Latest in LettingsIssue 3.
The rental market is very much alive and well. Of course there are some .burned fingers. among the unhappy landlords who bought off plan in high priced developments in northern cities. A small number of mortgage repossessions from landlords who did not allow for voids, repairs or failing tenants, but that.s how an open market works!
CHANGING ATTITUDES IN BUY TO LET (B2L)
TENANTS IN THE MARKET individuals, couples and small families have now turned their backs on home ownership. Unwilling to pay the purchase, transactions, fitting out and maintenance costs that go with ownership or the desperate worry of a mortgage that comes to the end of a reduced rate period. Getting out now also frequently incurs savage redemption costs. They take a rational decision looking to renting for the longer term. What an opportunity for landlords and agents who recognise that investing in residential property is a longer term play. Many tenancies are extended time after time and last for up to 8 or 9 years. This market needs a clear well promoted response and modest changes to the terms and conditions of the tenancy agreement.
UNFURNISHED IS the rule, a term of 1 . 5 years subject to an agreement that makes the tenant responsible for the supply and maintenance of their own domestic appliances and for internal redecoration. Landlords must of course supply a cooker and must comply with the provision of the Landlord and Tenant Act 1985 Section 11(as amended by the Housing Act 1988 Section 116) , keeping in repair the structure and exterior of their property and to carry out any repairs required within a reasonable time after being notified. http://www.opsi.gov.uk/acts/acts1988/Ukpga_19880050_en_1.htm
A gas safety check record prepared by a qualified corgi registered engineer must also be provided to the tenant annually and any repairs to gas pipe-work or appliances carried out immediately they are required.
Larger and more expensive homes are again in demand as homeowners sell in advance of choosing another home to buy.
Purchasers able and ready to complete can always strike better bargains having the luxury of enough time to choose and carry out any alterations or redecoration takes a lot of stress out of one of the most stressful periods of life. Many of these .Gap Renters. as they are known are downsizing when adult children leave home. Others are preparing for retirement and no longer need to live within commuting distance of the work place.
Once the new purchase is complete there is often a useful amount of cash left over for investment or to assist children in buying their own first home. Much of the investment pot goes straight back into the property market in this way but much more continues to flow into the B2L market. Active agents report on increases in the number of new landlords despite 5 interest rate rises that cannot be fully covered by increases in the rent. Even young people with some cash to invest are buying B2L properties knowing that they may need to top up the rental income from time to time.
HOW ELSE CAN WE SAVE? said one young couple recently.We can't rely on our state or employers pensions schemes, interest income from a cash deposit is low and we don.t really trust savings schemes that are invested in quoted securities. Better to buy a small property that will let well, then as we do better in our careers we can pay off the B2L mortgage early and use that free asset to help us buy more.
THE CONTINUING SHORTAGE OF HOMES - AFFORDABLE OR NOT
IT COMES AS no surprise to anyone involved in letting that the government.s Green Paper . Homes for the Future: Affordable, More Sustainable . makes no reference to the private rented sector (PRS). The only self funded, flexible and full taxed part of the housing market PRS providing, at no cost to the state, 12% of all of the homes in the UK did not even receive a mention.
The plans outlined in the Green Paper to build more homes, particularly affordable homes are unlikely to make an early impact on the shortage of low cost housing. They smack of an authoritarian centralised approach that was typical of Treasury thinking under Chancellor Brown.
The numbers tell the story:
- Projected annual growth in numbers of new households
- 223,000
- New builds scheduled to complete 2006 -2007
- 167,691
- Shortfall
- 55,309
The projected growth in the number of new households may be understated since net immigration is unknown. No allowance has been made for the replacement of homes that are beyond economical repair and due for demolition, or for the clearance of sink estates.
New build figures include a large number of flats since planners have encouraged higher density developments . the ideal home for families with young children?
The Government.s current target of 200,000 new homes each year falls well short of the need. It is a recipe for increased prices and severe difficulty for first time buyers whose average age is now 33(f)-34(m) . up from the 23-24 of fifteen years ago.
New higher targets project that 3 million new homes will be built by 2020 but will, according to the House Builders Federation (HBF) still not match the increasing rate of demand.
Centralised .sticks and carrots. will be applied to local authorities that do not identify 5 years worth of sites for development and create plans that will cover identification of sites for 10 years and will find themselves overruled if they fail to identify and give planning permission for sufficient new builds.
The social sector, housing associations and local authorities are expected to build at least 70,000 affordable homes and 45,000 properties to let although it is unlikely that housing associations will be able to raise the £11.6 billion required, well in excess of the £8 billion proposed by government.
New ideas include the provision of government backed loans to pay the deposit for first time buyers and low income households although no details have yet been worked through about the mechanics of these loans. Who will actually provide it and on what terms of repayment. Similarly, proposals to build new .eco-towns. . small stand alone villages of 5 . 20,000 homes . are not set out in sufficient detail for any judgement to be made on their viability. Where will they be located, who will pay for them and how will they fit into the grand scheme of things.
No mention is made of the critical constraints on new builds. New developments create a demand for schools, doctors and dentists surgeries, public transport, to say nothing on the need to extend water, sewage, electricity and gas networks. Local authorities and utilities find the provision of this vital infrastructure a daunting prospect. Suggestions that the cost should fall wholly on developers will strain their cash flow and cause an immediate increase in the cost of each new home on the site.
They also create a demand for skilled labour that is currently in short supply and over reliant on the increase in the number of immigrants with the right experience. The labour force has already been drained by the construction of new facilities and transport links for the London Olympics causing a labour cost explosion and a serious strain on the providers of utilities and transport.
In recent weeks the Prime Minister and a good many of his ministers have publicly announced their commitment to providing low cost housing . that said, they are accountable!