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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

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Buy To Let A Strong Investment For Most

The majority of buy to let investors still see buy to let as a good strong investment, with 56 per cent looking to keep or buy more rental properties.

The majority of landlords still see the sector as offering a good money making opportunity. However, there is concern that it will decline in the future with 44 per cent looking to sell. For those who are looking to leave the sector, 24 per cent are blaming falling yields. 23 per cent are concerned about tax changes and 19 per cent blame a decline in house prices.

60 per cent of landlords feel that property management had become a burden, likely because of growing regulation in the sector. 61 per cent of buy to let investors undervalued the costs that were involved.

However, some of those who are planning to sell their portfolio will remain involved in property, with 27 per cent planning to invest the money into their main property compared to a third who are thinking of re-investing in another asset class.

A significant regional divide was noted in terms of the best performing areas. Analysis from Octopus Choice revealed that typical rental properties in London cost landlords over £1,250 per annum for the first five years. While there are still hotspots such as Tower Hamlets, Barnet and Hackney, three quarters of landlords in the capital think buy to let investment will be less worthwhile in five years.

In Scotland and the East Midlands returns were more plentiful. Scottish landlords saw average annual returns of 8.8 per cent on their investment over an eight-year period, while those in the East Midlands return 8.2 per cent, making buy to let still a strong investment.

Head of Octopus Choice, Sam Handfield-Jones, said: ‘Brits still have an incessant love affair with bricks and mortar – but the hassle and cost of buy to let is a source of growing frustration, and some landlords may find that their once reliable day-to-day income is becoming harder and harder to come by. But this isn’t the case across all parts of the market, with money still to be made from the right property in the right region.’

Source: Residential Landlord

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Thousands Of Buy To Let Property Investments Sold

Almost 4,000 buy to let properties per month are being sold by property investors as part of the first recorded fall in the number of rental properties in 18 years.

New official figures from the Ministry of Housing report found that around 3,800 buy to let homes are being sold by landlords each month. This is due to changes in mortgage interest tax relief, which continue to have a negative effect on the buy to let market.

Landlords’ profits have been negatively affected by a plethora of tax and regulatory changes over the last few years. These changes range from the removal of the ‘wear and tear’ allowance for rental properties and the implementation of the 3 per cent Stamp Duty surcharge.

Chief executive of letting agent trade body ARLA Propertymark, David Cox, said: ‘The barrage of legislative changes landlords have faced over the past few years has meant the buy to let market is becoming increasingly unattractive to investors. Landlords are either hiking rents for tenants or choosing to exit the market altogether to avoid facing the increased costs incurred.’

The vast numbers of landlords leaving the buy to let market has lead to a chronic shortage of properties available to rent in certain parts of the country. The disparity is felt particularly acutely in London where rental demand is high.

CEO of Shojin Property Partners, Jatin Ondhia, commented: ‘As a result of the government’s increase in stamp duty, it is now much more costly to acquire a buy to let property. A £250,000 investment property will incur stamp duty of £10,000 compared to £2,500 for an owner occupier. Many landlords have seen their profits eroded by the increased burden of taxation and regulation. They are also facing poor buy to let yields especially in London for example, where they are between just 2-3 per cent, while nationwide the average yields are between 6-8 per cent.’

Source: Residential Landlord

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Supply of rental property continues to fall

Despite rising demand, housing levels in Britain’s private rented sector are dwindling, highlighting the need for more investment in purpose-built rental property for the country’s growing number of tenants.

Summary:

  • Up to 4,000 traditional buy-to-let rental properties are being sold each month by private landlords
  • New taxes introduced to curb buy-to-let investment are forcing more second property owners to sell due to rising costs
  • At a time when more people are renting their homes, it is imperative that greater levels of investment is put into the purpose-built rental sector

The gap between supply and demand levels of UK rental property continues to widen.

Close to 4,000 traditional buy-to-let rental properties are being sold in the UK each month, according to the latest report from the Ministry of Housing. In total, supply fell by 46,000 properties in 2017, the first recorded decline in rental homes in the country for 18 years.

The reduction in the availability of buy-to-let homes, often older properties on the outskirts of city centres originally intended for owner-occupiers, comes at a time when private landlords are being faced with increasing costs. Two years ago, a series of new tax measures, including a 3% rise in stamp duty on buy-to-let purchases, came into effect, decreasing profit levels.

As a result, it’s prompted many landlords to leave the market. Recent figures from UK Finance highlight a 19% fall in new mortgages approved for buy-to-let homes in the UK.

These findings back up those published earlier in August 2018 from the Royal Institute of Chartered Surveyors, who believe that this falling supply at a time when the demand for rental accommodation continues to rise will drive rental prices up 15% by 2023.

Increased taxation aims to shift the focus away from the outdated buy-to-let sector and grow investment in the purpose-built rental sector. These homes, located in prime city centre locations with the best facilities, are the properties that modern tenants will pay premiums to access.

Source: Select Property

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Warnings emerge of a ‘rental drought’ as lettings listings drop amid landlord exodus

An exodus of landlords from the buy-to-let market has caused a 12% drop in rental property listings over the past 12 months, Home.co.uk claims.

The property search engine currently says there are 228,033 houses, flats and rooms to rent across England and Wales.

It warns that buy-to-let taxes and Right to Rent rules have deterred landlords, with London the hardest hit.

Home.co.uk’s data shows there has been a 20% fall in rental supply in the capital, especially in richer areas where rents have in turn soared.

This was led by Westminster, where listings have slid by 447 to 2,673 over the past 12 months, pushing the average monthly rent up 24% to £5,292.

Kensington & Chelsea has 427 fewer listings at 1,584 and has seen rents rise by 14.7% over the past year to £5,502.

Doug Shephard, director at Home.co.uk, described the situation as a “rental drought”.

He said: “The current situation is particularly dire for tenants, who are set to continue to face increasing competition for good-quality properties and rising rents.

“Government red tape and higher taxation in the lettings market has triggered forced sales by landlords. Moreover, this additional supply is now negatively impacting on capital values.

“Vendor landlords have done their maths and they know that if they continue to let the property, even with a rent hike, they will be losing money overall. Conclusion: time to sell.

“The problem is, though, that the private rented sector constitutes 20% of the housing stock, the majority of which is owned by landlords with small portfolios. A recipe for disaster? Maybe.

“Negative sentiment in this sector is certainly sufficient to turn confidence in the wider property market to the downside, thereby creating misery for all, especially those wishing to rent.”

Source: Property Industry Eye

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Six million UK rental properties demanded by 2025

GBP 21 billion worth of purpose-built rental property was bought in 2017 alone, as a rising number of Britons are moving into the country’s rental market.

Summary:

  • The scale of demand in the UK’s rental sector has been revealed, with six million people expected to be wanting to live in rental accommodation by 2025
  • 20.5% of households in the UK are expected to be renting by 2022
  • Over 100,000 purpose-built rental properties are estimated to be in the pipeline, as buyers invest heavily into the sector

Is the UK’s rental market able to keep pace with rising demand levels?

As more Britons choose to rent their homes, new research from Hamptons International suggests that, by 2025, six million people will be demanding to access rental property.

From difficulties getting onto the property ladder, to changing generational attitudes towards renting, the rental sector continues to serve as the primary housing market for an increasing number of people in the UK.

The research also forecasts that, by 2022, 20.5% of all British households will be renting, up from 19.4% in 2018.

While Hamptons explored a number of theories as to how homes come onto the rental market, it did highlight the growth of the ‘Build to Rent’ market; purpose-built rental properties from developers funded by private and institutional investors.

As more Britons actively choose to rent their homes, there’s been an increased focus on ensuring that higher quality rental homes are delivered, while there’s also been renewed importance on raising management standards to better support the UK’s growing number of tenants.

The report commented: “Build to Rent only accounts for a small part of the market today, but we estimate there are more than 100,000 units in the pipeline and more to come.”

Analysis shows that the sector is anchored by significant amounts of wealth, with 65% of investor purchases in the sector in 2017 made with cash, totalling GBP 21 billion worth of property sold.

Source: Select Property