Demand > Supply = Residential property rents in the UK expected to keep rising

Residential property rents in the UK are increasing as tenant demand and a shortage of properties dominate a buoyant lettings market,

  • 26% more chartered surveyors reported a rise in demand for property rather than a fall
  • Strongest demand increase in London and the East of England.
  • Large deposits and difficulty securing mortgages leading to higher numbers seeking to rent rather than buy.
  • Low Supply, only 4.1% of Landlords intend to sell at the end of current AST. Supply fallen for fourth consecutive quarter.
  • Rents for houses are expected to marginally outperform flats.
  • However as property prices are still low, many owners may let for some time before selling, thus modestly increasing supply.
  • One in five landlords are experiencing rent arrears and many are concerned about the increase in Capital Gains Tax. Added to the forthcoming cuts to Local Housing Allowance and the possibility of increased interest rates, it is clear any increase in rents will be quickly offset by these additional factors that have to be taken into account.

Article is a summary of information from www.propertywire.com

Demand > Supply = Residential property rents in the UK expected to keep rising

Residential property rents in the UK are increasing as tenant demand and a shortage of properties dominate a buoyant lettings market,

  • 26% more chartered surveyors reported a rise in demand for property rather than a fall
  • Strongest demand increase in London and the East of England.
  • Large deposits and difficulty securing mortgages leading to higher numbers seeking to rent rather than buy.
  • Low Supply, only 4.1% of Landlords intend to sell at the end of current AST. Supply fallen for fourth consecutive quarter.
  • Rents for houses are expected to marginally outperform flats.
  • However as property prices are still low, many owners may let for some time before selling, thus modestly increasing supply.
  • One in five landlords are experiencing rent arrears and many are concerned about the increase in Capital Gains Tax. Added to the forthcoming cuts to Local Housing Allowance and the possibility of increased interest rates, it is clear any increase in rents will be quickly offset by these additional factors that have to be taken into account.

Article is a summary of information from www.propertywire.com

How to Earn up to an additional £1000 Tax Free per property by being Green

  • · Earn up to £1000 per property = £7bn nationally (tax free)
  • · Save 692kg of Co2 Saved per property = 8.5m tonnes nationally
  • · 0% APR finance from British Gas

The article below copied from www.propertytalklive.co.uk, shows this new scheme offered by British Gas. Landlord’s should jump on this, its an additional income and is doing your bit to be green and protect the environment. The returns work out as much as 8% and if you qualify for the finance this works out even more.

Article

As many as half of Britain’s homes could earn around £600 a year from roof top solar panels with some earning as much as £1000.

Read more

Landlords: Ways to be Green and Save Money

For all Landlords, in particular when lets are to students, all inclusive ASTs, or Flat Shares it is very important to try keep the costs down for pure profiteering reasons as well as doing our bit to be green. Being environmentally friendly in the long run really pays off financially and you can use being green as a marketing tool also. Being green can be expensive but there are a few cheap alternatives that can really have a big impact.

Here are our Top Tips… Read more

House Prices: Rising or Falling?

House Price Changes across UK

Diagram from the Telegraph

As the figures show, a universal headline figure of property price changes just doesn’t have relevance to individuals or investors. There is a huge disparity in rates and it is not in the stereotypical divide many of you are accustomed to.

Predictably London fairs well and in my opinion is one of the safest spots to invest in the long term. The not so great performance of the rest of the South East really drives home that nationally the outlook is not so good. The strong growth of the North West is great news for that area, one of previous very gloomy economic forecasts. This is a great place to put some money in if this price rises continue. In a region where you can still pick up bargains, properties where the equivalent in London would be 5-8 times the price. With higher percentages for council housing, this provides a great investor ground for stable rentals.

What has caused this increase in prices in the North West?

Where would you put your money?

“Interest rates rise to 8% in two years”- Never

Yesterday I read this article in the Telegraph, of which I provide a summary:

“Interest rates may rise to 8% within two years to choke off soaring inflation, according to radical new research by the influential Policy Exchange think tank.

The rise could happen as the recovery beds in and Government measures to stave off a recession lead to an explosion in the money supply.

Mr Lilico, Chief Executive of the think tank also warned of a return to “boom and bust”, as ballooning inflation threatens to tip the economy back in to recession in 2013 or 2014.

“Given the constraints of late 2008 and the absurdities of subsequent fiscal, finance and regulatory policy, if we can get away with a recession of only 6.6pc, deflation of only 2pc and inflation of only 10pc for one year, [Bank of England Governor] Mervyn King will deserve a medal,” Mr Lilico said.

A brief double dip recession early next year is likely, he said, but it “would be quite compatible with a boom thereafter”.

That boom would quickly run out of control, as the £200bn of “money printing” by the Bank during the crisis would lead to “a huge expansion in the money supply, which will lead to inflation”.

He estimates that the Retail Prices Index (RPI), the inflation measure favoured in wage settlements and against which annual rises in train fares are priced, would rise “above 10pc”.

The Consumer Prices Index (CPI), the inflation measure that the Bank is responsible for keeping at around 2pc, will top 6pc, Mr Lilico reckons.

This week, official data from the Office for National Statistics is expected to confirm that the economy grew 1.1pc in the second quarter of the year – reinforcing hopes that the recovery is strong enough to withstand the Coalition’s planned spending cuts.

To control inflation, “interest rates will rise rapidly as well”, Mr Lilico says. “To keep [RPI] inflation down to only 10pc for one year, the economy will have to be able to tolerate interest rates of perhaps 8pc.”

High interest rates, however, could prove too much for households, which are currently benefiting from historically low average mortgage rates of 4pc.

Mr Lilico added: “There is a risk that… the economy will not be able to tolerate 8pc interest rates without the mass defaulting on mortgages that we are trying to avoid. If that is the case, then interest rates may have to be kept lower for an additional nine months and the consequence will be inflation peaking at 20pc rather than 10pc, as in the 1970s.

The consequence of interest rate rises will be another recession in 2013 or 2014,” he said.

The concluding remarks of the Telegraph showed disagreement with this report and we agree. Even though since 1997 the primary objective of the MPC has been to control inflation and it is considered a separate entity to the Government, there is no chance just to control inflation interest rates will be put up this amount. The MPC and the coalition government has learnt a hard, tough lesson through the recession and are not about to stop the nation recovering solely to control  inflationary pressure.

A rise of this magnitude would result in major default on variable mortgages; not only from homeowners but also investors, mortgage costs for certain properties will increase 4 or 5 fold.  The result would be loss of confidence, major repossessions, reduction in disposable incomes and therefore a significant impact on consumer spending. This would significantly knock the economy into shock and we could return to the black days of the early nineties or worse. I do not think there is anything to worry about, worst situation in my opinion is interest rates rising two to three percent, like in the early noughties, this will help control inflation, Understandably the rate rise would mean less surplus for landlords on variable rate mortgages, but homeowners on the brink may face selling or losing their home; end result a boost for rental markets, and potential cheap quick sales available for investors.

Overall interest rates of 8%, not in the next decade!

info@propvestment.com www.twitter.com/propvestment www.propvestment.com

Reply to original article by Philip Aldrick in The Telegraph on 21st August 2010

Getting into the Mind of a Surveyor

Can you imagine what it is like to be a surveyor?  They have the power to make or break a market.  They made it for us on the way up and broke it for us on the way down.

Back in the days you would ask a surveyor to value a property at £60,000 which you had bought for £38,000 3 months ago and they would do it no problem.  You would remortgage and get a nice chunk to go and reinvest in more high yielding and high growth properties.

Now it is a different story.  You ask him or her to go and value a property you are trying to buy for £60,000 and they value it at £38,000.

So why do surveyors do this?  Well simply they are scared.  They are scared that the bank will come after them when the borrower has defaulted and all the property is worth is £38,000 when sold at auction.  If they put a value of £60,000 the bank could come after the surveyor for the difference i.e. £22,000.  The surveyor’s insurance will pick up the bill but the surveyor’s professional indemnity insurance rockets and the surveyor gets known as a bad surveyor.

Good surveyors in the bank’s books are the ones that down value.  The real pessimistic ones are the banks favourites.  But there is a point when the bank wants the surveyors to put an optimistic valuation.  Then the tide turns.

The surveyors that start valuing on the generous side start to get the work.  Ultimately the bank is safe because the surveyor has insurance.  So it becomes a game of who has the most balls.

We are not there yet.  But there will be a point when one of the banks says “I want to lend big time”.  Then there will be pressure from above on the surveyors to start valuing up properties.

Once other banks see what is happening they have two choices:

1. Do nothing and lose market share or

2. follow and compete by getting valuations that value up

The time of change will come back, tide will change and the cycle will circulate.

Article sourced from the view point and opinions of Ajay Ahuja of ahuja.co.uk

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Risks and Rewards: Renting to Students?

On the day of A-Level results, the day when a school kid becomes a legal student. This opens out a whole new influx on potential tenants as they make the transition from “living with parents” to “renting.”

There has been a rise in Student Lets; the latest “accommodationforstudents.com” research shows increase of 4.3% on last year.

The average weekly student rent now stands at £65.30, 4.3% higher than last year (£62.61). The previous two years’ increases were just 1.6% and 1.7%. Since 2004, when the average rent was £52.44, rents have risen 25%.

Rents are highest in the South East, which hosts 8 out of the 10 most expensive student locations. London leads the way with an average rent of over £100 per week, with Guildford, Uxbridge, Cambridge, Middlesex, Egham and Brighton all weighing in with rents of over £80 per week. The stats are based on nearly 60,000 properties in 83 cities across the UK.

Some traditional English redbrick universities: Liverpool (£55.49), Birmingham (£57.30), Manchester (£60.12), and Sheffield (£60.14) are still below the average UK weekly student rent of £65.30.

Best value locations in terms of student rental accommodation are Middlesbrough, Stoke-on-Trent and Stockton with average weekly rents of £41.47, £42.65 and £44.71 respectively.

So as a Landlord, the most promising locations are in the South East, in particular London, with its wide choice of universities and colleges. Also London attracts many foreign students, they our paying huge international rates for tuition fee so it’s a safe assumption to say they are willing to pay higher prices and come from well off backgrounds.

Example

One of our clients has a 3 bedroom flat it SE1, which has now been converted into a 4 bed. We have been able to achieve £599 per room per month, leaving the client with over £800 per month cash surplus after paying the buy-to-let mortgage.

We source the tenants from post graduate universities and colleges, what we have found is that many students like to pay 3 months in advance due to budgeting reasons and they pay it like they do their tuition on a term to term basis. This further aid the Landlord’s cash flow. What other private let in our economy is in a position to pay 3 month advances on rent.

There are of course risks involved like any other AST (Assured Short hold tenancy). Primarily rent payment, but if your contracts take references, take on parental guarantees and if possible insurance, your risk is dramatically reduced. In our case study, we have never had any students default on payments.

____

Landlord’s bewared; specify who is responsible for council tax, TV license and bills. Council tax is another source of advantage, Students are exempt. As a Landlord make sure the council is informed of the occupants of your property and advise the students on the simple procedure.

Provide your property with broadband, its only around £100 a year and that dramatically increases the rentablity of your property for students.

Older students are always more reliable, however there are many freshman available, those who have to go through Clearing, have little or no chance to get University Halls and have to look in the private market.

Don’t worry if there is not immediate responses from adverts, as it gets closer to the start of courses the interest grow exponentially, and desperation grows and properties are taken of the market.

Renting to students is cheap and cheerful, provide good quality basics, desks, chairs, a lamp and majority are happy and you won’t find any complains, they are always too busy partying or working to care for minor niggles.

Overall the returns out weigh the risks, managed well and reducing the risks, can create huge cash flow surpluses.

Email me for more info on our service info@propvestment.com

Sources include personal experience, Landlordzone.co.uk and accomodationforstudents.com

India Land of Contradiction: Implications to the Property Market

I write this week from India, having spent time in Mumbai.

In India contradictions survive side by side as if it were normal to do so.
Everything is just blended here. So much commotion and so many cars jostling for every inch of space on the streets. Here you have the most holy men in the world and the most corrupt living side by side coexisting in the same space.

These contradictions also extend themselves to the property market. In Mumbai, you have the most expensive property in the world, namely Mukesh Ambani new home costing £500m and only a stone through away from it Asia biggest slum Daravi in Central Mumbai, made famous in the recent hit Slum Dog Millionaire and a subsequent BBC documentary.

On one end of the scale, we have the Ambanis monstrous tower costing $1bn, which is currently under construction.
It consists of accommodation for 600 staff. It is the equivalent of a 60 storey building it house, 3 helipads, 6 parking floors to park the 168 imported cars, a gym floor, an entertainment floor and a few guest floors. Ambani’s new private heaven will occupy more than 48,000 square feet of the prime most land in one of the most expensive cities on the planet.

As per 2001 census, 54.1% of the city’s population lives in Dharavi  Asia’s biggest slum.
Mumbai has now spilled over to its neighbouring areas, giving rise to a hand-full of suburban domains.

It is actually very derogate to call this a slum. It actually is the heart of Mumbai. People live seemingly happily and actually thrive. The slum spreads laterally. This is the issue.
This takes up much valuable land. Instead, the plan is to do away with this thriving and productive community and to lock them up in tower blocks. This will then destroy the fabric of the all-important Indian family network, which is one of the most fundamental reasons why Indians not only survives, but also thrive happily.

In exchange for rehousing eligible households in 300 square-foot flats and providing some requisite infrastructure, amenities and commercial space, developers win the right to build developments on the rest of the land for sale on the open market.

The plan has been widely marketed as a win-win solution: a model of slum redevelopment through public-private part nership to be exported around the world.

The project is ridiculously lucrative. Once a no-man’s-land on a peripheral marsh, 590acre Dharavi has found itself in the center of globalizing Mumbai, surrounded by three major railway stations, a bus station and the two major east-west link roads. Most importantly, the Bandra-Kurla Complex, Mumbai’s new financial hub, flanks it where land values rival those of Manhattan and Tokyo.

It continues to be the entry point for many of Mumbai’s migrants and has been home to many families for generations. It has provided affordable shelter, economic opportunities and social mobility for countless people.

Dharvi has attracted support from the most surprising places. The Prince, who visited Dharavi in 2003, cited it as a model for environmentally and socially sustainable settlement because of the way it was organised around people’s needs. He was struck by what he described as the “underlying intuitive grammar of design” that, he said, was “totally absent from the faceless slabs that are still being built around the world to `warehouse’ the poor”.

The economic statistics of the settlement are astounding. They recycle 95% of Mumbai’s waste, there is no such thing as junk here, and everything is recycled and reused.
One million people are reported to call Dharavi home, but for many, it is also their place of business.

Other products manufactured in Dharavi’s cottage industries include soap and leather. One leather worker was so successful that he exported 25,000 belts to WalMart in the United States; he has since moved up and out of Dharavi. The annu al economic output in Dharavi is estimated at $1 billion.

I was amazed to see the levels property prices had reached within this city. The prices in Central Mumbai surpass the expensive price in areas of London.

The difference is India , has one of the strongest growth rates in the world and the property market in Mumbai will be a ridding on this wave. I can see most NRIs being priced out of this market in years to come.

This is a soft launch and is aimed primarily at investors. If you are interested, please register your interest at info@sowandreap.co.uk or call us on 0203 384 5323.

This article is an extract written by one of my mentors Suresh Vagjiani, MD of Sow & Reap

www.sowandreap.co.uk

FIVE TOP TIPS FOR CUTTING YOUR TAX BILL

1. Go abroad for five years: if you are out of the UK for five complete tax years and sell the properties while you are Overseas, the capital gains will not be taxable in the UK. They may, of course, be taxable in the country that you are living in, but the rate may be significantly lower than the UK’s 18-28%.

2. Get married. You can claim two lots of annual allowance, or put the property in your spouse’s name.

3. Be really, really pernickety with your administration. Whether it is offsetting losses from other asset sales a couple of years ago, or claiming capital expenditures during ownership of a property, you may need to prove your case to the taxman.

4. Improve the property by adding a conservatory or converting the loft. But be careful: refitting a kitchen or bathroom is unlikely to count.

5. Buy holiday homes, which qualify for faster taper relief – but may require more day-to-day work and a different long-term strategy.

sourced from Mortgage Express