Constraints in supply bolstered both rents and yields in June, according to the latest Buy-to-Let Index from LSL Property Services plc.

MortgageIntroducer.com – 16 July, 2010

The average rent in the UK rose by 1% in June. Rents have risen for five successive months, and are 3.2% higher than a year ago – the equivalent of £23 more per month than a year ago. The average rent is now £673 per month, the highest level since November 2008.

Commenting, David Brown, commercial director of LSL Property Services plc, commented: “Rents have continued their upwards trajectory, and are just a few pounds away from their peak levels in 2008.

“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.”

London continued to lead the surge in June, with rents in London rising by 1.9% to £942. Landlords in the north also had reason for cheer as rents rose in both the north west and north east – by 1.4% and 1.3% respectively. However the west midlands bucked the national trend, recording a drop of 1.7%.

As rents continued to increase, and house prices dropped off in June, yields on buy-to-let properties snicked up to 4.9%. The house price for the average rental property fell by 0.25% compared to May, with the rate of annual increase slowing to 8% in the past 12 months.

The total return from investing in buy-to-let over the last twelve months fell slightly to 12.3% in June as house prices fell slightly. The average landlord would have made £18,983 in the past year – a combination of £7,164 in rent and £11,819 in capital gains.

With the recent house price decreases, a landlord investing today can expect to make an annual return of 3.4% over the next twelve months. This is equivalent to £5,670 on a typical UK property.

There are few things more frustrating or stressful then needing to move but being unable to do so because you cannot sell your home. Unfortunately this is a situation too many currently find themselves in as the sales market continues to be slow, with a disappointingly low level of enquiries from potential purchasers throughout the normally busy spring and early summer months.

A significant improvement does not now seem likely as sales tend to fall during the summer holiday season and into the autumn months.

But, according to letting specialist Leaders, if you want or need to move you need not despair, there is another option. One that could not only enable you to move home as soon as you are ready, but will also provide an income and allow you to delay your sale until a more favourable sales market. That option is letting.

Says Leaders’ Managing Director, Paul Weller: “Letting your home could be the solution to your problems if you want to move soon. Demand for rental property is stronger than ever and good quality properties are being snapped up by tenants as soon as they become available.

“Whilst the sales market is suffering, the rental market is buoyant because more people are choosing to rent for a number of reasons: people are still uncertain about the economy and are either unable or unwilling to commit to buying a property; renting is a more affordable and flexible option, it does not require a huge deposit and it allows people to move on easily for work opportunities.

“We are seeing exceptionally strong demand for all types of properties in the areas we cover,” continues Mr Weller, “from studio flats to large family homes – with many tenants choosing to extend their tenancies indefinitely. If you put your property on the market with us you will be able to get moving quickly. You can let for six months – or longer if it suits – until the sales market improves, and in the meantime get a useful income from the rent.”

Leaders are advising home owners that if this option appeals to them they need to act sooner rather than later. Rental demand is particularly high at present whilst property stocks are lower, therefore premium rentals are being achieved. As autumn approaches, the tendency is for more properties to come onto the rental market, therefore the choice for tenants will be greater. Says Mr Weller: “It is important to set things in motion as early as possible even if the property is not going to be available for a couple to three months time.

There is a growing tendency for tenants to want to secure a home much further in advance than they used to – a reflection of the fact that there are fewer properties available now and tenants do not want to be disappointed in their search.

“Becoming a landlord can be a daunting prospect, particularly if it was not something you initially planned. But, as the UK’s largest independently owned letting specialists with more than 27 years experience, we can give you all the advice and support you need to make letting work for you.

We only let to fully-vetted tenants, we are up to date with and abide by all legislation that applies to letting and we always ensure that your rights and interest as a landlord are fully protected. Your property could be perfect for letting, so why put your plans on hold if you don’t have to?”

Leaders are fully bonded members of the Association of Residential Letting Agents (ARLA) and have a reputation for providing a high quality, friendly, personal service. They have 45 branches across the South and can provide completely impartial and expert advice on all aspects of letting and renting.

Base Rate Remains On Hold Following Emergency Budget , Simon Gammon, Head Of Knight Frank Finance

08 Jul 10

The decision by the Bank of England’s Monetary Committee to keep the base rate on hold at 0.5% for the sixteenth month running came as no surprise following last month’s emergency budget.

“Even though one of the new members of the Bank of England’s Monetary Policy Committee voted to increase rates at its June meeting, this view seems unlikely to prevail for some time,” says Simon Gammon, head of Knight Frank Finance, which specialises in mortgages over £1m.

“George Osborne’s budget got a largely positive response from the City and the consensus is that it could push any rate increase further into the future. Five-year swap rates have dropped to around 2.5% suggesting the market is not pricing in an imminent future increase” adds Gammon.

Even if rates seem unlikely to change for the next six months it is worth keeping in close contact with your mortgage adviser, he suggests. “There have been some very competitive five-year fixes on the market recently, some below 4%, but these are getting withdrawn very quickly as demand exceeds supply.”

“If you are thinking about taking a new mortgage or renewing your existing arrangements at the current time it could pay to talk to an expert so you are ready to move quickly to secure the best rate.”

The Deposit Protection Service (DPS) and the National Union of Students (NUS) today warn new students not to be caught out by unscrupulous landlords.

As the end of the academic year approaches, many students are preparing to go to university for the first time or are looking to change accommodation in time for the start of the new university year in September.

To coincide with this, The DPS has produced a new tenant’s guide to provide students with advice about moving into their first rental property.

‘The Deposit Protection Service: A Tenant’s Guide’ provides tenants with information on how the tenancy deposit protection scheme works and the obligations and responsibilities of landlords.

Kevin Firth, director of The DPS said:

“The Deposit Protection Service and National Union of Students are warning students to protect themselves against rogue landlords.

“Going away to university should be an exciting time for most students and putting in the time up front to make sure their deposit is correctly protected will mean there’s less chance of hassle in the long run. There are still too many landlords out there who are not registering their tenants’ deposits and this new guide will make sure all students are aware of their landlord’s obligations.”

Ben Whittaker, NUS Vice-President (Welfare) said:

“It is important that all students check that their landlords are registered with an approved tenancy deposit scheme and only use a landlord who is. Using a tenancy deposit protection scheme will provide students with peace of mind that their deposits are safely protected and if there is a dispute then students will have a means of redress”.

The DPS and NUS have drawn up a list of top tips for students to remember:

• Before signing the tenancy agreement you should make sure it refers to how your deposit will be protected and the process for repayment
• Before handing over money you should insist on written proof that the landlord belongs to a Government-approved deposit protection scheme
• You should make your landlord aware that you will be expecting a written receipt from the scheme within 14 days of handing over the deposit
• Your inventory should include a schedule of condition report containing signed and dated photographs to prove what condition the property was in when you arrive and leave
• You should also be present to agree the inventory and sign the schedule of condition report so landlords can’t claim for damage done before you have moved in

The DPS and NUS believe that by following these simple steps, students can make sure their deposits are safe and properly protected.

Poppy Michelsen, aged 20, studying Environmental Geoscience at Cardiff University said:

“Many landlords will return a deposit in full but I know from the experience of friends that a few disreputable ones will try to swindle students out of the full sum.

“Living away from home for the first time is daunting, especially with the added responsibility that comes with renting a property.

“Knowing our deposit is secure gives my housemates and I comfort and peace of mind. I would advise other students to do the same, and take every measure to ensure their deposit is protected by a registered scheme.”

The new guide will be distributed by NUS and is available to download from The DPS’s website: www.depositprotection.com or accessed here:
https://www.depositprotection.com/WebContent.ashx?docid=8c898ec3-a170-4581-93f3-889b289e5657

The DPS works by physically holding onto a tenant’s deposit, free of charge, for the term of the tenancy agreement. Under The DPS scheme the deposit remains protected even if the landlord or letting agent goes into administration.

The DPS is currently holding more than 575,000 tenants’ deposits, equating to over £420 million.

About The DPS:

The Deposit Protection Service is the custodial tenancy deposit protection scheme accredited by the Government. It is provided free of charge, and funded entirely by the interest earned from deposits held in the scheme. The DPS is run by Computershare Investor Services PLC. Online self-service allows landlords to register and make deposit payments, transfers and repayments 24 hours a day. Help and advice is available through a dedicated call centre during office hours. An impartial Alternative Dispute Resolution (ADR) service, helps to resolve any disputes quickly and without the need for court action.
For more information, visit www.depositprotection.com

New Local Housing Allowance Rates and Landlords – How the New LHA Rates Have Huge Implications for All Landlords

The whole issue of the government’s reform of the levels of Local Housing Allowance (LHA) rates has raised a lot of heat on the various discussion forums. In some of these, private landlords are cast as the villains of the piece but often it is the last government who gets the flak for their approach to LHA.

The arguments usually go something like this.

Someone – who is usually keen to point out they are a taxpayer – will say, “I cannot afford to live in say, Westminster borough myself, so why should I have to pay out of my taxes for those on benefits to live in such locations?”

They will point to the figures that show that the average Greater London rent in the private rented sector is £403pw for a 4 bed and £184pw for a one bed, and will say, “Hey, cheaper accommodation IS available below the new capped LHA rates – you’ll just have to move for it, like people have to move when they need a new job.”

The very real concern is that as a result of the new caps, some vulnerable people will be forced to move from their old homes in these expensive areas to other areas – one has horror visions of armies of old grandmothers with disabilities and young Mums being forcibly moved to cheaper boroughs further out.

Those who may be asked to move to areas where rents are cheaper will rightly point out that it was not they who sold off the council housing stock so it should not be them who have to suffer.

To this, the “taxpayer” inevitably replies, “Sure, and it was the bankers who caused the current economic crisis, but we will all have to pay for that too, through higher taxes. It’s a shame you now have to move out of expensive Westminster but that’s life. Welcome to the real world.”

And so the argument goes on.

Big Hit

Landlords letting in central London and other “expensive-to-rent-in” UK boroughs to LHA dependent tenants, whose LHA rates will be hit by the new capped rates will soon face a big hit on LHA rates payable once the new rates are implemented next year. (In places like Westminster we are talking huge numbers of LHA dependent tenants) And tenants in these areas will struggle to make up the difference once rates are cut to below the new cap.

So what will these landlords do? Well, they will have to 1) Accept reduced rents from their old LHA tenants but keep going or 2) Give notice to the LHA tenants and let to non LHA dependent tenants instead or 3) Sell up.

What will the tenants do? Well, if they cannot afford to make up the difference somehow, it looks like they will have to move to different boroughs where they can still get the accommodation they need at below the new LHA cap.

If large numbers do this I can only see additional demand placed on housing in neighbouring boroughs which (for now) have cheaper rents.

So landlords with existing residential property in places like Southwark, Lewisham and Tower Hamlets could well see rental demand rise strongly and even house prices go up.

In next weeks’ blog I’ll show how these changes have huge implications for both “expensive-to-rent-in-boroughs” as well as neighbouring cheaper ones and I’ll look at what the local authorities should be doing now to plan for this.

Useful Links for Landlords

This site, run by the London Mayor shows the level of private rented sector rents in different parts of London (using VOA data): http://www.london.gov.uk/rents

Here, using this site, you can what a tenant can get under LHA in different areas for different bedroom sizes:

https://lha-direct.voa.gov.uk/Secure/LHASearchIntro.aspx

Here are the likely new rates from next year:

http://www.voa.gov.uk/LHADirect/LHA-emergency-budget-news-2010.htm

Article by David Lawrenson of  LettingFocus.com

www.LettingFocus.com is the home of Private Rented Sector and Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.

Services to Businesses and the Public Sector

Primarily I am a consultant to banks, local authorities, social housing providers, insurers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing association / local authorities find private landlords (private rented access schemes, local letting agency models etc.)
I also write for property websites and am regularly quoted by the media.

Services for Private Landlords

We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our occasional group seminars.