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PRS Rental Price Growth Stalls

PRS Rental Price Growth Stalls

UK PRS Rental Price Growth Stalls

It was widely expected that UK private rented sector (PRS) rental prices would increase during the course of 2015, due to the lack of available rental properties on the market and continued strong demand from prospective tenants.

However, research by HomeLet found that the pace of rent rises had begun to slow in the three months prior to August 2015. Average PRS rental prices being charged to new tenants were only 1.6% higher than they were at the start of the year compared to the 2.2% rise that had been observed during the three months to August 2015.

PRS rents remain considerably higher than they were when figures are viewed on an annual basis, with average rental prices reaching £992 (GBP) in the three months to August, 10.5% higher than August 2014. 

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How Landlords Are Affected By 2015 Pre-Election Budget

How Landlords Are Affected By 2015 Pre-Election Budget

How Landlords Are Affected By 2015 Pre-Election Budget

During the pre-election budget last week, Chancellor of the Exchequer, George Osborne MP announced some significant changes that could have a detrimental impact on landlords the UK’s private rental sector (PRS) and residential property owners.

Below are the highlights of the pre-election budget that are of relevance to landlords and property owners:

  • £13 Billion (GBP) sale announced of the mortgages of UKAR – Northern Rock and Bradford and Bingley (Mortgage Express) to reduce national debt which followed the bailing out of the banks.
  • Introduction of 20 new housing zones.
  • The economy of the North grew faster than the South during 2014.
  • The UK has the highest rate of employment in its history!
    Employment is growing fastest in the North West, Yorkshire having the biggest employment.
  • Living standards are higher in 2015 than 2010.
  • Inflation forecast downgraded to 0.2%.
  • Low interest rates to be “locked in”.
  • Original target of debt reduction set in 2010 budget has been met.
  • 13 years of rising national debt has now been stopped.
  • UK achieved the largest and most sustained debt reduction of any major economy according to the IMF.
  • Government borrowing is falling.
  • The wealthy are making the biggest contributions to reduce debt.
  • End of austerity in 2019.
  • The annual tax return is to be abolished. New digital tax accounts to be created.
  • The personal tax free allowance has been raised to £10,600 (GBP) and will be raised to £11,000 (GBP) in 2017.
  • The higher rate tax threshold will rise to £43,300 (GBP) by 2018.
  • Class 2 national insurance contributions abolished for self-employed.
  • Stronger measures against tax avoidance and tax evasion.
  • Review of avoidance of inheritance tax through deeds of variation.
  • New penalties for tax evasion and those professionals who assist them.
  • Crime down 20%.

There was some good news contained in the 2015 pre-election budget too:

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UK Property Rental Prices Reach New Record High

UK Property Rental Prices Reach New Record High

UK Property Rental Prices Reach New Record High

Latest figures show that the new national average property rental price being advertised has reached a whopping £1,006 (GBP) per calendar month (pcm).

This is the first time ever that the national average property rental price has broken the 4 figure ceiling barrier in the UK.

The increase in the national average property rental price has been attributed to continued growth of the London and South East property markets.

Property rental prices being advertised in central London have reached £2,300 (GBP) per month, the highest recorded rental average apart from during the Olympic’s in the summer of 2012.

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2014 UK Property Prices To Increase Further

2014 UK Property Prices To Increase Further

UK Property Prices Extend Best Run Since 2007

There was some good news for property investors looking for capital appreciation this week as it was reported that UK property prices have continued to rise, increasing for the 14th consecutive month in March 2014, the longest run of price growth for nearly 7 years.

Residential property values across the UK increased by an average of 0.6% in March, with the South West and East Anglia regions recording the largest property price increases of 0.8%, according to data supplied by Hometrack Ltd.

Yorkshire & Humberside and the North West regions registered the smallest gains, with property values increasing by just 0.2% in March 2014.

Even independent surveyors are forecasting property prices to increase by a further 6% this year and are including this information on property condition reports for prospective purchasers.

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Portfolio Buy-To-Let Landlords Are A Minority

Portfolio Buy-To-Let Landlords Are A Minority

Only 6% Of UK Buy-To-Let Landlords Own More
Than One Rental Property

New data from the latest Countrywide Residential Lettings Index shows that portfolio landlords with multiple rental properties are the minority of the UK’s private rental sector.

According to the research data, the average the size of a UK landlords’ buy-to-let portfolio tends to be small, with only 6% owning more than a single rental unit, however in London this figure reduces to just 4%.

Countrywide also report that 56% of private rented sector landlords own at least 1 rental property within 10 miles of their own residential properties.

When the data is expanded to account for buy-to-let landlords who live within 25 miles of their rental properties, the North East recorded 83%, followed by 81% in the North West and 71% in East Midlands. Landlords who live within 25 miles of their rental properties in London average just 60%.

London has the highest proportion of landlords who live more than 100 miles away from their rental properties, with over 20% of UK PRS landlords doing so, twice the UK average.

Wales and the East of England are more rural than other regions of the UK with less dense population clusters, so many landlords purchase properties in busier areas and choose to live within a commutable distances in order to keep an eye on their rental assets. The proportion of landlords living between 10 and 25 miles away in Wales and the East of England is the largest in the UK.

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Flooding Spells Trouble For PRS Landlords

Flooding Spells Trouble For PRS Landlords

Post Flood Checks for PRS Landlords
Of Properties Affected By Flooding

The recent flooding observed in the South of England this winter have seen a large number of landlords and home owners properties damaged by flood water with around 6,500 properties damaged by flood water since December 2013.

This has meant that both landlords and tenants have had to put in a great deal of time and effort to put things right, with landlords spending a substantial amount of time contacting their landlord insurance providers to inform them of the situation and trying to arrange repairs.

However, there are some landlords who remain unsure of where to start when it comes to flood damage, so we take a look at what landlords can do if property has been affected by flooding:

  • Wear waterproof clothing, boots and a face mask
  • Get a qualified person to switch off electricity at mains – don’t touch sources of electricity while standing in water
  • Remove water using pump and generator – position generator outside as it produces carbon monoxide fumes which can kill
  • Only pump out water when flood levels outside house start to be lower than inside – this reduces the risk of structural damage
  • Houses can be cleaned and disinfected using ordinary household products
  • If drying property naturally, keep doors and windows open, if using dehumidifiers, close external doors and windows

Severe Flood Damage

Unfortunately, if you own property in the South of England there is a good chance they have been severely affected by flooding, especially if they are located near the Somerset levels or by the River Severn or River Thames.

The Environment Agency (EA) issued 16 severe flood warnings (meaning severe flooding with a danger to life) and 76 flood warnings (meaning immediate action should be taken) in January 2014 for the South West and South East of England.

If your rental properties have been affected by severe flooding then there is the likelihood that the tenants will have already been evacuated.

UK PRS landlords may find that they have to foot the bill to re-house tenants while their property is unfit to live in, and even after the flood waters have receded and it could still take months for damage to be repaired.

It is important for landlords to keep in constant contact with their landlord insurance provider and their tenants in order to make sure the restoration process runs as smoothly as possible.

Traditional brick or concrete walls will generally dry out well so long as they are clear for ventilation.

Wall cavities need to be inspected by an expert to ensure walls are secure and any damaged wall-cavity insulation will also need to be removed.

Internal walls, damaged plaster, plasterboard and wallpaper will have to go. Holes might also need to be drilled through plasterboards or dry linings to drain trapped water and aid ventilation, and timber partitions may rot if not dried properly and property owners are advised not to redecorate for at least three months after walls have dried and repairs have been done.

Modern wiring can withstand a short period of flooding, but if a property has been flooded for more than a few hours, it will probably need rewiring – downstairs at least. An electrician will also need to give junction boxes, socket outlets, light switches and ceiling connections a thorough check to ensure there is no water trapped inside them.

Moderate Flood Damage

Properties have been affected across the whole of the UK, even though properties worst affected by flooding are mainly in the South West and South East of England. Many of these properties are still habitable, however there are a number of other issues that landlords have to deal with.

Flooding can destroy the fabric and structure of property if left and it’s hard to be sure how solid a property’s foundations are after flooding, as some problems may take years to materialise.

There can be subsidence – which causes foundations to “sink”, and heave – which forces foundations upwards. Subsidence occurs when the ground under a building “shrinks” through lack of water, whereas heave occurs when the ground expands because of excess water. There is also the possibility of sinkholes and signs to watch out for are cracks and general movement in the building, but both can often remain undetected for some time.

Other indicators of structural damage include buckling of walls, bulging or dislodged sections of property and new cracks above windows or doors

Tenants will often get in contact immediately if they feel that their property is affected by flood water, and landlords should try to get as much information as possible about the amount of damaged caused.

Small amounts of water in rooms such as kitchens and bathrooms are less disastrous than in carpeted areas such as bedrooms or living rooms, and if it is safe to do so you can advise your tenants on how to contain flood water.

Landlords should keep in regular contact with tenants in the worst hit areas to monitor the situation and make preparations to re-home them if necessary.

Minimal Flood Damage

Rental properties built on high ground, away from lakes and rivers, will probably be unaffected by flooding. However, with the high winds and increased rainfall over the past few months there is still a danger of damage, so landlords need to make sure that basic checks are carried out to assess the damage when they are able to.

Roof tiles, chimney stacks, gutters soffits, and window frames can be adversely affected by strong winds and continuous heavy rainfall. If left in unchecked these minor issues can become major problems in the future.

Tenants may have noticed small leaks in garages and lofts during heavy rainfall, which should be treated as warning signs.

Unfortunately, nearly every landlord across the UK right now needs to have some sort of plan in place in case their properties are affected by flooding; otherwise they could find themselves in a difficult situation.

The Environment Agency website is updated on a regular basis with information concerning flood warnings and what to do in an emergency.

The new “Flood Re” proposals intended to replace the current statutes of the Water Bill will leave landlords high and dry as insurance companies withdraw insurance for rental properties in areas prone to flooding.

Property Repossessions Fall As Prices Increase

Property Repossessions Fall As Prices Increase

Property Repossessions Make Great Investments

Latest figures from the Land Registry show that property repossessions have dropped in every region of the UK with falls in the past year ranging from 10 – 39% whilst property prices have continued to climb.

The December 2013 data from Land Registry’s House Price Index (HPI) shows an annual property price increase of 4.4% which takes the typical average property value in the UK to £167,353.

The monthly change from November to December 2013 showed a property price increase of 1.1%.

But behind the good news there is a large North-South divide in property repossession volumes, with the number of property repossessions far greater in Northern England than the number of repossessions in the South, even after the recent falls.

Property repossessions are a fantastic opportunity for would be property investors as the mortgage lender in possession of the property are only seeking reimbursement for their initial mortgage outlay, presenting below market value (BMV) opportunities for investors.

Repossession volumes decreased by 31% to just 1,129 in October 2013 compared to 1,636 property repossessions in October 2012.

The UK regions with the greatest fall in the number of repossession property sales were the East Midlands and the South West.

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House Prices Officially Rising Across The UK

House Prices Officially Rising Across The UK

UK House Prices Rising Faster Than Inflation

The Office for National Statistics (ONS) has recorded year-on-year house price increases across the UK with property values increasing by:

  • 5.6% in England
  • 5.4% in Wales
  • 2.5% in Scotland
  • 3.3% in Northern Ireland

The increase in house prices and activity in the UK property market has been credited to an increase in first-time buyers (FTB) purchasing residential property using the Government’s Help-To-Buy scheme.

The ONS have revealed that annual house price growth outpaced the cost of living in November 2013, even after removing property market activity in London and the South East of England from the calculations, property prices were up by an average of 3.1%, compared with a 2.1% rate of inflation.

Property price increases in the UK are generally driven by market activity and price increases in London and its surrounding areas, although other regions have started to show accelerating property price increases.

Property prices in London were up by 11.6% in November 2013, compared with a year earlier, and property prices have also increased strongly across the whole of the UK according to official figures

Regional Property Price Increases

  • London: up 11.6%
  • South East: up 4.5%
  • West Midlands: up 4.4%
  • North East: up 4.2%
  • East: up 4.1%
  • Yorkshire and the Humber: up 3.2%
  • South West: up 3.1%
  • East Midlands: up 2%
  • North West: up 0.6%                           Source: ONS annual change, Nov 2013

UK regions are becoming far more buoyant and less reliant on activity in the London property market and the majority of buyers are having to look further afield than central locations to find affordable properties, creating a halo effect on property prices.

The annual increase in UK property prices in November follows on from the 5.5% rise observed in October 2013 and although the annual comparison did not show any acceleration, property prices were higher than the previous month increasing by 0.5% in November compared with October, with an average residential property valued at £248,000 (GBP).

The ONS house price index is based on mortgage completions, and is considered to be more comprehensive than House Price Indices (HPI) produced by mortgage lenders such as the Halifax and Nationwide whose figures are based on their own mortgage data.

 

Where Will Property Investors Get The Best Return From In 5 Years Time?

Where Will Property Investors Get The Best Return From In 5 Years Time?

Where Will Property Investors Get The Best Return From In 5 Years Time?

Savills have released their UK property price predictions for the next 5 years identifying what they think are the best UK regions to purchase properties in based on expected Capital Gains.

Residential properties in the South East region are predicted to increase in value by as much as 31.9%, whilst the East of England could see property prices rise by 30.4%.

In the South West region of the UK, Savills expect property prices to jump by 29.4% with increases in property values not increasing by as much in more Northern parts of the UK.

According to the 5 year forecast, East-Midlands property prices could increase by as much as 24.6%, however, London property prices are only expected to rise by 24.4%.

West-Midlands property prices are also expected to increase by up to 23.4% according to the forecast, but property prices in Wales are only predicted to increase by 21%

The city of York in the Yorkshire & Humber region could expect property price rises around 20.5% according to Savills and over the Pennines in the North West, property prices are estimated to increase by 19.3% in next 5 years, as is also the case in Scotland.

North East property price predictions are the worst of the company’s forecast only expected to grow by 17.6% over the next 5 years.

The property price predictions do not appear to take into account the effect of the Help-To-Buy scheme on the UK property market, nor do they allow for the prospect of another property price bubble or even another huge property crash.

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Rightmove Think London Property Prices Are Unsustainable

Rightmove Think London Property Prices Are Unsustainable

London Property Prices Increase
More Than 10% In October

Average UK property prices increased by 2.8% across the country in October, however property price rises in London are going through the roof and are unsustainable, according to property portal Rightmove

London property prices increased by £50,484 (GBP) equivalent to a 10.2% increase in October, after two consecutive monthly falls in the price of properties marketed.

Property prices in the Capital had fallen by -2.8% and -1.5% in August and September respectively, and the double digit price increases reported in October has analysts worried about the volatility and sustainability of the London property market.

The huge rise in London property prices has been attributed to corresponding factors;

  • Lack of supply of residential properties coming to market
  • Overseas investment in new build properties by foreign property investors

October’s strong recovery means London property prices are now 5.6% or £28,852(GBP) up on July’s all-time high of £515,379 (GBP), pushing the year-on-year increase in London to +13.8% or £66,161(GBP).

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