Tag: Landlords

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A Fairer Private Rented Sector

A fairer private rented sector

A Fairer Private Rented Sector

Foreword from the Secretary of State

 

In the words of Michael Gove

Everyone has a right to a decent home. No one should be condemned to live in properties that are inadequately heated, unsafe, or unhealthy. Yet more than 2.8 million of our fellow citizens
are paying to live in homes that are not fit for the 21st century. Tackling this is critical to our mission to level up the country. The reality today is that far too many renters are living in damp, dangerous, cold homes, powerless to put things right, and with the threat of sudden eviction hanging over them. They’re often frightened to raise a complaint. If they do, there is no guarantee that they won’t be penalised for it, that their rent won’t shoot up as a result, or that they won’t be hit with a Section 21 notice asking them to leave. This Government is determined to tackle these injustices by offering a New Deal to those living in the Private Rented Sector; one with quality, affordability, and fairness at its heart. In our Levelling Up White Paper – published earlier this year – we set out a clear mission to halve the number of poor-quality homes by 2030. We committed to levelling up quality across the board in the Private Rented Sector and especially in those parts of the country with the highest proportion of poor, sub-standard housing – Yorkshire and the Humber, the West Midlands, and the North West. This White Paper – A Fairer Private Rented Sector – sets out how we intend to deliver on this mission, raising the bar on quality and making this New Deal a reality for renters everywhere. It underlines our commitment, through the Renters

The Bill also fulfils our manifesto commitment to replace Section 21 ‘no fault’ eviction notices with a modern tenancy system that gives renters peace of mind so they can confidently settle
down and make their house a home. These changes will be backed by a powerful new Ombudsman so that disputes between tenants and landlords can be settled quickly and cheaply, without going to court. This white paper also outlines a host of additional reforms to empower tenants so they can make informed choices, raise concerns and challenge unfair rent hikes without fear
of repercussion. Of course, we also want to support the vast majority of responsible landlords who provide quality homes to their tenants. That is one of the reasons why this White Paper sets out our commitment to strengthen the grounds for possession where there is good reason for the landlord to take the property back. Together, these reforms will help to ease the financial burden on renters, reducing moving costs and emergency repair bills. It will reset the tenant-landlord relationship by making sure that complaints are acted upon and resolved quickly. Most importantly, however, the reforms set out in this White Paper fulfil this Government’s pledge to level up the quality of housing in all parts of the country so that everyone can live somewhere which is decent, safe and secure – a place they’re truly proud to call home.

Executive summary

Everyone deserves a secure and decent home. Our society should prioritise this just like access to a good school or hospital. The role of the Private Rented Sector (PRS) has changed in recent decades, as the sector has doubled in size, with landlords and tenants becoming increasingly diverse. Today, the sector needs to serve renters looking for flexibility and people who need to move quickly to progress their careers, while providing stability and security for young families and older renters. It must also work for a wide range of landlords, from those with a single property through to those with large businesses. Most people want to buy their own home one day and we are firmly committed to helping Generation Rent to become Generation Buy. We must reduce financial insecurities that prevent renters progressing on the path to home ownership and, in the meantime, renters should have a positive housing experience.

This White Paper builds on the vision of the Levelling Up White Paper and sets out our plans to fundamentally reform the Private Rented Sector and level up housing quality. Most private landlords take their responsibilities seriously, provide housing of a reasonable standard, and treat their tenants fairly. However, it is wrong that, in the 21st century, a fifth of private tenants in England are spending a third of their income on housing that is non-decent. Category 1 hazards – those that present the highest risk of serious harm or death – exist in 12% of properties, posing an immediate risk to tenants’ health and safety. This means some 1.6 million people are living in dangerously low-quality homes, in a state of disrepair, with cold, damp, and mould, and without functioning bathrooms and kitchens. Yet private landlords who rent out non-decent properties will receive an estimated £3 billion from the state in housing related welfare. It is time that this ended for good. No one should pay to live in a non-decent home. Poor-quality housing is holding people back and preventing neighbourhoods from thriving. Damp, and cold homes can make people ill, and cause respiratory conditions. Children in cold homes are twice as likely to suffer from respiratory problems such as asthma and bronchitis. Homes that overheat in hot summers similarly affect people’s health. In the PRS alone, this costs the NHS around £340 million a year. Illness, caused or exacerbated by living in a non-decent home, makes it harder for children to engage and achieve well in school, and adults are less productive at work. There is geographical disparity with the highest rates of non-decent homes in Yorkshire and the Humber, the West Midlands and the North West. Visibly dilapidated houses undermine pride in place and create the conditions for crime, drug use, and antisocial behaviour. Too many tenants face a lack of security that hits aspiration and makes life harder for families. Paying rent is likely to be a tenant’s biggest monthly expense and private renters are frequently at the sharpest end of wider affordability pressures. Private renters spend an average of 31% of their household income on rent, more than social renters (27%) or homeowners with mortgages (18%),8 reducing the flexibility in their budgets to respond to other rising costs, such as energy.

Frequent home moves are expensive with moving costs of hundreds of pounds.9 This makes it harder for renters to save a deposit to buy their own home. Over a fifth (22%) of private renters who moved in 2019 to 2020 did not end their tenancy by choice, including 8% who were asked to leave by their landlord and a further 8% who left because their fixed term ended. The prospect of being evicted without reason at two months’ notice (so called ‘no fault’ Section 21 evictions) can leave tenants feeling anxious and reluctant to challenge poor practice. Families worry about moves that do not align to school terms, and tenants feel they cannot put down roots in their communities or hold down stable employment. Children in insecure housing experience worse educational outcomes, reduced levels of teacher commitment and more disrupted friendship groups, than other children.11 In 2019 to 2020, 22% of tenants who wished to complain to their landlord did not do so. In 2018, Citizens Advice found that if a tenant complained to their local council, they were five times more likely to be evicted using Section 21 than those who stayed silent.13 The existing system does not work for responsible landlords or communities either. We must support landlords to act efficiently to tackle antisocial behaviour or deliberate and persistent non-payment of rent, which can harm communities. Many landlords are trying to do the right thing but simply cannot access the information or support that they need to navigate the legal landscape, or they are frustrated by long delays in the courts. In addition, inadequate enforcement is allowing criminal landlords to thrive, causing misery for tenants, and
damaging the businesses and reputations of law-abiding landlords. Collectively, this adds up to a Private Rented Sector that offers the most expensive, least secure, and lowest quality housing to 4.4 million households, including 1.3 million households with children and 382,000 households over 65.14 This is driving unacceptable outcomes and holding back some of the most deprived parts of the country.

Our ambition

We are committed to delivering a fairer, more secure, and higher quality Private Rented
Sector. We believe:
1. All tenants should have access to a good quality, safe and secure home.
2. All tenants should be able to treat their house as their home and be empowered to challenge poor practice.
3. All landlords should have information on how to comply with their responsibilities and be able to repossess their properties when necessary.
4. Landlords and tenants should be supported by a system that enables effective resolution of issues.
5. Local councils should have strong and effective enforcement tools to crack down on poor practice.

What we have done

We have taken significant action over the past decade to improve private renting. In 2010, 1.4 million rented homes were non-decent, accounting for 37% of the total. This figure has fallen steadily to 1 million homes today (21% of the total).15 To improve safety standards, we have required landlords to provide smoke and carbon monoxide detectors as well as regular electrical safety checks. We supported the Homes (Fitness for Human Habitation) Act 2018, which means landlords must not let out homes with serious hazards that leave the dwelling unsuitable for occupation.
To help tenants and landlords in resolving disputes, we made it a requirement in 2014 for letting and managing agents to belong to a government-approved redress scheme. We have also given local councils stronger powers to take action against landlords who do not meet expected standards. We have introduced Banning Orders to drive criminal landlords out of the market, civil penalties of up to £30,000 as an alternative to prosecution, and a database of rogue landlords and agents. Over the last five years, we have awarded £6.7 million to over 180 local councils to boost their enforcement work and support innovation.
To reduce financial barriers to private renting, we have capped most tenancy deposits at five weeks’ rent and prevented landlords and agents from charging undue or excess letting fees. Between 2010-11 and 2020-21 the proportion of household income (including housing benefit) spent on rent by private renters reduced from 35% to 31%.16 We have taken additional steps to protect private tenants when exceptional circumstances required. During the Coronavirus pandemic our emergency measures helped tenants to remain in their homes by banning bailiff evictions, extending notice periods, and providing unprecedented financial aid. These measures worked. There was a reduction of over 40% in households owed a homelessness duty following the end of an Assured Shorthold Tenancy (AST) in 2020 to 2021 compared with 2019 to 2020,17 and repossessions by county court bailiffs between January and March 2022 were down 55% compared to the same quarter in 2019.

Comment

This is a very brave and necessary course of action, to deal with the housing crisis. Housing costs have risen exponentially, since the late 1990s, when the population began to grow rapidly due to migration. The true number of migrants in the UK is not known, but one thing is for certain, there are upwards of TEN MILLION more people in the UK today, than there were just a decade ago, probably much more, they all need to live somewhere and although this may be devastating to landlords who have worked hard to purchase property to secure themselves an income for the future, especially as many have been denied their anticipated income from pension funds that have been stagnant, the government does need to look at the bigger picture and act quickly, before this crisis evolves in to civil unrest.

Download the full White Paper HERE

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A proposal for an ethical way forward for the BTL market

A proposal for an ethical way forward for the BTL market

A proposal for an ethical way forward for the BTL market

Turning the buy to let market in its head

 

A recent article written by the director of Trellows, has had an incredible response, all of it positive. In the article. Antony Antoniou presents a proposal for an ethical way forward for the BTL market. Attempting to rectify the disaster, that the BTL market has become, will not be a quick fix, it will firstly require a U-turn on the way residential property is viewed in the UK. If we accept that homes are a fundamental right, we must also accept that everyone should have the opportunity to own their own home, or at the very least, have a home that they can build their lives around, without living in fear of their next section 21. There is also the moral issue, of those who are in a privileged position, with easier access to funds, being able to compete with first time buyers, for the same property, leaving the disadvantaged first time buyers unable to buy their own home and being left at the mercy of short term rentals, which the modern AST actually is. If a family move in to a property in January and take a couple of months to settle in, they are then literally just eight months away from their next section 21, this is not a situation that is acceptable in modern Britain.

We at Trellows, aim to lead by example, therefore we will now be operating to an ethical strategy, which will raise the standard of property, then offer these properties for long term rental to families, with leases of FIVE YEARS, plus an option to buy plus a contribution towards their deposit.

Here is an overview of our strategy:

The basis of our strategy is as follows:

  1. We will seek to find properties that are in a poor state of repair, un-mortgageable or those with an EPC rating that falls below par.
  2. We will completely renovate these properties, ensuring that they are brought up to top-spec, along with suitable insulation that will raise them above the impending minimum EPC level 3, although we will endeavour to exceed this where possible.
  3. We will offer the properties for rent on an Assured Shorthold Tenancy of FIVE YEARS, with a clear scale of rental increases, based on RPI, to ensure that everyone knows where they stand. This of course is dependant on securing a fixed five year term with the lenders, as we must know our outgoings, before we can commit to income.
  4. In month 53, the tenants will be offered the ‘Right-to-Buy’ the property at the median of three independent valuations, which they must accept by the end of month 54.
  5. We will offer to contribute 10% of the purchase price to the tenants by way of a gifted deposit, this will only be made available if they choose to exercise their ‘Right-to-Buy’ and will not be available for any other reason.
  6. The tenants must exchange before the end of month 59, with completion set any time after the end of month 60. This is to ensure that should the sale not proceed, we have time to prepare another fixed term, with the same option.
  7. We will pay for a financial adviser to give the tenants a ‘Financial Health Check’ early on in the tenancy and this adviser will be available at our expense, to advise them on how to prepare themselves financially, so that they will be able to purchase the property, should they wish.
  8. At the end of  the period, we will have brought a derelict property back in to use for a family, made that property available on a long-term AST, we will have achieved some capital growth and rental income for five years. Thereafter, we will re-invest the proceeds of the sale, in to another property, repeating the process.
  9. We would like to petition the Government to match our gifted deposit, by re-introducing ‘Help-to-Buy’ for resale property, which will leave the tenants only needing find 5% of the deposit, to qualify them for the best and cheapest mortgage deals. It is unfair, that those who are most in need, should be paying the most in interest.
  10. We aim to encourage our investors, partners and the industry as a whole to adopt this model, thereby creating an ethical property market, that will also be open to those in need.
  11. The UK housing stock is a national asset and our strategy is to encourage properties throughout the country to be renovated, insulated and rented on similar terms, this strategy could also be applied to new-build homes, where investors contribute to the build and subsequently rent the properties on similar terms, offer people a real and stable home to build a future.

We would like to encourage larger developers to follow suit and contribute towards changing the landscape of residential homes in the UK.

If you would like to get involved, please get in touch.

Read the full article by Antony Antoniou HERE

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Plans to force buy-to-let owners to pay up to £10,000 to boost energy efficiency

buy to let
  • Campaigners are calling for plans to charge landlords up to £10k to be scrapped 
  • Plans are for all new rental homes to have an energy rating of C or above 

Campaigners are urging the Government to scrap proposals to make landlords pay up to £10,000 to improve the energy efficiency of their rental homes.

The National Residential Landlords Association suggested that landlords could not reasonably be expected to pick up the tab in the way that the Government is suggesting for stringent new rules affecting buy-to-let properties.

In an official statement, NRLA said that the plans were based on the ‘misguided assumption that all landlords are property tycoons with deep pockets’.

In a consultation that closed in January, the Government proposed that from 2025 where a new tenancy agreement is signed, the property will need to have an Energy Performance Certificate rating of C or above.

From 2028, all rental properties will need to meet the new standard, even where it is not a new tenancy agreement.

The Government has suggested that, in meeting these targets, landlords should be expected to pay up to £10,000 to make the necessary improvements.

However, the NRLA said that this imposed cap fails to accept the realities of different property and rental values across the country.

It follows research from NRLA that showed private landlords making an average net income from property of less than £4,500 a year. (Scroll down for more information about how this figure was calculated.)

The National Residential Landlords Association is calling on the amount that landlords should be expected to contribute to be linked to average market rents in any given area – known as broad rental market areas – as calculated by the Valuation Office Agency.

Under the NRLA’s proposals, this would mean the amount a landlord would need to contribute would gradually taper from £5,000 to £10,000, taking into account different rental values – and by implication, property values – across the country.

VAT and council tax reductions

Alongside this, the NRLA is calling for a package of fiscal measures to support property investment.

It said these should include the development of a decarbonisation tax allowance, where VAT would no longer apply to energy efficiency and low carbon work.

And it said council tax should not be charged where energy improvements are being made to rental properties when they are empty.

Ben Beadle, of the National Residential Landlords Association, said: ‘We all want to see as many energy efficient rental properties in the sector as possible.

‘Besides being good for tenants, improvements made to rental properties ensure they become more attractive to prospective tenants when being marketed by landlords and agents.’

However, he added: ‘The Government’s proposals for the sector are not good enough.

‘They rely on a misguided assumption that landlords have unlimited sums of money and fail to accept the realities of different property and rental values across the country.

‘Ministers need a smarter approach with a proper financial package if they are to ensure their ambitious objectives are to be met.’

David Reed, of Richmond estate agents Antony Roberts, said: ‘We all want to see improvements to energy efficiency but If these proposals come to fruition, there’ll be a rush of landlords with property in vast swathes of suburbs – where older, less efficient properties make up a greater proportion of the stock – selling rather than incurring what could be considerable costs in retaining an investment in property.

‘With yields so low, returns barely meet costs as they are, especially as the latter have grown significantly in recent years either directly (Tenant Fees Act and electrical regulations) or indirectly (unable to offset mortgage interest).

‘Tenants love charming period conversion flats in good commuter territory and seldom is efficiency/an EPC rating at the forefront of the search criteria, whereas location and provision of attractive accommodation win hands down. There are simply not enough newer, in theory more efficient, properties being constructed to meet tenant demand.

‘The private rental sector vitally needs a healthy supply of good property and landlords who own one or maybe two rental properties make up a large sector of the market. Many are already disgruntled by recent changes and longer-term plans are under question. If they leave, the effect on tenants will be hard felt – a further restriction of supply giving more upward pressure on rental and lack of choice.

‘Hopefully consideration will be given to where there is no easy-fix or realistic programme of improvement to achieve grade C status or better.’

How much do landlords make?

Private landlords make an average net income from property of less than £4,500 a year, according to the The National Residential Landlords Association.

Here is how the NRLA reached that figure… 

The English Private Landlord survey said that the average – median – gross rental income for a landlord before tax and other deductions is £15,000.

 Average costs for landlords would be:

– Repair and replacement of furnishings – based on the previous tax exemption for 10% of annual rent (£1,500)

– Cost of a gas safety certificate (average £80 required annually – checkatrade average)

– Electrical safety check (average £265 performed every 5 years. £53 annually – checkatrade average)

– Deposit protection (£13 from TDS)

– Tenant referencing cost (for two tenants £49 NRLA tenant referencing)

– Interest-only mortgage for the average UK property (£250,000) with a 20% deposit (cheapest available £6,096 annual)

– Insurance (£531.15 for building and contents insurance from Hamilton Fraser using average floor space for PRS property https://www.statista.com/statistics/292206/average-floor-area-size-of-dwellings-in-england-by-tenure/)

– Agency fees (£1200 based on 8% agency fees)

The NRLA based its calculation on an average landlord of a house let to a couple with an interest-only mortgage, and assumed that tenants move annually.

Total gross rental income – £15,000

Repair and replacement costs – £1,500

Tenancy management costs – £726.15 (includes average cost of insurance, gas safety certificates, 1/5 of the EICR cost, deposit protection and tenant referencing)

Agency fees – £1,200

Total deductions before tax and mortgage costs – £11,573.85

Amount that can be taxed – £2,314.77 (£11,573.85 x 0.20)

Tax after mortgage interest relief accounted for – £1,095.57 (£2,314.77 – (£6,096.00 mortgage costs x 0.20)

Remaining balance after Tax – £10,478.28 (£11,573.85 – £1,095.57)

Mortgage costs – £6,096.00 (based on cheapest available 80% Loan to Value mortgage on the average property in the UK of £250,000)

Remaining balance after all average costs deducted – £4,382.28 (£10,478.28 – £6,096.00)

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Court of Appeal sides with landlords in landmark case ruling

Court of Appeal sides with landlords in landmark case ruling

The Court of Appeal yesterday ruled that Section 21 notices issued by landlords are valid provided a gas safety certificate is issued before the notice is given to the tenant, not before a tenant moves into a property.

The case of Trecarrell v Rouncefield focussed on the relationship between Section 21 notices and gas safety certificates.

The landlord, Trecarrell House Limited, was initially granted an order to repossess the property using Section 21 powers, but the tenant successfully appealed on the grounds that they were not provided with a gas safety certificate before moving into the property.

However, the Court of Appeal ruled that failure to give the gas safety certificate before the tenant begins to occupy can be remedied by giving it at any time before service of a Section 21 notice.

The case itself was heard earlier this year and landlords in England and Wales have been waiting for the outcome of this important decision.

The judgment hinged on whether a landlord’s failure to provide a gas safety certificate before the tenant’s occupation is a breach of the prescribed requirements to serve a valid Section 21 notice under the Housing Act 1988.

This was a particularly important case as a mistake by a landlord or its agent would have consequences far greater than other breaches of legislation, which can be remedied or resolved in order to serve a fresh notice.

Without the ability to serve a section notice at any point in a tenancy the rights of landlords would be seriously curtailed and could prevent the use of possession of a property in future where the landlord has no other grounds to secure possession.

The leading ruling from Lord Justice Pattern, which will be welcomed by so many landlords, states: “Although the point is not straightforward, I am not therefore persuaded that for the purposes of Section 21 the obligation to provide the gas safety record to a new tenant prior to the tenant taking up occupation cannot be complied with by late delivery of the gas safety record.

“Late delivery of the document does provide the tenant with the information he needs. If a breach has the consequence for which Cherry contends then that must apply in every case of late delivery even if the delay is only minimal. This seems to me an unlikely result for Parliament to have intended particularly in the light of the express rejection of the 28 day deadline under paragraph (6)(a).

“Many ASTs are granted for fixed periods of one year or less so that in practice the landlord’s inability to rely upon section 21 will provide a strong incentive for the timely compliance with paragraph (6)(b).

“As a matter of construction, I, therefore, prefer the view that as a result of regulation 2(2) the time when the landlord “is in breach” of paragraph (6)(b) ends for the purposes of Section 21 once the  gas safety record is provided.”

But landlords should ensure that all other requirements such as deposit protection, for instance, are fully compliant as they can affect the validity of a Section 21 notice.

Tony Kent, head of the property litigation team at Mackrell Solicitors, said: “For landlords, this decision comes as an enormous relief since the consequences of the ruling of the lower courts have seemed disproportionately severe for them, especially when there is a gas safety record in existence and the landlord or their agent had either forgotten to serve it or the tenant has denied receipt at the beginning of the tenancy.”

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Coronavirus outbreak could cost the buy to let sector £14.9bn in three short months

Market: Brexit Bounce giving way to Corona Crippling, says agent

The latest research by Deposit Replacement Scheme, Ome, has found that the impact of the Coronavirus could cost buy to let landlords nearly £14.9bn should tenants be unable to pay rent during the three month support period announced by the government yesterday.

Last night the government announced that they would suspend new evictions and halt new possessions proceedings to the court while the Coronavirus crisis persists. They have also protected landlords as well as tenants with a three-month mortgage payment holiday on buy to let mortgages.

However, if tenants simply can’t pay, this holiday will do little to help landlords who will still have to pay once the three months is up, with or without the rental income from their tenants.

Ome’s research shows that there are 5.2m households currently within the private rental sector alone and without the ability to work and pay their rent, the buy to let sector could see a loss of £4.97bn every month based on the average monthly rent of £955 alone. Over three months this climbs to a huge £14.9bn.

Nationally, this lost income is highest in England with potentially £11.6bn lost in rental income, while London is home to the biggest sum regionally with a potential £4.9bn lost in three months alone.

What does this mean for the average landlord?

There are some 2.6m landlords operating within the UK buy to let sector meaning the average landlord has a portfolio of two rental properties. With an average rent of £955 and a loss of three months’ rental revenue across both properties, they could be facing an individual £5,730 shortfall in rental income.

With a ratio of 2.1 properties per landlord in Scotland, the loss is at its greatest at £6,146 over three months with Northern Ireland also high at £6,083.

Not only does this huge sum have implications on a sector that has already seen its financial return stretched by the government, but it could see tenants out of pocket even further should landlords look to keep their tenancy deposit to account for lost rental income.

Co-founder of Ome, Matthew Hooker, commented: 

“It’s great news that the government are providing some financial respite for the nation’s landlords, however, it’s more of a weekend away than a holiday and once expired, UK landlords are still facing the cost of a buy to let mortgage without the rental income to pay it.

It’s by no means the fault of the tenant if they are unable to pay but there is a very real chance that landlords will turn to the rental deposits at the end of a tenancy in order to recoup this lost rent. While this would be unfair on a tenant who has otherwise kept the property in good order, it may well be the case that landlords are simply left with no choice.

The silver lining at least is that hopefully, not all tenants will be unable to pay their rent and so this sum of lost rental income should reduce, but whichever way you look at it, the UK rental sector is in for a tough few months.”

 

Location
Private renters
Average rent
1 month B2L lost revenue
3 months B2L lost revenue
Number of landlords
Average number of B2L properties
Cost per landlord
England
4,552,000
£852
£3,878,304,000
£11,634,912,000
2,266,770
2.0
£5,753
Wales
176,000
£515
£90,675,200
£272,025,600
104,450
1.7
£4,828
Scotland
340,000
£748
£254,481,840
£763,445,520
158,505
2.1
£6,146
Northern Ireland
138,000
£627
£86,526,000
£259,578,000
64,995
2.1
£6,083
UK
5,206,000
£955
£4,971,730,000
£14,915,190,000
2,594,720
2.0
£5,748
Location
Private renters
Average rent (2019)
1 month B2L lost revenue
3 months B2L lost revenue
London
964,000
£1,697
£1,635,908,000
£4,907,724,000
South East
713,000
£998
£711,574,000
£2,134,722,000
South West
474,000
£816
£386,784,000
£1,160,352,000
East of England
437,000
£869
£379,753,000
£1,139,259,000
North West
571,000
£621
£354,591,000
£1,063,773,000
West Midlands
405,000
£662
£268,110,000
£804,330,000
Yorkshire and the Humber
427,000
£617
£263,459,000
£790,377,000
East Midlands
359,000
£628
£225,452,000
£676,356,000
North East
202,000
£533
£107,666,000
£322,998,000
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House price gap between sellers and buyers reduces

Unmanaged vacant properties may invalidate insurance - claim

Leading lettings and sales agent, Benham and Reeves, has released the latest of its very own quarterly house price index based on data from the top four existing indices, looking at where the average house price sits and how the gap between buyer and seller expectation and actual sales has changed.

The Benham and Reeves House Price Index combines data from the four leading industry indices to give a singular figure of how the UK market is moving based on both buyer and seller sentiment, as well as looking at the difference in these indices and what they reveal about the state of the current market.

Current property values

The latest index from Benham and Reeves for Q4 2019 shows that the current overall average UK house price is sitting at £251,912 having dropped marginally by -0.2% on the previous quarter, although prices were up by 1.4% on an annual basis.

In London, the average property value also dropped marginally to £511,166, down -0.4% on the previous quarter, down -0.7% on an annual basis.

Seller and buyer expectations show signs of alignment 

The latest quarterly data from Nationwide and Halifax shows that the amount UK buyers are committing to borrowing has increased slightly by 0.31% to £225,188. At the same time, the average asking price has fallen by -1.02%, while sold prices are up 0.4% to £234,167.

Despite a market bounce following the election, it’s clear that months of Brexit uncertainty have seen the expectation gap between buyers and sellers close. The gap between buyer expectation and asking prices dropped -1% in Q4 to 35%, while there was also a -1% decrease between asking price and sold price, down to -23%.

However, in London, this gap remained consistent with a 33% increase between the price at which buyers were being approved for a mortgage and the asking price expectations of UK sellers, while there was a -22% drop between this asking price and the average sold price.

Director of Benham and Reeves, Marc von Grundherr, commented: 

“It’s only natural that asking prices will remain at a higher level than the average mortgage approval or sold price, but it’s interesting to see that months of Brexit uncertainty had started to bring this difference in buyer and seller expectations closer together.

As buyers committed to slightly more in the way of a mortgage approval price to take advantage of lower market values and lower interest rates, sellers realised they had to lower asking expectations to secure a deal in tough market conditions. This also translated to a smaller gap between asking price and the sold price accepted.

However, with a huge spike in activity following December’s election, we will no doubt see asking prices start to lift once again, as UK sellers look to take advantage of returning buyer demand.

While this asking price expectation will always be higher than the reality of the average sold price, an optimistic increase in a stronger market places sellers in a better position to negotiate a stronger sale price before accepting an offer.”

Benham and Reeves House Price Index
UK
Year
Quarter
Average House Price
Quarterly Change
Annual Change
2018
Q1
£245,074
–
Q2
£248,245
1.3%
Q3
£250,244
0.8%
Q4
£248,513
-0.7%
2019
Q1
£247,463
-0.4%
1.0%
Q2
£251,682
1.7%
1.4%
Q3
£252,487
0.3%
0.9%
Q4
£251,912
-0.2%
1.4%
London
Year
Quarter
Average House Price
Quarterly Change
Annual Change
2018
Q1
£519,238
–
Q2
£520,412
0.2%
Q3
£517,059
-0.6%
Q4
£514,976
-0.4%
2019
Q1
£504,731
-2.0%
-2.8%
Q2
£512,193
1.5%
-1.6%
Q3
£513,180
0.2%
-0.8%
Q4
£511,166
-0.4%
-0.7%
UK
Year
Quarter
Mortgage Approvals Price
< Difference >
Asking Price
< Difference >
Sold Price
2018
Q1
£218,231
37.8%
£300,684
-25.4%
£224,319
2018
Q2
£219,116
40.4%
£307,745
-26.3%
£226,869
2018
Q3
£221,959
37.4%
£305,060
-24.1%
£231,438
2018
Q4
£220,522
37.1%
£302,239
-23.8%
£230,274
2019
Q1
£221,578
35.6%
£300,481
-24.3%
£227,608
2019
Q2
£225,987
36.2%
£307,691
-25.5%
£229,276
2019
Q3
£224,490
36.5%
£306,321
-23.6%
£234,074
2019
Q4
£225,188
34.6%
£303,182
-22.8%
£234,167
London
Year
Quarter
Mortgage Approvals Price
< Difference >
Asking Price
< Difference >
Sold Price
2018
Q1
£473,776
30.8%
£619,905
-23.1%
£476,653
2018
Q2
£468,845
34.0%
£628,174
-23.8%
£478,555
2018
Q3
£468,544
31.2%
£614,537
-21.9%
£480,090
2018
Q4
£466,988
31.5%
£614,044
-22.4%
£476,273
2019
Q1
£455,594
32.8%
£605,178
-22.9%
£466,356
2019
Q2
£465,722
32.7%
£618,232
-24.5%
£466,683
2019
Q3
£460,686
33.1%
£612,967
-21.9%
£478,594
2019
Q4
£458,363
32.9%
£609,315
-21.5%
£478,227
Posted on

Barclays refuses to offer buy-to-let borrowers a payment holiday

Barclays refuses to offer buy-to-let borrowers a payment holiday

Landlords who have a buy-to-let mortgage with Barclays will not be offered a repayment holiday, despite government guidance to offer borrowers a payment referral of up to three months as a consequence of the COVID-19 pandemic.

The bank says that the support is primarily available to residential mortgage borrowers, with buy-to-let landlords not considered to be a priority.

A spokesperson for Barclays said: “This is an unprecedented and ever-changing situation, we are constantly reviewing how we best support all of our customers and are working on an appropriate solution and will provide an update later this week.”

Posted on

Useful guidance and support for dealing with tenants during Covid-19 outbreak

Useful guidance and support for dealing with tenants during Covid-19 outbreak

A high number of buy-to-let landlords are concerned about the impact of the Coronavirus, but The Guild of Letting and Management has provided some practical guidance and advice to help you cope with the existing situation.

One of the most common questions many landlords are currently asking about is the announcement the government made on the 18th March 2020, relating to evictions and support for those renting, although it is important to point out that the new legislation has not yet been released.

A key topic on the Guild’s advice line is Rent. It is important to note, that not every single tenant in the UK has been made redundant, or is experiencing difficulty, therefore, it is important to ensure that this is dealt with on a case by case basis.

Points to consider:

1. Ensure the tenant is aware that rent is still due.

2. If the tenant is experiencing difficulty, guide them to the Department of Work & Pensions website where they can obtain the guidance they require regarding pay, statutory sick pay (SSP) and other relevant up to date information.

3. Ask tenants to put their concerns to you in writing. It is important that you are able to discuss the matter with all the relevant facts to hand.

4. Speak to your lender and find out what they are putting in place. Some landlords have already offered tenants a discount on rent or a “rent holiday”. But remember, that as with the mortgage lenders, this deferred rent will have to be paid back at some point in the future.

5. Speak to the guarantor, where there is one. They should not be left out of any discussions regarding rent payments.

6. Check whether your insurer can offer rent and legal protection.

7. Keep records up to date. Every discussion, conversation over the phone, email, must be logged and documented.

8. Any pre-existing arrears (pre-18th March 2020) cannot be factored into this Coronavirus situation. Remember everyone is in the same boat. No one has experienced this before, This is not the same as the 2008 recession, this is a public health matter, so it is difficult for everyone involved on so many levels.

Posted on

Coronavirus could cost BTL landlords almost £15bn in lost rental income

Coronavirus could cost BTL landlords almost £15bn in lost rental income

The devastating impact of the Coronavirus could cost buy-to-let landlords nearly £14.9bn should tenants be unable to pay rent during the three month support period announced by the government last week, new research shows.

The government has announced that they will suspend new evictions and halt new possessions proceedings to the court in light of the COVID-19 pandemic.

If tenants are unable to pay their rent, Ome calculates that this would leave landlords £14.9bn out of pocket over a three-month period.

The deposit replacement scheme’s findings are based on the fact that there are 5.2m households currently within the private rental sector alone and without the ability to work and pay their rent, the buy to let sector could see a loss of £4.97bn every month based on the average monthly rent of £955 alone.

Nationally, this lost income is highest in England with potentially £11.6bn lost in rental income, while London is home to the biggest sum regionally with a potential £4.9bn lost in three months alone.

There are some 2.6m landlords operating within the UK buy to let sector meaning the average landlord has a portfolio of two rental properties. With an average rent of £955 and a loss of three months’ rental revenue across both properties, they could be facing an individual £5,730 shortfall in rental income.

With a ratio of 2.1 properties per landlord in Scotland, the loss is at its greatest at £6,146 over three months with Northern Ireland also high at £6,083.

Co-founder of Ome, Matthew Hooker, commented: “It’s great news that the government are providing some financial respite for the nation’s landlords, however, it’s more of a weekend away than a holiday and once expired, UK landlords are still facing the cost of a buy to let mortgage without the rental income to pay it.

“It’s by no means the fault of the tenant if they are unable to pay but there is a very real chance that landlords will turn to the rental deposits at the end of a tenancy in order to recoup this lost rent. While this would be unfair on a tenant who has otherwise kept the property in good order, it may well be the case that landlords are simply left with no choice.

“The silver lining at least is that hopefully, not all tenants will be unable to pay their rent and so this sum of lost rental income should reduce, but whichever way you look at it, the UK rental sector is in for a tough few months.”

Posted on

Landlords switching from short-term lets to longer lets before lockdown

Landlords switching from short-term lets to longer lets before lockdown

There has been a significant increase in the number of landlords and homeowners switching from short-term lets to longer rentals.

Across the UK there has been a 20% drop in people looking for rooms over the last week due primarily to the COVID-19 outbreak, according to SpareRoom.

With a possible countrywide lock down rapidly approaching, the flatsharing website reports that people with rooms to rent are understandably keen to find tenants.

SpareRoom has seen a 15% increase in adverts from agents and a 12% uplift from landlords, just in the past two days. This is driven, in part, by landlords and homeowners switching from using short-term rental sites like Airbnb as tourism tanks and looking for longer term rents for their rooms.

With supply in some parts of the country currently outstripping demand, 18% of agents have reduced their asking rents in the past two weeks, while 11% of landlords have done the same, with some directly mentioning COVID-19 as the reason for this reduction.

With the growing concern about face to face contact SpareRoom has also seen a real trend over the last week of people moving towards video calls – getting to know each other and having a first view of the property this way.

Matt Hutchinson, SpareRoom director, said: “Whenever there’s uncertainty people put off making big decisions, like moving house. We saw it during the confusion over Brexit and we’re seeing it in a much more marked way now. In contrast, people with rooms to fill are desperately hoping to get new tenants in before the country goes into lockdown.

“Although it’s still early days, we’re also seeing some interesting shifts in behaviour on both sides. Following widespread cancellations, we’re seeing both landlords and homeowners moving from short term rents to looking for longer term security.

“Tenants are getting creative by using video calls to hold virtual viewings and interviews. The people you live with make a far bigger difference to you than the property itself, and video calls are a great way to get that all important first impression before deciding to go and see a property. It also minimises the need for travel and social contact so it’s a win-win.”