October 2019
Property investment essentials
Welcome to the latest issue. Brrr - who turned the heating off? As the clocks go back there’s an autumnal chill in the air and the evenings feel much darker. So why not grab a cup of cocoa and place another log on the fire whilst you read the latest issue of Property Investment Essentials! This month we’ve taken our regular look at the trends within the property market. We’ve also examined void periods and specifically how to avoid them. Finally, we have a guide detailing how to become a landlord, for those who are considering joining the Private Rented Sector. We hope you enjoy this issue!
Political uncertainty and the property market After the recent ‘Super Saturday’ defeat in Westminster, it remains unclear whether we will leave the EU at the end of October. But now that a general election is expected early in the New Year, we have several more months of the main parties making claims and promises in the run up to the publication of their manifestos.
The policies intended to tackle what some describe as the ‘broken housing market’ will be claimed to be ‘vote-winners’ for the growing number of young people who are unable to get onto the housing ladder.
However, our concern with some of the policies that they’re proposing is that they won’t fix the issues. For example, Rent Controls: Simply put - they don’t control rents. International studies have concluded that rent controls in other parts of the world led to a deterioration in the quality of rental stock, a squeeze on supply and ultimately kept tenants trapped in homes that were no longer appropriate for their needs. As it happens, we believe rents across the UK are largely in control as they typically rise in line with inflation. Meanwhile homeowners are waiting to see if there could be any change to stamp duty – a reform of this tax could possibly be announced by Sajid Javid in his first budget as Chancellor of the Exchequer on 6th November. With stamp duty costing house-buyers several thousand pounds, a reduction would be quite a popular move. However, within the rental market, landlords have faced an increased rate of stamp duty since 2016 and we would argue a reform of this additional tax burden imposed on purchasers of second homes is imperative. Across the city at the Bank of England, the Monetary Committee is widely
Kate Hurles Head of Landlord Investments
expected to vote to keep interest rates at 0.75% next month - a rate which has remained unchanged since August 2018, when rates rose by just 0.25%. Whilst this move wouldn’t be great news for savers, it is a clear sign that inflation is remaining in check and that consumer confidence is positive. But as rents rise faster than inflation, whilst house price growth continues to plateau, then some homeowners may be considering becoming a landlord rather than sell a home they no longer need to live in themselves – read our guide for becoming a landlord on page 3. Whatever happens both in the economy and in Westminster in the coming months, there is no slowdown in demand for privately rented homes. Renting provides an affordable and flexible route for millions of individuals, couples and families to live in a home they call their own, and at haart we’ll continue to ensure standards across the Private Rented Sector are driven up and that landlords and their tenants continue to live and work in harmony together.
Market news
Rents continue to rise whilst house price growth stalls haart says: •
Rents in the UK rose by 2.5% in September compared to the same time a month a year ago; the average monthly rent now stands at £967
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Rents in London increased by 3.3% in September this year compared to September 2018; the average monthly rent in the capital now stands at £1,694
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When London is excluded, the average UK rental value was £797 in September 2019, this is up 2.2% on last year
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HomeLet’s September Rental Index reveals that rents rose in all 12 of the regions covered in the research
The continued reduction in supply of properties available to rent appears to be the primary reason rental prices are increasing above the rate of inflation. As tenants stay in their homes for longer, and there are a smaller number of new landlords entering the market, then there are inevitable constraints on supply. However, rents are generally linked to both what tenants are willing - and able - to pay, which is helping ensure rents aren’t spiralling out of control.
Average house prices in the UK increased by 1.3% in the year to August 2019, up from 0.8% in July 2019 but remain below the increases seen this time last year. Over the past three years, there has been a general slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England. The lowest annual growth was in London where prices fell by 1.4% over the year to August 2019, followed by the south east where prices fell by 0.6% over the year.
Investment news
Could you become an accidental landlord? Whether you’ve inherited a home, or moved in with a partner; if you find you now have a “spare” property - could you become an accidental landlord? The Private Rented Sector saw a rise in the number of accidental landlords during the financial crash of 2008 as some decided to rent out, rather than to sell their property. And whilst there is no current threat of a similar downturn in the property market, the economic uncertainty does mean some are hesitating to put their property up for sale. Therefore, if you’d rather not sell right now, then you could find that becoming a landlord provides an additional source of income, until the current uncertainty has passed. Where to start Take an objective look at your property to ascertain whether it needs any repairs. The annoying door handle which sticks, or the cupboard door which has almost fallen off is only going to get worse when a tenant moves in. You should also decide whether the home could do with a lick of paint, new carpets or even a refreshed bathroom or kitchen. These improvements could ensure the property is rented faster and can secure a higher rent. To furnish or not If the property has some left-over furniture you could be tempted to offer it for rent furnished. However, consider this carefully because there are regulations you will need to comply with. For example, the sofa must be fire-resistant, and must have still have the fire safety label attached.
Get an Energy Performance Certificate It is now a legal requirement that a property must have an energy rating of at least an E before it can be let to a private tenant. If you have the property assessed and it has a poor rating, then the assessor will provide some guidance about how to increase the energy efficiency of the property - which could be something as simple as installing a draft excluder. Service the boiler The boiler needs to be serviced every year, and the Gas Safety Certificate must be passed to the tenant before the property is let. Appoint a letting agent Some landlords decide to go it alone. However, choosing a professional letting agents to let and manage the property for you can help to ensure your experience as a landlord is a positive one. At haart we can guide you through the process of becoming a landlord. For example: we’ll explain what you need to do if the property is in an area which is subject to a selective licensing scheme; help you find suitable tenants; and draw up all of the agreements for you. We’ll also ensure the deposit is properly protected and ensure that the paperwork in place before the tenancy starts. All of our branches have ARLA qualified staff, ensuring you and your property will be in expert hands.
Nightingale Quarter Derby Situated on the site of the former Derbyshire Royal Infirmary, this development offers a range of 1, 2 and 3 bedroom houses and apartments. The infirmary’s iconic pepper pot buildings will be retained for community use, with residents having access to numerous facilities including cafés, gyms and exhibition space. Prices from £185,000 Available to buy off plan Approx yield up to 6% for houses and up to 6.5% for apartments Image is for illustrative purposes only.
Crocketts Lane Birmingham A collection of 83 luxury one & two bed apartments boasting original features. Ideally located 4 miles west of Birmingham City Centre, Crocketts Lane provides purchasers the opportunity to enjoy all that the West Midlands has to offer. Prices from £225,000 Expected yield up to 8% For more information on the above developments, please call Kate Hurles on 07960120267.
Management news
Managing void periods Although void periods are inevitable in any let, any time when you don’t have a tenant living in your property can impact the profitability of your investment. This is why it is crucial to carefully manage voids periods to ensure they are as short, and infrequent as possible. Here are our top tips for keeping void periods in check: Advertise the property to let well in advance As soon as you know the property is going to become vacant, you should start marketing it. Selecting a professional letting agent who maintains a waiting list could help to ensure you have a tenant ready to move into your property almost as soon as it becomes vacant. Use quality photographs Although a tenant may use a property portal such as Rightmove to search for a home to rent, the portals can be crowded with lots of other properties available. However, data shows that interest in a property peaks when it is supported with good quality images. Therefore, checking that your agent takes professional photos can help to ensure your property stands out, and this can secure early interest.
Ask for reasonable rent Even if your property is in an area with high demand you should charge a reasonable rent. If you try and push the rent higher than a tenant is willing to pay, then it could take longer to rent out. Indeed, inflated rents can mean that your tenant decides to move out earlier than they would have done normally. Offer a deposit replacement scheme Whilst a deposit replacement scheme can be useful for tenants; they have also been designed to give landlords greater protection. Should a tenant damage your property then the deposit replacement service can speed up the payment to you, meaning repairs can be made much more swiftly. Select a reliable tenant Never under-estimate the importance of a thorough reference check. The service doesn’t need to be too expensive, and most references can be turned around within days. However, having a good quality tenant who can afford the
rent will be crucial in ensuring positive tenancy. Get all of your paperwork in order Make sure you have everything you need, such as an Energy Performance Certificate and a Gas Safety Certificate, because if these have expired the start date of the next tenancy could be delayed. Keep the property well maintained Ask your letting agent to inspect the property regularly to spot any early issues. This will help to ensure there are no surprises when the tenant does move out. Respond quickly to faults reported by the tenant - not only because the issue could get worse if it is left, but also the tenant will appreciate the speed of your response. If you’re concerned about void periods impacting the profitability of your portfolio, speak to your local haart branch.
Please contact me if you are interested in joining our Landlord Investor Club. It’s free to join and we will give you access to exciting investment opportunities and useful information. Kate Hurles Head of Landlord Investments kate.hurles@haart.co.uk 07960 120267
