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Average buy-to-let home gained £15k in value during the pandemic

The value of the private rented sector in England, Wales and Scotland has grown 5.8 per cent to £1.4trillion following the housing market boom of the past year. The average buy-to-let property was worth 5.6 per cent – or around £14,500 – more in March 2021 than it was at the start of the pandemic, reaching approximately £259,000.

However, while the overall value of the buy-to-let sector increased, the number of homes available actually fell.

This was according to research from mortgage lender Shawbrook Bank into the effect the pandemic had on landlords.

It found that Wales, the North West and Scotland had seen the most dramatic increases in price, totalling 11 per cent, 10.7 per cent and 9.5 per cent respectively.

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Rising prices in these areas reflected the trend of people moving out of cities in search of more green space.

Meanwhile, prices in the capital increased 2.5 per cent over the last year – though London remained the most expensive region in the UK to buy a rental property.

The 5.6 per cent growth does not quite match the phenomenal price rises seen in the mainstream housing market, though it may have increased since the study was undertaken in March.

According to the latest Nationwide index, residential house prices jumped 10.5 per cent in the year to the end of July.

Landlords were able to benefit from the stamp duty holiday which saved them up to £15,000 by cutting the tax on the portion of any property purchase under £500,000.

However, they still had to pay the additional 3 per cent surcharge on second homes, which they have been liable for since 2016.

More than a quarter of landlords said they had bought a property this year because of the stamp duty holiday, rising to 43 per cent of those who owned four or more properties.

A further 13 per cent were in the process of buying a property when surveyed, as a direct result of the government incentive, according to Shawbrook.

Of those that had bought, or were in the process, 46 per cent of landlords said they would not have done so had it not been for the holiday.

John Eastgate, managing director of property finance at Shawbrook Bank, said: ‘Against the backdrop of the pandemic, the private rented sector has once again shown its strength and the important role it plays.

‘Landlords are looking to expand their portfolios due to a combination of rising house prices, attractive yields and growing demand from tenants.’

Where can landlords find the best rental yields?

For landlords looking to buy over the next year, Shawbrook revealed the regions that have the highest rental yields.

It found that the best returns could be had in Scotland, with an average yield of 5.8 per cent; the North West, with an average of 5.5 per cent; Yorkshire and the Humber, with an average of 5.4 per cent.

While London may generate the highest rents, yields for London buy-to-let properties were among the lowest at 3.9 per cent, below the UK average of 4.3 per cent.

Nearly a third of the landlords surveyed said they planned to buy their next property in a more rural location.

As well as considering the locations where they could get the best yields, landlords were also looking for property features that would make their homes more attractive to tenants in a post-pandemic world.

More than a third said they were looking for a property with a garden, while 27 per cent were seeking one with a ‘decent-sized’ living space.

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Sector’s value grew – but number of rented homes fell

While the value of the buy-to-let sector grew, its size decreased as some landlords decided to leave the market and sell their properties.

Numbers of privately rented homes fell by 2.6 per cent to 4.8million between March 2020 and March 2021, according to Shawbrook, now making up 17 per cent of total housing stock.

There has been an outflow of landlords in recent times due to factors such as a stricter tax regime, and tougher energy efficiency rules coming over the horizon.

According to separate data from the National Residential Landlords Association, the proportion of landlords intending to buy new properties saw a dramatic drop from 19 per cent in the first quarter of 2021, to 14 per cent in the second quarter, according to the NRLA.

In comparison, the proportion looking to sell up was 20 per cent, up three percentage points from the first quarter of the year.

Another possible reason for this was that landlords’ income took a hit during the pandemic, as they gave rent reductions and payment holidays.

According to Shawbrook 44 per cent of landlords reduced monthly rent for their tenants at some stage.

However, some landlords said the impact of the pandemic was not as bad as they initially expected.

Jackie Tomes, founder and chief executive of Kent-based property company Tomes Homes, said: ‘When the pandemic hit we were forecasting potential drops in rental income at 25-30 per cent, but the reality has been very different for us.

‘We have strong relationships with our tenants, and while some have (and continue to) struggle, we have been very successful at agreeing repayment plans.

‘We’ve also noticed that voids have been down because tenants haven’t been moving to a new house. So higher arrears, but lower voids.’

In the year to the end of March 2021, average rents increased by 1.6 per cent.

Fewer properties = fiercer competition among tenants
As the supply of properties decreased, the Shawbrook study suggested that demand from tenants for the homes that were available grew.

In total, 42 per cent of landlords that had remained in the market said they had seen demand increase for their properties in the past 12 months.

In addition, two thirds (67 per cent) of landlords said that they were confident about the future of the property market over the next twelve months.

Tomes continued: ‘Recently, we have seen an incredible surge of tenant demand. The locations we are invested in are seeing even more “DFL’s” (the Down from Londons) wanting to rent to test out a new lifestyle further from the city.

‘While all property types have seen increased demand due to limited supply in the market, larger 2-3-bedroom properties are seeing even more interest.’

This tallies with data from the NRLA which found that nearly 39 per cent of its members believed demand for homes to rent increased in the second quarter of 2021 (April to June) – a five-year high.

This could be a product of tenant demand coming back into the market, as many put off moves during the pandemic.

Shawbrook got its data from Office for National Statistics population projections and the English Housing Survey, as well as Ministry of Housing, Communities & Local Government figures.


Source: This is Money

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Private Rented Sector Grows to £1.4trn

The value of the Private Rented Sector (PRS) in England, Wales and Scotland grew by 5.8 per cent to £1.4trn in the last year according to a new report from Shawbrook Bank.

Since the first national lockdown, house prices have rebounded at pace. March 2021 saw house price growth of 9.9 per cent year on year, as the Stamp Duty holiday boosted confidence and demand. Buy-to-let properties have also seen marked price increases, with the value of the average buy-to let property across the UK rising by 5.6 per cent to December 2020 to approximately £258,900.

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The past eighteen months have been a period of substantial consequence for the PRS, which had already been impacted in recent years by taxation and regulatory changes. Some landlords chose to leave the market and the PRS actually contracted in size over the last year. Separately, many tenants made a change, opting to return to their family homes during the pandemic, to leave cities in search of more space, or to make the most of the Stamp Duty holiday and become homeowners themselves. This reduction in the size of the PRS therefore isn’t surprising after the last year. The outlook however points to growth.

Demand from tenants has been growing. In total, 42 per cent of landlords report that they have seen demand increase for their properties in the past 12 months.

In addition, two thirds (67 per cent) of landlords said that they were confident about the future of the property market over the next twelve months, with a third (34 per cent) of all landlords planning to buy a property in the coming year.

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As house prices continue to grow, an increasing number of people are renting for longer. Half (49 per cent) of renters say they expect to be renting for the rest of their life. Affordability is one reason behind these figures. However, a growing number are also choosing to stay renting. More flexible lifestyles have led to some looking for the same from their property. In total, 10 per cent said they prefer the reduced responsibility of renting, while a further 7 per cent said that renting allowed them to live in a better location than if they bought.

When asked why they were confident about the future of the property market, landlords pointed to house price growth (41 per cent), an increase in demand from tenants (41 per cent), the general strength of the economy (33 per cent), and the increased rental yields currently available (26 per cent).

For landlords looking to buy over the next year, to capitalise on the increase in tenant demand, and current low mortgage rates, Shawbrook’s research reveals the regions where high rental yields can be achieved. The highest rental yields can be found in the North West (5.5 per cent), Yorkshire and the Humber (5.4 per cent) and Scotland (5.8 per cent). In comparison, while London may generate the highest rents, yields for London buy-to-let properties are currently amongst the lowest at 3.9 per cent, below the UK average of 4.3 per cent.

John Eastgate, MD, Property Finance at Shawbrook Bank, comments: “Against the backdrop of the pandemic, the PRS has once again shown its strength and the important role it plays. Landlords are looking to expand their portfolios due to a combination of rising house prices, attractive yields and growing demand from tenants. Borrowing to help fund this expansion is an attractive option, with landlords presented with great choice and historically low mortgage costs.

He added: “While more first-time buyers have stepped onto the property ladder in the last year, the reality is that rising house prices mean more will continue to be locked out of home-ownership. This, coupled with disruption to employment and lagging wage inflation, will make it difficult for some to buy their own home. In addition, with more choosing to rent for the flexibility and freedom it offers, there is a clear need for professional landlords who can offer high quality accommodation.”


Source: Property Wire

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Rents shoot up in South of England

The cost of renting has risen in the South of England outside London, research from Homlet shows.

Rents have risen by 10% to £942 in the South West, by 7.7% in the East of England to £983, and by 6.1% in the South East to £1,085.

The cost of renting has fallen by 4.5% in London to £1,556, signalling people moving out of the city.

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Andy Halstead, chief executive of HomeLet, said: “At a national level the latest data shows a continuation of the trends we’ve seen emerging since the national lockdown ended, with rents for new tenancies increasing across the UK, with the exception of London.”

“In the regions surrounding London, the annualised variations in rental values for new tenancies looks significant, especially in the South West (10%), East of England (7.7%) and South East (6.1%). In reality this is a theme that we’ve seen grow gradually month on month, since July 2020.

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“In the South West average rents are now £83 per month higher than the same time last year. The upward pressure on the regions around the capital, particularly commuter towns, is coming from a broad range of tenants looking for more space, both inside and outside the property.

“The trends we’ve seen in the past 12 months highlight the responsiveness of the private rented sector, and the crucial role it plays in supporting the changing needs of a significant proportion of households in the UK.”


Source: Property Wire

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More Support Needed Landlords Tell Inquiry

Rather than concentrating on measures to block tenant evictions, Government focus should be on providing better support for the private rented sector, so as to help both landlords and tenants.

This is what National Residential Landlords Association chief executive Ben Beadle told a Housing, Communities and Local Government Select Committee’s Inquiry into the Impact of COVID-19 on homelessness and the private rented sector this week.

It was true that the Government had already provided unprecedented levels of support for the sector, Beadle told the inquiry. Even so, a solid commitment to prevent greater problems was needed, he said.

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While helping some tenants, changes made by the Government in response to the Coronavirus Crisis had also caused significant hardship to some landlords, in particular to those whose tenants had been in significant rent arrears prior to the crisis.

The NRLA has been campaigning for financial support to help tenants pay off arrears built up during the crisis along the lines of schemes already operating in Scotland and Wales.

The HCLG Committee inquiry was set up to consider both the immediate and long-term impact of the pandemic on the homeless, rough sleepers and those in the private rented sector. Current hearings are taking evidence from stakeholders about what is being done and what further support is needed. Besides hearing from the NRLA, the committee also heard this week from representatives of Citizens Advice and Shelter, organisations which have joined the NRLA in calling for financial help for renters forced into arrears by the Coronavirus Crisis.

‘What we are lacking is a longer-term strategy to help the sector and I think the measures we have laid out with our colleagues from Crisis and Citizens Advice and others are a route to sustaining tenancies, which is what everyone wants’, said Beadle.

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  • No eviction notices are to be served until 11 January at the earliest and, given the 14 day notice period required, no evictions are expected to be enforced until 25 January 2021 at the earliest. The only exceptions to this are the most serious circumstances: illegal occupation, false statement, anti-social behaviour, perpetrators of domestic abuse in social housing, where a property is unoccupied following the death of a tenant, and extreme rent arrears equivalent to nine months’ rent with any arrears accrued since 23 March discounted.

This is the advice contained in updated guidance published by the Government this week: COVID-19 and renting: guidance for landlords, tenants and local authorities. This provides advice to landlords and tenants on the provisions in the Coronavirus Act 2020, and about their rights and responsibilities during the COVID-19 outbreak.

Source: Residential Landlord

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‘Temporary relief’ for tenants as fewer landlords hike rents

The number of landlords increasing rents declined last month but is still “worryingly high”, ARLA Propertymark warns.

The trade body’s October Private Rented Sector Report found that the number of tenants experiencing rent rises fell by eight percentage points in October, with 50% of letting agents witnessing an increase in rent prices, down from 58% in September.

This is the lowest figure since June, when the number of tenants experiencing rent rises was 55%, but it is still up compared with the 22% recorded in October 2018.

Agents reported that more tenants successfully negotiated rent reductions last month, at 1.6% from 1.2% in October.

Despite this increase, the figure is down year-on-year from 3.7% in October 2018 and 2.5% in October 2017.

Agents also reported an eight percentage point increase in stock per branch to 201 in October, from 193 in September.

This is up from 198 in October 2018 and 182 in October 2017.

Demand from prospective tenants remained the same with 72 registered prospective tenants per member branch.

David Cox, chief executive of ARLA Propertymark, said: “This month’s figures show some temporary relief for tenants. However, while the number of landlords increasing rents has fallen, year on year the figure remains worryingly high.

“Even looking at the increase in the number of tenants negotiating rent reductions, which should be a positive thing, when comparing year-on-year it is less than half of what it stood at in 2018.

“For far too long, successive governments of all political persuasions have passed significant amounts of complex legislation for landlords, making the buy-to-let market a less attractive investment, and this coupled with Brexit uncertainty and a looming General Election has left the sector strained.

“Unfortunately, rents are likely to remain high and tenants will continue to feel the pinch.”


Source: Property Industry Eye

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More landlords fleeing the private rented sector or hiking rents

Letting agents have reported a spike in landlords selling up.

The exodus was ahead of the tenant fees ban, to be implemented tomorrow, and which is expected to result in higher costs for landlords and the abolition of Section 21.

ARLA Propertymark’s April report found that letting agents saw the highest number of landlords selling their buy-to-let properties since May last year.

The number of landlords exiting the market rose to five per branch, up from four in March.

There were also signs of rents rising ahead of the fee ban, with 33% of agents reporting a rise, up from 30% in March.

The number of tenants successfully negotiating rent reductions fell from 2.9% in March to 1.9% in April – the lowest figure seen since May 2016 when it stood at the same.

Rental supply was marginally down from 203 properties per branch to 202, but this is still up 13% annually.

Demand from prospective tenants also decreased over the month, with the number of house hunters registered per branch falling to 64 on average, compared with 67 in March.

David Cox, ARLA Propertymark chief executive, said: “As predicted, April’s findings have shown an upsurge in the number of landlords selling their buy-to-let properties.

“Tomorrow, the Tenant Fees Act will come into force in England.

“This, coupled with the proposed scrapping of Section 21, is forcing landlords to either increase rents or leave the market altogether.

“As supply of rental accommodation falls further, tenants will only be faced with more competition for properties, pushing up rent prices on good-quality, well-managed properties and decreasing tenants’ ability to negotiate rent reductions.

“In order to remain profitable, landlords will increase rents to cover the additional fees they are now faced with and as a result, tenants will continue to feel the burn.”


Source: Property Industry Eye

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Buy To Let Property Rent Rises On The Up

The number of tenants experiencing rent rises in the private rental sector rose in January for the first time since September last year.

According to the latest January Private Rented Sector (PRS) Report from ARLA Propertymark, the number of tenants experiencing rent rises increased in January, with 26 per cent of agents witnessing landlords increasing them, compared to 18 per cent in December.

This is the highest figure recorded since September, when 31 per cent of tenants were experiencing rent rises in their private rental properties.

The year-on-year figure for rent rises in private rental properties is also up, rising by 7 per cent when compared to January 2018.

The uplift in the rate of rent rises in January has come despite the average number of available private rental properties also increasing on a monthly basis, up from 193 in December to 197 in January.

This is possibly due to the increase in tenant demand also registered in the month. Demand from prospective tenants increased in January, with the number of house-hunters registered per branch rising to 73 on average, compared to 50 in December.

ARLA Propertymark Chief Executive, David Cox, said: ‘This month’s results are another huge blow for tenants. With demand increasing by 46 per cent from December, and rents starting to rise in response to all of the cost increases landlords have experienced over the last few years, tenants are in for a rough ride.

‘Last month, there were three landlords selling their buy to let (BTL) properties per branch, and as landlords continue to exit the market, rent prices will only continue to rise.’

He continued: ‘With the Tenant Fees Act passing its final hurdle in the House of Commons and receiving Royal Assent this month, tenants will continue bearing the brunt, as agents and landlords start preparing for a post-tenant fees world.’

Source: Residential Landlord

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More Competition For The Buy To Let Private Landlord

The private landlord has a hard time; whilst many are aware that tenants will seek private rented properties because of better standards, sometimes better areas, there will also be those who believe that private rented accommodation is the worst deal available for tenants and strive to persuade others of this stance. 

I wrote a little time ago of the encouragement that seems to be given to the corporate landlord, the large companies who build new properties in large numbers; they would make up the shortfall there is between what social landlords can provide. Easier to control perhaps than the small private landlord?

I was surprised to read recently that a number of private builders have decided that as they cannot make profitable enough deals with housing associations, they will register themselves as social landlords. Hopkins Homes has a turnover of £166 million; with concerns that the homes they are building will not be affordable without branding as a housing association, they have registered Peal Community Housing as a housing association.

Others have gone the same way; Larkfleet Homes opened Swift Homes as an association in 2018. The Chief Executive of Larkfleet, Karl Hicks, stated ‘It is becoming increasingly difficult for associations to obtain the funds to buy new homes. We have therefore set up Swift…to take on this role directly’.

It seems probable that if these housing associations, and the others like them, operate with success, there will be others that will swiftly follow. Chris Wakefield, a director of Park Properties which registered in September said that there were problems with bureaucracy (there’s a surprise) but echoing other private builder Housing Associations, that the original housing associations, had been known to offer ‘less than build cost’ for developments. Of all the people that should be working for charity and negative profit, it is not fair to expect private builders to join that number.

But are a housing association the way to ensure houses get built and a fair deal be found all round? I think it will be confusing for many people. Will the properties be offered on the same terms as a social property? Will the tenants appreciate the differences, if there are any?

Why is this challenge for the private landlord? Brand new properties will always seem more appealing to some than a characterful, and probably more spacious, older property. I think the grants that landlords used, having diminished, will disappear; the landlords that the Government will want are the corporate lettings. I hope it will work, but not to the detriment of the many caring and responsive private landlords that the local authorities have relied on.

I cannot fail to mention this week that Amber Rudd has had the courage to say that Universal Credit is not working and that more changes need to be put in place if it is to effectively provide benefits to those that need them. Well said, Ms Rudd. Is she making a place for herself as the landlords’ friend? There may be a general election before long – Amber Rudd as Prime Minister? Remember you heard it here first!

Source: Residential Landlord

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Private Rented Sector investment to hit £75bn by 2025

Investment in the UK’s private rented sector (PRS) is expected to nearly double in size over the next six years, as home-ownership rates wane in the wake of affordability pressures.

The level of capital being invested or committed into the UK’s professionally-managed institutional PRS is forecasted to hit £75bn by 2025, marking a sharp rise from its current levels of just under £40bn.

The total proportion of the UK’s housing market which is expected to be privately rented is also set to grow from 20.6 per cent to 22 per cent, with an additional 560,000 households predicted to be living in the private rented sector by 2023, according to Knight Frank.

“Once again, affordability has emerged as a key reason for people choosing to rent in order to live in an area where they would not be able to buy,” said Tim Hyatt, head of residential lettings at Knight Frank.

Hyatt added: “However, average rents in Great Britain rose one per cent in the 12 months to December as more landlords leave the sector and levels of stock decline.”

Source: City AM

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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