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Home rental costs still rising, says LSL

The average cost of renting a Private Rental Sector (PRS) property is now 3.4% more than it was 12 months ago, according to a new survey.

Rents Reach Record High and Continue to Rise

UK Rents Reach Record High and Continue to Rise

The cost of renting a property in England and Wales reached another new record high in October 2012, with typical PRS rents averaging £744 (GBP) a month, up 0.4% on September.

October’s increase is the seventh consecutive month of overall rent rises, with the biggest increases being in London – up 0.9% and the South East of England – up 0.7%.

However, it wasn’t all good news for landlords as five areas saw average PRS property rental prices fall, with the biggest decrease being in the East Midlands – down 1.8%.

The survey by LSL Property Services suggested that the pace of PRS rent rise’s has slowed and that the heat had come out of the rental market as the quieter season for new tenants approached.

David Newnes, LSL Director, said “A combination of improved buyer activity and a seasonal slowdown has taken some of the heat out of the rental market as it enters the traditionally quieter final months of the year. However, despite the deceleration, the fact that monthly rents rose by twice the rate seen a year ago points to the underlying strength of tenant demand for PRS property.”

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Landlord Mortgages Are Hard To Get say RLA

Landlord Mortgages Are Hard To Get say RLA

According to a recent survey by the Residential Landlords Association (RLA), almost half of their landlord members have encountered difficulty when trying to obtain a buy-to-let or landlord mortgage.

141 RLA members were asked how easy they had found it to access a buy-to-let mortgage,

  • 21% said they were unable to obtain a buy-to-let mortgage
  • 24% said they found it very difficult
  • 22% had to shop around
  • 14% found it easy to get a mortgage
  • 17% said they found it fairly straightforward

The RLA said that the first major challenge for the new housing minister Mark Prisk will be to persuade banks to unlock the financial support needed by private landlords to grow the residential lettings sector at a time when more homes are needed.

RLA chairman Alan Ward said: “We welcome the Government’s renewed commitment and interest in the opportunities that the private rented sector can play in meeting the country’s housing needs. However, this will not happen without financing from the banks. It is time that the blame game for the difficulties in accessing finance between Government and the banks came to the end for the sake of those desperate for a roof over their heads.”

The release of the RLA data coincides with news that the UK mortgage market has endured its third worst August for almost two decades.

The news comes from e.surv, which are part of the LSL property group, who have made the gloomy forecast based on its own activity and reckons to be correct to within a near margin of official statistics which will be issued later in the month.

The firm is predicting that house purchase loans in August fell 8% from August 2011, down from 53,040 approvals to 48,913 – making last month the third worst August for almost 20 years.

Whilst last month’s figure was up from July’s 47,312, e-surv said this shouldn’t be taken as a sign of improving market conditions, saying that July was weak by historic standards with purchase approvals 5% lower than July 2011.

The firm said tightening credit conditions and the effects of the double-dip recession were moving the UK mortgage market back towards 2010 levels and the annual contraction in landlord mortgages is the result of a sharp fall in lending to borrowers with deposits of less than 15%.

The average LTV on a property purchase loan has now fallen below 60% for the last three months, reversing a seven-month period where it was at least 60%.
 
Richard Sexton, business development director of e.surv, said: “Much of the progress the mortgage market has made since summer 2011 has been unravelled by the double-dip recession. Lending volumes – particularly to first-time buyers – are slipping back towards the dismal levels we last saw in 2010 and early 2011. This is largely thanks to a fall in the number of high loan-to-value mortgages banks are willing to grant.  Credit conditions for banks have become painfully tight, and they’ve responded by toughening criteria on mortgages aimed at borrowers with small deposits. The distraction of the Olympics, the awful weather and holiday season could also all be reasonably cited as potential contributory factors.”
 
e.surv said August was the third consecutive month where lending has fallen on an annual basis, and the biggest year-on-year fall for 15 months since 1993, when the Bank of England’s records begin, only 2008 and 2010 have seen lower lending levels during August.

e.surv’s analysis found that more landlords have stepped in to fill the vacuum left by first-time buyers at the bottom of the market. Despite overall purchase approvals falling 8% year-on-year, approvals on property worth less than £125,000 fell by only 4% as landlord mortgages were used to purchase property that was out of reach of first-time buyers.
 
Sexton said: “With rents pushed up to record levels, landlords are piling in to cheap property. Tight mortgage lending conditions are a virtuous circle for landlords and a vicious one for first-time buyers. The fewer first-time buyers there are, the cheaper property becomes for landlords, and the more expensive rents get. We expect landlords to continue to represent a disproportionate share of the buying market in the medium term. Would-be buyers will hope the Government’s Funding for Lending scheme can help improve the flow of credit in the near future.”
 
There was some positive news in August. On a month-on-month basis, house purchase loans rose 3% from 47,312 in July.

But this shouldn’t be taken as sign that market conditions are set to improve. July was weak by historic standards – purchase approvals were 5% lower than July 2011 – and high LTV lending levels were the same as in August.

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Tenant Demand Boosts Landlord Confidence

Tenant Demand Boosts Landlord Confidence

UK Buy-To-Let Landlord confidence has been boosted by continued strong tenant demand and falling property prices, according to the latest landlord survey conducted by LSL Property Services.

• 48% of UK BTL landlords believe that now is a good time to invest in property
• Less than 1% think it is now a good time to reduce their portfolios.
• 82% of landlords who think now is a good time to buy rental property cited attractive property prices
• 53% of UK landlords mentioned strong tenant demand.

The strength of tenant demand has been the major driving force behind recent UK rent rises, with rents at a record high of £725.00 (GBP) in England & Wales in July 2012.

In the past six months,

• 44% of UK landlords have seen a rise in tenant demand,
• 1% of UK landlords have observed a decrease in demand.

UK property investors are hoping that this growth will continue, with 64% of landlords anticipating a further increase in demand over the next twelve months.

40% of landlords expect to increase rents by an average of 4.5% in the coming 12 months, with just 1% expecting that they will be forced to reduce rents.

Sim Sekhon, spokesman for specialist landlord services provider, Legal 4 Landlords also commented on the latest LSL survey: “The findings show what UK Buy-to-Let landlords and property professionals have suspected for a while, that the UK PRS market is gaining strength and investors are able to get realistically good rental yields. Many landlords are taking advantage of the wealth of products and services designed to help them maximise profit and provide peace of mind for both tenant and landlord. Our Rent Guarantee Insurance and Tenant Referencing services have been sought by thousands of UK landlords over the last 12 months, as landlords look to avoid causing their tenants, or themselves, financial stress”.

David Newnes, director of LSL Property Services, commented: “House prices are still subdued in many parts of the country and tenant demand is still growing. This is presenting landlords with the opportunity to secure strong yields on properties, and boosting confidence in UK Buy-To-Let as a long-term investment. The majority of landlords expect tenant demand will increase in the future, and as long as lending to first-time buyers remains in the doldrums, and new house building remains subdued, we won’t see demand for rental accommodation tail off. In these conditions, while affordability may increasingly come into play as landlords set rents, they are far more likely to continue to rise than tumble in the coming 12 months.”

Read more about the specialist landlord and letting agent services offered by Legal 4 Landlords

In a new report released this week, property group LSL have reported that UK asking price PRS rents have fallen for a second month running.

  • The average monthly Private Rental Sector (PRS) rent in England and Wales now stands at £705.
  • The biggest decreases were in the South-West and East Midlands on a monthly basis, with rents falling by 1.5% and 1.4% respectively.
  • Rents also dipped in London, falling by 0.3% – its second monthly decline in the first quarter of 2012.
  • Rents rose in two regions, increasing by 0.7% in the South-East and 0.6% in the East of England.

Despite a monthly decrease in average monthly rents, overall, rents have increased by 4.9% annually in London, the region with the fastest long-term growth. Despite recent declines, London’s average rent was 0.2% higher in March than at the end of 2011. The next biggest annual increase was in the East of England, where rents rose by 3.4%. On an annual basis, rents have only fallen in two locations, dropping by 2.2% in the East Midlands and 0.4% in the North-West.

David Brown, commercial director of LSL Property Services, said: “The recent dip in rents will be welcome news for tenants. However, drop-off in rents is likely to be short-lived. With the passing of the Stamp Duty deadline increasing the cost of moving, and banks’ funding conditions likely to limit high-value mortgage lending to first-time buyers, would-be buyers will be more reliant than ever on rented accommodation. As we head into a traditionally busier period for the market, a redoubling of tenant demand is likely to push rents higher once more, despite the improved supply.”

Contrary to ARLA, LSL says tenants’ arrears have been going down. In March, it estimates unpaid rent at £267 Million (GBP), down by 6% on February’s figure.

Rent arrears fall again in 2012

More UK Landlords Using Rent Guarantee Products

Private Rented Sector (PRS) rent arrears dropped in February with 9.3% of all rent late or unpaid at the end of the month, down from 10.7% in January.

With household bills increasing, UK unemployment still rising and the whole country still struggling to avoid a double dip recession as a result of the Eurozone crisis, together with the government’s welfare reforms and public sector belt tightening, there hasn’t been a great deal of optimism around, especially from landlords.

However, figures released by LSL property services show that UK landlords have a little less to worry about, with the amount of rent arrears and late payments falling again.

Either private sector landlords are having an excellent run of good fortune, having tenants who are able, paying the rent in full and on time, or they have become smarter and are now utilising the range of Rent Guarantee products that are currently on the market, to ensure they get paid and their monthly cashflow doesn’t suffer.

Being a landlord and letting a property in the UK means there will always the risk of the tenant not paying the rent, (rent default).

Even the best tenant referencing service cannot predict if a tenant will lose their job and fall on hard times and not be able to pay their rent.

How do landlords cover their expenditure if this happens?

In today’s struggling economic climate, many UK landlords are finding their tenants struggling with rising unemployment and increased bills. Often leading to the rent not being paid and the tenant facing eviction when the amount of rent arrears exceeds 8 weeks.

Recovering arrears can be difficult and costly for landlords, without any guarantee of success.

At Legal 4 Landlords, our Rent Guarantee Insurance will cover landlords against their tenant defaulting or failing to pay the rent.

New data released by LSL property services has shown that in February, working tenants in the UK Private Rented Sector were paying 0.6% less in rental asking prices than they were in January.

Rents for working tenants have been falling slightly since November 2011, after rising steadily for the preceding nine months of the year.

According to LSL, the average private sector rent for working tenants in England and Wales is now around £707 per calendar month.

Tenants in employment are paying on average £24 a month more now compared to the same period last year, that’s an increase of 3.5%.However, residential property rents in London continue to outpace the rest of the UK, with rental values up 5.6% on March 2011 prices.

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