Increasing supply has boosted ‘tenants negotiating power’

By Marc Da Silva
December 12, 2016

Buy-to-let landlords who scrambled to acquire homes earlier this year are beginning to rent them out or now looking to re-let them following the end of a tenancy, providing tenants with a flood of properties, new research suggests.

A record number of sales took place in March, as buyers tried to beat the introduction in April of the 3% stamp duty surcharge for those looking to acquire additional properties, including buy-to-let homes.

That has resulted in a sharp rise in rental properties being listed in November, according to new data from Countrywide.

Johnny Morris, research director at Countrywide, said: “Higher than usual numbers of homes available to rent has boosted tenants’ negotiating power.  Stock growth has outstripped that of tenants.  This is in part due to the hangover from the rush to beat the 3% stamp duty charge earlier in the year and a shift in stock from the sales market.

“With more choice and facing stretched affordability, many tenants are using their new found negotiating power to agree lower rents than in 2015.”

London, in particular, has seen rental listings surge, narrowing the gap between rents in the capital and the rest of the country for the first time since 2010.

In November, the average London rent was 0.7% lower than last year, the steepest decline since October 2010 when the average rent stood at £901 a month.

Over the course of the last 12 months, London has gone from the region with the second fastest rate of rental growth in Great Britain to the slowest.

The gap between rents in London and the rest of Great Britain has steadily grown over the last five years. By 2015, the gap had reached a record £490 a month, up from £150 a month in 2010. However, with rents in the capital now growing at a slower rate than in the rest of Great Britain, the gap between London and the rest of the country has narrowed.

Last month, the gap had dropped to £489 a month, the first fall since 2010, fuelled by a significant rise in housing stock. Rents in the capital currently stand 60% higher than in the rest of Great Britain.

In November, there were 32% more homes to rent in London than 12 months ago while the number of would-be tenants rose by just 9%. Over November the asking rent was cut on 11% of homes let in London, more than double the proportion in 2015 (5%).

Across the country the cost of a new let rose by 2% over the last 12 months, or 3.1% if London is excluded.

Rental growth has been driven by Northern England; the North East, North West and Yorkshire & Humber. Taking these three regions together, rents have risen faster than in any other part of Great Britain. Some 25% of tenants renewing their contract in Northern England saw their rent increase in November 2016, up from 16% in the corresponding month last year.

Morris commented: “Since the gap between London rents and those in the rest of the country hit a high watermark in 2015, the gap has been gradually narrowing.  The pressure on affordability and number of homes coming onto the rental market in the capital means that rents are likely to lag behind the rest of the country in 2017.”

https://www.landlordtoday.co.uk/breaking-news/2016/12/increasing-supply-has-boosted-tenants-negotiating-power

London's biggest rent drop for six years caused by 32% stock rise

By Graham Norwood
December 12, 2016

The average London rent in November was 0.7 per cent lower than last year - not an enormous fall but nonetheless the sharpest drop since October 2010 according to Countrywide.

In its latest monthly rental index it reveals that over the course of the last 12 months, London has gone from the region with the second fastest rate of rental growth in Britain to the slowest.

The gap between rents in London and the rest of Britain has steadily grown over the last five years - by last year the gap had reached a record £490 a month, up from £150 a month in 2010.

However, by last month the gap had fallen to £489 a month, the first fall in six years; this means that rents in the capital currently stand some 60 per cent higher than in the rest of the country.


The reason for London’s relatively decline is a surge in the number of homes available to rent in the capital. Last month there were 32 per cent more homes to rent in London than a year ago while the number of would-be tenants rose by only nine per cent, says Countrywide.

Over November the asking rent was cut on 11 per cent of homes let in London, more than double the proportion in 2015 when it was five per cent.

“Stock growth has outstripped that of tenants. This is in part due to the hangover from the rush to beat the three per cent stamp duty surcharge and a shift in stock from the sales market. With more choice and facing stretched affordability, many tenants are using their new found negotiating power to agree lower rents than in 2015” says Johnny Morris, research director at Countrywide.

“Since the gap between London rents and those in the rest of the country hit a high watermark in 2015, the gap has been gradually narrowing.  The pressure on affordability and number of homes coming onto the rental market in the capital means that rents are likely to lag behind the rest of the country in 2017” he adds.

Across the country the cost of a new tenancy rose by 2.0 per cent over the last 12 months, or 3.1 per cent if London is excluded.

https://www.lettingagenttoday.co.uk/breaking-news/2016/12/londons-biggest-rent-drop-for-six-years-caused-by-32-stock-fall

RICS agency members say rents will rise in 2017 as demand grows

By Graham Norwood
December 09, 2016

CREDIT: Antonio G. Ferguson

The latest market survey by the Royal Institution of Chartered Surveyors suggests rents will rise in 2017 for one simple reason - demand is outstripping supply.

RICS surveys work on the basis of a balance of its contributing member agents who come out for or against a market criterion - so, for example, its survey over the past month has revealed a balance of 15 per cent more RICS members reporting rent rises than those reporting a standstill or a rent fall.

Likewise new landlord instructions fell slightly with a balance of six per cent more member agents contributing to the survey seeing a decline rather than a rise.


But RICS says tenant demand continues to outpace supply across most areas and rent expectations remain firmly in positive territory, with 17 per cent more respondents forecasting further growth rather than a fall.

Comments from RICS’ letting agent members, added to the survey, give a snapshot of issues affecting the sector across the UK.

“The sector is currently chaotic in Wales with the introduction of statutory regulations under the Rent Smart Wales system. Some landlords are withdrawing their properties from the rental sector which  will inevitably lead to a future shortage” warns Paul Lucas of R K Lucas & Sons in Haverfordwest.

“Increasing stock levels are creating a tenants market with consequent downward negotiations on rental levels” according to Alun Jones of Knightsbridge agency Marler & Marler.

Meanwhile Simon Cooper of Stags in Exeter says: “Continuing strong tenant demand and a shortage of properties to offer them. Rents not going up strongly due to limited wage increases.”

https://www.lettingagenttoday.co.uk/breaking-news/2016/12/rics-agency-members-say-rents-will-rise-in-2017-as-demand-grows

Revealed: the extent of the buy-to-let market collapse

By Isabelle Fraser
December 09, 2016

The number of properties sold to buy-to-let investors has fallen 63.7pc in the year to November
CREDIT: DAVID ROSE

New research has exposed the scale of the fall in buy-to-let purchases in the year that the Government hiked stamp duty by 3pc on such transactions.

The number of properties sold to buy-to-let investors has fallen 63.7pc in the year to November in England and Wales, according to the estate agency Haart, dropping 8.2pc last month alone. In London, the number of such properties sold fell by 40pc.

It also reported that the number of landlords registering to buy properties is down 59.2pc annually.


There was a big surge of transactions in March, before the stamp duty came in, followed by a sharp decline.

Paul Smith, the chief executive of Haart, said: “The scale of decline in buy-to-let in just 12 months is deeply worrying - landlords have clearly pulled out of the market and are unlikely to return any time soon."

He has been a vocal opponent of the recent increases to stamp duty for homes over £1m and for buy-to-let investors, calling on the Government to end what he described as the "war on landlords" in which it cast them as "pantomime villains of the property market".

He said: "Tenants are stuck in an intensely competitive market where rents are often more expensive than mortgages, because there are simply not enough properties available for lettings, and many landlords now have no choice but to pass the extra costs on to tenants."

Haart is the UK's largest independent estate agency group and has 100 estate agencies nationwide, from which it has established these figures.

Activity in the owner-occupier market was down too, with 21.3pc fewer new buyer registrations in the last year, and 30.9pc fewer first-time buyers. The research also found that the number of new tenants looking for homes was down 5.2pc, pushing down average rents.

A separate study by crowdfunding platform Property Partner reported a 6.8pc increase in new rental listings in the UK in November compared with  the previous month .

There was not an even picture across the country: in Bristol, it said there was a 162.7pc rise in such properties going on to the market in November, but in London there was a fall of 1.2pc.

http://www.telegraph.co.uk/property/house-prices/revealed-extent-buy-to-let-market-collapse/

UK office construction forecast to plunge after Brexit vote

By Julia Kollewe
December 06, 2016

Construction cranes at Embassy Gardens in Battersea, south-west London. Fewer developments will rise in future, warns Savills. Photograph: Matthew Lloyd/Getty Images

The Brexit vote will lead to a slump in office construction, with up to half of planned developments in central London likely to be postponed or scrapped in coming years, according to estate agent Savills.


Commercial development has barely recovered from the post-financial crisis slump, and the uncertainty surrounding the terms of Britain’s departure from the EU will trigger another 30% to 40% decline across the country in the next five years, , Savills said in its annual forecasts. Central London will be worst hit.

Its report said: “The seismic shock of the Brexit vote brought transactional activity in many cases to a juddering halt, a pause at least to reconsider pricing as opposed to pulling out of deals.”

Several commercial property funds suspended trading in the summer to stop withdrawals from panicking investors fearing a collapse in property values, but all funds have since re-opened.

Worried about the impact of Brexit on the City, banks are considering moving operations to mainland Europe and there have been warnings that 100,000 jobs could go if London loses its ability to process euro-denominated transactions. This would sharply reduce demand for new office space.

Savills is predicting a 4% fall in UK office prices next year followed by a 1% drop in 2018. Thereafter it forecasts a slow return to growth, pencilling in price increases of 1.1% in 2019, 2.5% in 2020 and 3.2% in 2021. This translates into 1.6% growth over the five-year period.

Mat Oakley, head of UK & European commercial research at Savills, said: “In London offices we have seen about a 5% fall this year, and there is probably another 2% to 3% to go – assuming we get a reasonably soft Brexit.”

The gloomy predictions come a week after the City's biggest tower, 1 Undershaft, receive planning permission. The developer, Singapore-based Aroland Holdings, says it will house 10,000 workers. Another tower at 22 Bishopsgate has also been given the green light. The developer, French-owned fund management firm Axa, had warned before the referendum that that it might pull out in the event of a Brexit vote, but decided to push ahead in October.

Commercial property prices in the UK are predicted to rise slowly in the coming years

Guardian graphic | Source: Savills
Savills commercial property forecasts

Oakley said there had been an increase in overseas investors piling into London offices and other UK commercial assets since the June referendum, all attracted by the weaker pound. As domestic investors are in retreat, the proportion of foreign buyers is about to rise to a record high of about 60% between October and December, up from a recent average of 42%.

While the Brexit vote came as a shock in June, other events such as the election of Donald Trump in the US and the upcoming elections in France and Germany next year meant that the UK is regarded as somewhat less risky than before, he added.

With London property so expensive, investors from the Middle East have been hunting for cheaper deals outside the capital, in places such as Birmingham, Edinburgh, Glasgow and Bristol.

The Savills report said: “Lower levels of domestic demand, particularly at larger lot sizes will give non-domestic investors a clearer playing field.” The next five years are likely to experience record levels of international investment in commercial property outside London, ranging from office blocks to shopping centres, warehouses and data centres.

Mark Ridley, chief executive of Savills UK and Europe, said: “The sterling devaluation has made UK property very attractive for international investors pegged to the dollar or euro, with 2017 activity in central London likely to be dominated by Asian investors, with American and pan-European investors also strong nationally.”

Sterling has lost 13% of its value against the dollar since the referendum and is down almost 9% against the euro. At one stage it had lost almost 20% of its value.

Savills commercial property forecasts

Another draw for foreign investors is that they continue to be taxed in the same way as UK buyers, unlike countries such as the US which have imposed extra non-dom taxes.

Savills also sees an end to the post-credit crunch house price boom, forecasting that residential prices will flatline next year after five years of increases. London’s luxury property market has been hit in particular, as Brexit uncertainty and increased stamp duty have been putting off foreign buyers.

Lucian Cook, head of residential research at Savills, noted that there had been a shift in housing policy under housing and planning minister Gavin Barwell, with a bigger emphasis on building more homes across a wider range of tenures such as homes for rent. But a representative from Church Commissioners, who manage the Church of England’s £7bn investment fund, suggested that Cook was painting too rosy a picture.

https://www.theguardian.com/business/2016/dec/06/uk-office-construction-forecast-to-plunge-after-brexit-vote

Rents set to rise further as demand will continue to outstrip supply in 2017

By Marc Da Silva
December 07, 2016

The substantial imbalance between supply and demand is likely to persist, maintaining upward pressure on rental prices on 2017, according to the Association of Residential Letting Agents (ARLA).

The trade body for letting agents forecast that demand from renters will continue to rise next year but fear that the number of homes coming on to the market will drop, adding to the widening supply-demand imbalance in the market.

More than half - 52% - of letting agents surveyed expect rent prices to increase in 2017, and not just due to lower stock levels.

As many of you will know, the existing rules that permit buy-to-let landlords to offset all of their mortgage interest against tax will, from April 2017, be phased out, restricting the amount of mortgage interest landlords can offset against tax on their property investments, with most agents acknowledging the fact that landlords will be left with little alternative but to pass higher costs on to tenants.

What's more, letting agents in England will be banned from charging fees to tenants under plans announced by the chancellor in his Autumn Statement, and most agents are hoping to be able to shift the costs on to landlords, which in turn would also potentially push up rents.

“Following the announcement of an outright ban on letting agent fees during the chancellor’s Autumn Statement, we expect rent prices to rise and tenants to be forced to look for properties in cheaper areas,” said David Cox, managing director, ARLA.

He added: “The government continues to lash out against the private rented sector to cover its own failure to build the number of homes this country needs. Such policies will have a detrimental effect on the very people the government aims to help the most.


“As a result, we predict 2017 will be a raw year for renters. We now need stabilisation from the government before tenants are squeezed dry of every penny.”

https://www.landlordtoday.co.uk/breaking-news/2016/12/rents-set-to-rise-further-as-demand-will-continue-to-outstrip-supply-in-2017