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Rents rising fastest on larger properties: Hamptons

Rents on larger properties are rising at a faster pace than smaller homes, according to the latest housing index from Hamptons.

Rents on four-bedroom properties are showing the strongest growth having increased by 10.6 per cent over the year to October. This gives an average rental cost of £1,949 per calendar month. This is three times the rate of growth seen for one-bedroom properties, where rents have increased just 3.7 per cent year-on-year, to £875 pcm, according to Hamptons’ monthly letting index. 

The estate and letting agent said the shift towards working from home as a result of Covid had fuelled demand for more living space and larger properties. As a result the cost of trading up to gain this additional space had substantially increased.

The gap between the monthly rent of a one and two-bed home now stands at its widest point since 2013, when Hamptons starting compiling this index, with the monthly cost of renting a one bed property now equivalent to the cost of renting a two-bed property in 2016.

In total, the cost of trading up from a one-bed to a two-bed rental property has doubled over the last three years.  Last month it cost £144 or 16 per cent more to rent a two-bed home, more than double the gap (£68 or 8 per cent) recorded in October 2018.  

This equates to an extra £1,728 each year on average in rental payments. The cost of moving from a two-bed to a three-bed has also risen.

London is the costliest region in the country to trade up, both in absolute and percentage terms.  Last month the average two-bed in the capital cost £567 or 42 per cent more each month than a one-bed.  The North East is the cheapest region to swap a one-bed for a two-bed, where it will cost an extra £102 a month, equivalent to a 20 per cent increase.

Compared to last year, the cost of trading up has risen the most in the East Midlands.  Here it cost 12 per cent or £63 more each month to trade a one-bed for a two-bed home than in October 2020.  This is because rents on one-bed properties in the region have fallen by 0.2 per cent year-on-year, while two-bed rents have risen by 9.7 per cent.

London is the only region where it’s cheaper to trade up than it was last year.  This is because rents on one-bed properties in the capital have risen faster than two-beds. Much of the demand for one-bed homes in London has been driven by younger tenants and pied-à-terre hunters returning to the capital, which in turn has bolstered rents.

Hamptons head of research Aneisha Beveridge says: “The pandemic has marked the first time that we’ve seen such a big divergence in rental growth by property size.  

“Usually, rental growth remains fairly uniform no matter how large the home is, but over the last year the gap between rental growth on smaller and larger properties has widened to around 5 per cent.  But as more tenants make their return to city centres, many seeking smaller properties, it’s likely that the gap will begin to shrink in the new year.

“There are few signs that rental growth is slowing as the year ends meaning that if growth continues at current rates, we are likely to see rents outside the capital hit £1,000 per month by the middle of next year.  

“Rents in London are starting to recover their pre-pandemic momentum which will serve to bump up the headline rental growth figure nationally.”

Original Article from Mortgage Strategy 22/11/21

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Rental sector already cleaning up its act on EPCs, suggests bank

The private rental sector is already attempting to improve its EPC results according to research from Shawbrook Bank. 

From 2025 new rules mean rental properties with an EPC rating of D, or below, will not be able to take on new tenants.

The bank’s study found that 17 per cent of landlords had made efforts to improve the energy efficiency of their property, rising to 22 per cent of portfolio landlords with four or more buy to let units.  

For example, of all the landlords that had undertaken a refurbishment, 22 per cent had replaced the boiler and heating system in their property, a further 23 per cent had replaced the windows, and 18 per cent had installed new white goods. 

Making properties more energy efficient can boost demand from tenants too. 

Indeed, one in 10 private renters contacted as part of the study said that they would stay in their current property longer if their landlord made changes to the property which benefit the environment. 

Tenants were also happy to pay more in rent should landlords make certain changes to their property. 

Some 18 per cent of tenants said they’d pay more if windows were replaced, 15 per cent would pay more for a new boiler and heating system, and 10 per cent suggested that installing solar panels would justify paying more rent.

However, for those investors who own older properties – which are typically less energy efficient – it can be harder to improve the rating. This could mean that by 2025 some properties could be ‘unrentable’ and ‘unsellable’ warns the bank.

According to data from the Ministry of Levelling Up, Housing and Communities there are close to 13m homes in England and Wales currently with an EPC rating of D or below.

John Eastgate, property finance managing director at Shawbrook Bank, comments: “For many property owners in the UK, getting their property to a C rating is going to take a lot more than simply installing a new boiler. The reality is that for older properties – some of which may be listed- it will be an expensive exercise to make the necessary changes.

“It’s welcome news that landlords are already acting ahead of the rule change in 2025 and it’s completely right that we should all be considering how to make our properties more energy efficient and environmentally friendly. Some owners, however, will need support from both lenders, and the government, to make these changes financially possible. 

“Without this, we risk a substantial part of the private rental sector becoming unrentable and therefore unmortgageable and unsellable in 2025. With home ownership still out of reach for many this could leave us with a shortage of quality homes to rent.”

Original Article from Letting Agent Today 09/11/21

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Build-to-rent sector set to triple in size as demand ‘soars’ says Foxtons

Estate agency says nine of London’s boroughs now have more than 1,000 BTR properties within them as popularity increases among young professionals.

Lettings agents who ignore the growing build-to-rent (BTR) sector are missing a huge opportunity as the sector prepares to triple in size within the capital and beyond, Foxtons has claimed.

The estate agency, which likes to position itself as an early champion of the US-style of renting, says BTR properties are witnessing ‘soaring’ demand as many renters put accommodation quality and services ahead of affordability.

BTR developments are more expensive to rent in than traditional lets around them, the agency’s own research shows, including a 9.1% average premium for one-bed flats and an 11.3% premium for two-beds.

“Part of the BTR premium can be attributed to their new, or nearly new, condition,” says Sarah Tonkinson, MD of its BTR arm.

“It is also worth noting that premiums may look higher than the reality. Rent-free periods are sometimes used to entice renters at the beginning or end of a BTR tenancy, yet are not calculated in the average rent.”

The data and claims outlined above are within Foxtons’ latest London Lettings Report, which reveals that 8% of its long-lets this year have been within BTR developments, up from 2.2% four years ago.

“While BTR in the UK still only accounts for 1% of the private rental market, it has huge potential and is a sector Foxtons has supported for a number of years,” adds Tonkinson.

The report also reveals that demand for rented property in central London is ramping up again after falling off a cliff during Covid as many younger renters returned to their hometowns.

In Zone 1 registrations are up by 101% year-on-year and up by 72% in Zone 2. But although rents are still lower than pre-pandemic times, a lack of stock means rents are now rising by up to 7% in central postcodes as demand outstrips supply.

Original Article from The Negotiator 02/11/21

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More than half of tenants would pay more for greener home

More than half of tenants would be willing to pay more in rent in order to live in a greener home, new research has revealed.

The survey, by LettingaProperty.com, found that 98% of renters would prefer to live in an energy-efficient home and 52% would be willing to pay an extra 10% in order to do so.

A third of renters (33%) would accept a 5% rent increase, while 8% would 

be willing to pay an extra 20% if it meant they could rent a greener home.

The vast majority of renters (85%) were happy to consider a so-called “green lease”, which includes clauses designed to ensure the tenant and landlord work together to improve the home’s energy efficiency, while reducing costs and environmental impact.

Already, 95% of renters expect their property to have double glazing and 92% expect it to have loft or wall insulation.

Furthermore, 92% expect recycling bins and 73% expect LED lightbulbs, 56% expect smart meters and 38% expect smart thermostats. 

On top of this, 50% of renters expect dual flush toilets, while 26% expect solar panels and ground source heating.

LettingaProperty.com founder Jonathan Daines says: “We’ve heard a lot recently about the cost to landlords of making their properties greener, from replacing gas boilers with heat pumps to installing insulation. 

“This survey has revealed that tenants are prepared to play their part too, with over half of renters happy to pay more for greener homes. 

“It is overwhelmingly clear that tenants are demanding greener choices than the rental sector currently offers.

“Clearly, renters know what they want when it comes to green credentials. And while many landlords can’t afford solar panels or heat pumps, smaller eco improvements can help properties stand out and increase renter appeal. 

“Landlords should be mindful of this sentiment and take any steps they can to make their properties greener.”

Original Article from Mortgage Strategy 01/11/21

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Rents fell 9% in October but remain higher than 2020: Goodlord

Average rents in England fell by almost 9%  from £1,104 per month in September to £1,006 in October, although year on year, rents were around 7% higher, according to the latest index from Goodlord.

The company says that void periods have also started to increase, but that demand remains very high in comparison to 2020 figures. 

The South West saw the biggest decrease in the cost of rent, recording a 16% reduction. 

This was followed by a 14% fall in the South East and 11% in the North West. 

Greater London, the North East, East Midlands and West Midlands recorded reductions of between 4-6%.

However, these decreases followed a string of higher than average rental prices between July and September. 

The October average remains higher than figures recorded for May and June 2021. 

In addition, year-on-year rental prices are 7.2% higher than 2020 averages. 

Voids hit the highest levels recorded since May, rising to an average of 19 days during October. 

This is up from September’s average of 17 days. 

There was a big shift in the North East where, after 4 months of historically low voids, numbers returned to more predictable levels. 

The region recorded an average void period of 20 days in October, up from 11 the previous month.

The East Midlands, Greater London, and the South West also recorded a rise in void periods. 

The South West held steady month-on-month at 17 days. 

The North West, however, saw a drop in voids from 25 days to 18 days, and the West Midlands also saw a decrease; 21 days down to 19.  

Year-on-year, voids are currently 17% lower than 2020 averages.

Goodlord chief operating officer Tom Mundy says: “We’ve witnessed huge market demand in 2021 so far and I’m not surprised that void periods are still lower than those recorded in 2020 and that average rents are much higher too. 

“We’ve definitely seen a slight cooling of demand this month, as is to be expected following the summer surge from renters and early autumn demand from students. 

“But this cooling should be taken with a pinch of salt as the year-on-year figures clearly show that the lettings sector is continuing to experience consistently high demand across England.”

Original Article from Mortgage Strategy 01/11/21

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Agents to extend Deposit Alternative scheme to existing tenants

Some agents allied with deposit alternative service flatfair – and who previously offered the service to new tenants – are now going to extend it to existing renters as well.

Flatfair says participating agents include Spicerhaart and a number of Hunters branches, and believes this will effectively unlock millions of pounds in the coming months.

It says the existing average deposit is over £1,400.

“We all feel the financial strain in the run up to Christmas, which is why we’re pleased to be offering some light at the end of the tunnel” explains flatfair chief executive Franz Doerr. 

“It’s our mission to put millions of pounds that are pointlessly locked away back in the pockets of tenants across the UK, while providing landlords with the cover they need.”

And Elisa Bayliss, assistant lettings manager at Hunters Bingley, adds: “Hunters Bingley have been using the flatfair deposit alternative for around two years now … we have recently got on board with unlocking traditional deposits, with flatfair deposit unlocking. All the landlord feedback so far has been extremely positive, and landlords are happy to offer it to good tenants, whilst doubling their protection.”

Original Article from Letting Agent Today 28/10/21

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Energy Efficiency still not a hot topic for most house buyers

New research shows that despite media attention and new government policies, better energy efficiency is not a key issue for the large majority of buyers. 

A study by NatWest and IHS Markit, based on responses from 4,500 people across the UK in the third quarter of 2021, found that only a small percentage of homebuyers considered EPC rating a ‘very important’ factor if purchasing a home in the next 10 years; it was the fourth lowest among the 12 factors surveyed.  

Only 15 per cent of households said that having an EPC rating of C or above was essential when selecting a property.

The EPC rating ranked below other environmental factors, such as air quality, amount of local green space and levels of noise pollution. 

Out of all the environmental factors listed, risk of flooding was considered by far the most important, even beating internet speed for importance. 

And although 52 per cent of homeowners have plans for green home improvements over the next decade – this is only if they are cost effective. 

Just one-in-seven homeowners are ‘very confident’ of being able to replace their gas boiler with a more sustainable alternative at an estimated cost of £5,000. Some 57 per cent were either ‘not very’ or ‘not at all confident’.

Lloyd Cochrane, head of mortgages at NatWest, says: “With COP 26 fast approaching, the tracker shows that there is a noticeable proportion of homeowners who firstly don’t consider an EPC rating or energy efficiency as important and secondly, have no plans to make improvements in the next decade..

“… There is much more we all need to do across industry and government to raise consumer awareness, provide relevant information and appropriate support. The switch to greener lives and homes should be accessible to all – not just those who can afford it.”

Original Article from Estate Agent Today 26/10/21

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Record levels of rising tenant demand

69% of landlords have reported increasing levels of tenant demand in the third quarter of 2021, with 36% stating the increase was ‘significant’.

A survey of over 600 landlords by BVA BDRC on behalf of Paragon Bank showed that regionally, net increases of 79% and 74% were reported by landlords in the South West and South East (excluding London), respectively. Although still seeing relatively strong levels of interest from tenants, a lower proportion, 59%, of investors with property in the North East indicated experiencing increased demand.

This figure falls to 54% amongst those managing portfolios in central London, in part due to the region seeing the highest levels of decreasing demand (16%). Despite this, the data suggests that a significant shift is being seen in appetite for central London living as people continue to return to the capital – the same period in 2020 saw a net increase in tenant demand reported by just 16% of Central London landlords, while 58% reported demand was decreasing.

Richard Rowntree, Paragon Bank managing director, said: “Landlords have been recording rising levels of tenant demand following the first lockdown, which reflects the shift in housing need created by the virus. The third quarter of the year is usually a busy one for the private rented sector (PRS) with graduates starting new jobs, the beginning of the academic year and people turning to housing once the holiday season is over.

“With this seasonal demand added to already high levels of tenant demand, we are beginning to see a shortage of property in certain parts of the PRS, which is leading to rental inflation. The sector needs to expand to meet these exceptional levels of tenant needs.

“Recognising this, lenders can assist investors with products and service that supports them in responding to the needs a diverse and growing mix of tenants.”

Original Article from Best Advice 19/10/21

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More buy to let and Build To Rent new-builds ‘will help developers recover’

Savills says an increase in the number of new builds bought for buy to let and other property investment will help developers recover from the demise of the Help To Buy scheme.

However, there may be a difficulty with the constriction industry being able to meet demand from investors and others.

Emily Williams, associate director of research at the agency, comments: “Despite the upcoming end of Help to Buy, there remains considerable appetite for new homes, and we expect delivery of affordable and private rental stock to expand to fill the gap left by Help to Buy.

“But the ability of developers and investors to build new homes is currently being limited by a lack of suitable consented land. There needs to be a continued effort to deliver more consents in high demand areas.”

Savills, in its latest housing market forecast, predicts that housebuilding volumes will not recover to pre-pandemic volumes until 2016 and even then delivery will be 60,000 below the government’s 300,000 homes per year target. 

Delivery peaked in 2019/20 at 220,000 homes and fell to 190,000 in 2020/21. Volumes are expected to sink to 180,000 in 2021/2 and only recover 2019/20 volumes in 2026.   

Starts slowed due to Covid but were already falling pre-pandemic, in part because housebuilders began to anticipate the end of Help to Buy, often shifting focus to smaller sites deliverable before the end of the scheme.  

Also, sites gaining permission have been skewed to lower demand markets, with supply highly constrained in high demand locations. Renewed government commitment to delivering more homes in the north of the country suggests this is unlikely to change, the agency suggests.

Savills says: “Build to Rent is the only part of the private housebuilding market we expect to be significantly bigger in 2025/26 compared to 2019/20.  

“Delivery rose from 7,000 to 14,000 between 2016/17 and 2019/20.  A further doubling would give us an expected 30,000 homes within five years, equivalent to 14 per cent of all new homes completed in 2025/6.  There may be opportunities for the sector to expand further, certainly tenant demand is not lacking.”

Original Article from Letting Agent Today 19/10/21

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New RICS forecast of rising tenant demand and higher rent

Tenant demand continues to rise and is now way beyond the long term average according to the latest market snapshot by the Royal Institution of Chartered Surveyors.

The snapshot is a sentiment survey, and the latest released this week shows a net balance of 62 per cent of surveyors reporting increasing tenant demand. 

This is in line with figures seen over the past four months, RICS says, but is far beyond the long run average of 19 per cent. 

“At the same time, the series on landlord instructions remains very much negative (as it has done in each month since July 2020) returning a net balance of minus 21 per cent” says RICS.

Rents are rising as a result and at the national level, some 55 per cent of respondents to the survey expected rents to rise further in the near future, with growth expected in every region. 

In London, rents are now seen rising by approximately two per cent a year – RICS says this marks “a significant turnaround relative to six months ago, when rental projections were in negative territory.”

On the sales side, the market has cooled slightly following the end of the stamp duty holiday. But a continuing lack of supply is keeping the market buoyant.

Original Article from Letting Agent Today 15/10/21