In a week where the City has been buoyed by slightly better CPI figures, property investors with an interest in landlord insurance have received both positive and negative news about their industry.
As a comparatively new face in the lending business launches a clutch of short term loans designed especially for landlords, research shows tenant arrears are at their highest since 2008.
Shawbrook Bank, which launched only twelve months ago, are hoping to woo buy-to-let landlords with a range of short term loans. They include a loan for landlords looking to buy, refurbish or release equity from the after works value of a property, and short term loans for those landlords who are looking to add to their portfolio by buying a property at an auction.
The bank will also offer short term loans for any landlord looking to carry out small refurbishments to a property. The bank is still a relatively new lender but they have already seen high demand for their products which offer competitive pricing and fee structures.
Stephen Johnson, managing director of commercial lending at Shawbrook Bank, said “Our appetite to lend to professional investors is strong, and we’re constantly looking at ways to improve our products and processes to meet the needs of our brokers and clients.”
The bad news is that the growth in the number of tenants in arrears increased by 1.6% in the third quarter of 2012. There are now 99,000 tenants in arrears of at least two-months and this is 15% more than this time last year. Tenants in severe arrears represent 2.5% of tenancies in England and Wales and despite the steady growth in severe tenant arrears so far this year, there was a reduction in the number of private tenants who were evicted through court orders. On an annual basis, cases of buy to let mortgages more than three months in arrears fell by 21%.
A new service that will interest a whole host of interested parties is about to be launched and the target of the service will be property investors with an interest in landlord insurance.
The tracking service offered by a new company called traceWise will enable customers to find the owner of a property quickly and give them contact details. The service should appeal to tenants trying to trace an absent landlord quickly, letting agents and even local authorities many of whom are now trying to trace absent landlords with a view to renting out their homes. traceWise intend to charge clients a fee somewhere in the region of £15-£25 depending on the request, and affirm they will not charge customers at all if their searches return no useful information.
Juliette Chan is a director of the tracking company and is confident their product will suit the market. She said: “The traceWise service is of huge interest to estate and letting agents as it enables them to identify and contact potential clients in a highly targeted and professional fashion. The days of randomly dropping leaflets through doors, particularly in regards to letting property, is ending, and the ability to use a guided missile to hit a target rather than a scatter-gun approach is the way forward. External consultants Michael Day of Integra Property Services and leading business mentor Chelsey Baker have been working with us over the last year and are totally convinced that our products and services are revolutionising the way in which enlightened agents operate their businesses.”
In fact the company have been delighted with the trials and the bringing together of information gleaned from a number of databases, including the Land Registry, appears to bear rich dividends for those who know where to look.
A report by one of the UK’s leading social landlords suggests that property investors with an interest in landlord insurance are better off sticking to the private sector rather than providing homes that qualify for affordable rent status.
London and Quadrant own well over 60,000 homes in the South East of England that provide shelter for social tenants but it is warning the Government that many housing associations and other social housing providers are in a precarious situation because of affordable rent agreements.
The report says in many areas of the UK the risks for developers building homes aimed at achieving a local market rate rent are much lower than for those working on an affordable rent model. It goes on to say: “Housing associations have to fund around 85% of the cost of each affordable rent home upfront, with rents under the new system averaging around 60-80% of market levels, depending on local factors. In the majority of cases, local authority partners have as much say over how the property is used and by whom as the providing housing association. Essentially, housing associations are receiving a low level of grant to deliver an inflexible asset and with limited influence or control over the customer profile. With further welfare reforms in the offing, affordable rent development will become riskier still. Housing associations will be much more heavily debt-laden, but dependent on less certain income streams to service the debt. In comparison, for market rent, while the full price of provision must be funded, rent levels, usage and tenancy terms are fully flexible, offering stronger opportunities to build capacity and flex use. The ability to quickly mitigate risk as circumstances change is a key advantage.”
In fact according to statistics released this week affordable rent levels are averaging 68% of the local market rate, showing a weekly rate of £110 compared to £163. It is a problem new Housing Minister Mark Prisk will have to address quickly to keep housing associations onside.
Holders of landlord insurance policies in a northern city are being urged to buck up their ideas as complaints from tenants reached a record high last year.
The beautiful city of York has for many years attracted tourists from all over the world, and students have flocked to the city to study there. As a result rented properties have been highly sought after and property investors have done their best to meet the demand. However, not all landlords have been conducting their business in a fit and proper way, and City of York Council say they received 170 complaints about residential landlords. Most of the complaints concerned health and safety issues but there were a small number of tenants who complained of harassment by the landlord and a handful of tenants claimed illegal eviction. The council also noted that emergency services were called in on three occasions to deal with a landlord’s “behaviour or neglect”. The council believe it has identified a dozen landlords who regularly cause problems and they are determined to root them out.
A spokeswoman for the council said: “We know standards in the private rented sector, compared to other tenures in the city, are poorer, as is the case nationally. However, there are many good landlords and letting agents, and private tenants are generally satisfied with the standard of their accommodation. We have found the majority of those landlords who don’t adhere to the law do so out of ignorance and we work with them to support them in raising standards. However, firm action is taken against those who flout the law or act irresponsibly.”
With an increase of something in the region of 50% in the number of rented properties in the city over a period of just a decade, the number of complaints will be seen by many as a sign of a place where landlords are generally doing a good job, and if the council only has to worry about getting tough with a dozen landlords then the city should soon be an even better place to live.
With no end in sight to the boom in the letting business, landlords are even turning to more expensive loans in a bid to expand their portfolios in time to take advantage of the present situation.
A report by bridging loan experts West One Loans says that more and more brokers are being approached by professional landlords keen to get buy-to-let loans but who have been turned away by High Street Banks. 98% of brokers interviewed said they were doing more business now with property investors interested in landlord insurance than they were at the beginning of the year.
Chairman of West One Loans, Duncan Kreeger, said the report conversely showed slightly fewer brokers thinking now was an opportune time for landlords to take on more properties but explained: “While there has been a fall in the number of brokers who are certain investors should expand their portfolios, the change is small – and 81% of brokers are still confident it’s a good time to invest in the sector. Furthermore, the number of brokers who think it’s definitely not a good time to pile into the market has fallen to less than one in ten. Landlords and brokers have different opinions of the market. While fewer brokers think it is a good time to invest in buy-to-let, high demand from landlords suggests they feel otherwise. Despite a slight cooling of broker sentiment towards buy-to-let as an investment for the future, thanks to the current demand from landlords, buy-to-let bridging is flourishing. Bridging is still not being affected by increasingly problematic conditions in the wider residential market. In fact, it’s thriving off the back of them.”
It is perhaps indicative of the confidence landlords feel that they are prepared to go for these expensive loans. Tenants are in plentiful supply in all areas of the country and they have virtually killed off competition from first time buyers who find it even more difficult to get a home loan from the High Street Banks. The result is residential landlords can drive a hard bargain with sellers when it comes to negotiating a price on a property, which in turn will reconcile the extra interest they are paying on their loans.
As rental achievements hit an all time high in the UK, property investors with an interest in landlord insurance are experiencing better than ever prospects.
A survey carried out by lettings experts LSL Property Services found that the average cost of renting a property in the UK is now £725 a month with the prospect of prices going even higher. Residential landlords are not only bringing in record levels of rent, but 40% expect their properties to become more expensive for tenants in the next 12 months as they anticipate raising their rents by almost 5%. Incredibly only 1% of the landlords questioned expected to reduce the amount of rent they charge. The confidence of property investors at the moment is summed up by the fact that 2 out of 3 landlords said they expected demand for their properties to increase over the next year.
And who can blame them? First time buyers with small deposits (10% and under) are finding mortgages in ever decreasing supply and with ever increasing interest rates, leaving professional landlords to snap up good properties at knock down prices. David Newmes, Director of LSL Property Services, doesn’t hold out much hope for first time buyers or tenants, saying “As long as lending to first-time buyers remains in the doldrums, and new house building remains subdued, we won’t see demand for rental accommodation tail off. In these conditions, while affordability may increasingly come into play as landlords set rents, they are far more likely to continue to rise than tumble in the coming 12 months.”
There seems little evidence that Government pressure on lenders to loosen the purse strings is having any effect on the market and until it does there will be no stopping landlords determined to make the best of their opportunities.
Property investors with an interest in landlord insurance are being urged to think carefully before they install district heating systems as lawyers warn of legal uncertainty over charges to tenants.
The rush, by mainly social landlords, to push ahead with district heating systems has been precipitated by billions of pounds worth of Government funding for which district heating schemes can apply. District heating schemes can provide heat to multiple buildings in one area and thus remove the need for landlords to install boilers in each individual unit. The Government’s community energy savings programme will provide subsidies to schemes aiming at energy efficiency solutions until December this year and at present it is estimated that 60 such projects are already under construction, with many more in the pipeline. The Department of Energy and Climate Change (DECC) estimate that district networks are already the heat source for over 170,000 buildings in the UK and that eventually such systems could provide heating for half of the country’s heating requirements.
However, there is a big problem for landlords. Lawyers say landlords must carefully consult tenants about heating charges before rushing into signing up for the new systems as under the Landlords and Tenants Act of 1985 any mistakes in the procedure could lead to tenants having their heating bills capped at £100 per annum. Solicitor Rhianna Wilshire said: “The Landlord and Tenant Act was not drafted with long-term district heating arrangements in mind and it is important that a landlord considers section 20 consultation requirements at the earliest opportunity. Appointing heat suppliers on long-term arrangements for new build schemes may be complicated if there are no tenants in occupation at the time that the agreement is procured and signed.”
It is believed that tenants have already won cases against landlords in these circumstances and for some the December deadline may have to be missed for the sake of prudence.
New research by specialist broker Mortgages for Business has found that almost 10% of residential property investors have been told by their existing lenders to start looking for a mortgage elsewhere.
This is mainly down to RBS who are looking to reduce their exposure to property, while Bradford & Bingley are expected to exit the property market completely. However, despite the mortgage difficulties, six in ten private landlords have plans to expand their portfolios by the end of 2012. The research also found that for the first time since the last quarter of 2007, more investors are considering organising property insurance on an overseas purchase rather than making additional buys in the UK.
Over three-quarters of investors (76%) feel mortgage lenders need to be doing more to help them out. The main gripes were with rates, fees and LTVs. Landlords are also looking for more innovative lending and they were also interested in seeing more case-by-case underwriting rather than computer-based lending decisions. Around 54% of investors who have plans to expand revealed they will need to refinance their existing properties first. Of these, one-fifth admit they will struggle to secure finance because of a lack of equity and this they feel may well put an end to their plans to expand.
David Whittaker is the Managing Director at Mortgage for Business, he said “Landlord appetite for buying residential property is high. This will support the private rented sector and ease the strain on would be renters chasing too few properties. Landlords are bullishly confident about the prospects of the buy to let market over the next six months. There are a huge number of would-be owners being displaced into the rental market every year, which has kept tenant demand sky high and pushed yields on private rental property over the 6% threshold.”
The growth of property investors taking out landlord insurance and buy-to-let mortgages in a rural part of Scotland is at record highs, as the financial downturn shows no sign of picking up.
With experts in the Angus region of Scotland estimating it can take up to 15 years for prospective home owners to save up for a deposit on a house there is little surprise that the local rental market is booming, as tenants look for decent affordable accommodation. Local professional landlords are being joined in the sector by home owners who can no longer afford to live in the home they have mortgaged. They are also been joined by young and middle aged professional business people looking for a secure investment that will eventually realise a pension. It is this third type of landlord that appears to be in the majority as they bravely take a chance on utilising the equity they have in their current property to create a nest egg, and forge a secure future for themselves and their families.
Amanda Wiewiorka, who works for Wardhaugh Property Management Services in Forfar, said: “Anyone thinking of getting into buy-to-let, and the number is growing by the day as house prices fall, should take a five to ten year view, not look at this as a short-term plan. More landlords in Angus are buying up three to four bedroom homes which are popular with the growing number of families that are renting. This is a whole new market for buy-to-let and is particularly short on supply.”
The situation in Angus, which has around 5,500 properties privately rented out by 4,000 landlords, is mirrored across most of Scotland with industry insiders estimating there are approximately 1.2 million home owners collecting rents from tenants ensconced in one of their properties.
Property investors living in the Milton Keynes area have the chance to get first hand information from experts in the rental sector on Monday July 16th.
That is the date for the next meeting of the local branch of the National Landlords Association (NLA) to which all private landlords in the area have been offered an open invitation. The meeting will be addressed by the NLA’s Head of Regions, Ken Staunton, who will assess the latest regulations coming from Brussels and Westminster and the impact they could have on landlords and their tenants.
Landlords will also be given advice on monetary matters by Lin Fisher from the Trading Standards Illegal Money Lending team. She will be explaining the importance of having close contact with ones tenants and how it can minimise the chances of rent collection problems and thus, in turn, reduce the need for a landlord insurance policy to actually have to intervene. Of course a landlord insurance policy is a necessity for all landlords however!
The theme was chosen by Mr Staunton when discussing how he will chair the meeting. He said: “If tenants are experiencing financial strains, we strongly advise them to discuss these with their landlords as early as possible and not resort to using alternative means of finance. Maintaining good communication channels makes it more likely that the landlord and tenant will come to an agreement as to how they can work together to ensure an enduring tenancy. It is important to note that landlords will often prefer to negotiate a more amicable solution before a tenant runs into rent arrears, rather than pursue costly and time consuming court proceedings. Professional landlords favour good, sustainable tenancies over short lived tenancies that result in periods in which their property will lie vacant. Therefore it is in the landlord’s best interest to help their tenant through tough financial times where possible.”
The meeting will open at 6.30 pm at the Abbey Hill Golf Club and offers free entry to all private landlords and letting agents.