Kate Faulkner's Latest Summary & Analysis of Rental Reports

publication date: Jan 16, 2013
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
Download

Kate Faulkner's Latest Summary & Analysis of Rental Reports

There are five regular reports on the rental sector, some cover the UK and some that cover just England and Wales. Here is a summary of the report headlines and latest data together with Kate Faulkner’s comments below to help landlords and tenants understand the implications of these reports for them:-

Report headlines:-

Paragon Mortgages “Landlords expand portfolios in Q4 12” –(England, Wales & Scotland)
Homelet “UK rents still up on last year despite monthly dip” –England, Wales, Scotland & NI)
Acadametrics/LSL BTL “Tenants’ relief as rents finally fall in November” –(England & Wales)

Average Rents

Average Rents

Kate Faulkner comments:

“All rental indices are now showing rents aren’t rising at the pace they were, and indeed some falls have been seen throughout 2012. This proves two things. Firstly, that rents really do move in line with wage rises/falls, and secondly, that that the private rented sector is working efficiently in favour of the end customer: the tenant. 

“Some commentators are using previous rental reports to ‘bash’ landlords via the media and accuse them of profiteering at tenants’ expense. This really isn’t the case. The majority of landlords take good care of their properties and their tenants. If people that think landlords are ‘raking it in’ they should take some time to understand the financials of managing a portfolio. They would soon see that ‘landlord bashing’ isn’t wise. If it wasn’t for good landlords during this recession, there would be an awful lot of people in dire straits from a housing perspective by now.”

Landlords Buy to Let Yields/Returns

Landlords Buy to Let Yields/Returns

Kate Faulkner comments:

“Rental returns have stabilised over the last few years and months to just over 5% for all landlords and between 6 and 7% for professional landlords. Anyone letting a property now needs to stress test it for rises in mortgage rates to 7% to make sure their portfolios still cash flow in a few years’ time when interest rates return to normal levels.” 

Capital Growth for Landlords

LSLxxxxxxxxxxxxxxxx “Annually rising rents and renewed growth in property values meant that the total annual return on a rental property was 6.0% in November. This represents an average return of £9,747 with rental income of £7,896 and a capital gain of £1,851

Kate Faulkner comments:

“Although LSL suggest capital growth is being secured by landlords currently, this isn’t reflective on a national basis. Even in London, some areas haven’t recovered to 2007 heights yet, let alone kept up with inflation. As such, any capital growth for landlords who bought since 2007 needs to have or be built in rather than expecting to gain from natural property price growth over the coming years.”

Demand for Rented Properties

Paragon “Landlords are expecting tenant demand to remain high in 2013”
LSLxxxxxxxxxxxxxxxx “The housing market is still haunted by same demons of undersupply of new homes and tight credit conditions for buyers with the smallest deposits, which is pushing up tenant demand”

Kate Faulkner comments:

“Tenant demand going into 2013 is likely to continue to rise. However, this doesn’t guarantee rents will rise as tenants can only afford to pay what their wages allow. Over the last few years, although there have been reports of huge rent rises, these were rents recovering to the heights of 2008. Demand for rental properties can only continue to grow if tenants have enough money left in their wages to rent a property. Interestingly, an increased supply of houses with rooms to rent rather than a whole house, have led to rents falling in this sector in most areas outside London.”

Supply of Rental Properties

Paragonxxxxxxxxxxxx
“Driven by strong and sustained rental demand, landlords continued to buy more property during the last quarter of the year, increasing their average portfolio to 12.7 properties compared to 12.5 properties in Q3”

Kate Faulkner comments:

“Landlords in the main have LTVs of 50% or in some cases less. And as lenders have realised the potential of this market place – and the low risk – more competitive mortgage rates have crept in. With property prices in many areas either still falling or stabilising, many landlords are either hunting for bargains or are fairly sure they are buying at the market ‘bottom’, so stock is likely to increase over the next year or two.  

“The only thing landlords need to be aware of though is the government’s initiative to drive institutional investment into the private rental sector. This could tip some areas from an under supply to an oversupply as happened back in 2008 when lots of accidental landlords put their properties on the market.”


Need help with a property problem? Have a question? Why not call Designs on Property on 01652 641 722 or Contact Us via email.
NALS Conference Chair 2016

Kate's Consumer Portal

Propertychecklists.co.uk

FREE Buy to Let eBooks

Download a copy of our
Buy to Let Show eBooks
for FREEsimply click on
the image below

Buy to Let Show - download our Buy to Let eBook for FREE