Landlords warned they must prepare for longer tenancies

 

 According to the Association of Independent Inventory Clerks (AIIC), landlords and property managers must now prepare for long-term tenancies as data shows the average private tenancy length is now four years up from three and a half years in the previous survey.

The organisation says heightened preparation must include thorough administration and more thought about the choice of furniture and interior design themes.

It also found that some 46% of 25-34 year-olds lived in the Private Rented Sector in 2014-15, up from 24% in 2004-05.

Patricia Barber, Chair of the AIIC, said: “Despite numerous reports suggesting that the average tenant doesn't want a long-term contract, the official statistics show that average tenancy lengths are increasing – particularly among families – as people rent for longer.”  

The organisation says that these figures should encourage landlords to think harder about what will make their rental property feel more like a home and what can be done to facilitate renters staying in their property for longer.

Barber also states that the phenomenon of long-term renting highlights how important it is for landlords to be organised and make sure they're on top of their administration duties.

She said: “When tenants stick around for longer, often the chances of confusion and disagreement over certain issues are increased when the tenancy does eventually come to an end. The longer time goes on, the more likely landlords and tenants are to forget details from the tenancy agreement or important information about the deposit, and that's why stringent administration – keeping copies of everything and organising it accordingly – is so important.”

The AIIC reminds landlords that this need for evidence and records – especially for long-term tenancies – demonstrates the value of a thorough and professionally-prepared inventory carried out at the start of the rental.

Barber continues: “There are more grey areas over the condition of a property the longer a tenancy goes on. A detailed inventory will help landlords and tenants to determine exactly how the property's condition has changed over the course of the tenancy, what can be deemed fair wear and tear and what needs to be replaced and therefore deducted from the tenant's deposit.”

Should a dispute arise at the end of a tenancy, the AIIC maintains that a detailed inventory, which has been signed and agreed by the tenant, is the most important piece of evidence available to a landlord or letting agent.

This year the AIIC is celebrating its 20th anniversary – which will be marked at the organisation's annual awards dinner, where the winner of Inventory Clerk of the Year will be announced.

Property wealth soars for retired homeowners

• Current : Property wealth soars for retired homeowners

                  

   

The latest data from Key Retirement has highlighted that homeowners who have retired have seen their property wealth soar by almost £13.7bn in the past three months.

Pensioners who own their homes outright have earned an average of £3,106 tax-free each from their houses in the past three months taking their property wealth to a new record high.
In the six years since Key started monitoring the housing wealth of the over-65s, total pensioner property wealth has increased by around 20% or £152bn - around £37,160 on average for every homeowner.
Over-65 homeowners now own property wealth of £917.1bn outright. Customers turning to equity release take out £72,000 on average.

 

 

Retired homeowners in London were the biggest winners gaining an average of around £15,061 each in the past three months.
Dean Mirfin, technical diretor at Key Retirement, said: “Retired homeowners have huge assets in their homes which can make a massive contribution to their standard of living demonstrating how important property investment is.
For many the major barometer of their financial well-being is the value of their home. The increase in values experienced since our research began in 2010 show the impact that property values can have on pensioner capital and income in retirement.
The cash that can be generated from property easily outstrips the average amount held in private pensions highlighting how important it is for homeowners to seek independent expert advice on how to use their housing wealth.”

 

 

Is this a good market for both buyers and sellers?

    

February 2016 Latest Property Price Summary

Most of the indices are showing 6-7% increases for the end of 2015, bar Halifax which seem to be recording a much higher increase of 9.5% for some reason. Rightmove report good news for first-time buyers saying “there's more property coming to market” with “asking prices pretty much the same as a month ago” and “prices have hardly increased month-on-month for properties with two bedrooms or fewer”.
And, in a rare good market for both buyers and sellers, the trading up/down market should do well this year as confidence - which is key to property market success - is high. According to The Halifax Housing Market Confidence Tracker “a majority of people believe that average UK property prices will be higher 12 months from now”. The question will be what will happen on 16th March when George Osborne clarifies the 3% Stamp Duty for second home owners and how will this affect the current buoyant market from 1st April?
Rightmove - “Active start to 2016 and surprisingly good news for first-time buyers”
NAEA - “Supply of available housing halves in ten years”
RICS - “Near term price expectations reach 20 month high”
Nationwide - “House price growth remains steady in January”
Halifax - “Quarterly house price growth at 2.2%”
LSL - “House prices increase £18,000 in 2015”
Hometrack - “City house price inflation accelerates to 15 month high of 11.4%”
Land Registry - “The annual price change now stands at 6.4 per cent”
LSL's index has some super data in it this month which shows sales in the second half of the year were above the same period in 2014. Usefully, the research delves deeper to show an increase in detached home sales - up 5% year-on-year - in the final quarter of 2015. The reason this data is useful is it provides great commentary at a regional level and good insight into which property types and areas are doing well from a volume of sales perspective as well as price.
The other interesting insight from the reports this month is the commentary on the impact of George Osborne's attack on landlords. LSL point out that “A recent Sunday Times analysis in conjunction with a major estate agency suggested that from the sales the firm recorded in 2015, only a third of homes sold to investors attracted any kind of offer from someone who wanted the property as a main residence (whether first time buyer or not), and that investor purchases made up around 15% of total sales”. In other words BTL investors are not really competing with 'normal buyers' at all. Hometrack broadly agree, with their stats suggesting “8 out of every 10 sale…. still go to owner-occupiers”. So

The question that needs answering post April is if investor demand is 'choked off' in areas with a high demand for rented property, what will happen to rents and prices in these local markets if supply is switched from the PRS to the sales market?
Property Price Towns and City Differences
LSL’s data shows the biggest monthly boost was in Bournemouth “with a 2.9% (£7,371) upswing - driven by more tech jobs in the city” and the “Strongest sales surge was found in the North West, up 8.8% year-on-year as buyers seek more property for their money”. In addition, “The fastest growth year-on-year across the country has been experienced in Luton where home values are up 17.5%, with trains here only taking 23 minutes to get into St Pancras Station.”
Hometrack’s city data shows that economic powerhouse Cambridge continues to outperform London with a 14.4% increase, while London grows at 13.8% with Bristol not far behind at 12.8%. However beyond these areas, price growth is only achieving 8-10% even in strong property markets such as Oxford. From the Land Registry data, property prices in Liverpool and Manchester, although still (by their measure) way behind price heights achieved in 2008, are seeing strong 5%+ price growth year on year, potential good news for those currently trapped in negative equity.
Demand for Property
Despite all the headlines saying what a buoyant market 2015 was, in reality, the actual number of sales moved slightly upwards according to Halifax who researched the HMRC data to conclude: “UK home sales totalled 1.23 million in 2015; marginally higher than the 1.22 million recorded in 2014”. As LSL confirm, “sales picked up during the year with transactions in the second half of 2015 6% higher than in the same period in 2014”. Data from Rightmove suggests that “demand as measured by visits to the Rightmove website in the first working week of 2016 is up by 21% on the same period in 2015.” However, we will have to wait for a few months to see if this actually translates into higher buying and selling activity rather than people more keen to look this year than last! The concern remains in that, according to Nationwide, “construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability”.
Supply of Property
This is probably the single most feared issue in the property market at the moment. Buyer demand is definitely up and strong, but the supply of property isn’t coming through. Unlike many industries, production can’t be scaled up and down quickly in line with demand. As such, agents are going to have to continue to find ways of attracting new instructions while high street offices will be battling competition from cheaper, mainly on-line propositions. The scariest stat, though, from all the reports is from the NAEA who recorded that there were “37 properties available in December 2015, compared to 72 in December 2005” showing stock levels per agent had halved. This is no doubt why the bigger agents are on a spending spree to buy up smaller, locally successful agents.

 

Where have all the rental properties gone?

According to new data from the Association of Residential Letting Agents, the supply of rental accommodation is the lowest since records began a year ago, while demand for accommodation rose slightly in January 2015.

After a period of gentle decline, the number of properties registered per letting agent branch dropped by 5% to 172 in January –10 fewer than in December.

Regional winners and losers

Supply in Scotland stands above the national average, with 280 properties available per member branch, while the supply of rental properties in London is 59 per cent less, with only 116 properties per branch. However, the capital has seen a slight increase in the number of properties available over the last month, rising from 108 in December 2015.

Demand for accommodation

Demand for rental accommodation picked up in January following a seasonal lull in December, with an average of 31 prospective tenants now registered per branch. However, it has not returned to the high levels reported in January and February last year, when there were 38 and 40 tenants registered per branch respectively.

In line with growing demand, the number of agents reporting rent hikes for tenants increased in January, with three in ten (30 per cent) reporting an increase in rent – the highest since September 2015.

David Cox, managing director, Association of Residential Letting Agents (ARLA) said: “Supply of housing continues to be a problem and tenants bear the brunt of this with more people competing for properties at higher prices. The majority of tenants find that it is impossible to save very much at the end of the month to put towards buying their own home. Our recent Cost of Renting report2 found that a fifth of those renting in the UK do not expect to ever be able to afford to buy a home, and unless we act soon to build more properties, this number will only get higher.

Upcoming stamp duty changes on additional residential properties

Nearly two-thirds (63 per cent) of ARLA members think the Chancellor’s stamp duty reforms for buy-to-let (BTL) properties will push landlords out of the market, which will in turn cause supply to drop further – and nearly six in ten (58 per cent) believe the reforms will push up rent costs.

However, nearly half (47 per cent) of ARLA agents reported that they have seen an uplift in interest from buyers looking to invest in BTL properties before the 1st April – a rise from 24 per cent from last month.

David Cox continues: “A few weeks into the new-year and the April deadline for the stamp duty surcharge is looming and interest from buyers looking to invest in buy-to-let properties and beat the deadline is ramping up. The final details of the new tax will be revealed at the Budget in March but we are not expecting to see the Government back down on this policy. The findings from our members echo our concerns that efforts to penalise buy-to-let landlords will ultimately impact those entering and currently in the rental market, as by increasing rents landlords will seek to recoup their costs. Rent costs are already rising exponentially, and tenants are feeling the strain of a crowded marketplace. We just need more houses; it’s as simple as that.”

 

 

 

 

 

 

Landlords beware: Sub-letting on the rise

New research by landlord insurance provider Direct Line for Business reveals that one in six (17%) tenants in the UK admits to having rented out part or all of their property to someone who isn't on the lease agreement.

A quarter of tenants who sub-let their property didn't check the terms of their lease to see if it was permitted, while 34% had not informed their landlord of the decision.
Of the sub-letters who did not inform their landlord, 23% got found out in the end anyway.  The consequences when landlords catch tenants sub-letting can be severe. In 11% of cases the tenants named on the lease were evicted with 6% losing their deposit in the process. Other repercussions include landlords increasing rental charges (22%), issuing a fine (14%) or issuing a formal warning (8%).
In spite of this, Direct Line for Business's research reveals that 2016 could see an increase in the number of people sub-letting their properties. One in six renters (15%) claim they are thinking about sub-letting part or all of their rented property by advertising on property letting websites such as Airbnb.
Nick Breton, Head of Direct Line for Business said: “The average monthly rent across  the UK currently stands at £7392. This means on average, approximately a third of people's income goes towards accommodation. With the market having seen a five per cent increase in average rents in the last year, it seems that a larger number of renters are tempted to offset this expense by sub-letting their properties.”

 

 

Over the last two years, Landlord Action have seen an 18% increase in the number of instructions from from landlords with sub-letting cases.
Paul Shamplina, Founder of Landlord Action commented, “Sub-letting is fast becoming one of the leading grounds for eviction, alongside rent arrears and Section 21 for possession only. This has been fuelled by sky high rents preventing some tenants from being able to afford even single-unit accommodation, forcing many to resort to bedsits or shared accommodation.
Organised sub-letting scams are also becoming more prevalent, where tenants, or sometimes even fake tenants, advertise properties and rooms on holiday/accommodation websites in order to cream a profit without the landlords' consent.”
When looking at who the properties are sub-let to, friends or recommendations (28%) are the two most common types of sub-lets. Family members account for just over a fifth (21%), while 19% of renters have sub-let to strangers responding to an advert.
Sub-letting is most common in the North West and West Midlands, where more than a quarter (27%) of private tenants say that have sub-let their properties. London (23%) is third, while renters in the South East (9%) and Northern Ireland (7%) are least likely to sub-let their properties.
Nick Breton continued: “There could be some serious consequences for tenants who sub-let, but landlords need to be aware that in these circumstances there could also be insurance implications. Sub-letting is not covered under most insurance policies, so it's really important that landlords make their tenants fully aware of the restrictions on the lease and maintain that communication that can help prevent any future breaches”.

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