We want everyone who rents to be able to live in a house that suits their needs and in an area where they want to live, including near family, friends or schools.

“We want people to have the security to make that house their home – whether they are looking for a house for three years or 30 years.”

She added: “The Private Residential Tenancy already offers greater security for tenants, balanced with appropriate safeguards for landlords and investors.

“These additional new properties to the sector can give people long-term security and the confidence they are renting from an experienced, professional management company.

“The additional long-term stability these properties provide will make a huge difference for many households, especially those wanting to create a family home and settle into a community.”

Graham Barnet, Sigma chief executive, said: “We are delighted to have the support of the Scottish Government’s Building Scotland Fund.

“Our approach to housing delivery has been working extremely well in England and is helping to deliver thousands of new houses for the private rental market.

“We see significant demand for our high-quality, professionally managed homes in Scotland and look forward to using this new fund to assist in addressing Scotland’s housing needs.

“We are also continuing to explore other opportunities to extend our business model.”

The planned investment follows First Minister Nicola Sturgeon’s comments at the SNP conference in Edinburgh that a £150 million scheme would be established to provide loans to help first-time buyers with deposits.

The scheme would offer first-time buyers loans of up to £25,000 to fund or top up their deposit.

Source: Herald Scotland

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One in ten rental properties listed on Zoopla specify ‘no benefits tenants’

One in ten rental properties being advertised on Zoopla explicitly exclude anyone who is claiming benefits, research claims.

Analysis by the National Housing Federation (NHF) of 85,912 properties listed for rent across England on Zoopla this year found 8,710 that openly said “No DSS” or similar.

Separately, Shelter has conducted a mystery shopping exercise on Gumtree and SpareRoom.co.uk, finding that applicants who mentioned that they were claiming benefits were more than twice as likely to get negative responses as those who did not.

While it is not unlawful to refuse to let to people on benefits, Shelter has earlier argued that excluding benefit claimants is discriminatory and has been rumoured to be considering a legal case under the Equality Act.

The issue has prompted much debate on EYE, with agents stating it is landlords who want this exclusion due to the perceived higher risks of rental arrears, while groups such as the Residential Landlords Association have blamed the terms and conditions set by mortgage lenders.

The NHF said that the “blatant discrimination” against people on benefits must stop.

It has issued a series of recommendations.

It calls for agents and their professional bodies to ensure all renters are treated equally, and that such exclusions are refused on listings sites.

It also wants landlords to stop using letting agents who advise against letting to tenants on housing benefit. The NHF said landlords should instead assess each tenant based on the property and whether they can afford it, rather than where the money comes from.

The NHF said: “We are calling on everyone involved in the lettings industry to take action to stop the unfair treatment of people who claim housing benefit.

“This change requires agents, landlords, mortgage lenders, insurance providers and the Government to commit to ensuring that all renters are treated equally, regardless of whether they claim housing benefit.”

Separately, Universal Credit has been blamed for a spike in buy-to-let mortgages that are in significant arrears.

Data from UK Finance shows that the number of buy-to-let loans with more significant arrears of 10% or more was up 3% annually to 1,150.

Mark Pilling, managing director at Spicerhaart Corporate Sales, which deals with arrears and repossessions on behalf of lenders, said these figures suggest issues with Universal Credit are starting to impact landlords.

He said: “Last month, the Residential Landlords Association revealed that 61% of landlords with tenants receiving Universal Credit have had problems with non-payment and arrears, and on average, these tenants owe 49% more than they did a year ago.

“Universal Credit has been plagued by problems since it was introduced, and while the Government announced in the Budget that more money will be dedicated to the new welfare system, it is clear that much of the damage has already been done.

“Many claimants experienced huge delays in receiving their money, forcing them into arrears, and many are receiving far less than they did with the old system, which means in many cases they simply do not have enough money to pay their rent on their reduced incomes.

“From a lender’s point of view, it is important that they keep a close eye on their buy-to-let customers who have tenants who are on or are soon to be moved on to Universal Credit so they are able to work out the best solution for those who are struggling so that repossession is a last resort.”

Source: Property Industry Eye

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Lack of supply pushes rents outside of London to £800 per month

Typical asking rents outside London have hit £800 per month for the first time.

There was a quarterly rent rise of 0.8%, the biggest jump recorded in this time of year since 2015.

Notably there are 8.7% fewer rental properties available compared to this time last year and 19.4% fewer in London.

The slowdown in the buy-to-let market has contributed to this lack of choice, as there was a 14% drop in mortgage approvals compared to the same period last year and a 53% fall from three years ago.

Miles Shipside, Rightmove’s commercial director and housing market analyst, said: “Rental demand is currently outstripping supply in many locations, especially in the capital.

“The exit of more landlords from the buy-to-let market in recent years has been due to a raft of different factors, from the more onerous tax regime and more stringent borrowing criteria, to the higher stamp duty on second home purchases and extra legal obligations.

“What we’re left with is a lack of available homes for tenants looking to find their next place to rent, meaning that when the right kind of property does come along it isn’t sticking around for very long before it’s snapped up.”

Shipside added: “Although some of the shortfall in supply will be met by quality housing provided by Build to Rent schemes in the coming years, it’s likely stock shortages will remain in areas with a high concentration of renters.

“Given this backdrop and rents likely to rise, private landlords should try and look beyond the current challenges if they can and stay in the sector.

“If they concentrate on improving the spec of their existing properties and buy better quality accommodation to add to their portfolios, tenant demand should steadily improve rental yields.”

Source: Mortgage Introducer