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ARLA Calls For Rental Regulation In England

ARLA Calls For Rental Regulation In England

Government Urged To Rethink PRS Regulation

The Association of Residential Letting Agents (ARLA) wants the Government to bring England in line with the rest of the UK by calling for greater regulation of the private rental sector to better protect tenants.

ARLA argues that tenants in England could soon be less well protected than their Scottish and Welsh counterparts, due to the delay by the Government to introduce laws allowing for better regulation of the lettings industry.

According to data released by ARLA, 36% of all households in England are in private sector rented accommodation and the lack of regulation of the Private Rental Sector (PRS) is fast becoming an issue that affects more of the population than ever before.

The Scottish government reviewed its strategy for the PRS on the 30th May, while the Welsh government is set to introduce a Housing Bill legislating for a compulsory licensing scheme for all letting agents in Wales, as well as a code of practice, before the end of the 2012/13 Assembly term.

The announcements by Scottish and Welsh parliaments are in stark contrast with the current UK Government’s stance of opposition to regulation of the Private Rental Sector because of an apparent fear that landlords will become bogged down and put off by having to wade through a mountain of red tape.

On the surface this seems incredibly thoughtful of the Government, however, it is not to be forgotten that they also intend for all landlords to become unpaid agents for the UK Border Agency policing the immigration status of all tenants. No matter how watered down that proposal becomes the intent of those in power was made clear – to tap into powerful resources to save themselves money. It does make you wonder if the reluctance for regulation is simply because the Government can’t find a way to financially benefit from introducing new regulatory legislation at this current time.

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Landlords need to be aware of the energy efficiency of their rental properties

Landlords need to be aware of the energy efficiency of their rental properties

UK PRS landlords are being urged to check the energy efficiency of their rental properties that they want to let out before tenants commit to rent them, as it could save their tenants a substantial amount of money in the long term.

Landlords have stated that their tenants are becoming increasingly concerned with the extortionate cost of utility charges and many tenants have even used the information displayed on EPC’s to make the decision to go ahead with the let of more energy efficient rental properties.

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New figures released by the Council of Mortgage Lenders (CML), show that the number of residential property repossessions remained relatively stable in the first quarter of this year.

According to the CML, some 9,600 residential property repossessions were recorded in the first three months of 2012, approximately the same amount recorded in the same quarter in 2011, although repossession statistics are up by 10% on the fourth quarter of 2011.

The CML have stated that the results of their findings correspond with a typical seasonal trend in UK property.

As a direct result of its findings for the first quarter of the year, the council of mortgage lenders may have to revise the repossession forecast for 2012 downwards from the expected 45,000 repossessions.

However, in a statement, the organisation added: “Continuing pressures on household finances, changes to welfare benefits and an upward drift in mortgage rates all have the potential to disrupt the current stable picture.”

The CML also indicated that the first quarter of 2012 saw a drop in the number of mortgages with arrears of 2.5% or more of their outstanding balance, dropping from 160,300 to 157,800 on a quarterly basis.

The UK may need an extra 1.1 Million private sector rental properties within the next 4 Years

The number of people renting homes in the UK Private Rented Sector (PRS) has almost doubled over the last ten years, increasing from 2.5 Million tenants in PRS properties in 2002 to 4.8 million tenants today.

‘Rental Britain’ – A new report from Savills estate agency and the property portal Rightmove, predicts that one in five households could be in Private Rented Sector (PRS) property by the year 2016.

That would require an additional 1.1 Million rental properties to be made available for rent to new tenants.

The report may be gloomy reading for the UK Government but it is great news for thousands UK landlords who have already secured their rental incomes using specialist products and services for landlords, such as, Rent Guarantee insurance.

The ‘Rental Britain’ report forecasts that £200 Billion (GBP) investment in property will be needed, but says that only £50 Billion (GBP) of this is expected to come from buy-to let-funding, with the gap filled by institutional investment in new purpose built rental accommodation, but the report says that this needs to be recognised by the planning system.

The report also states that a shortage in supply is making some regions of the UK unaffordable, with PRS rent rises averaging 5.2% across the UK during 2011.

The report estimates that during 2011, working tenants paid around £48 Billion (GBP) in rent to private landlords, and this is expected to rise to around £70 Billion within the next five years.

Lucian Cook, director of Savills residential research, said: “Meeting the growing demand for private renting and the changing profile of tenant demand are perhaps the greatest challenges facing both the housing industry and policy makers. The dynamics of supply and demand make a great case for investment in this sector, and rising rents and lower capital values have begun to attract private investors back into the market. Investment returns relative to other asset classes will dictate the pace of investor entry to this sector.”

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Private rented sector property rents in the UK are only expected to rise moderately in 2012, remaining almost in line with inflation and salary increases, according to the Belvoir rental index, which records monthly and annual rents across the popular letting agents 140+ UK offices.

Their data shows that in the UK, property rental fluctuation is very regional and this is likely to continue throughout 2012, with areas such as the South East likely to see a higher increase as residential property rental prices force people out of London into the Home Counties.

Dorian Gonsalves, Managing Director of Belvoir Lettings said “With regard to other areas of the UK I think rents will be relatively stable and increases are likely to be very modest. Landlords should be realistic and it is worth noting that, according to the Belvoir rental index, many areas have still not recovered to the level of rents that were being achieved in 2008. I predict that increased rents and stable or decreasing house prices will result in increased rental yields in 2012. However, this is clearly very dependent on the outcome of the Eurozone crisis and its impact on credit and borrowing. The current crisis is making consumers nervous, which will affect both the buy to let and mortgage market”.

A recent phenomenon noted by letting and property managing agents across the country is the occurrence of “double renting”, (homeowners who are struggling to sell are letting out their existing home to provide an on-going income stream and then moving to another lower cost rental property).

Double renting helps avoid the stamp duty and legal costs that are associated with buying and selling, enabling savvy homeowners to remain invested in the property market until the situation improves and sell at a profit.

“I believe that for reasons of flexibility, mobility and budget, 2012 will see a shift towards more people viewing renting as a preferred lifestyle choice rather than a necessity. By renting a property people are able to plan their spending much more accurately and have the flexibility to follow job offers etc. These factors are becoming increasingly important, particularly in the current financial climate. Because of the regional variations in rental yields it is very important for landlords to talk to specialists who understand the local market, as buying in the wrong area could be very costly. We are able to report on regional markets rather than providing a broad brush approach, which is not particularly helpful from a property investment perspective”, explained Mr Gonsalves.

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Private residential renting on the decline?

UK PRS faces mounting rent arrears

The demand for Private Rental Sector (PRS) residential property and the rise in the number of tenants struggling to meet their rental payments on a regular monthly basis is expected to see the decline of the UK residential property rental market.

According to the latest lettings survey from the Association of Residential Letting Agents, (ARLA) 55% of its members reported more tenants than available properties in the last quarter of 2011, down on 74% reported in the previous quarter.

39.2% of ARLA members reported an increase in tenants struggling to pay their rent, over the same period, a figure up from 36.7% the previous quarter.

President of ARLA, Tim Hyatt, said: “With household income decreasing and job uncertainty prevailing, it could be that increasing rental arrears is a sign that the wider economic malaise is having a tangible impact on personal finance – some consumers may have reached the limit of their access to finance, while others may be cutting back as many commentators have predicted. We are reassured by the fact that the number of new tenancies is stable, but we will be watching the market closely in the coming months to determine how significant these latest figures will prove to be”.

The number of First‐Time Buyers (FTB) able to secure finance isn’t expected to significantly increase during 2012 so the demand for the limited supply of private sector rental accommodation will only continue to rise. It won’t be long before rents will resume an upward trend.

With the mortgage market still facing more financial fallout from the Eurozone crisis and the wider economy remaining sluggish, UK credit conditions are unlikely to ease significantly in 2012. As household income become even more stretched during the course of the year, it is expected that the current rental boom will begin to decrease outside of prime areas in the latter half of this year.

With the numbers of tenants having trouble paying their rent being on the rise, UK Landlords are encouraged to use Rent Guarantee products from reputable suppliers such as Legal 4 Landlords as a means to keep their rental income flowing in.
If you are a Landlord who lets a property then you run the risk of rent default by your tenant. Even the best checks and references cannot predict a tenant falling on hard times and not being able to pay their rent. Could you cover your expenditure if this happened?

In the current economic climate, many landlords are finding their default rates soar as tenants struggle with rising unemployment and increased bills. Recovering arrears can be difficult and costly for landlords, without any guarantee of success.
At Legal 4 Landlords, our Rent Guarantee Insurance will cover you against your tenant defaulting or failing to pay the rent

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