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RLA warns of new risk to landlords.


Landlord Keys 22

New rules to protect rent paid by tenants to letting agents will fail to provide adequate protection for landlords, the Residential Landlords Association has warned.

From April next year, all letting agents in England will need to be members of a Government approved Client Money Protection (CMP) Scheme. These will protect the rental money that a tenant pays to a letting agent to pass onto their landlord in situations such as the agent ceasing trading.

Details of the policy provided by the Government reveal that:

• The level of insurance held by CMP schemes will not cover the full value of the rental money held by the letting agent.
• The CMP schemes will not pay out in certain circumstances.
• CMP schemes will be able to cap the amount they pay out, in the same way as the Financial Services Compensation scheme.

The Residential Landlords Association is warning that there will be a considerable risk to landlords, particularly those with large portfolios, of not receiving all the money which they are owed. It is advising that to help reduce the risk, landlords should spread their properties across a number of agents so that they reduce the need to go over whatever limit will be guaranteed with each one.

David Smith, Policy Director for the RLA said: “It is right that money provided to agents by tenants for landlords should be protected. It is disappointing that the Government’s plans will not offer full protection and we urge Ministers to think again or they will undermine confidence in the scheme.

Otherwise we will encourage landlords to ensure that they do not put all their eggs in one basket and spread the risk.”

What is the true effect of tax changes on the buy to let market?

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Although media coverage of landlord reactions have been mixed, it is fair to say that the buy to let industry has undergone radical change over the past couple of years and most, if not all landlords have been affected in one way or another.

Speculation suggested that landlords would quit buy to let in their droves. Meanwhile, there has been a growing trend for landlords to move property ownership into a limited company for tax purposes.

Furthermore, recent data from property advice website The Property Hub, suggests that many existing landlords are undaunted by recent changes and the threat of a no-deal Brexit, with 77% planning to increase their portfolios over the next 12 months.

Andrew Turner, chief executive at specialist buy to let broker Commercial Trust, puts the story straight on the true outcome of tax changes on buy to let.

Andrew says: “It was inevitable that tax changes, which could potentially suppress profitability in the short term, would impact upon the perceived desirability of buy to let investment. The expectation was that this would be most keenly felt by those with fewer properties, because adjusting to the changes would be a more painful process for new investors or those with less experience.

However, the simple fact is that buy to let remains a solid investment option, with strong potential for an attractive and profitable return on capital invested.

Investors should not be deterred from buy to let. Demand for rental housing is stronger than ever, the cost of debt remains relatively cheap and the housing shortage is likely to continue. Even so, any investment decision requires care and expertise.

Many headlines have focused on one and two property investors who have left the market because they have found it difficult to adjust.

What is the reality?

Landlords have time and again proven that they are willing to adapt to change when necessary. Recent data from UK Finance, also indicated an evolution in buy to let, rather than a mass exodus.

Jackie Bennett, Director of Mortgages at UK Finance, revealed in November, that forecasts for 2018 buy to let purchase activity, were likely to fall about £3 billion short of expectations, stating:

Saying: “This is undoubtedly the impact of various tax, regulatory and legislative changes that have happened to landlords in the buy-to-let sector.”

However, Bennett went on to add that buy-to-let remortgaging exceeded forecasts for 2018, with lending likely to reach £27 billion, representing a £3 billion surplus on what was anticipated.

Turner said: “The market continues to grow and in Q2 2018 increased by 6% over 2017 levels. UK Finance statistics revealed that much of this growth was in remortgages, which grew by 15%, while purchases dipped by about 12%.

In early August 2018, the Bank of England decided to increase rates by 0.25%. Although there has been limited market reaction so far, I expect to see market rates increase, because margins are wafer thin.

The Bank of England has said as much itself, with repeated messages that rates are anticipated to rise gradually over the long-term. Landlords have responded to this and there has been significant interest in fixed rates, useful to guard against rate rises. Investors are likely to continue to do this as their renewal dates come up and therefore I’m sure the remortgage market for buy to let will remain buoyant over the coming months.”

Tenants paint a picture of their perfect rented home

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According to a new study, tenants would stay in their rented homes for longer if landlords let them do the place up to their own tastes.

Unfashionable décor, damage left by previous tenants and bans on pets were all reasons cited by tenants putting them off renting a property.

But the big surprise was that 44 per cent of tenants would be happy to redecorate a rented home to their own taste – and they say this would encourage them to take more care of the property –  while a third would spend their own money on decorating to make their rooms look nicer.

“For many people now, especially the younger generation, the idea of owning your own home can feel like a bit of a pipe dream,” said Alan Kemp, head of brand marketing at Graham & Brown, which commissioned the report for International Wallpaper Week (October 1 – 7, 2018).

“Landlords these days usually don’t let tenants decorate, which is just one thing in a long list of bugbears, and these strict rules leave Generation Rent lagging behind in the home style stakes.”

The research also disclosed that 27 per cent of renters had turned down a buy to let property because of the state of the décor.

They were put off by out-of-style coloured bathroom suites, textured walls or ceilings, bare walls, magnolia paintwork and coloured kitchen units.

One in five said their landlord would not allow them to decorate, while 62 per cent would get out paint brushes if the landlord gave them permission to restyle their homes.

Vast majority of tenants prefer a shorter tenancy

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According to a recent study by online letting agent, MakeUrMove, and contrary to Government proposals, only 7.2 percent of UK tenants stated that they would prefer a tenancy lasting three years.

The research found that instead, 30% of tenants want tenancies to last 12 months, and a further 20% want tenancies to last for no more than two years.

While the outcome of the consultation is yet to be published, these new findings show many prefer flexibility and freedom when it comes to tenancies, with 31% saying flexibility was the most important factor when looking at the length of their tenancy.

29% of tenants stated that they’d actually like a tenancy to last significantly longer than three years, and nearly half (43%) of the tenants questioned had spent more than five years in their current rental property.

Alexandra Morris, MakeUrMove’s managing director, commented: “Many tenancy agreements are currently set at twelve months with a six months break clause and we’ve found nearly a third of tenants are happy with this length. Our findings reinforce that the majority of people want either the flexibility of a shorter rental, or the security of a much, much longer term.

The Secretary of State for Housing, Communities and Local Government stated that ‘being able to call your rental property your home is vital to putting down roots and building stronger communities’, yet our research shows that 87 percent of tenants already think of their rental property as a home under the current regulations.”

The findings also revealed that 59% of tenants surveyed had been the ones to give notice on their last tenancy, with just 3 percent being evicted by the landlord.

Alexandra added: “While we don’t yet know the outcome of the consultation, our study suggests three-year minimum tenancies aren’t going to address tenants key concerns around their rental properties. The Government has once again looked at an issue in isolation with no regard for other related issues and proposed regulations. We believe that in order to make the rental market work for everyone, someone needs to take a step back and look at the cumulative effect of all changes to the market.”

Brits remain positive about property despite Brexit

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The latest research from has suggested that, despite the threat of a ‘no-deal’ Brexit, the majority of the British public remain upbeat about the future of the UK property market.

According to the figures, only 23% of the public said they felt Brexit would have a negative impact on property prices, with the remaining respondents saying they believed property prices would remain steady (33%) or rise (42%) as a result of the United Kingdom leaving the European Union.

When asked about property price predictions for the next 12 months, 36% said they thought property prices would remain stable and 41% percent said they expected further price rises over the next year. When respondent were asked to consider the next five years, the number of people expecting to see a rise in property prices increased to 52%, demonstrating long-term optimism amongst the British public.

The research questioned members of the public in a wide range of housing circumstances, both homeowners and those renting. Those who currently own their first property, whether mortgaged or owned outright, were the least positive about market growth, with 68%(owned outright) and 70% (mortgaged) believing that Brexit will result in steady or rising property prices. Those renting, but with a desire to own, came next with 72% predicting stable or rising property prices, followed by those who own a mortgaged property that is not their first property (75%), those who are renting with no current desire to own (80%), those who own a property outright that is not their first property (80%) and those who are currently living with parents (86%).

Market optimism was also fairly consistent across all age ranges, though those aged 25 to 34 were the most reserved with their predictions of market strength.

Danny Luke, Quick Move Now’s managing director, commented: “The British public appear to be feeling really quite positive about the impact of Brexit on the UK property market. I hope the public are right, however there are several indicators that I think we need to pay attention to. The recent interest rate increase, a report from Rightmove suggesting that property asking prices are falling, national statistics showing an eight percent reduction in the number of property transactions, and predictions from the Royal Institution of Chartered Surveyors (RICS) all suggest that the British public may be a little overly optimistic.

A much more likely outcome appears to be a subduing of the UK property market. Although I hope it is not the case, should there be any more ‘bad news’ from Brexit, or elsewhere, I fear we may see a much less positive public, and a real impact on UK property prices.”

Top tips to keep your home safe while on holiday

As million of Brits prepare to pack their suitcases and head off on their summer holidays, their homes could be a prime target for criminals.
That’s the warning from national security firm Croma, which is urging people to think carefully about protecting their homes this summer. Millions of us are expected to head off on holiday in 2018, with the forthcoming school holidays a catalyst for even more travel in July and August. But with burglaries on the rise (up 9% on last year according to the ONS), people are being urged to make sure they leave their empty homes as protected as possible.
Roberto Fiorentino, CEO of Croma, says: “What we’re seeing on the ground really reflects the national figures and, furthermore, we’re seeing a real rise in criminal gangs, who are far more sophisticated when it comes to burglaries.
The summer holidays are a prime opportunity for them to break into homes and get away with thousands of pounds worth of goods, completely uncontested.”

To tips to help holidaymakers protect their homes this summer

1: Switch off your home devices

Cyber security experts this week revealed that hackers can determine your exact location to within a few feet through your Google home speaker or Chromecast device. Switch off your device and your broadband while you’re away.

2: Be social media savvy

Bragging about the fact you’re about to jet off to the Maldives for two weeks could put your home, not just your popularity, at risk. While you may think your group of Facebook friends is small, you never know who might be listening. Keep quiet about your movements.

3: Make your home look occupied

Some of our clients have electric blinds they can set to open and close remotely from an iPad, which is a good decoy. If you don’t have the budget for connected devices like these, take simple steps like setting lights on a timer, asking a neighbour to park in your drive and cancelling deliveries so they don’t pile up on your doorstep.

4: Get your CCTV in the right place

There’s no point having security cameras pointing right at your front door – by the time a burglar has got that far it’s too late. Position them further away to detect potential burglars further away with the assistance of perimeter detection. You can enlist a security firm like Croma to monitor your CCTV while you’re away. They can move quickly if something happens.

5: Don’t hand them the key

Too many people leave a spare key hidden under a rock or in a porch. Needless to say this is asking for trouble. Leave it with a neighbour you trust implicitly.

Roberto adds: “With the rise in violent crime people are fearful of asking friends to house-sit in case a break-in happens and they’re attacked,” he says. “They feel much more comfortable getting a professional in and, with these homes often having more expensive items at stake inside, they’re prepared to pay for the service to protect their possessions.”

Build to rent investments to become the mainstream by 2025

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In recent years, the UK housing market has experienced a steady increase in the number of residents renting privately: 20% of households are now in private rented accommodation across the UK (with 30% of the population renting in London).

This trend can be attributed to the poor supply of new homes and rising house prices. In recent years, the shortage of housing supply has been thrown into the spotlight thanks to the combination of a recent price boom and stagnant real wages. According to figures by Nationwide, the annual rate of house price growth has increased to 2.5% in October 2017, pushing homeownership further out of reach of young Londoners looking to buy their first property.

These factors all contributed to opening a gap in the market, giving property developers a new way to profit from Generation Rent: those under 35 years old in full employment stuck in overpriced housing and earning too much to qualify for social housing.

In 2017, the growing build-to-rent market attracted £2.4bn in investment and is forecast to grow by a further 180% over the next six years. It seems like build-to-rent offers great opportunities for property investors: in fact, the demand for more affordable private rental properties is expected to increase alongside the development of new build-to-rent units. Recent forecasts by PwC property consultants expect to see 60% of Londoners living in rented accommodation by 2025.

New purpose-built homes are typically flats, developed with the aim of appealing to long term renters instead of buyers. A typical example would be the former 2012 Olympics athletes accommodation in Stratford, London, now converted to a build-to-rent style complex. Research from the BPF and Savills published in April 2018 shows the total number of build-to-rent homes complete, under construction and in planning across the UK has increased by 30% in the past year. There is no doubt that this figure is set to increase.

To tackle the recent housing crisis, Prime Minister Theresa May has invested government funds to increase housing supply by building 300,000 houses a year for the next five years. Build-to-rent was not a focus area for government action, instead focusing its efforts to encourage homeownership. However, in May 2018 the British Property Federation has published research that shows 75% of MPs support build-to-rent and its contribution to the UK housing supply. Although London mayor Sadiq Khan has announced his intentions to build 5,000 build-to-rent properties in the capital, investment is only limited to collective investment, and not singular bodies. It seems like the government has identified build-to-rent as a way of boosting supply, however we are yet to see schemes opened up to local authorities and developers.

The government has called for the entire private rental sector to provide longer-term tenancies for families and older renters, and many large development companies have responded to this growing need. Noteworthy build-to-rent investments included Grainger agreeing three deals for a total of £86 million in Sheffield, Manchester and Birmingham. Additional investment from Legal & General meant that Birmingham alone secured £81 million worth in investment during the fourth quarter. One of the landmark London deals of 2017 was CPPIB’s £250 million investment in to Lendlease’s Elephant & Castle project.

The build-to-rent sector is funded and managed by investors who require long-term rental growth, which means its business model essentially depends on ensuring its customers’ experience of renting is an enjoyable one, and the sector becomes one in which they are happy to stay if they wish. Although build-to-rent may not be a mainstream property class at the moment, increased investment patterns, growing demand and the government’s rising support for this asset type are proving to be invaluable to the acceleration of this industry.

How will new HMO licensing rules affect landlords?


In early March, 2018, the Government introduced new rules regarding licensing of houses in multiple occupation.

From October 1st, 2018, there will be an extension to the scope of mandatory licensing requirements for HMOs, under section 55(3) of the Housing Act 2004.

This means that more properties will require a licence before they can be let.

From October 2018, HMOs occupied by five or more people must have an appropriate mandatory licence, with the number of storeys no longer a consideration.

The changes go further; HMO licensing will also now apply to purpose-built flats where there are up to two flats in the block.

HMOs that currently require a selective licence, will be subject to mandatory licensing from October 1st, 2018.

Landlords will have to obtain a mandatory licence where their property meets the following criteria:

• It is occupied by five or more persons;
• is occupied by persons living in two or more separate households; and meets—
• the standard test under section 254(2) of the Act;
• the self-contained flat test under section 254(3) of the Act but is not a purpose-built flat situated in a block comprising three or more self-contained flats; or
• the converted building test under section 254(4) of the Act.

A licence is valid for five years and a separate licence must apply to each HMO property.

Jorden Abbs, director of operations at Commercial Trust Limited, commented: “It is absolutely essential that you keep up to date with the changes taking place and ensure that you have the relevant HMO licence, if this is required. In the first instance, you should speak to your local council to learn if a licence is necessary and if so, what you must do.

“The changes coming in will impact on a number of London’s landlords, but represent a further effort to improve standards with the private rental market.

“Lenders already adopt differing approaches to investors who are looking to finance an HMO.

“If you are looking to obtain financing for an HMO, come and talk to us. We work with a broad range of buy to let lenders offering landlords a wide choice of products. With a telephone conversation, we can help to identify the best buy to let mortgage to fit your circumstances.”

Tackling the housing crisis- what’s next?

In Autumn 2017, Chancellor Philip Hammond announced that by the mid 2020s, an extra 300,000 homes would be built annually to try and tackle the housing crisis. This would require an investment of at least £44 billion over the next 5 years. Additionally, the removal of Stamp Duty applied to purchases below £300,000 was introduced to encourage more first-time buyers. This was particularly aimed at encouraging millennials who had been predominantly renting rather than buying property. The newly released Spring Statement 2018 has no new major announcements but offers a few more initiatives aimed at tackling the housing crisis. The chancellor confirmed that the government was on track to hit their targeted number of new homes.

The Spring Statement outlined new investments plans:
– An investment of £1.67 billion to build 22,000 new homes by 2021/22 in London to tackle the housing crisis.
– 215,000 new homes to be built by 2031 in the West Midlands facilitated by a £100 million grant from the land remediation fund.
– Additionally, the House Growth Partnership was doubled to £220 million in order to support the smaller household builders.

The build to rent initiative is a potential solution to the chronic housing shortage with the current younger generation finding it increasingly harder to climb onto the housing ladder, seeking rented accommodation as the only option left to them. Investors and developers have therefore become interested in purpose-built blocks of rental homes as the market is extremely buoyant and reliable in contrast with the unpredictability of the standard housing market. A successful example of this Build to Rent scheme is the East Village in Stratford where 3,000 homes were built by Delancey and Qatari Diar.

In 2018, the government announced that 133 council led projects would receive funding under its Housing Infrastructure Fund thus paving the way for 200,000 new homes to be built helping to meet the required 300,000 homes by the mid-2020s.

The £866 million fund is part of the £5 billion Housing Infrastructure Fund that has been established to increase the speed at which new homes are constructed and help alleviate the current housing shortage.

This investment finances 133 council led infrastructure projects to build essential services and resources such as roads, cycle paths, flood defences, energy and water supply and land remediation work. Allowing for expansion and making housing developments viable in some of Britain’s highest demand areas. The former housing secretary, Sajid Javid, explained that without this financial support, these projects would take years to get started and may struggle to even get off the ground at all, thus further delaying the homes that communities desperately need.

The government highlighted some infrastructure development projects including:

• Manor Cluster in Sheffield, where £3.6 million of funding for drainage works, new roads and footpaths will help unlock more than 400 homes by 2025.
• Ashton Green in Leicester, where 3,300 homes are in the pipeline following a £10 million investment for new roads.
• Botley in Hampshire, where 1,000 properties will now be constructed due to a by-pass.
• Ilfracombe Southern Extension in Devon where 750 new homes can be unlocked thanks to £6.5 million funding for a new primary school.

This Infrastructure Fund is just one of the main Government schemes introduced to boost the development of new homes. Other initiatives include reducing time waiting for planning permission, changing rules to accommodate the conversion of agricultural or industrial buildings into housing, and providing extra cash for the Home Builders Fund which helps small developers access finance.

Rental sector remains resilient amid gloomy housing market

The latest data and analysis from HomeLet has revealed rental prices across the UK have shown a modest rise in the first quarter of 2018. Overall, rents have risen by 0.9% in the last twelve months, equating to an average monthly increase of £3 per property.

Martin Totty, chief executive of HomeLet, had this to say: “Rental price inflation was much more stable over the whole of 2017 compared to 2016, when rents rose at an annual rate of more than 4% in the first half of the year, before dropping back in the second half. So far, we are seeing this more stable market continue to prevail in 2018.

Accoding to the latest figures from HomeLet, average rents in the UK are now £912 – up by 0.9% on the same time last year. When London is excluded, the average rent in the UK is now £759, this is up by 0.1% on last year.

Rents in Scotland are showing the highest year-on-year increase at 5.6%. The region with the largest month-on-month decrease was the North East, showing a 2.1% difference between February and March 2018.

Martin continued:“The data also shows the sensitivity of the rental market to factors other than simply location. Last year, we saw rents in the areas surrounding the commuter belt to the south of the capital rise during a spate of rail strikes. The rate of growth has now slowed in this area as the strikes have ended. However, in the first quarter of 2018 rents in the central and eastern regions of London rose, which coincides with Crossrail nearing completion and suggests commutability into London has a real-time impact on the rental market.”

During the first quarter of 2018, house prices across the UK rose by 2.7%, whilst the rental market increases have been nowhere near as significant, rising just 0.3% (from £909 to £912), showing much more stability, which has characterised the rental sector over a long period. As well as this, overall rents have risen much slower over the last year than consumer price inflation, which was 2.5% in February.”

Martin concluded: “This data shows that a year into the three year phasing-in of changes to buy-to-let landlord taxation, rental inflation so far has remained steady rather than increasing as some commentators had predicted.”

Whilst March’s average increase reflects higher rents recorded in 10 of the 12 areas of the country HomeLet monitors – Wales and the North East bucking the trend – the pace of rental price inflation has slowed from 1.2% in February.