Three in 10 property purchases fall through

New research from Which? Mortgage Advisers reveals that three in ten (28%) homebuyers have had a house purchase fall through after their offer was accepted, and on average homebuyers were left nearly £3,000 out of pocket as a result.

The survey of 2,000 homebuyers – who bought their home in the previous two years – found that it takes over 4.5 months on average, from starting a property search to having an offer accepted. However, 28% of purchases fell through after that point.

The main reasons for a property purchase falling through were:

  •     The seller decided not to sell their home after all (27%)
  •     The buyer pulled out, as their own property sale had fallen through (21%)
  •     The buyer found somewhere else to buy (21%)
  •     The buyer was ‘gazumped’ (21%)

Of those who had lost money and knew how much they were out of pocket, the average loss was £2,899. This included conveyancing, survey, mortgage valuation or brokerage fees paid and not recovered.

Many homebuyers experience failed transactions due to problems in the ‘property chain’ – the line of buyers and sellers linked together because each is selling and buying a property from another.

For more advice on managing a property chain and keeping things moving, visit Which

Research reveals nearly five million renters at risk

Research reveals nearly five million renters at risk

Results from a survey by YouGov, commissioned by Royal London, reveal almost five million renters in the UK have no plans in place to cover their rent if they became too ill to earn for three months or more, even though recent cuts to housing benefits could leave them at risk.

This is despite the fact that over a quarter of renters in paid employment (27%) said they knew someone who had struggled in this situation.

More than one in three renters in paid employment (34%) admit they don’t know how long they could survive, and six in ten people (60%) who had some idea said they could only survive on their savings for three months or less.  Their first port of call would be to apply for state benefits (53%), followed by reducing their household expenses (47%) and then dipping into their savings (39%).

Worryingly, fewer than one in ten (7%) renters in paid employment have ever consulted a financial adviser. The most common place people turn to for financial advice is their family and friends.

Debbie Kennedy, Head of Protection for Royal London Intermediary, said:

“Renters who assume that housing benefit will be there when they need it could find the reality is very different.  A series of cuts to housing benefit means that more people would not get their rent paid in full if their income fell unexpectedly.

“It would be bad enough to be taken ill without the added anxiety of getting behind with the rent and facing possible eviction.  Income protection may be more affordable than people realise and can provide a financial safety net and enable people to focus on getting better.”

Economists predict over the next ten years the UK will experience falling levels of home ownership and rising levels of private renting.  In ten years’ time, 59% of 20-39 year olds will rent privately, up from 45% in 2013. A further 15% are in social housing, renting from housing associations or local authorities.

Source: Royal London

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Surge in investors buying student property

New data has found that the first quarter of 2016 has seen a surge in investors acquiring student property, to beat the new stamp duty legislation, which comes into force in April 2016.

Research, conducted by The Mistoria Group – student property investment specialists, reveals investors have been flocking to complete their student property purchase by the end of this month, to avoid the 3% stamp duty surcharge coming in for second homes.

The research shows that sales of student property in the North West have leapt by over 30% between January-March 2016, compared with the first quarter of 2015.  More than 50% of student property investors are from the South, while a third are overseas investors.  The remaining 20% of investors are from the Midlands and the North.

Over the last few years, student housing has undergone a significant amount of change, with rising rents and a higher level of expectation from the occupying students, many of whom are looking for high-spec accommodation with luxuries like plasma TVs, Wi-Fi and built-in white goods.  The removal of the cap on student numbers have also triggered many universities to anticipate an increase in enrolment over the coming years, which is driving demand for more high quality, affordable student accommodation.

Mish Liyanage, managing director of The Mistoria Group comments: “We have seen a rush of investors wanting to purchase student property over the last quarter and we anticipate that demand for student property will continue to grow significantly in 2016 and beyond.

Since the birth of the buy-to-let mortgage 18 years ago, student accommodation has outperformed all other traditional property assets and has been the strongest growing investment property market in the UK.

Over the last five years, student properties in the North West have generated yields in excess of 13% and geared yield in excess of 35% in Salford and Liverpool.  Our research shows that the North West provides greater returns than any other city in the UK. This is fuelled by the massive regeneration taking place in Manchester, with the proposed High Speed 2 (HS2) high-speed railway between London Euston and the North West to be completed in the next 15-20 years.

A HMO (House in Multiple Occupation) property can provide an 8% minimum cash rental yield and a typical 13% total cash yield, including 5% capital appreciation.  The average gross cash rental yields for the student property sector in the North West of England were 8.1% for the 2015.”

Help with housing costs isn’t aligning with rent for private tenants, says CIH

New research from Chartered Institute of Housing (CIH) reveals tenants face an increasingly widening gap between the Local Housing Allowance (LHA) they receive to help with their housing costs and the actual rent they pay.

Analysis conducted by CIH looked at LHA rates since 2012 and found that in some parts of the UK, people are only able to afford to rent in the bottom five or 10% of the private rented sector (PRS) market. However, the LHA rates were originally intended to ensure that people could access 30% of the market. The situation is set to worsen as LHA rates freeze for four years from April 2016.

The cash shortfall affects tenants across the UK, the study has found. In Aberdeen, Scotland, there are very severe cash shortfalls in every LHA category, and in Northern Ireland, 80% of LHA rates have already fallen below the bottom 30% of the market – second only to England. In Newport, South Wales, the LHA shared accommodation rate would need to be set at £29 per week more for people under 35 to be able to afford the whole of the lowest 30% of the market. In England, the LHA rate for Chesterfield’s broad rental market area is even lower than the lowest rent that the rent officer could find in their market evidence data – in other words, there’s no shared accommodation available at the LHA rate.

CIH chief executive Terrie Alafat CBE said: “We are becoming more and more concerned by the lack of correlation between LHA rates and rents, and our research shows that people are going to find it difficult to continue renting in the PRS.”

She added: “CIH is calling on the government to review LHA rates for all categories of accommodation, to make sure everyone is able to access a safe, affordable home.

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Build-to-rent hailed as a solution for property market

Landlords are turning away from the rental market as prices rise, but build to rent could be the future of the market.

At the start of this year, it was believed that the build-to-rent market was the single biggest sector in the future of British property. A shining light, build-to-rent was going to see investment flood into the rental sector nationwide thanks to the fact it side-stepped the Stamp Duty levy, making it cheaper for investors, and offered tenants exactly what they wanted and needed for a rental home.
Millions of pounds were committed to the sector by a number of large companies, and things looked good, until the chancellor announced that build-to-rent would not be exempt from the tax changes after all. But is this really a hindrance, or does build-to rent have the inherent strength to overcome this setback? We take a look at the positives that make it still the perfect option for investors looking to get themselves onto the property ladder.

Below market value prices
The build-to-rent sector was dealt a blow in late March, when the chancellor revealed that it would not be, as had been expected, exempt from the 3% levy. However, that’s not all build to rent had up its sleeve, and it still has more to offer investors in its below market value pricing.

Guaranteed returns
Any property investment is a risk, and at a time when the chancellor has increased the cost of getting onto the rental ladder from an owners’ point of view, chances are that this risk looks even more unwelcome than ever before.

But it doesn’t need to be that way. With investments in many build-to-rent developments, investors can get themselves a guaranteed return of 7% for three years, which takes away the element of risk that might be acting as a little voice telling them not to invest in the market.

Long-term sustainability
The main driver of growth in the market at the moment has been generation rent; those who rent because they want to and not because they have to.

 

Build to rent sits perfectly when it comes to this rise in generation rent. Young people who choose to rent want to get their hands on homes that are located well in terms of transport and lifestyle, as well as being purpose-built for their needs. The build-to-rent sector serves this better than any other area of the property market, and as such is set up well for long-term success.

Source: Property Wire

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Abandonment issues – new laws to help landlords

Over a third of UK landlords have had a property abandoned by tenants before, according to new research from the National Landlords Association (NLA).

The problem was worst for Northern Landlords, with over 51% having experienced the problem – with more than half of North Eastern landlords (58%) having experienced an abandoned property.

A much lower 31% of landlords in the South West have had a property abandoned before, and a mere 33% in London.

Abandonment is when a tenant vacates a property before the tenancy is over, but fails to inform their landlord. As the tenant often leaves without paying outstanding rent, this poses multiple problems for the investor – compounded by the fact that it’s a criminal offence for the landlord to take any steps toward preventing the continuation of the tenancy, because the tenant still has the legal right to return and take up residence at any point.

Instead, the landlord is forced to go through a lengthy legal process in order to regain the abandoned property, which can take months.

The new Housing and Planning Act, which contains measures that aim to tackle the problem, recently received the Royal Ascent. The new measures also contain proposals allowing local councils to keep hold of the proceeds from prosecuting rogue landlords, as well as introducing more rigorous penalties and banning orders for serious or repeat offenders.

CEO of the NLA, Richard Lambert, said: ‘The process of recovering an abandoned property is too long, frustrating, and costly for landlords at the moment. Many people will be shocked by just how common this problem is, and landlords will be relieved to know that the Housing and Planning Act will create a new process to deal with the issue, giving them far greater security and peace of mind when recovering properties they believe to have been abandoned.’

Weird pets and lack of charm are a turn-off for landlords

A pet giraffe could be a problem – landlords rely on gut instinct when choosing tenants

Insecure income and failed credit checks are the obvious tenant turn-offs, but new research from BDRC, the UK’s largest independent research consultancy, says that bizarre pets or bad attitude can be equal deal-breakers.

BRDC’s respected Landlords Panel survey revealed that would-be tenants should dress smart and be open and honest. Enthusiasm for the property came out as a strong plus. Proof of income, references and your employment history could all help landlords choose you as the ideal tenant, said the Panel.

“The study also focussed on the major turn offs for landlords. The factors which raised the most alarm bells were having bad or no references, a low, irregular or non-existent income and failing a credit check,” explained a BRDC spokesman.

“Despite this, the tenant’s own character was still very important, with almost a fifth of landlords citing a lack of manners or simply the look of the tenant as causes for worry. Almost three quarters of landlords said they would trust their gut instinct when deciding on new tenants,” he said.

Pets also played a part in the landlord’s relationship with the tenants. Only one in ten were always happy to allow a dog to take up residence. “Many worried that the pooch might damage the property, annoy the neighbours or leave a lingering smell,” said the spokesman.

As well as showing that financial security and a little charm come out on top, the research also held the spotlight up to some of the more peculiar tenant requests regarding pets. Requests range from cats and chickens through to the more problematic pigs, snakes and iguanas, with landlords even getting requests to let in most of the animal kingdom as room-mates.

“While a tenant’s tarantula might shock a squeamish landlord, “can I keep my horse in the kitchen?” is a request which is presumably too impractical for anyone’s consideration,” commented the BDRC of their findings.

Storm damage is most common buy-to-let insurance claim

Storm damage is most common buy-to-let insurance claim

Storm damage represents the most common insurance claim on buy-to-let properties by UK landlords, according to an analysis of 100,000 insurance policies by Simple Landlords. The average cost of this type of claim is £1,500, the survey showed.

A burst pipe was the second most common claim with an average claim value of £4,500 followed by damage from a break-in (average claim value £2,300), vandalism (£1,900) and accidental damage (£2,200).

“Weather-related damage can be significantly higher and more expensive to repair if your property is not maintained to a high standard,” Simple Landlords warned in the report. “It may also result in a claim being rejected due to poor maintenance. Most insurance companies measure storms with the Beaufort wind force scale and consider that wind speeds below those classed as a storm (52mph) would not damage a well-maintained property.”

It also warned that buildings with special features such as a conservatory can be especially badly hit. “While you never know where a storm will hit, certain features can make properties particularly vulnerable to harsh weather conditions. Properties with conservatories attached and dormer windows are especially likely to be damaged by high winds and excessive rain during a storm,” the report said.

For the full report, visit: www.simplelandlordsinsurance.com