Month: January 2020

At 11.00pm tonight the UK will officially leave the EU. Initially there will be no obvious change as we move straight into an 11 month transition period. This will come to an end on 31 December 2020, either with or without a trade deal so, going forward, there may be something of a bumpy ride for the property market while the government negotiates terms.

Last year, according to RICS figures, Brexit uncertainty hit the housing market to the tune of a £5000 fall in average prices. However, since the general election in December, the property market seems to be experiencing something of a so-called “Boris bounce” with prices now going up and an increase in numbers of mortgage approvals.

Of course it’s impossible to predict how long this might last. Any instability in the market over the coming months is likely to make potential buyers more risk-averse, leading to fewer transactions. But if fewer people are buying, this will prove positive for the rental market. Renters may decide to stay put rather than move onto homeownership. Bad news for housing transactions but good news for landlords and letting agents. Also, for canny investors, any dampening of house prices means the possibility of picking up a bargain.  

The Bank of England has decided to leave interest rates untouched for the time being but in the coming months, mortgages may be affected by Brexit. Some commentators have suggested the base rate could go up post-Brexit, making buy-to-let mortgages more expensive. On the other hand, as one press report recently pointed out, once we no longer have to abide by EU Regulation, some laws such as the Mortgage Credit Directive – which enforces uniform borrowing rules across all EU member states – could be repealed, opening up the possibility of more flexible lending. And, of course, if mortgages become harder to obtain for potential purchasers, that too will ramp up demand in the rental market. So, once more, landlords could stand to gain.

While the Government moves on to negotiate a trade deal with Brussels, accountants KPMG said in a report last year that whatever the final outcome, the London market is likely to be most heavily impacted by any post-Brexit economic shocks.

For landlords, with the future still far from certain, the key to ensuring profitability will be to keep rental homes well-maintained and effectively managed and to make sure they stay ahead of the curve on compliance. With the biggest shift of the economic and legislative landscape in most of our lifetimes now in sight, it will be vital for us all to remain alert to changes in our markets and the legal framework moving forward.

Last week we blogged about the new electrical safety regulations that come into force on 1 July. Today we’re reminding landlords to put 1 April in their diaries too, because new rules on energy efficiency are being rolled out.

Since 2018, minimum energy efficiency standards (MEES) have been in force for new tenancies in England and Wales. The regulations outlaw new tenancy agreements on properties with an energy performance certificate (EPC) rating below E – unless the property is exempt. But from April this year, the MEES regulations will apply to all rental properties and it will become illegal to rent out any home with an existing or continuing tenancy that fails to meet the minimum required energy rating.

Here are five ways that you can improve the energy efficiency of your property:

• Replace old, inefficient boilers
• Insulate around doors and windows and inside loft spaces
• Install double glazing
• Replace all light bulbs with LEDs
• Install radiator thermostats and smart meters

If for some reason you can’t carry out works immediately, there are some temporary exemptions available for:

• new landlords and those whose properties would be devalued by more than 5% if improvement works are carried out; and

• landlords who can’t get third party consent to carry out the required improvements from say, the lender, tenant or superior landlord.

Breaches will result in financial penalties – which in some cases could be as much as £150,000 – so don’t ignore the deadline. April is only two months away, so landlords are advised to get their properties assessed and any works budgeted for sooner rather than later. Access will be needed to carry out the required works and arranging this with tenants can take time.

The smart money is on the Government raising the bar again in a few years’ time and property pundits think D or even C is likely to be set as the minimum EPC rating in the future. So if landlords have work to do on their rental homes, it’s well worth installing energy-efficient appliances, replacing those draughty doors and windows, and upgrading insulation to ensure properties achieve a C rating now.

Political uncertainty spread its tendrils through most industry sectors in 2019, including the seemingly unstoppable Build-to-Rent market. The last 12 months saw a 22% drop in investment, according to research from CBRE. The consultant reports that transactions for the second half of 2019 were subdued compared to the last two quarters of 2018. CBRE puts this down to market uncertainty around the General Election but there is no doubt that the markets have picked up since then.

Looking to the year ahead James Hinde, the director of valuation and advisory services at CBRE is optimistic. He says the outlook for 2020 is “favourable” with some £1.5 billion worth of deals currently under offer. Hinde forecasts “rapid expansion” and CBRE’s forecast is for residential investment to rise by approximately 30% this year, with demand driven by “an increasingly diverse investor base from both domestic and overseas institutions.”

This chimes with Savills analysis for the British Property Federation (BPF) which we reported in yesterday’s blog. There are now 152,071 B2R homes at various stages of completion in the UK. Of these, 40,181 of these are complete, with a further 35,415 under construction and 75,475 in planning. This represents an increase of 15% over last year.

LifebyRingley, our lettings business based in Manchester, continues to thrive, growing its management portfolio of BTR homes and witnessing rapid growth in the sector. This is borne out by the 51% surge in the number of completed rental homes in key regional cities reported by Savills, with Manchester, Birmingham, Liverpool, Leeds, Glasgow and Sheffield leading the way. 

There are now more completed Build-to-Rent homes across the UK’s regions than in London, although the capital still has more homes under development. 

Yesterday’s Rental Market Report from Zoopla shows the continued resilience of the UK property market. Despite a turbulent year in politics as a result of MPs squabbling over Brexit, there has been steady rental growth across the board.

Core regional cities such as York, Bristol and Nottingham have seen 5% growth – more than double the UK average – thanks to strong local economies. No doubt they will benefit from the new government’s renewed focus on political devolution, with York being identified as a potential new home for the House of Lords.

Rental prices in London have increased by 2.8% – the highest rate in the capital for almost four years – and providing the final Brexit deal doesn’t prove too damaging – we expect this to continue.

Zoopla’s prediction of a 3.5% growth in rental prices during the coming year is welcome news for landlords and the institutional investors who continue to eye the UK rental market. This is borne out by recent research from Savills which shows there are now over 150,000 build-to-rent homes in the pipeline.

However, Zoopla signals warning signs too. Rental growth has largely been driven by higher wages but there are already signs that wage growth may be slowing. Lack of supply is another factor, with many private landlords looking to exit the market following tax and regulatory changes. A drop-off in available rental homes combined with reduced wage growth could leave renters out of pocket. To that end, the government should rethink its approach to buy-to-let landlords.

It’s no secret that we Brits love our pets, with an estimated 44% of us sharing our homes with at least one animal. But landlords aren’t so keen. Pets can be dirty and destructive and regardless of withholding deposit payments to cover the cost of the clean-up at the end of the tenancy, for many buy-to-let landlords, the hassle just isn’t worth it.   

For renters, this can make life difficult, especially if they are forced to give up a much-loved pet because they can’t find an animal-friendly property. Pets bring a huge amount of joy and comfort to many of our lives, helping us through difficult times and improving our mental and physical wellbeing. But only an estimated 7% of landlords advertise homes as suitable for pets, meaning many people struggle to find the right home. 

So Housing Secretary Robert Jenrick MP has called on landlords to make it easier for responsible tenants to have well-behaved pets in their homes. He announced that an overhaul of the model tenancy contracts, which can be used as the basis of tenancy agreements, will now be revised to remove restrictions on well-behaved pets to ensure more landlords cater to pet owners wherever possible.

The model agreement sets out minimum requirements and can be altered by landlords to cater for specific circumstances, tenants or properties. The aim is that total bans on renters with pets should only be enforced where there is good reason, such as in smaller properties or in flats where owning a pet could be impractical. 

However, many landlords regard pets as a big no-no. How can they tell whether a dog or cat is likely to be clean or well-behaved? After all, prospective tenants are unlikely to say otherwise! Some landlords quote bills running into tens of thousands of pounds to replace not only stained carpets and chewed furniture but structural fixtures and fittings such as architraves and wooden floors that have been irreparably damaged by tenants’ pets.

So where does the Housing Secretary’s announcement leave the rental sector?  In reality, as The Residential Landlords Association has told its members, this statement by the government does not make it a legally binding requirement for landlords to accept pets. The use of the model tenancy agreement is not mandatory: landlords still have the right to refuse tenants with animals.

And while the government is only currently proposing a change in the model agreement, if the government wishes to go further into legislation, considerations will need to include how the tenancy agreement interacts with the lease for a flat – some of which have prohibitions against pets, or at least require a pet (or its owner on their behalf) to obtain a pet licence before they take up residence.  

At Ringley, we act for a number of institutional landlords in the Build to Rent sector. All of them not only actively encourage pets – as they feel that being pet-friendly encourages tenants to stay longer – but at least one is considering keeping a dog on Reception that residents can adopt for an hour or two, via the residents app, to take for a walk.  There is a feeling that we all become more approachable to strangers when we have a pet and therefore pets are good for community engagement.  The dog will come with a disclaimer though – walkers won’t be allowed to keep him out after bedtime and muddy paws must be washed after use!