Landlord news to Thursday, August 15th, 2019

RICS predicts rent rises as tenant demand grows. Rent rises currently match inflation. Private landlord repossessions take 22.5 weeks;
Monopoly houses on pound coins

RICS predict rent rises

The Royal Institution of Chartered Surveyors (RICS) has released its July 2019 UK Residential Market Survey. Its strong view is that the new government administration needs to review its focus and view housing ‘as a whole, not separate parts’.

Tenant demand is at its highest reading, since the end of 2016, but landlord instructions continue to wane. The result is inevitable – rents are set to rise.

July’s reading for rental growth, is at its highest over 12 quarters, at a net balance of +25%.

So, for all the good intention of the government to grow the number of new homeowners, by taking their eye off the bigger picture, landlords are being disenfranchised and tenants are suffering.

Across the rest of the property market, statistics are flat.

Interest in purchasing has been modestly reinvigorated, 8% of respondents saw a rise in enquiries from new buyers.

However, newly agreed sales are down to -6% from +3% in June. There are regional differences – the North East and West Midlands have seen a significance up-tick in July.

In the short term, sales are predicted to be flat.

Prices, nationally, were down month on month from -1% in June to -9% in July. Nonetheless, Northern Ireland, Scotland and Wales have experienced strong price rises.

Simon Rubinsohn, chief economist at RICS, highlighted the strong need for more rental property, encouraging institutions to take on the responsibility:

"… the lettings market data continues to send a very strong message that institutions need to upscale their build to rent pipeline to address the shortfall resulting from the decline in appetite from buy to let investors. It is significant that the near-term rental expectations indicator has climbed to a three-year high."

Percentage signs and 3D graph

Rent rises match inflation

July statistics, released in Homelet’s Rental Index, show that average rents across the UK rose by 2.3% to £959. ONS data for June recorded inflation at 2% in the Consumer Prices Index, demonstrating that the two are in line with one another.

In London, year-on-year rents for July increased by 3.1%. This figure is also up on June 2019, from £1,611 to a current average of £1,665.

When taking London out of the data, the UK’s rental average was £794 in July, up 2.2% on 2018, from £777.

There were rent rises across all 12 regions of the UK outlined in the Homelet survey.

The greatest annual variance was in the South West, where rents have increased 4.5% since 2018. Scotland and Wales were next, both experiencing a 4.3% growth.

London was fourth in the ranking, which is encouraging news for landlords in the capital.

Region

Jul-19

Jun-19

Jul-18

Annual variation

South West

£855

£842

£818

4.50%

Scotland

£679

£671

£651

4.30%

Wales

£637

£625

£611

4.30%

Greater London

£1,665

£1,611

£1,615

3.10%

Northern Ireland

£671

£671

£653

2.80%

East Midlands

£646

£635

£631

2.40%

North West

£726

£711

£712

2.00%

East Of England

£925

£917

£909

1.80%

West Midlands

£709

£695

£701

1.10%

South East

£1,053

£1,035

£1,041

1.20%

Yorkshire & Humberside

£641

£634

£635

0.90%

North East

£529

£530

£525

0.80%

UK Average 

£959

£941

£937

2.30%

UK excluding Greater London

£794

£781

£777

2.20%

Source: Homelet

Eviction notice

Court repossessions take 22.5 weeks

The Ministry of Justice has released statistics for April to June 2019, which show that the average number of weeks between a possession claim and a repossession, for private landlords, is 22.5 weeks.

Published in August, its “Mortgage and Landlord Possession Statistics in England and Wales” found that London experienced the highest rates of possession actions.

The statistics for repossession have consistently exceeded 21 weeks, for the past 5 years. But, with the current discussion around scrapping Section 21 evictions, landlords and landlord groups are rightly highlighting the Q2 figures, to demonstrate the vital need for change in the justice system.

The longevity of data showing such the extended periods of delay in the process demonstrates that when it comes to repossessions, landlords may face months of financial loss/costs.

The RLA continue to campaign on behalf of UK landlords on this matter. John Stewart, policy manager at the RLA, had this to say:

“With proposals to scrap Section 21 repossessions set to lead to a significant increase in cases brought to the courts, it is now a matter of urgency that the government brings forward its plans for court reform.

“This requires a fully funded, properly staffed, dedicated housing court that can bring rapid justice for landlords and tenants. Tinkering with the existing system will not be good enough.”

form being completed

Form 6A updated

All landlords will be aware of the vital need for accuracy with documentation. However, the National Landlords Association identified an error with the Form 6A, issued by the Ministry of Housing, Communities and Local Government (MHCLG).

The document is served to tenants in the event that a landlord wishes to reclaim possession of their property, through no fault of the tenant.

The wording of the document is prescribed. It cannot be changed without a statutory instrument (a form of legislation which allows provisions of an Act of Parliament to be changed).

The error that came to light was centred around the notes within the document which had been duplicated.

The NLA’s policy and public affairs manager, Meera Chindooroy, highlighted the importance of using the corrected form:

“It’s of vital importance to all landlords that government departments get forms such as this right. Incorrect forms may impact on landlords’ ability to regain possession of their properties, regardless of who is at fault.”

The updated Form 6A can be found here on the government website.

Houses overshadowed by an aqueduct

Limited companies for larger portfolios

55% of landlords, planning to purchase buy to let property, will do so through a limited company structure. Twice the number planning to do so in private name.

These are the findings of new research from Precise Mortgages.

Where portfolios are 11 properties - or more - strong, a limited company structure is overwhelmingly the chosen course for investment, 71% of landlords choosing to purchase property this way.

Separate research on remortgages, has been conducted by consumer insight consultancy BVA BDRC, for Foundation Home Loans.

Of the third of landlords set to remortgage in the next 12 months, 53% of those landlords will do so in personal name, whereas 19% intend to remortgage through a limited company structure.

Where portfolios are concerned, the preferred route for landlords is to remortgage through a limited company.

The shift in favour of special purpose vehicle (SPV) investment is not surprising. It arose as a result of mortgage interest tax relief changing for individuals.

Jeff Knight, director of marketing at Foundation Home Loans addressed the findings:

“Understandably when it comes to remortgaging there is a continued shift towards the use of limited company vehicles particularly as we see the growth in portfolio and professional landlords who understand the advantages of holding their properties within such corporate structures.”

It is important to recognise, though, that a decision on whether to incorporate is a complex one, for which independent financial advice should be sought.

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