21Nov 2011

Current Property News: A housing strategy for England. But is it for the rental Industry?

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By Steve Roulstone

Today the Government have released their Housing Strategy for England, which is designed to give a kick start to housing sales across the UK, which most would agree is something that is badly needed and a view point that I totally agree with and have commented so in these pages on many occasions over the last eighteen months. But Housing Sales are not the only consideration nowadays and for once the Government have acknowledged this, with a section and strategy purely designed to encourage Landlords to start buying more property for the rental market.

Rounding a square peg.

I recognise that one problem the Government had to address was how to encourage growth in an area that had come under such criticism (Profit from rising property prices) for the perceived effect profit on Property values had had on the current financial situation and current property price de-valuation. What I did not expect but can perfectly understand is the decision to encourage growth through Business organisations rather than individuals. This very comfortably  delivers possibility of growth, which according to conversations I have recently had with Management at one of the larger National Property houses, whose clients include the organisations targeted by this policy, who are actively buying property in numbers at the moment, will be well received.

Using Council powers.

What I still cannot understand and accept, is that Local Government will be the answer to what is described as the ‘rouge Landlords’ who still flaunt such legislation as the Tenants Deposit Scheme and Houses of Multiple Occupation standards or as mentioned, the Decent Housing standards, for certainly where we are based in the Midlands, all Councils that I have come in too contact with have confirmed that they do not have either the man power or time (ability) to pursue Landlords and therefore deliver a local deterrent.

Working with the Industry.

It is very encouraging to see a whole section giving information about what the Industry can deliver and I am sure the ringing endorsement of the ‘Safe Agent scheme’ has been well received by the Industry in general, but I cannot make comment about this situation without pointing out that if the Government really wanted to get rid of rouge Landlords at the same time as increasing standards, then the Industry is here with open arms! Surely the fact behind the figures quoted that more property in the rented sector is of better quality than in the hands of owner occupiers says it all. I know that all of the properties in our Management would pass with flying colours, because we would not manage property that failed these standards.

Where does the problem lie?

I am also well aware that the figures state that some of the worst quality housing is in the private rental sector as well. Now with the information that we do not manage them and with the firm belief that neither do other professional Letting Agencies, it does not take such a massive leap of imagination to realise where these properties do actually lie! So what is the answer? Simple, involve us in managing or looking at these properties, so that all Landlords have to be connected with some professional licensed Agent. There are further issues raised for the rental sector by this statement especially surrounding Green policies, which I will address through these pages later this week.

19Nov 2011

Current Property News: Rents rise in September.

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By Mike Edwards

There is no relief for tenants as rents rise in all regions for the first time on record, according to the latest buy-to-let index from LSL Property Services plc. September figures show the average monthly rent in England and Wales rose by 0.7% to £718, surpassing the previous record high of £713 in August. With annual rental inflation at 4.3%, the average rent is now £29 per month higher than September 2010.

Rents rose in all regions of England and Wales for the first time on record and as a result rents hit record highs in six regions. Not surprisingly rents increased the fastest in the South East and the East Midlands, where they rose by 1.8% and 1.1% respectively compared to August. The smallest increases were in the West Midlands (0.2%) and the North East (0.3%). However, over the course of last year, London’s rents have risen at a faster rate than any other region, increasing by 5.8%. However the appetite for UK property investment outside of the capital also remains subdued, with 12.5% of investors looking to acquire over the coming year.

LSL also report that annual returns on rental property dropped back in September after property prices fell annually. The average total annual return in September was 1.8%, the equivalent of £2,995 being £7,661 in rent, with a capital loss of £4,666. However, property prices in the last quarter have held up better than in the previous twelve months, and if this is maintained, a property investor could expect to make a total annual return of 8% over the next year.

Rising rents may prove to be a headache for tenants, but they are improving the outlook for investors – which may in turn encourage further investment in the private rented sector. Despite capital losses after house prices fell annually, growing rental incomes means returns are still in the black. The average yield rose from 5.2% to 5.3% in September, the highest level since the housing downturn, and outstripping many investments. So with house prices yet to resume their upwards climb, there are opportunities for prospective investors to secure profitable bargains.

Figures this week from Hamptons show that investors in the shape of cash buyers are being enticed back to the market. They have reported a yearly increase in cash buyer applicants (from 11.86% in September 2010 to 12.46% in September 2011) emphasizing the perceived strength of residential property as an investment asset. Marc Goldberg, head of sales at Hamptons International says: “Due to the long-term nature of property as investment class, many of our buyers prefer to invest their cash in bricks and mortar rather than more uncertain assets such as stocks and shares. Although the current economic downturn may have caused uncertainty, vendors can take heart that we’re seeing an encouraging increase in cash buyers ready to complete quickly.”

However, this picture of positivity jars with the appetite for investment seen in the latest Young Index figures, which appear to more accurately reflect the wider sentiment of continuing economic uncertainty. This quarter’s figures show a fall in the proportion of investors seeking to acquire property in London over the coming 12 months to 33.3% (from 46.3% in the previous quarter and 59.3% in Q4 2009).

17Nov 2011

Tenant advice: Notice period and final days.

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By Steve Roulstone

It is a real advantage to be able to comment on situations which arise through the daily activity in our office as letting Agents, because it means that the Blogs are always relevant. This week is no different. Once again a theme which crops up on a regular basis has been discussed and I felt would make a good subject to advice Tenants about what to expect at the end of a Tenancy.

A full month’s rent?

It is rare for a Tenant to pay a full month’s rent for both the first month or the last month of their Tenancy and this would only happen, if for example, the Tenancy started on the 1st day of the month and ended on the last day of the month! There are two ways of dealing with rent payments and at Castle Estates Stafford, we opted for the system of taking a payment for the first month for the days remaining in that month and from then on rent is due on the 1st of the month for each calendar month in full. The other is to always take a full month’s rent due on the date that the Tenant moves in and the due date remains as that day throughout the Tenancy.

Matter of choice.

The problems are present for both systems, for example having the date a Tenant moves in as a due date, causes problems for any move after the 28th, because of February and months that only have 30 days. With our system, it is explaining why they do not just pay for a full month on the day the Tenancy commences. But as it is our job to look after Landlords first and foremost, we find that arrears are easier to control if all rents are due on the same day, then all arrears are of the same length and letters are all sent at the same time.

Monies due at the end of Tenancy.

The issue that does arrive though is not when Tenants leave at the end of a month, in line with the required length of notice, but when they leave at any other day in the month and for some reason feel that for example, if they leave on the same date they move in, the rent paid at the beginning of the Tenancy covers the extra days – is does not!

Best solution.

Has got to be good communications! It is important that Agents make it clear to Tenants what is due when and why, and of course systems in place to cover this ensure all Tenancies are treated the same. With the Tenants Deposit Scheme ensuring both parties to a deposit are happy prior to any return, it is doubly important to get this right. Bad communication in my experience leads to people digging their heels in and unless we as Agents can show clear instruction and reasoning, our customers, our Landlords, may lose out.

Proper dues.

Of course it is only what is legally due that Agents will collect and the best solution when all else fails, is to add up in total the number of days associated with any part months (only ever the first and last months) and with a daily rate to hand, calculate the rent due for both periods. Of course the daily rate has to be in line with the manner in which the courts approve daily rates to be calculated which should be confirmed as well, hopefully then as is the case with most Tenants the calculation is both understood and accepted. Unlike the Tenancy that ended badly because the Tenant expected a full month’s rent to be returned as well as the deposit, because he paid his rent in advance, even though his last payment was at the start of the month and he left on the last day!

10Nov 2011

Current Property News: Buyers feeling the freeze!

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By Mike Edwards

Banks approved 6% fewer house purchase mortgages in September than in August, with 17,000 would-be first-time buyers left out in the cold.          The figure of 33,130 house purchase approvals was, however, 8% higher than in September last year though the comparison is with a very flat month from 2010. To compound this figures from the British Bankers Association show the number of remortgage approvals in September was also down on the August figure, by 8%, although about the same as in September 2010. There are some commentators who may suggest this lessening of remortgage money is not such a bad thing in terms of how over borrowed the country and individuals are.       

The BBA reports that growth in gross mortgage activity is being driven by the buy-to-let market and it is clear that a modest stimulus to gross mortgage lending is coming from the buy-to-let sector as rental yields continue to improve as we commented on recently. Indeed any recent improvement in gross lending can almost certainly be put down entirely to buy-to-let landlords taking advantage of the current rental market than a much-needed surge in lending to first-time buyers. Strict lending criteria and absurdly high deposit requirements are continuing to keep mortgage finance out of the hands of the average first-timer, and this is flooding the private rented sector with demand.    

The only problem on the horizon though for Landlords is given the additional supply and even allowing for increased rental demand, the likely sluggish future growth in the capital value of their properties may continue for some time. And if they decide to sell their portfolio what sort of market may they be selling into? Latest calculations indicate that each month there are 17,000 more frustrated buyers than before the downturn having to rely on rental accommodation because they are unable to buy. This is driving up competition for accommodation in both the flatshare sector and the wider rental market. For many investors, these conditions are too attractive to ignore, hence the growing investment in buy-to-let.         

While this continued buy-to-let interest may well alleviate some of the pressure on the current stock of rental homes, the supply will have to increase at a much faster rate to match growing demand and limit further rent rises. The CML says that in the 12 months to August an average of 15,800 first-time buyers a month secured mortgages, compared to an average of 33,100 a year between 2002 and 2007. These are staggering figures and do not bode well for the future of the housing market for several years to come. Without first time buyers the market is eventually bound to seize up – or see spectacular price falls. 

Whilst the mortgage market is doing its best to stagger on the ailing economy is entering a state of rigor mortis, and the crisis afflicting Europe makes any resurrection of growth look unlikely.   The temptation for lenders to pull further back from an unsure market and recoup equity over the winter is becoming overwhelming. Supply of credit remains painfully restricted, meaning there is almost no margin for lenders to grow their loan books, so they are being understandably cautious and focusing on targeting borrowers with big deposits.

07Nov 2011

Property Landlord advice: Landlords visiting property can cause problems.

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By Steve Roulstone

Once again I have a subject that is very relevant to our own office, as it is based upon something that has caused some consternation this week. It seems that the only way it could have been avoided was to keep a Landlord away from his own property even though the reason for his visit was perfectly reasonable!

Managed should mean Managed.

Of course, when we are appointed by Landlords as their Managing Agent, it is not with the thought that the Landlord is then going to be visiting the property with Tenant ensconced on a regular basis. Far from it, I am a firm believer in encouraging Landlords to stay away from the property, even when they live next door, which happens more often than you would envisage! If we are appointed to be the Landlords representative, then we need to be allowed to do our job and because we have systems which ensure all actions carried out are done so correctly and that all conversations, comments and requests are noted, when this happens outside of our control it can leave us with problems, either then or later.

Coming back to bite you.

The instance that happened this week was of a Landlord unable to recall exactly what was said during a visit made (with permission of course!) to carry our maintenance (another blog all in its own right!) but it was the subject of the conversation which was the problem, because the Tenant having left the property, is being asked to decorate a bedroom back from purple walls to magnolia and yet they are stating they sought and gained the Landlords approval when they spoke.

Correct procedures at all times.

The main point here is that every member of our staff knows that as soon as any Tenant asks about decoration, we have a set procedure which includes confirmation in writing of both the request and response as well as submitting sample colours for approval. The same applies to any conversation which may have implications, we record the content, but what it is difficult to do is point out to the Landlord that they have gone about matters the wrong way by not informing us of the request when the initial approach was first made.   

Implications.

In this case, it is going to be difficult to prove the Tenant wrong, especially as we have nothing in writing to back up our case should the matter go to arbitration through the TDS scheme, which it probably will, so we may see the Landlord having to both paint the bedroom himself and pay for the privilege as a result of what started out as an innocent property visit carried out by the Landlord.

Recommendations.

So it is for cases such as this that we try wherever possible to encourage Landlords to stay away from their own property, or at the very least, to always ask the Tenants to contact us about any issue they raise, no matter how small, rather than get involved themselves, no matter how innocent the subject appears. Only then can we ensure that we remain in control of the situation and able to ‘Manage’ the position on behalf of the Landlord, after all I am yet to find any Landlord who approved purple paint for any room in their house!

04Nov 2011

Current Property News: Trapped renters equal half of the UK rental sector.

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By Mike Edwards

This information is taken from Rightmove’s Quarterly Consumer Confidence Survey out today. Trapped renters, tenants who would like, but cannot afford to, buy, make up 55% of the rental sector, with one in four of them over the age of 40, according to the portal’s latest Consumer Rental Forecast. Thus, this group faces the prospect of having to choose between a heavily reduced mortgage term to pay off any mortgage they do eventually take before they become pensioners, or continuing to pay off a mortgage into their 70s and beyond.

In rough terms recent surveys show that over half of those in rented accommodation would like to buy now, but can’t make the sums add up and, as a result, are trapped. The global economic woes that have left first-time buyer numbers at record lows will shatter the goals and aspirations of many as they face the reality of renting for far longer than they originally planned. Indeed those trapped and still renting when over the age of 40 could face the prospect of being an OAP mortgagee, or face difficulty getting a 25-year mortgage term if it takes them beyond lenders’ retirement age criteria. Generally most front line lenders will take age plus mortgage term to a maximum of 75

There is also a growing gap between demand and supply and demand continues to set records. But available stock is down 5% on the last quarter as the supply of new rental properties remains muted and tenants stay in properties for longer. The lack of supply means renters are resigned to paying more, with 53% of them expecting rents to rise in the next 12 months and 39% can see themselves still renting in three years’ time. On an Assured Shorthold Tenancy a properly served Section 13 notice to increase the rent leaves tenants with little option provided the newly sought rent is in line with local market levels for similar properties. The other danger for longer tenants is that it does not matter how much the rent is increased by, only that it reflects current trends. So any tenant that has been enjoying a fairly soft rent might find themselves with a nasty surprise if the Landlord or their agent monitors local rent and increases levels accordingly.

This of course is all good news for investors holding the type of property in demand especially in sought after locations. This combination of high tenant demand and upward rental pressure will be particularly appealing to long-term investors. Many investors say that attractive yields from rental returns, compared to returns on their other investments, are their main reason for investing in property. With the stock market continuing to offer the certainty of a stressful rollercoaster ride and safe cash investments delivering below inflation returns the solidity of bricks and mortar combined with high tenant demand and rising rents has growing investor appeal as a physical asset that could prove to be a better long term hedge against inflation.

02Nov 2011

Property Landlord advice: Keeping the House Warm!

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By Steve Roulstone

At our office in Stafford, at this time of year, we like to remind our Tenants on behalf of our Landlords, especially in relation to their Insurance, that during the winter months they have the responsibility of keeping their rented property at the right temperature to combat our winter weather. We do this every year to ensure that property is left unprotected during holidays, be it skiing, a winter break or just over the Christmas period that Tenants are away, the home still needs protecting. Especially after the hard spells we experienced last year, which were a timely reminder ensuring we do not take any year for granted as far as the weather in this country is concerned.

Correct temperature recommended.

Of course one of the most important pieces of advice, in amongst information on emergency procedures and confirmation of responsibility, is the correct temperature that an empty house should be maintained at and it is this one figure that I wanted to highlight today, because should you ask any group of people what temperature they should maintain their own house at whilst away during the winter months, it would be my position that very few would be correct in their estimate!

Plumbers and Insurance agree.

The surprising thing was that the recommendation was agreed by both the Insurance companies (written as part of the policy) and the plumbers we spoke to, namely that the house should be kept between 12c and 15c. (I know that in my own house, and even in the rented property I now occupy, I have never aimed to keep the property at this figure) However, what matters here is that as Agents we advise the Tenants in a manner that they both realize their responsibilities and are advised in a way that the implications are understood.

Co-operation required.

If it is part of a Landlords Insurance policy that a minimum temperature be maintained when a property is empty, then it is important that Tenants are reminded at least once a year and that the reminder is timely, with the beginning of the winter being the best time to renew the instruction. There is no doubt that cold snaps such as we experienced last year may not come every year, but then there is just as much chance that they will and this is something that the Landlord cannot ignore, because should an Insurance Company be able to prove that a property has not been maintained correctly, then they have the ultimate sanction and could refuse to accept any subsequent claim!     

Clear advice and implications.

What we would all seek to avoid in such circumstances, is a situation where the Tenant can be held responsible for damage caused because they did not follow what was required of them so it is important that they are both made aware and advised of the clear implications that could follow from not carrying out there responsibility. What we do know from previous experience, is uncommon to popular belief, the majority of Tenants do understand and are sympathetic to what they need to do in these circumstances and therefore when advised properly and informed on time, they will co-operate and help to keep ‘burst pipes’ to a minimum! 

01Nov 2011

Tenant advice: Correct procedure for end of Tenancy.

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By Steve Roulstone

One area that can constantly present problems to both Agent and Tenant (and subsequently Landlord) alike, concerns works needed after a Tenancy has ended, when the Tenant looks to re-visit the property to carry out garden maintenance, cleaning or removal of rubbish left. This is of course further complicated by the regulations surrounding the Tenants Deposit Scheme but for the purposes of this explanation, I will ignore TDS otherwise as a Blog this could become a Novel!

Correct procedure.

Of course what we have to work by is the legal requirements and therefore the legal manner in which Tenancies are considered. To explain, this means that the day of the check-out (for all Tenancies should be marked by an official visit to the property by the Landlord or Agent, otherwise no record can be made of state and condition) when keys are handed over and the last day that rent is actually paid for the property, the Tenancy comes to an end. The problem this presents is when the Tenant looks to re-visit to address issues as described above, because they can only do so with the Landlords permission!

Time to address the issues.

 It is the expectation and stance of many Tenants that can cause trouble here because if works are left to be done, such as cleaning or removal of rubbish, then it is perfectly reasonable for the Landlord or Agent to want to charge for the work to be completed, because the Tenant no longer has a legal right to access the property and of course the Landlord or Agent may be moving a new Tenant in as soon as the following day.

Not by right.

The main cause of any upset in my experience is the reaction from the outgoing Tenant to having access denied and the fear of charges that will arise from the work not being carried out in time. As I have stated, I am not going to bring TDS in too this scenario, so what we are talking about here are principals and the word of law. Therefore, any upset is because Landlords and Agents use the law as the basis of decisions made and subsequently it is the Law that the Tenant is questioning. Of course, the Law in such instances when applied correctly cannot be questioned and because Landlords and Agents know they are on sound footing very rarely does the Tenant receive any lee way, but even when it is granted, there can still be bad feeling, even though such access is purely at the Landlords grace.    

How to avoid problems.

Well of course there is no guarantee, because with people being people, there will always be some Tenants who do not wish to comply with the requirements of the agreement, but my advice to any Tenant is to understand what you are required to do at an early stage, then (and this is the important bit) when your Landlord or Agent confirms the end of Tenancy procedure and implications of the check out date (done properly this can avoid problems) it will not come as such a surprise. But rest assured, should you ignore the detail and expect to walk away with works remaining,  Agents will on behalf of their Landlords, pursue the Tenant for recompense, through and within the TDS legislation.

28Oct 2011

Property Landlord advice: DPS sister Company applies to run the TDP scheme for Scotland

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By Mike Edwards

The Letting Protection Service Scotland the sister company to the Deposit Protection Service in England and Wales) has applied to run a tenancy protection scheme in Scotland. Though part of a tender process the DPS rightly emphasises it will be the only contender in Scotland to have had any experience of protecting deposits.

In its activities for England and Wales the DPS has protected more than 1.7 million to date, amounting to more than £1.3bn in value. Its application is fully expected to be approved and will trigger implementation of compulsory tenancy deposit protection in Scotland where, unlike England and Wales and argued by many very sensibly, insurance-backed schemes will not be authorised.

Instead, landlords and agents who take deposits must put the money in a banking or ‘custodial’ scheme and from the date the Scottish scheme launches from that date they will have 30 days (not the 14 as in England and Wales) to protect deposits for all new tenancies. Landlords holding deposits for existing tenancies will have nine months’ from the launch of the first scheme to protect their tenants’ deposits.

Under the Tenancy Deposit Schemes (Scotland) Regulations 2011, which came into force in March 2011, landlords and letting agents will have a duty to protect tenants’ deposits as soon as the first approved scheme launches. This is thought likely to be from April 2012 or if not soon after.     
               
There has been constant criticism of the English decision to allow three schemes, two of them insurance backed and in effect promoted by vested interests. In reality The Dispute Service in effect is for agents and Mydeposits.com is for Landlords enabling both to hold onto the deposit monies.

This was seen by many objective commentators as rather defeating the object of TDP which is to keep the tenant’s money – and all too often it is forgotten just whose money the deposit actually is – 100% safe and protected from abuse by others.

25Oct 2011

Property Letting Update: Tenants Numbers Fluctuating

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By Craig Smith

We were having a conversation in the office just last week about how the number of tenant enquiries seems to have dropped rapidly. The number of telephone calls receiving asking about properties had fallen but Landlords are still as keen as ever to get their properties let, if there is no tenant there is no rent coming in to cover mortgages, insurance etc.

More Tenants on the Move

But wait, its not as bad as it sounds! By looking at the number of enquiries compared with the last 2 years there is still an increase in the number of tenants on the move. For example, on our website alone, the number of views from August 2009 to August 2011 had risen by more than 12,000. It is the same story comparing the number of views from March 2009 to this year with an increase of more than 13,000!

This doesn’t necessarily mean that there are 13,000+ more tenants moving. More and more people are now using the internet for everything from ordering their weekly shop, to social media, to finding a roof to go over their heads! Perhaps the increase could be blamed on a mix of properties being more easily accessible online and an increase in the number of properties in the rental market.

Higher Demand, Higher Rents?

There have been a number of news reports recently stating how poor the housing market is and that many people cant afford to get themselves onto the property ladder, so perhaps this is why more people are looking to rent instead? It has been reported on the ARLA website over the last couple of weeks that demand seems to be outstripping the supply of rental properties.

Well, we always have properties available and I very much doubt that we’ll ever see a day where we have absolutely nothing left to market but this isn’t quite what is meant by this term. Sometimes we see a high demand for family homes, such as 2 or 3 bed houses and as they get snapped up, the number still available will decrease. This is when tenants may be willing to stretch to pay a little more rent to make sure they get the house they want. At this time of year, there is always lower demand for rental properties and we can prove this by looking at the number of enquiries in October year on year.

Should We Be Worried?

It seems that the only news we see about property in this country is how about how poorly the market is doing and how the country is on its knees. Yes, it is true that a lot more people are trying to spend less wherever possible, not just in the property market but life in general. I don’t think we need to be worried but perhaps just a little more cautious.