Level Of Tenant Rent Arrears Drops

July 23rd, 2010

The number of private landlords experiencing tenant rent arrears has fallen over the last three months, with the average amount outstanding dropping significantly, according to the National Landlords Association (NLA).

Figures from the NLA reveal that 21% of landlords had tenants in arrears over the last quarter, compared to 24.5% in Q1 this year.

In addition, the average amount of outstanding rent arrears dropped substantially from £978 in Q1 to £799 in Q2, indicating that the financial pressures on tenants has started to ease.

David Salusbury, chairman of the NLA, says: “Rent arrears are a serious problem for landlords all over the UK. It is good to see the latest data which represents a small improvement in that more tenants are keeping up with their rent payments and not putting pressure on their landlords who may well have mortgage repayments to consider.

“It is critical that tenants and landlords communicate and work together to tackle financial problems before they result in a loss of rent or even the tenancy.”

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Tenants Hit Record Levels

July 21st, 2010

New tenant numbers have risen 16% since the beginning of the year, reaching a record 50,480, according to Countrywide.

June had the sharpest rise in new tenants registering for rental accommodation, increasing by 18,000, up 22% on the month before.

This is the highest number of new tenants Countrywide has recorded in a single month since its records began in 2003.

However, the sharp rise in demand is in stark contrast to the number of new properties being offered, which fell 6% in the last three months.

There are no an average of 5.5 tenants for every property available compared to 4.9 tenants in the first three months of 2010. The greatest demand is for two-bedroom houses in the South West, with 8.9 tenants for each property and homes being snapped up within an average of two weeks, three days less than in Q1 and six days less than in Q4 2009.

John Hards, co-managing director for Countrywide Residential Lettings, says: “The number of tenants’ entering the market is at unprecedented levels and we have yet to enter the peak season. Student demand for private rental accommodation will increase further with university applications at record levels.

“The buy-to-let sector remains a good source of investment, however, the government need to do more to incentivise new landlords in order to appease the current shortage of properties. If tenant levels continue to rise at the same rate, this will be further exacerbated.”

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‘Unprecedented Demand’ From Prospective Tenants: Countrywide

July 20th, 2010

Countrywide has reported record demand saw 50,480 new tenants registered for rental accommodation in the second quarter of the year, which represents a 16% increase since the start of the year.

June saw the sharpest increase with over 18,000 new tenants registering, the highest number in a single month since records began, 22% more the previous month. The rise in demand is a sharp contrast to the fall in the number of new properties being offered, which has fallen 6% in the last three months.

The government’s increase in capital gains tax does not appear to have deterred new first time landlords coming to the market, which has increased by 6% since the last quarter. Countrywide says that fears that London landlords would be hit most by capital gains tax appear unfounded with a 4% increase in new landlords letting their properties.

The excessive level of demand has led to marginal increases in rental prices. As more families turn to renting, four bedroom properties have seen the highest increase, with the average rent rising to £1,090 per calendar month – a 4% increase compared to Q1 2010.

There is now an average of 5.5 tenants vying for each property compared to 4.9 tenants in the first three months of the year. The highest demand remains for two bedroom houses in the South West with 8.9 tenants vying for each property. This level of demand is having a significant impact on the market, with properties being snapped up within on average of two weeks – 3 days less that in Q1 and 6 days less in Q4 2009.

John Hards, Countrywide Residential Lettings, co-managing director, said: “The number of tenants’ entering the market is at unprecedented levels – and we have yet to enter the peak season. Student demand for private rental accommodation will increase further with university applications at record levels.

“The buy-to-let sector remains a good source of investment, however, the government need to do more to incentivise new landlords in order to appease the current shortage of properties. If tenant levels continue to rise at the same rate, this will be further exacerbated.”

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Landlords Expecting Continued Increase In Tenant Demand

July 19th, 2010

29% of landlords recorded growing levels of tenant demand during he second quarter of the year, compared to 10% who said it was falling, according to Paragon Mortgages’ PRS Trends Report.

This compares to the first quarter of the year, when 24% of landlords reported growing tenant demand and 8% reported falling levels of demand. Tenant demand was stable for the 54% of landlords during the second quarter, whilst 7% said they were unsure which direction demand was heading.

Landlords expect tenant demand to strengthen considerably: 35% of landlords expect demand to be higher in 12 months’ time, with 8% forecasting a decline.

Nigel Terrington, Paragon Group chief executive, said: “Tenant demand has been rising consistently for two years and shows no signs of slowing down. Would-be home buyers continue to be unwilling or unable to step onto the property ladder, whilst longer-term social changes, such as greater numbers of single person households and economic migrants, are also creating more demand for rented property.

“Strong tenant demand is great news for landlords, but will lead to rental inflation for tenants unless the private rented sector is able to expand to meet this demand. Pressure is building on the finite number of properties in the sector because the lack of buy-to-let mortgage availability has prevented landlords from growing their property portfolios.”

There was a significant increase in the proportion of landlords planning to purchase, with 21% intending to purchase during the third quarter of the year, up from 12% who said they wanted to purchase in the second quarter.

Four out of 10 landlords said that they attempted to secure buy-to-let finance for purchase or remortgage purposes during the second quarter, with 52% of those saying that it was more difficult than previous attempts to secure finance, with just 13% stating it was easier.

Landlords said that a wider availability of mortgage finance, tax incentives and sustained levels of tenant demand would encourage further investment in the PRS. Just over four out of 10 landlords (43%) said they would like a better tax environment to help expand their property business, with 45% calling for the expansion of available mortgage finance.

Terrington said: “It is clear that confidence is high amongst the landlord community, which is reflected in the greater appetite for investment. There is obviously a dislocation between landlords’ intention to purchase and their actual ability to do so given the continued scarcity of buy-to-let mortgage finance. However, PRS Trends confirms that landlords still value residential property as an investment vehicle.”

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Rental Supply Hits All-Time Low

July 16th, 2010

Tenants are outstripping the supply of available rental properties, according to the Association of Residential Lettings Agents (ARLA).

ARLA research revealed that 70% of its member offices reported greater numbers of tenants than housing stock, compared to 59% last quarter and 24% in September 2009.

The South East was found to have the highest incidence of the issue, with 76% of members reporting tenants outstripping supply.

Ian Potter, operations manager of ARLA, said: “The spring period would usually see a rise in rental properties coming onto the market and, although there is some evidence of landlords considering selling up, it is not enough to counteract the change in supply.

“This situation has been deteriorating rapidly in recent months, as the supply and demand of homes to buy is also swinging out of kilter, making the prospect of a severe rental housing shortage ever more likely.”

Potter added that the rise in Capital Gains Tax announced in the emergency Budget could discourage potential landlords from investing in the sector.

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Rising Rents Hit 2008 Levels

July 16th, 2010

The average rent across the UK increased 1% in June as constraints on supply boosted prices to their highest level since 2008, according to LSL Property Services.

LSL revealed that rents have risen for the fifth month in a row and are now 3.2% higher than a year ago. The average rent now stands at £673 per month, the highest price since November 2008.
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London lead the surge in June, with rents in the capital increasing 1.9% to an average £942, while rents in the North and North East rose 1.4% and 1.3% respectively.

However, the West Midlands saw a drop in rents of 1.7%.

Rental yields on buy-to-let properties have also been boosted up to 4.9% in June, as the average house price for the average rental property fell by 0.25% and the annual increase slowed to 8%.

The total return from investing in buy-to-let over the last year dropped slightly to 12.3% in June LSL found, as house prices come down. The average landlords would have made £18,983 in the past year, made up of £7164 in rent and £11,819 in capital gains.

Tenant arrears also fell to 10.1% of all rent in June compared to 10.7% in May, with £234m of all rent in the UK unpaid.

David Brown, commercial director of LSL, said: “The seasonal pick-up was exaggerated by the squeeze in the supply of rental accommodation. Although landlords weren’t clobbered as badly as feared, it is possible that some left the market in the run-up to the Budget and concerns over the new Capital Gains Tax rate dampened the number of new investors entering the market in June.

“But the restricted availability of buy-to-let mortgage finance has been the underlying factor holding back investment in the sector and the number of new rental properties hitting the market.”

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Cash-strapped Landlords Struggling To Cover Mortgages

July 15th, 2010

One in four landlords have admitted rents from tenants are barely covering their mortgage repayments and any interest rate rises could spell disaster, according to flat and house share website Spareroom.co.uk.

Research by Spareroom.co.uk found that 41% of landlords are only just meeting mortgage payments, while 43% said rents would no longer cover their mortgages if interest rates increased by 2%.

Some landlords admitted to standing even closer to the precipice, with 22% saying an interest rate rise of 1% would lead to rents not covering mortgages, while 10% said a rate rise of just 0.5% would create a shortfall.

The Bank of England’s Monetary Policy Committee has held interest rates at 0.5% for 16 months and is likely to maintain the rate for the time being. However, commentators agree interest rates must rise eventually.

Concerns over mortgage payments and potential rate rises have led 63% of landlords to increase rents in the past six months, with 21% admitting they have or plan to hike rents by 5% this year. A further 18% plan increases of between 3% and 5%.

However, over half of landlords said they are worried increasing rents could lose them loyal and valuable tenants.

Matt Hutchinson, director of Spareroom.co.uk, said: “Britain’s landlords are in a Catch 22. On the one hand, the rise in Capital Gains Tax for higher rate taxpayers means that many landlords either won’t be able to sell their buy-to-let properties full stop or will sell at a far greater loss. At the same time, holding onto their properties means they are at the mercy of the Bank of England and facing higher mortgage payments.

“For many landlords, it is hard to know which way to turn, and it could be that tenants feel the full force of landlords’ financial strain. The vast majority of landlords who have good relationships with their tenants don’t want to force the rent up, but for those who are struggling to make ends meet, it’s the only option.”

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Buy-To-Let Landlords Warned To Protect Against Tenant Troubles

July 15th, 2010

Buy-to-let landlords warned to protect against tenant troubles
15 July 2010

With the housing market still in a state of flux and predictions that house prices may fall further, many homeowners who are looking to move may consider renting their property out instead of selling.

However, moneysupermarket.com has warned homeowners who are considering this option to make sure they take out adequate landlords insurance as standard home insurance policies become invalid once you earn an income from your property.

With tenant demand for residential property continuing to rise, the proportion of landlords planning to buy new properties increasing and lenders slowly reintroducing good value buy-to-let mortgages, the number of people becoming landlords for the first time appears to be on the rise.

Whether you are moving into buy-to-let for investment, or have decided to go down this route to move home, getting the contract and paperwork right is essential and having adequate insurance in place is a must.

Last year, one in three landlords had tenants in arrears, so Brits shouldn’t skimp on their insurance. However it doesn’t have to break the bank, with standard landlord insurance available from as little as £93 a year from simple insurance, which covers loss of rent. For £134 a year, acumus will provide landlords with cover for legal expenses should they arise from incidents such as repossession, tenant default, and debt recovery.

Julie Owens, head of home insurance at moneysupermarket.com, said:

“Whether you’re looking at buy-to-let property for investment, extra income, or because you cannot sell your house, it is essential to have sufficient insurance to cover any financial losses connected with letting out a property. I advise anyone contemplating becoming a landlord to seek advice and get all of the relevant information before taking this venture on.”

“Landlord insurance which includes Rent Guarantee cover or legal expenses can be more expensive, however if things go wrong between a landlord and tenant legal proceedings can involve a hefty cost. It is important to have a good contract in place to know where each party stands should the tenant and landlord relationship fall sour.

“I advise insuring yourself against these circumstances before they arise, it is always better to be prepared and there are a number of suitable insurance policies for landlords on the market. The varying levels of cover available means it’s essential to do your research and pick the policy that is the best fit for your circumstances, policy wording can differ so it is vital to check the small print to determine exactly what is covered.”

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Fair Wear And Tear Guide For Landlords

July 15th, 2010

Government-authorised tenancy deposit protection scheme mydeposits.co.uk has created a ’wear and tear’ guide for landlords.

It offers advice on how to make a ’fair’ judgement call at the end of the tenancy period.There can be clear and direct financial consequences for both landlord and tenant should a dispute arise at the end of the tenancy.

The mydeposits ‘Wear & Tear – when is it fair’ guide aims to help landlords consider and weigh up the different factors involved in the decision-making process. The guide also highlights the importance of communication between landlord and tenant, particularly at the outset of the tenancy, when the landlord can set expectations of the tenants and the final condition of the property.

The mydeposits guide explores a number of different areas from the length of the tenancy period and the occupants themselves, to looking at the difference between wear and tear and actual damage to property.

Eddie Hooker, chief executive of mydeposits.co.uk said: “Wear and tear is always a hot topic of debate and is very much situation-dependent. We have worked with landlords and our in-house disputes team to compile the guide, which is by no means definitive, but hopefully gives landlords some benchmarks and examples to consider when checking out their tenants.”

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Rents Predicted To Rise 10% In Next Two Years

July 12th, 2010

York has been named the most affordable city in the UK to share a flat, according to flatsharing website Easyroommate.co.uk, as it forecast that rents will continue to soar along with rising demand.

Research by Easyroommate.co.uk showed that the average amount people will pay in York to rent a room is £270 per month or 14% of the average monthly wage in the city.

Easyroommate.co.uk compared rents and earnings across the 55 largest cities in the UK and revealed that the average UK rent is £348 per month or 16% of the national average monthly income.

Southampton was shown to be the least affordable city to rent in, with 27% of the average income of £1914 being spent on rent which comes in at an average £516 per month.

Despite London having the most expensive rent in the UK at £551 per month, proportionally, it comes in as the second leas affordable city. With the average income in the city clocking in at £2594, flatsharers are paying around 21 % of their wage on rent.

All five of the most expensive cities to rent in were located in the South East, with Southampton and London followed by Guildford (£505 per month), Cambridge (£418) and St. Albans (£410).

However, St Albans was found to be the third most affordable city to live in due to the average monthly income of £2932.

The three northern cities of York (£270 pcm), Stoke (£275) and Hull (£287) were amongst the cheapest cities to rent in.

Jonathan Moore, director of Easyroommate.co.uk, said: “There’s a clear split between the North and South, but the South East is looking increasingly like a separate market entirely. The squeeze in supply of properties has been felt more keenly in London and its outlying satellite towns, where demand is highest and rents are in London have soared to double those seen in York. For the price of renting a room in the South East, prospective flatsharers could rent whole properties elsewhere in the UK.”

Moore predicted that demand for flatshare will increase as first-time buyers continue to struggle to access mortgages and unemployment rises with public sector cuts.

He said: “We expect the monthly rents to rise by 10% across the UK over the next two years, with an increasing gulf between the rental market in the South East and the rest of the UK. But despite the imminent public sector job losses, the financial services sector shows signs of recovery and more jobs are becoming available in London. As demand for accommodation from young professionals grows, we anticipate the cost of room rental in London to top £600 per month.”

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