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Category: Property News

Time to invest in rental properties?

by Asif AliPosted on

New investment into private buy-to-let properties is stagnating, whilst tenant demand for rentals is increasing; it’s no surprise that the UK is facing a serious rental crisis. Increased competition for rentals across the country is driving rental prices higher each month – But private landlords still seem hesitant to expand their rental portfolios. 

Why are landlords selling up? 

Going back a couple of years, the pandemic created a huge sellers market across the UK. This, teamed with Rishi Sunak’s stamp duty holiday, created a “selling fever” as many private landlords jumped at the opportunity to sell-up. 

This loss of private landlords has been intensified in the last year by a decrease in new landlords wanting to invest in buy-to-let properties. While the current rental crisis will be a contributing factor as private landlords wait for a more stable economy, there are likely additional factors at play which make this investment seem less appealing. One concern for new landlords will be the costly eco upgrades they will be required to make to properties by 2030. 

Why should landlords invest in Buy-to-let now? 

With the above in mind, landlords will likely be concerned about stepping into new buy-to-let investments, but with the right plan 2023 might be the perfect time to invest. 

Historically, the best time to make an investment is when the property landscape looks bleak. Currently, buying competition is low and house prices continue to plummet across the country. In December 2022, the average UK house price dropped for the third month in a row by 1.5%, creating interesting affordable investment opportunities. 

With increasing rental demand landlords will be able to charge higher rental prices, driving up yields for properties which were bought for lower prices. 

Landlords who are still considering selling-up should consider selling their more expensive properties in the South in trade of new affordable investments in the North. Rental yields are increasing rapidly around cities such as Birmingham and Manchester, now could be the perfect time to capture these opportunities whilst property prices are still low. 

Whilst no investment is risk-free, a property investment strategy tailored for the current market can still yield very profitable results. There will be some short-term hurdles which come with investing during a rental crisis but the right investments should lay a strong foundation for a lucrative long-term investment.

Best investment opportunities for 2023

by Asif AliPosted on

A new year often provides an opportunity to take stock of your current investment and reflect on your ambitions for the year to come. You may be considering new investment opportunities or wondering how the housing investment landscape has changed over the last year. 

To help you start your new year with a plan, we’ve identified some investment opportunities which have a lot of potential in 2023. 

Apartments or houses?

Whilst traditionally you may have sought out larger properties or single houses, it’s time to think small and explore apartment rentals. Generally, apartments offer a lower capital entry point, higher yields and more of a hands-off, hassle-free investment. With rental prices continuing to increase, young renters will be seeking cost-efficient homes which will undoubtedly continue to increase the popularity of apartments vs houses. Being a more cost-efficient entry point, apartments are a great starter property for new investors. 

Student Accommodation 

As we’ve covered in a previous article, a handful of northern student cities seem to be leading uk rental yield increases. Including; Newcastle Upon Tyne (Avg. 9.8%),  Manchester (avg. 10.1%), Bradford (10.6%) and Nottingham (11.3%). Renting to students often bring higher yields by charging rent per person rather than by property. Student rentals in busy cities will always be in high demand, making for a fast tenant turnover with each new semester. 

Looking beyond London

Research suggests that cities in the North and Midlands are becoming the new hot-spots for property investment in the UK. With cities such as Birmingham and Manchester rapidly growing in popularity with both movers and businesses (attracting higher numbers of young professionals) these cities are prime hot-spots to invest in early 2023 before property prices peak with the rising popularity. 

Property will always provide great investment opportunities, but it’s vital to be strategic with your investments to ensure you are getting your desired yield. Always conduct thorough research before making a new investment. 

New limitations on social housing rent increases

by Asif AliPosted on

Driven by inflation and high rental demand, rental prices are increasing across the country. But what does this mean for landlords? And what are your limitations when considering rental increases? 

Social Housing rental increases 

Housing associations are considering the impact of rental increases for social and affordable housing tenants; several options are now being considered to offer support to tenants dealing with these price increases. Most notably, new limitations are being implemented in 2023 to cap rental costs for social housing tenants. 

Why does action need to be taken? 

Monthly rental costs for Social housing are permitted to increase by up to CPI plus 1% annually. However, in August 2022 the Bank of England forecast that CPI would be 9.9% in Quarter 3 of 2022, suggesting very significant rental increases would be permitted in 2023-24. These increases will inevitably cause significant pressure for some social renters as they struggle to keep up with the price increases. 

In October 2022, the UK government launched a consultation to cap these social housing rental increases in 2023. The consultation proposed to protect existing social tenants from significant rent increases in 2023 by capping social housing rent increases from April. The consultation considered rental increase caps at 3%, 5% and 7% in response to these concerns. 

Whilst many social housing providers might independently choose to cap property rental below CPI plus 1%, imposing a rental increase ceiling would provide protection for tenants who are in exceptional circumstances. 

The Government has now confirmed that these rental increases will be capped at 7% from April 1st 2023, this change also applies to shared ownership tenants. 

A detailed report of the October consultation can be found here. 

The new cap on rental increases for social housing tenants in 2023 should offer a sense of security and protection to tenants concerned about rental increases. 

Government scheme allows tenants to buy share of their homes

by Asif AliPosted on

As part of the Right to Shared Ownership scheme, residents in social and affordable housing can now apply for the chance to buy a share in their rental home. 

The government is positioning this scheme as an alternative route to buying a home for those who would have previously found the step challenging. Lucy Frazer, Housing Minister, suggested that this scheme has been put into motion to provide tenants with the chance to live in a home of their own. 

What does this mean for tenants? 

Affordable and social housing tenants will be provided with the opportunity to own a share of their home as a leaseholder. The tenant will usually be required to pay monthly service charges on the building which will include maintenance charges. 

What does this mean?

  • Tenants will be able to buy a share of their property worth between 10 and 75 %
  • Having a share of the property provides the tenant with more control over the home they live in
  • Becoming a shared owner would require the tenant to take out a mortgage while continuing to pay rent on the remaining equity, increasing living costs for the tenant
  • The Right to Shared Ownership scheme is not available in Scotland, Wales or Northern Ireland.

Which Tenants could be eligible to use this scheme? 

Tenants can apply to buy a share of their home when:

  • It is the tenant’s main home
  • The tenant has lived in the property for at least 1 year
  • They have been a tenant of social or affordable housing for at least 3 years
  • The property is eligible for the Right to Shared Ownership scheme (Landlords will be able to confirm this)

 The UK Government plans to make the Right to Shared Ownership an option that is available to more tenants in the coming years.

What does this mean for Landlords 

  • The tenant will become a leaseholder and be liable to pay service charges for necessary maintenance on the property at the same rate as someone who owns 100% of the equity on the property
  • There is an ‘initial repair period’ whilst the scheme is implemented. Meaning that costs such as structural repairs and installations will continue to be the landlord’s responsibility for 10 years after the property was built
  • If a shared owner does not pay their rent, there are measures in place for landlords to regain full possession.

Call for evidence on the impact of short-term lets

by Asif AliPosted on

The government has released a call for evidence to evaluate the impact of short-term lets on the housing market with the view to implement more effective regulations. 

Housing supply challenges are leading to mass shifts in quality of living – with young adults unable to leave their family homes, household overcrowding, unstable living circumstances and even an increase in homelessness.

How should this crisis be addressed? 

The most powerful way to address this crisis is to build more affordable homes across the country. The UK government has stated targets for this, but are falling behind on their plans to build new properties.  

Another factor in this crisis is unused homes, with an increasing number of properties being used primarily as a holiday home or other short-term let. Short-term lets are often criticised for having a big impact on the private rental sector, contributing to a significant lack of suitable housing for locals.

How big is the problem? 

  • Research from the BBC indicated that the total number of holiday lets across the country has risen by 40% since 2018.
  • Propertymark estimated in 2020 that 46,000 properties have already been made unavailable for local people looking for a home due to private landlords changing from long-term to short lets and one in 10 landlords would consider switching to short lets, under the current regulatory framework.

The correlation between increasing short-term lets and housing supply problems in the UK is hard to ignore. There is now pressure on the Government to take action to apply stronger controls to short-term lets to ensure a better balance between housing supply and the potential economic benefits from holiday makers. 

Government plans for 2023

The UK Government has released a call for evidence to develop a registration scheme in England for tourist accommodation with the aim of collecting data on the market to better understand the impact of short-term lets. 

The  review will look to address potential solutions for the key challenges caused by increasing short-term lets – particularly localised to areas where these issues are intensified by larger numbers of holiday makers. 

It will consider the growth of the short-term letting market, benefits of short-term lets and the potential impact of new policy suggestions. Additional consideration should be given to localised effects of the policies to account for the county variation in holiday let oversaturation.

It may be difficult for the UK government to balance the need to provide long-term homes with the economic benefits of holiday rentals, particularly considering the ever-growing need to boost the UK economy and move out of the cost of living crisis. 

We hope that the call to evidence will pave the way for balanced and data-driven initiatives which can benefit both the private rental sector and short-term letting agents.

Blackouts

by Asif AliPosted on

Blackout warnings have been issued by the National Grid, with planned nationwide blackouts expected to affect the UK in the coming winter months.

The Chief Executive of the National Grid, John Pettigrew, has warned that the blackouts are likely to take place during “very cold winter weekdays” between 4pm and 7pm and are a consequence of Russia’s war in Ukraine. 

How should Landlords respond? 

Unexpected blackouts could cause uncertainty and stress amongst tenants, particularly if they do not receive information on the length and frequency of the blackouts. However, when properly prepared, blackouts can be dealt with and both landlords and tenants can avoid major inconvenience. 

To make the circumstances as manageable as possible, landlords should take responsibility for properly informing their tenants of the expected upcoming blackouts, and provide useful information on how to prepare. 

Tips on how to prepare for the upcoming blackouts: 

  • Landlords should provide their tenants with updated information on the expected blackouts, including expected times and frequency (where possible).
  • Tenants should be advised to locate external batteries available for important devices (phones, laptops etc) ahead of the blackouts.
  • Tenants should keep a working torch in an easy to find location in their home.
  • Landlords should also consider the additional impact the blackouts may have on tenants who have young children, particularly around mealtimes. Reminding tenants that the expected blackouts may interfere with mealtimes will allow tenants to make alternative plans (such as pre-preparing non-cook meal options, or using a camping stove (for tenants who have a safe outdoor space).
  • To avoid panic, tenants can also be reassured that blackouts which only last for a few hours shouldn’t cause any major food safety issues for food kept inside the fridge or freezer. As long as the doors remain closed during the blackout, the fridge and freezer should remain at a cold enough temperature that the tenant’s food quality is not compromised.
  • Finally, due to the blackouts taking place during cold winter evenings, landlords can remind tenants to have alternative means of keeping warm available in the case that the temperature in their home drops significantly during the blackout. (Such as extra blankets and warm clothing). 

If tenants are well-informed of the upcoming blackouts and receive guidance on how to prepare, these planned blackouts shouldn’t cause any major inconveniences for either landlords or tenants. However, we advise following related news stories as more information is released in regards to the planned times and frequencies of these blackouts. 

Housing supply targets

by Asif AliPosted on

The UK is facing an urgent need for new and affordable housing across the country caused by an increasing population and lack of new builds. 

Housing supply issues have a significant effect on quality of living for renters, and potential renters, across the country. Lack of suitable housing can lead to: 

  • Overcrowding in houses as people work together to save costs 
  • Unstable living circumstances caused by increasing numbers of landlords selling up, or not being able to secure long-term rentals 
  • Increase in homelessness 
  • Impaired labour mobility 

According to research by the National Housing Federation, to minimise this crisis the UK must build an estimated 340,000 per year, with 145,000 fitting into the affordable housing category.

Additionally, it comes as no surprise that the supply challenges are creating a competitive housing landscape, raising prices and making it increasingly difficult for first time buyers to enter the market.  In August 2012, the average house price in England was £180,000, since then, house prices have increased by an astonishing 76%. 

As part of the Renters Reform white paper, the UK government pledged to build 300,000 new houses per year to work towards this goal.

Housing targets scrapped

Nearly 60 conservative rebels pledged to back-up plans to ban mandatory housing targets. Rishi Sunak has responded to this by easing measures and setting them as “advisory” instead of mandatory. 

In response to the surprising shift, Michael Gove stated “there is no truly objective way of calculating how many new homes are needed in an area” but the “plan-making process for housing has to start with a number”. 

Looking back to when Rishi became Prime Minister in October, there were already doubts surrounding these housing targets. In October (2022) statements, Rishi had claimed that he “did not believe in arbitrary, top-down numbers”. Whilst committed to building more suitable homes across the country the new Prime Minister doubted the achievability and accuracy of the targets.

The conservative rebels took issue with the effects the targets might have on specific constituencies, with concerns of over-building in more rural areas. The government has claimed that they will now consult on how the new guidelines can take local density into account. 

Whilst housing targets of 300,000 new homes per year will be advisory and not mandatory, the Government has stated their commitment to plan high numbers of new builds across the country. Additionally, new measures are being put in place to better control the short-term letting market in the hopes that this can create opportunities for higher numbers of suitable residential homes. 

The best property investment opportunities for next year

by Asif AliPosted on

As 2022 draws to a close, many landlords will be casting their eyes to 2023 and the rental opportunities that lie ahead for those seeking to expand their portfolios.

Despite ongoing economic challenges, property investment remains strong across the UK with rental demand and yields increasing across the country.

However, as the economic landscape changes, London is no longer taking centre-stage as a desired location for rental properties. Rising student demands and growing industry in northern cities is presenting new and exciting opportunities for landlords which might present more cost-efficient investments.

Where are the leading property investment opportunities in 2023?

1. Birmingham

As the largest professional hub outside of London, Birmingham presents an affordable opportunity for landlords wanting to expand their portfolios elsewhere.

The city benefits from a consistently high demand of both relocating professionals and students. This means buy-to-let landlords can find some exciting choices for investment in this city.

With 40% of the population in Birmingham being under 25, we can only expect demand for rentals in this city to continue growing over the coming years.

2. Bristol

In 2022, Bristol took top spot in Aldermore Bank’s buy-to-let city tracker, which ranks the UK’s best areas for buy-to-let investments. The research takes into account average rental prices, rental yield, short-term returns, long-term returns and percentage of the city population who are in the rental market.

Its top ranking was mainly due to long-term property growth; with an annual average growth of 5.1%, along with the lowest number of long-term property vacancies (0.6%).

This thriving city in the South West presents a research-backed solid investment that will likely appeal to landlords in the south looking to expand their property portfolios.

3. (any) Student Cities

As mentioned in our previous article, demand for student accommodation across the uk is at an all time high, presenting many investment opportunities for landlords who are interested in short-term student lets.

By nature student lets provide higher yields for landlords, due to charging rent per student. With the current demand crisis for student accommodation, now might be the right time to invest.

Abolishing Section 21 – Could it be good news for landlords?

by Asif AliPosted on

The section 21 notice allows landlords to regain possession from assured shorthold tenancies without establishing fault on behalf of the tenant, usually referred to as a ‘no fault eviction’.

This has been criticised for affecting the wellbeing of private tenants, creating a sense of insecurity and lack of clarity. Abolishing this process and implementing more predictable systems is intended to provide more security for tenants and landlords across the country.

As part of the renters reform bill, the abolition of the section 21 ruling is part of a Government white paper which promises to create fairer standards of living for renters across the country.

What is changing?

The Renters Reform Bill sets out plans to abolish section 21 eviction notices. The abolition would supposedly put an end to ‘no fault evictions’, granting tenants more clarity in regards to the length of their tenancies.

After section 21 is abolished, landlords will need to provide a suitable reason for ending tenancies, for example, a breach of contract or selling the property.

Whilst bringing significant change to the buy-to-let market, landlords will be relieved to learn that the changes to section 21 do not affect their ability to take back properties from anti-social tenants or for necessary reasons (such as wanting to sell the property or move back in.)

In fact, this process may become easier when it is for a suitable reason. With the new changes, Court processing is intended to be reformed to be quicker. Evictions currently can take 6 to 12 months.

We can expect that this new system brings both a sense of security for tenants as well as an easier process for landlords who need to reclaim their properties for necessary reasons. However, we would advise that landlords work with a suitable managing agent such as Howsy, who can help them navigate the changes in legislation as well as the eviction process.