Buy to let news to Thursday, August 1st, 2019

Regeneration creates BTL opportunity; House prices soar in Manchester;
House renovation

Regeneration leads to rental growth

New research suggests a link between cities that have undergone regeneration – and rising rents – with these areas seeing higher rental growth than other parts of England.

Data from letting platform Bunk, indicates that the average rental increases in cities that have undergone significant investment, has been 21% over the past 5 years, compared with an average of 16% across England, over the same period.

The highest level of rental growth has been achieved in Manchester, which has seen a 38% increase since 2014.

The report suggests that this is partly down to the relocation of the BBC and investment in the regeneration of Salford Quays.

Manchester’s 38% figure was matched by Cambridge, where it is anticipated that the construction of a further 200 homes, will entice more people to the city.

Newcastle was next best at 31% rental growth, followed by 29% in Bristol.

Tom Woollard, co-founder of Bunk, said:

“Regardless of your opinion on gentrification, one thing is clear. These transformations are positive in terms of the level and quality of housing stock being provided and there is certainly an appetite for these developments and for housing in areas to have seen drastic improvements.

‘For landlords this maintained demand pushes up prices and these areas provide a very good return on investment in a landscape that is currently rather tough. So for those looking to invest, the best option is to get in early to an area that has been earmarked for regeneration but is still affordable at present, and you should see a healthy return despite the changes to the sector of late.”

Row of modern terrace houses

June slow-down in rental market

June saw a fall in the number of properties available ‘to let’, as the number of ‘let’ properties also reduced, in a slowing down of the rental market.

Data from the latest Property Activity Index saw a decline in tenant demand as the traditional summer slow-down began to take effect.

There was a fall of -4.1%, in the number of new rental properties available to rent, compared to June 2018.

The number of properties ‘let’ during June was also significantly less than a year earlier. This June the figure stood at 2.2%, in June 2018 it was 7.8%.

Only two of the 12 regions in the UK saw growth in the number of properties ‘to let’, with London seeing the biggest number of new listings at 18.2%.

The capital had 3.8% growth in properties ‘let’, during June and was one of eight regions to see an increase in new tenancies.

Stephen Watson, managing director of agency board provider Agency Express, commented:

“As we look back at the data recorded by the Property Activity Index, we can see that over the few years June has been a buoyant month for the UK lettings market. However, this year the figures paint a different picture, evident by the drop in supply.

“Historical trends within the indices also show that we should not see an increase in figures until September, but with the current rate of change it will be interesting to see what the forth coming months bring.”

Row of terraced houses

Manchester’s buy to let appeal highlighted

Manchester’s potential for property investment has been highlighted by new data, showing that house prices rose 44.7% over the last five years, far outperforming the rest of the UK.

David Alexander of Apropos by DJ Alexander, revealed that the UK average over the same period was 23.7% and 25.3% in England.

In the last year alone, average house prices in Manchester have grown by 5.2%, compared to 1.2% across the whole of the UK, while as a region, the North West saw average increases of 3.4%.

Investment in Manchester is of course a major catalyst for housing demand, which in turn is helping to push prices up.

Outside of London, Manchester has seen the biggest growth in population and the Greater Manchester area is expected to grow to 2.95 million by 2031, from its current 2.68 million.

David Alexander said:

“Manchester has long been a fashionable and attractive city attracting many thousands of people drawn to its night life, job prospects, and lifestyle. However, the city has had a growing gap between mortgage affordability and earnings with those on median incomes experiencing a ratio of earnings to median house prices of 5.74 in 2018 which is the highest ever figure, with the second highest figure in 2017 and the previous peaks occurring in 2006.

“This means that there are a growing number of well-paid individuals who want to live in the city but cannot immediately access a mortgage and are therefore keen to live in the private rented sector.”

He added:

“For individuals and investors, Manchester, offers a potentially great return on their home or their investment. It is clear that social housing will not fill the property gap which is occurring in Manchester so it will be the private rental sector which fulfills renters needs for many years to come.”

Scottish flag

Australia has the most landlords owning Scottish properties

A new report has revealed Australia to be the country with the most overseas landlords owning property in Scotland.

The data from SafeDeposits Scotland, Scotland’s largest tenancy deposit scheme provider, reported that there were 528 landlords living in Australia, who owned Scottish properties.

Second in the list came the United States, with 358 landlords, followed by Ireland with 223.

Ian Potter, Chair of SafeDeposits Scotland, said:

“Scottish commercial property has become increasingly popular with overseas investors, but information on those buying and renting private residential property has been less well documented. Alongside overseas investors will be Scots who have moved abroad – temporarily or permanently – and decided to retain property in Scotland.

“Our figures demonstrate that landlords of Scottish property live all over the world. The landlords that we know about are already aware of their obligations to protect tenancy deposits, but there may be others out there that are unfamiliar with the Scottish system.”

Housing estate

ARLA report post-Fees Ban rental rises

A new report suggests that the Tenant Fees Act had a profound effect on the rental market, with large numbers of tenants seeing their rents rise in the aftermath of its introduction.

According to ARLA Propertymark’s June Private Rented Sector Report, 55% of agents reported that landlords had increased rents during June, that is 22% more than in May, just prior to the Act.

The number of tenants experiencing a rental increase, since the Tenant Fees Act was first muted, has been on an upward trajectory.

In June 2017, 31% of tenants experienced a rental increase and that figure rose to 35% in June 2018, before the latest data showed a huge leap this June.

ARLA’s data also revealed a slight fall in the amount of rental stock under management from May to June 2019, standing at 199 properties for the latter month, from 201 in May.

At the same time, there was a slight rise from 69 in May, to 70 in June, in the number of registered prospective tenants, looking for a new home.

David Cox, chief executive of ARLA Propertymark, commented:

“Unsurprisingly, rent costs hit a record high in June as tenants suffered the impact of the tenant fee ban.

“Ever since the government proposed the ban, we warned that tenants would continue to
pay the same amount, but the cost would be passed onto tenants through increased rents, rather than upfront costs.

“In addition to the repercussions of the Tenant Fees Act, the proposed abolition of Section 21, coupled with the Mayor of London’s recent call for rent controls, will only cause the sector to shrink further.

“In turn this will increase pressure on the sector because it will discourage new landlords from investing in the market, causing rents to rise for tenants as less rental accommodation is available.”

Old Bailey statue

91% of landlords support concept of a new housing court

An overwhelming 91% of landlords asked, support the concept of a dedicated housing court to resolve issues, with the majority unhappy with the existing process for repossessions.

The research, published by the Residential Landlords Association (RLA), reported that 79% of private landlords who have used courts to gain repossession, have been dissatisfied.

The RLA has written to the new Justice Secretary, Robert Buckland, to warn that the courts are likely to be overwhelmed with actions, should the Government go ahead with plans to abolish Section 21.

On average, it already takes over five months for a landlord to regain possession of a rental property, using the court system – and if more landlords have to use that route in the future, this will create further log jams and delays.

The Citizens Advice has reported that tenants too, are put off by the current legal process, with 54% saying they have been deterred from taking action against landlords.

David Smith, policy director for the RLA, commented:

"Ministers are proposing some of the most far reaching changes the private rented sector has ever seen. If the new Government decides it wants to proceed with these it is vital that significant and bold reforms are made to the court system.

“With landlords and tenants failing to secure justice in a timely fashion when things do go wrong, anything other than wholesale changes with proper funding to support it will lead to chaos.”

The Bank of England building

MPC votes to maintain base rate

The Bank of England’s Monetary Policy Committee has voted unanimously to maintain the base rate at 0.75%.

For landlords on existing mortgages and those looking to borrow to invest in buy to let, this means that there is less pressure on lenders to raise interest rates.

Commenting on its decision, the Bank of England said:

“Increased uncertainty about the nature of EU withdrawal means that the economy could follow a wide range of paths over coming years. The appropriate path of monetary policy will depend on the balance of the effects of Brexit on demand, supply and the exchange rate. The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction. In all circumstances, the Committee will set monetary policy appropriately to achieve the 2% inflation target.

“The MPC judges at this meeting that the existing stance of monetary policy is appropriate.

“Assuming a smooth Brexit and some recovery in global growth, a significant margin of excess demand is likely to build in the medium term. Were that to occur, the Committee judges that increases in interest rates, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2% target.”

The results of the next MPC vote on the base rate will take place on Thursday, September 19th.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.