Tag Archives: Property Advice

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.

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.

10Oct 2011

The Benefits of Regulated Letting Agents to Landlords and Tenants

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By Craig Smith

Wow, it seems like only  minutes ago that our blog was last updated but it is nearly 2 months already! Anyway, not too long ago I published a post raising some concerns that some people have with unregulated letting agents not being properly trained. Well, I can confirm that I have now passed all four of the ARLA Technical Award examinations which means that I will soon be able to become a member of ARLA!

Because of this, myself and one of our directors attended a regional ARLA meeting just last week. This is where members from the surrounding regions (in our case, Staffordshire and Shropshire) get together and discuss the latest legislation changes and ideas to promote our businesses and ensure that we always give the best and up to date advice.

Unregulated Agents Under-Cutting

One topic that was discussed was an unregulated agent who was seeing properties with a to let board and contacting the owner with false promises of having a tenant who is very interested. Of course, once a Landlord has moved to the agent the tenant has magically already found somewhere else but the agent has then gained (or in some peoples opinions stolen) the business from a professional organisation.

Sometimes a logo doesn’t mean much but a little homework can go a long way. For example, as you are reading this now, do you really know what ARLA means and how they look after both Tenants and Landlords? By being a member, an agent has to follow the codes of practice as set out by them which gives a more professional letting service and better management of a rental property.

Proper Training for Professionals

Another good service provided by ARLA is the training that they can provide. Not only the exams as we spoke about earlier, but training sessions throughout the country for different areas of property management. You might think that an agent should already know everything about everything but there is always something new on the horizon! Updates in law can determine whether a process needs to be changed or different advice needs to be given to a Landlord.

Of course, not every unregulated agent should be treated as cowboys, it always takes time to become established and better known in an area and also time to gain the experience needed. Unfortunately, like with most walks of life, it only takes a handful of the bad guys to give others a bad name.

Important Updates for Landlords

As mentioned earlier, it is important for Landlords and Agents alike to stay in the know of changes to legislation that may affect their rental properties. This is another benefit of being a member of a professional body as we found out last week with the changes to the payment of water rates for a rental property, more about this to come soon! 

30Sep 2011

Property Landlord Advice: Rents rising in August.

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By Mike Edwards

Rents rose by 1.2% in August – the largest monthly increase in a year – but tenant arrears increased for the first time since April, according to the latest buy-to-let Index from LSL Property Services plc. The average rent increase to £713 per month across England and Wales in August, surpassing the previous record high of £705 in July. This is the largest monthly increase since August 2010 with rents rising fastest in Wales and the South East, where both saw increases of 2.1%, closely followed by London (1.5%) and the South West (1.3%).

The only regions to see a monthly fall in rents were West and East Midlands where prices dropped by 0.4% compared to July. Annual figures show that London has seen the highest rental figures, with rents hitting a new record high of £1,025 per month in August, an annual growth of 6.6% equivalent to £63 per month. According to even more recent figures the average rent in Greater London according to tenant referencing specialist HomeLet has now increased to £1,202. This is an increase of 12.2% compared to the same time last year but over the same period; the average salary of tenants in the region has increased by just 2.4%.

LSL also report that annual returns on rental property improved in August after annual decreases in property prices slowed. The average total annual return in August rose to 2.6%, as capital losses diminish. However, there are signs that tenants are already feeling the strain of the rent rises as tenant arrears increased for the first time since April, with 10.7% of all UK rent unpaid or late by the end of August. This is up 9% compared to the previous month. Unpaid rent totaled £300 million across the UK in August, up 19.5% from the £251 million unpaid in July.

However, August figures always show an increase in arrears because the holiday season often takes its toll on tenant arrears, with many households squeezed by summer holiday spending. While arrears may be expected to fall back into line in the short-term, the growth is indicative of the mounting pressure facing tenants. With rents rising so quickly, soaring inflation and an uncertain economic outlook as evidenced by the recent turmoil yet again in the markets, over the long-term one can only anticipate that rental arrears will become a growing financial problem for landlords.

19Sep 2011

Rental Issues: Can Tenants decorate?

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By Steve Roulstone

As I stated in my last blog, it has been one of those weeks where recurring issues have chosen to raise their heads all at the same time and the latest one that has attracted the attention of my ‘electronic pen’ is that of Tenants decorating a property, either with or without permission!! This week it has been one of the latter that has caused the problem and because of this, I felt these pages would be a good way of clarifying exactly what should happen and what is or is not allowed for Tenants wishing to decorate in a rental home.

Good call.

Firstly, unlike many of my compatriots in this industry, I appreciate where Tenants are coming from when at a viewing they ask if they can decorate. I can see that the person asking (it is usually a Female who would ask the question) does so because they wish to make the house their own and put their own stamp on what they perceive as their future ‘home’. It can be disappointing for a Landlord to be asked after they have just completed decoration in the neutral colours we suggested, so unless decoration is a real issue, we normally say not for the first six months, after all, as we explain, if the Tenants decide to move after six months, then we would rather they saved their money!

Without knowledge.

This is the scenario that we all fear and I well remember the first time this happened to me, when  a Mother, wishing to provide her kids with a bedroom that was definitely their own, decorated one bedroom in red, black and white Manchester United wallpaper, complete with gold and red crest and the second bedroom in Barbie pink! It was not just that the wallpaper was garish, but also because it was job had very badly carried out and even after removal of the paper, the paintwork resembled a poker dot finish rather than a normal painted finish.

The correct way.

Of course permission to carry out decoration should not and cannot be unreasonably withheld and that means that a system should be in place so that approval can be sought. This should include a written request from the Tenant including colour and paper samples, which will produce a written response from the Landlord either saying yes or no to the suggested scheme. This is because it is unreasonable to ask that a bedroom should be painted deep purple, no matter what the reason for the request, so it is therefore NOT unreasonable to refuse permission. But with acceptable colours a written acceptance ensures there is no comeback, either for the Tenant, or the Agent!

Professional Decorators.

But Tenants should be made aware, that even if the Landlord does accept the scheme itself, they will (and should) expect a professional finish in carrying out the work. I have known Landlords insist that any work is carried out by professional decorators and if the property has been decorated in this manner in the past, then to request painters and decorators to carry out the work again, is reasonable. But to allow people to carry out the work themselves does leave the standard of the work squarely on the shoulders of the Tenant and if they fail to carry out the work well, with badly fitting paperwork and the edges of paintwork not defined, then it is perfectly reasonable for the Landlord to insist the Tenants pay to have the room returned to its original state and condition.

Confirmation is everything.

This is a judgement call for both Landlord and Agent and in most cases is dealt with as previously mentioned by ensuring letters are in place, with perfectly clear obligations contained in the letter and with photographs of both before and after. If doubt does exist, then permission could be given for just one room, such as a bathroom or small bedroom, to judge the standard of decoration achieved prior to allowing any further work to be carried out. Either way this is a major part of Managing a property and should be taken seriously, and dealt with professionally to ensure mistakes are avoided for all concerned. But even though we advise all Tenants of the procedure before  commencement of all Tenancies when we discover that decoration without permission on a property visit we know the consequence will more than likely, not be good!

12Sep 2011

Current Property News: Property debate on 'You and Yours'

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By Steve Roulstone

Well it only lasted for ten minutes, but I for one would like to thank the BBC for actually doing what I have been pointing out for what seems like years – if you are going to discuss the Rental Industry, get a professional in to do it! Alongside a representative from Shelter and from a leading London Estate Agent, the BBC invited Ian Potter of ARLA to join the discussion about where the housing market is going in relation to supply and growing demand.

UK is larger than the South East.

It was also good to hear it being pointed out to the Estate Agent world, whose representative initially quoted facts and figures for the London market, that this is a larger Country and that what happens outside of London is not only different, but that it matters just as much – well done Ian!

Supply and demand.

The main points raised in the short debate (longer than would have been allowed on TV so not complaining!) was that the market is reacting to supply and demand and that availability and prices reflect exactly what is happening in the market at present.  The equality between wages and deposit requirements, now and thirty years ago when deposit requirements were approximately the same was noted with great interest and spoke volumes about where modern priorities now lie. It was also made clear that more Landlords would buy if the property was available to enable them to invest, but it was a shortage of property that was delaying them doing so.

Family needs catered for.

 It was also muted that more family homes were required, to enable couples to settle and start a family in the rental sector, rather than waiting until they could buy before they did so. This is a subject that I agree wholeheartedly with and have backed up with property that My Wife and I have purchased for our portfolio, which are all Family homes. Now here’s an idea, if the Government wants to do something to get the market moving and solve an issue which could if ignored have an impact on birth rates, how about encouraging the Landlords with the money to buy the family homes that are not selling?

The difference.

 The plea that Ian Potter of ARLA made loud and clear in the programme (although I am still unsure what level playing field was being talked about?) was that Estate Agents, Letting Agents and Landlords be given professional status through Government legislation. It was good to hear a plea for professionalism and to see that other agencies, in this case Shelter, agree. It would have been nicer if it could have been embellished upon, but I have to accept it was not the central theme of the discussion.

A good shout well made!

The point was however clearly there for all to hear, that through professional agencies, would come professional services and the minefield that can exist for Tenant and Landlord alike, should they suffer the consequences of dubious management by the rogue agents that continue to give our industry a poor reputation, could help to be avoided. So well done Ian, and thank-you BBC for bringing in a Professional from our Industry. 

 

09Sep 2011

Current Property News: Good news bad news day for renting. Not forgetting the legal issues.

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By Steve Roulstone

I recently commented on how the BBC in a recent report, jumped to conclusions without researching the market to back up the assumptions that they confirmed on air. Namely, that not buying your own house was bad for individuals and supposedly the Country as a whole. There is no great surprise here because the BBC loves to report on the property market in a negative manner, I wish I knew why, but can only surmise as to the reason!

Endesleigh understand!

So it was with great pleasure that I found an article pointing out that by way of a survey that had been carried out, my own findings, from dealing with Tenants on a daily basis, were correct. One of the main reasons people are renting is because it suits their lifestyle. The ability to move on quickly, sample differing locations, City or Country, differing types of property, Flats or Houses all add to the trend for renting to become more popular up and down the UK.  I do not quite understand the reference to colours contained in the article, but will comment further on the point about price, because another article, released on the same week, completely disagrees.

The Telegraph does not!

So imagine my surprise, within five minutes finding an article that completely sees the current market in the opposite way in relation to the cost of Renting against the cost of Buying? I accept that the report does refer to first time buyers and specific advantages available to them in the housing market, but I think we have to look at where the information comes from in this case. Unfortunately, we are not given that much detail, but what I can state, is that the average rent of £677 for a two bed flat, is heavily influenced by London rates and is therefore unrepresentative of the rest of the Country. More detail would be useful.

Complicated process.

What does effect the decision to rent rather than buy, is the legal process that everybody has to go through and the risk associated with a sale collapsing, this despite open discussion and comment that the system is in desperate need of reform.  The long winded buying process is unworkable for people who know they will probably have to move at least once if not twice during their formative working years and until such time as a quicker, cheaper workable method of buying and selling property is introduced, this will only further encourage people towards the rental market.

Facts do not lie.

Well in this case with the affordability question, I guess the jury is still out and unless and until we see the figures behind the statements contained in these reports, I for one could not comment further. However, one fact that needs adding to this equation is the evidence we see through our own Agency of a legal system which appears to be getting worse rather than better, causing more deals to collapse. I say this because we see the effect of sales that have gone wrong as owners turn to the rental market to allow them to move on by renting their home out or desperate for rented property to allow their chain not to collapse, in increasing numbers. Add this to the proven fact that more and more people are looking to the rental market for their chosen route to find a home, the problems, cost and delays caused by buying and selling property at present will only swell the ranks further and add to those people turning to the rental market as their solution.

05Sep 2011

Current property News: Rental increases Figures behind the Facts.

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By Steve Roulstone

Here are some of the facts behind the figures that are being quoted organizations who specialize in collating data for the property market. On their own figures do not always mean much, but placed together in this format and a pattern is emerging!

  • Rents rose for the sixth consecutive month in July, increasing by 0.6% to £705 per calender month and marking a new record high. It means that the average rent is now £29 higher per month than in July 2010. Nevertheless, the level of late of unpaid rents fell slightly from 9.3% to 9%, according to the latest Buy-to-Let Index from LSL Property Services.. The average yield also rose reaching 5.2% in July, up from 4.8% a year ago.
  • The greatest rental increase was in London, where rents increased by 7.1%, hitting a new high of £1,009 per month. This was followed by the North East, where rents increased by 5.5%, and the East and West Midlands, where rents rose by 4.8%. Only in Wales have rents remained flat year-on-year. On a monthly basis, rents increased fastest in the South East, up 1.7%, while in Wales and the East Midlands they increased by 1.4% compared to June. David Newnes, estate agency managing director of LSL Property Services, says: “Rents are on an upward trajectory, and it is unlikely that tenants will gain respite any time soon. Demand from thousands of frustrated buyers each month is underpinning buoyant competition for rental homes, enabling landlords to increase prices.
  • “This is the peak summer season, with more renters on the move, the market will continue to heat up. Such strong demand and high rental incomes has forced lenders to take notice, and more are returning to the sector. As a result of the competition in the buy-to-let market, the range of affordable products is expanding – and lending to investors rose by 21% in the last quarter. Nevertheless, even with squeeze on landlord finance abating, the new supply will not be enough to meet demand from tenants.

 

  • Almost a quarter of landlords are feeling more optimistic about the prospects for their property portfolios, rental income and yields. They are helped by a perception of availability of buy-to-let finance: 22% in the second quarter of this year said that it was reasonably available, compared with 17% in the first quarter. According to Paragon Mortgage’s Q2 Private Rented Sector Trends Report, 23% of landlords feel more optimistic than was the case in Q1, particularly if they are professional landlords, with 30% stating they were more optimistic, compared with 15% of smaller-scale landlords. On average, landlords expect to have 13.1 residential properties in their portfolios in a year’s time, compared with 12.6 properties currently.
  • This is the first time in two years that landlords have predicted an increase in the number of properties in their portfolios. Nearly three out of ten landlords (29%) have increased rents during the second quarter, the majority of whom reported an increase of between 2% and 4%. Landlords are also more optimistic about the net value of their portfolios, with a growing proportion expecting an increase in value (14% in Q2 against 13% in Q1), and fewer are forecasting declining values (12% Q2 vs 19% Q1). The majority of landlords (74%) expect net values to remain the same.
  • Also highlighted in the report is a shift in the types of property that landlords are looking to add to their portfolios during the third quarter. Of those looking to purchase during the quarter, terrace houses are the most popular choice, with more than half of landlords saying they expect to buy this type of property. However, there have also been significant increases in the popularity of semi-detached houses (up from 28% to 41%) and detached (up from 9% to 22%).

All of this confirms what we as Agents have seen and continue to see month on month. The rental market is healthy and from the shop floor it is also noticeable, that we are receiving far more enquiries from would be Landlords. The ‘Buy to Let’ market may not rise to the heights of five years ago again, but the investment Landlord is definitely coming back, the only difference is that the market will give this current trend another ‘name’ soon – let’s wait and see!!

30Aug 2011

Rental Issues: Holding a property for rent.

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By Steve Roulstone

It has been a week of issues that repeat themselves at differing times in our Stafford office and the length of time that we are able to hold property has once again come to our attention.  We always receive calls from people who have decided to rent for a period after selling a home and the advice is usually the same. ‘Call us back at the most, six weeks before you are ready to move’. I have written before about the differences between Renting and selling property and what must be appreciated to understand the Landlords and agents requirements but there is still a lot of misunderstanding about how long a Landlord will hold a property for a prospective Tenant.

Change of mind.

One of the issues that rarely gets mentioned, is the way in which the law operates for Tenants and the fact that they can proceed with the intention of moving in to a property for months, and then have a change of mind for whatever reason, the day before without any penalty. What needs to be understood is that the Landlord has to start the process all over again and stand the loss of rent caused by the Tenant pulling out of the commitment. Experienced tells us that the shorter the period between the Tenant choosing a home and the day they sign the agreement (the day they move in) the less chance of a change of mind.

Normal circumstances.

It is also accepted by the majority of people renting, that apart from the need to give notice in the house they currently rent, by far the majority will move within a three week period. In fact it is still far more common for us to have Tenants wishing to move within one week than Tenants wanting to move in over six weeks! So the market itself produces a normal scenario and this is what most Landlords will expect. Therefore, when we do get asked to hold a property for a longer than normal length of time, as we must always ensure we follow the Landlords wishes, it is very rare for a Landlord to agree, rather, allowing any subsequent Tenants who wish to progress at an earlier date to rent the property instead.

Risk is inherent.

It is when a Landlord does indeed choose a Tenant wishing to move at an earlier date that the problems arise, because even though we confirm that we cannot accept the application for an extended wait, advising people that they have lost the property concerned understandably causes upset. We always ensure that we do not take any payment or accept referencing forms until we are able to commit any Tenant to the process, but even then, by following the Landlords wishes, as we are bound to do by our contract with the Landlord, as the Agent it is our staff that get the brunt of the disappointment, but it does explain why we always try to stop people looking for anything more than six weeks before they wish to move.

22Aug 2011

Property Landlord advice: Tenancy problems that should be avoided.

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By Steve Roulstone

 

One issue that continues to raise its head from time to time is the condition of property when the Tenant moves in. Not when it has been left in any poor state by the outgoing Tenant, because any agent knows how to deal with that problem. After all it is in the agents power to do what is needed to deal with the state and condition of a property when it is the outgoing Tenant that has caused the problem and of course the Agent will also be aware when the work is going to be carried out and when the next Tenant is due to move in. No the problem I am referring to is when the property is new to the market, or new to the Agent and it is the Landlord who is not carrying out the work they have promised and the work is therefore NOT in the control of the Agent.

First impression.

 

It is not common for Agents to criticise Landlords, but when this happens it is the Agent that bears the brunt of the complaints from the new Tenant and let’s be honest, why shouldn’t they complain, if the first thing they have to do is clean the property from top to bottom because work they have been promised has not been carried out! I know how I would feel under such circumstances and even if it is just one room, because of say decoration, it matters not, because most Ladies will then feel the whole house has been left in a poor state. Now most of the time, one persons ‘clean’ is a matter of conjecture rather than a definitive condition, but the problems caused by allowing this situation to arise for the rest of the Tenancy can be very damaging.

No choice!

 

Of course the big problem for any incoming Tenant is the lack of options most would have when faced with a dirty house. In the majority of cases everything depends on the move and having either left another rented or property that has been sold, no other options exist and this is when bad feelings really set in because nobody likes to be left with a ‘fait accompli’ that they have no say in or no other choice. Left to fester, the Landlord immediately has a problem on his hands and I would venture to suggest that if the property is being self managed (Tenant find for the Agent) then it is highly possible that the whole Tenancy will fair badly from that moment onwards.   

 

Check it out!

 

There is no doubt when the Tenants do leave it is going to be very difficult for the Agent or Landlord to prove any damage or cleanliness issues caused by the Tenant and even if let’s say the garden is not looked after with an uncut lawn, heels will be dug in if it mentioned because of the state of the house when they moved in. The other area commonly causing problems is the furniture not wanted by the Tenant being left at the property. Put simply, just because the Landlord does not want it, why should the Tenant have to put up with it?

Start well – end well.

 

Compare that situation to a house presented in excellent order, clean and ready to be occupied. Then the Tenant starts the Tenancy well and knows that they are not the only ones who want or need to look after the property. Over the years we have had many situations like this, where the solution is not in our hands (We cannot employ cleaners or move furniture without permission) and the disappointment is that it continues to happen. Best advice is not always listened to, but the follow up from the Tenants is always heard, because we are the Agent of the Landlord and are duty bound to look after his interests it is our job to do so: But it does not mean we enjoy it!