Recent reports have claimed that the cost of renting has increased across the board but there may be a nasty shock in store for those who have just got their A level results. While the private rental sector has shown increases of 4.3% over the last 12 months, students are now facing rises of up to 25%.
The Royal Institution of Chartered Surveyors (RICS) have claimed that the rise in demand and the increase in private rental charges are down to the scarcity of mortgage products and the situation is only likely to continue in the same manner for the foreseeable future.
In fact, surveyors predict that a similar rise of around 3.9% in rental costs will follow over the course of the next calendar year as the mortgage market continues to be difficult to access.
“While tenant interest is still riding high, what remains to be seen is whether many are willing to meet the increasing rents being demanded by landlords,” said Peter Bolton-King, residential director at RICS.
“However, it is clear we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders.
“These barriers to homeownership need to be addressed alongside the shortage of new stock coming to the market.”
Meanwhile, a further survey has shown that while a student’s weekly rent has risen by 2.4% in the same 12 month period, some areas of the UK have returned increases of around ten times that figure.
The organisation, Accommodation for Students has shown that rents in the North of the country have jumped by alarming rates and they have revealed a 25% increase in Hull over 12 months while Lancaster and Durham have recorded rises of 24% and 20% respectively.
According to Simon Thompson, co-founder of Accommodation for Students, the rises tend to be greater, depending on how desirable the local college or University might be.
“A key factor in determining student rents is the desirability of attending some universities, Mr Thompson said.
“That puts pressure on the accommodation available and, hence, the charging of higher rents. Winchester, Durham, Lancaster, Exeter and Newcastle come into this category.”
In addition, Oxford and Cambridge have experienced obvious increases while the cheapest place for students to rent in the UK is Glamorgan, with an average cost of just £46.00 a week.
The student and private rental markets are completely different entities but both sets of figures show us that the advantages in the current climate are firmly with the UK’s landlords.
Recent reports have shown just how much of the UK are relying on renting their homes while many of those are facing the prospect of having such an arrangement on a permanent basis. As a financial comparative, it’s widely claimed that renting is more expensive than buying and the struggle to maintain payments seems to be getting worse.
A report generated by Receivers Templeton LPA, who comprise part of the LSL Property Services Group, is suggesting that over 100,000 people across Great Britain are more than two months behind with their rent. This represents a significant increase of 24% compared with a year ago and the numbers are at their highest since 2008.
In addition, the number of eviction court orders for tenants increased by 6% in the first quarter of 2012 and by 5% over the figures declared twelve months ago.
Paul Jardine of Templeton LPA suggested that the rise was, in some part due to the increase in the number of rental contracts but that falling incomes and genuine hardship were significant contributors to the final statistics.
“As the private rented sector grows, the number of tenants in dire financial straits is steadily climbing. Falling wages in real terms have been compounded by rising rents, pushing a greater number of rented households over the edge financially,” Mr Templeton said.
“With the instability in the labour market and wider economy, and public sector cuts still to come, the section of renters in multiple months of arrears is likely to continue its expansion.”
Meanwhile, the Housing Organisation Shelter are claiming that the situation is being compounded by higher rents that are rising towards unaffordable levels.
“This is yet more evidence of the crushing impact rising rents and stagnating wages are having on family finances,” said Shelter’s Kay Boycott.
“Shelter research found that average private rents are now unaffordable for working families in more than half of England, with many paying up to half of their income each month. And with homeownership out of reach for so many, hundreds of thousands of families are beginning to realise renting looks set to be a way of life, not just a temporary stopgap.”
In recent weeks, there have been calls from Shelter and others for the government to look at ways in which they can overhaul the rental sector. The findings from Templeton LPA cannot differentiate between those who are hit by higher rents compared to others who have lost their job or are suffering financial issues due to other factors. Everyone does seem to be agreed however that the statistics can only get worse over the course of the next few months.
Earlier in the week we saw the reaction of Shelter, the housing and homelessness charity to a survey claiming that property rental could soon become a permanent way of life for many. The organisation suggested that the government had to wake up to the reality that only a quarter of the UK population may be owning their own home by the year 2025 and to ensure that improvements were made in all areas.
“It’s time government woke up to the fact that ‘rental Britain’ is here to stay,” said Shelter’s Chief Executive Campbell Robb.
While these are apt comments, some observers were surprised that the organisation didn’t take the opportunity to suggest that home ownership needs to be more affordable. To be fair however, Shelter have been vocal on this subject in the past but for the time being, this particular challenge has been taken up by another charity – the Joseph Rowntree Foundation.
The organisation focuses on potential buyers between the ages of 18 and 24: At present it claims that 2.4 million of them live in private rented accommodation but as they attempt to save for home ownership, ‘inflated’ house prices mean that they face an uncertain future.
The foundation then calls for major reforms in order to avoid a permanent rental trap by the start of the next decade. By 2020 it claims that young people will be staying with their parents for longer and they will subsequently need to call on those parents to help them purchase their own home.
Those that decide that staying at home has run its course face the prospect of a long period of private rental.
“The challenges facing young people by 2020 will require fundamental changes to the UK housing system. Young people are particularly vulnerable in a badly functioning housing system due to their lack of resources and opportunities,” the report states.
It goes on to echo the comments made by Shelter in suggesting that huge reforms are needed in the private rental sector.
“There is a particular need to reform the private rental sector, balancing the interests of both landlords and tenants. The growing number of families living in the private rental sector will create a need for more stability in the sector,” the report concludes.
While Shelter and the Joseph Rowntree Foundation may be approaching things from slightly different angles, they both agree that home ownership may become just a distant dream unless more positive steps are taken to address the issue.
In previous weeks, studies and surveys have told us that many families are currently caught up in a rental trap. With the lack of available mortgages and the struggles for first time buyers to raise a deposit for a new property, a significant proportion of potential buyers are having to be patient in the current climate.
However, there are increasing suggestions that this pattern is set to become a permanent way of life for this and possibly future generations. A study by Cambridge University which has been published by The Observer suggests that much of the UK buying public face being locked out of the market for the long term.
In the present day, the survey claims that 35% of the population are homeowners although that figure has dropped from 43% in 1993. It goes on to claim that further decline is set to follow and that as few as 27% of us will own our own homes by the year 2025.
The report indicates that those with families are in the greatest danger of renting for life as they continue to spend over half their income on monthly rental charges. As a result, there is simply no money left to save for a deposit and they remain locked in to the prospect of renting on a permanent basis.
“The worse the economy, the more the likelihood of this group’s housing being in the private rented sector,” the report continues. “In London, if current trends continue, tenants will soon outnumber owners, with important political, social and economic implications.”
The news has been met with resignation in some areas and the housing organisation Shelter says that the government has to recognise that renting has now become a ‘way of life’ for many families. It has gone on to call for major investment in the private rental sector in order to improve standards in all areas.
“This report shows what is fast becoming the new reality of our housing market in the current economic climate: home ownership continuing to fall while renting becomes a way of life for British families,” said Shelter’s Chief Executive Campbell Robb.
“Yet despite the growing pressure on the rental market, the government’s recent housing strategy virtually ignored the sector and did little to address the issues of affordability, stability and quality that so many renters face. It’s time government woke up to the fact that ‘rental Britain’ is here to stay.”
Many of those families would naturally want to retain a hope that they can still move into home ownership and as such, will be hoping that the future isn’t as bleak as the report suggests. As far as Shelter are concerned however, maybe a proportion should really be considering that rental has now become permanent.
Renting is back in the spotlight this week with the news that more and more homes are being put on the private rental market by owners who simply can’t sell their properties. However, it seems that despite this increase in available homes, demand in the rental sector is still outstripping supply by some considerable margin.
The findings have come from the Association of Residential Letting Agents (Arla) who have noted a significant increase in rental properties that have come on to the market as a result of this scenario.
However, in many cases, the homes remain on the market and this could prove a problem for anyone renting and looking for a long term arrangement.
“Renting is often seen as a low-hassle, lower risk option when compared to purchasing a home, yet many people find the prospect of renting a home daunting, whatever their age or experience,” said Ian Potter, Operations Manager at Arla.
“First time tenants – young or old – should remember to keep the process as focussed and simple as possible. Keeping to some simple guidelines can help tenants navigate the process from property hunting to signing a tenancy agreement.”
The organisation has gone on to provide a series of tips for anyone renting for the very first time and these can be found in full at the website – www.arla.co.uk.
Included in the advice is a tip to research your postcode, which has a great bearing on the price you can expect to pay. Sometimes, even moving a mile away from a certain location will have a favourable effect on your monthly charge so remember to ask a letting agent for advice.
Arla also advise that the lettings industry is unregulated and at present, agents do not have to subscribe to an Ombudsman scheme. However, looking for an agent that is Arla affiliated will help to give you peace of mind.
You should also make sure that your deposit is safeguarded. This is a significant outlay for tenants and by securing it in a scheme such as TDS (the Tenancy Deposit Scheme) you can help to safeguard your money.
Arla also advises to get a proper inventory drawn up and agreed when you move in. This will identify any damage to the home – and its contents if you are renting furnished and will prevent any problems when the time comes to move out again.
Full details of this advice can be found on the Arla website and if you are renting for the first time, it makes sense to follow them and be sure of what you are entering into.
It’s a question that will probably never be met with a definitive answer as many would be homeowners face up to the question of whether buying or renting is their best option. Naturally, as individuals, those in this position will have a differing set of circumstances and the difficulties in securing a mortgage may well be enough to push many down the rental channel.
As for the costs involved, the Halifax has declared that home owning is considerably cheaper and on average, anyone renting their property could be paying in excess of £100 a month more for the privilege.
As part of the Halifax Buying Versus Renting Review, the organisation took into account many factors including the relative cost of monthly mortgage and rental payments, the cost of essential building repairs and maintenance and any money lost as a result of funding a deposit. Additional expenditure such as buildings insurance was also used as part of the overall survey.
Using their own records and those supplied by the National Office of Statistics, Halifax claim that the typical cost of purchasing a three bedroom house in December 2011 was £600, which is £116 less than the finances involved for renting an identical property.
Ultimately, that works out to be a 16% saving and a significant change to a previous survey carried out in 2008 which claimed that the costs involved for buying a home worked out to be 29% more expensive than renting.
“The affordability gains for buyers relative to renters in the last three years have been significant,” said Martin Ellis, housing economist at Halifax.
“The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates. At the same time, rents have risen due to strong demand for rented accommodation.”
The findings also arrive after a claim from the Association of Letting Agents that the rental market is showing clear signs of softening and that demand for the type of three bedroom property used in the survey is on the decline.
The figures are indeed significant but as the property market has already indicated, this promises to be a volatile and uncertain period in terms of mortgage rates and the ability to arrange a home loan. In addition, economic uncertainty and the difficulty in raising a substantial deposit are likely to see very few renters change their current position in the light of these statistics.
Property lettings are put under the microscope this week as a survey released by one prominent agent suggests that the costs of renting your home may be dropping. Meanwhile, the survey goes on to suggest that Christmas spending is one of the factors currently having an impact on a rise in late rental payments.
LSL Property Services claim that the average monthly rental payment across the UK in December fell by 0.8% from the previous month. However, LSL go on to state that this still represents an increase of 4% on comparative prices from December 2010.
The fall comes after ten straight months of rental increases, although this does represent a fairly familiar ‘seasonal decrease’.
“The rental market was sheltered from the full impact of the seasonal lull by the strength of underlying tenant demand as many prospective renters took the opportunity to move in the run-up to Christmas at a time when the market is traditionally less competitive,” said David Newnes, director at LSL.
The survey also revealed an increase in late rental payments which it blames squarely on the impact from Christmas spending. The findings suggest that 10.7% of all rental payments were late or unpaid in December, as opposed to a figure of 9.3% from the previous month.
Those figures have prompted the Association of Residential Letting Agents to highlight the difficulties faced by tenants and landlords alike and has reiterated the need for watertight contracts, preferably from a recognised agent.
“It is more critical than ever to take references and conduct thorough research before signing a tenancy agreement,” said Arla’s President Tim Hyatt.
“Seeking advice from a professional, licensed letting agent is the best way to ensure tenants and landlords’ rights are protected.”
The fall in monthly rental prices may be seen by those looking to rent as a positive sign however, industry experts are warning against too much excitement, while affirming their belief that this is no more than a seasonal anomaly.
“It may be premature to say the UK rental market has peaked and that we are about to see rents fall away,” said Matt Hutchinson, director at Spareroom.co.uk.
“What we are probably seeing is a temporary blip, a natural cooling off period for the rental market.”
Overall, rental prices are expected to shortly begin climbing once again while continuing to increase throughout 2012 but the next survey run along similar lines may give us a more telling picture.
It’s a seemingly never ending question and one which has been in the news once again this week as the property website Zoopla claim that there has been a recent, significant move back towards a buying preference.
Zoopla’s Nicholas Leeming states,
“For those lucky enough to be in a position to get a mortgage, there may never have been a better time to buy.”
Leeming goes on to qualify his statement by stating that the issue for many prospective buyers is the difficulty in obtaining a mortgage in the first instance. It appears that this problem is a major factor in the number of people who accept renting as their only option.
“With house prices down, low interest rates and sky high demand in the private rental sector, buying has never been a better option for those able to secure a mortgage,” Leeming said at the time.
Returning to the question of buying versus renting, there are other, obvious reasons why a purchase is more attractive to UK buyers. In the private sector, the concept of ‘renting for life’ is rare, and while this option may be readily available in other countries, in the UK, it’s virtually non-existent.
This question of security is therefore a major factor but if restrictions on mortgage lending prove to be too much of a barrier, what can prospective purchasers do?
A popular way to get that first foot on the property ladder has been to buy a property in need of ‘modernisation’. This can, of course, be a risky investment as the term can cover such a wide breadth of properties in all states of disrepair.
However, for anyone happy to take on such a property, this can represent a cheap initial investment and a new website has been launched with the sole intention of helping buyers find exactly the right house for renovation.
Unmodernised.com takes all such properties from the websites of the nation’s estate agents and lists them on one central portal. There are naturally going to be developers crawling all over the new site but Julian Bryson, co-founder of unmodernised.com believes that first time buyers are healthily represented among the early enquiries.
“End-users have different aspirations to developers,” Bryson said.” They want to live in a home that they can truly make their own, and who actively seek a “project”. “There’s definitely an element of that in our buyers, and they’re very creative and design-led.”
Buying a house in need of modernisation should be considered extremely carefully but for those struggling to get on the ladder it is an option nevertheless.
If you are just starting out in the buy-to-let game or you’re a seasoned landlord, you need to understand the importance of carrying out background checks on potential tenants. It’s a landlord’s market right now with more and more people choosing to rent so you don’t need to bite off the hand of the first person who shows an interest in your property. You can afford to be a little more choosy.
The National Landlords Association (NLA) has issued a reminder to landlords to carry out checks on potential tenants before they let out a property.
This advice is being given to all landlords so they can confirm the identity of the tenant and ensure there are no reasons why rent payments would be missed.
The NLA carried out recent survey which revealed that almost three quarters of all landlords seeking possession of one of their properties suffered from rent arrears.
After carrying out a number of searches, NLA’s Tenant Check found that almost 1 in 20 tenants had more than one CCJ (County Court Judgement) against their name at a previous address during the first quarter of 2011.
Most tenant check services include a CCJ search, ID check, alias name search, history of previous addresses, together with a bankruptcy check. A more thorough check, and this is recommended, will include employer and landlord references and an assessment of a tenant’s ability to meet rent payments.
The NLA reported a record number of tenant checks during the month of August and this included the highest number of full tenant checks in any one month. These figures show that landlords are becoming more and more conscious of the tenants they let their properties out to.
David Salusbury, Chairman, NLA, said: “Getting a proper background check done on all tenants before they move into a property is one of the most important things a landlord can do before handing over the keys.
“It is vital landlords find out basic information about their prospective tenant to help avoid rent arrears or other problems further down the track. This gives the landlord peace of mind that their properties are in good hands and will hopefully mark the start of a satisfactory and hassle-free tenancy.”
A landlord has been left picking up the pieces after a tenant wrecked his property and then walked away from court without paying a penny. £20,000 of damage was caused in total rendering the property inhabitable until the damage is put right.
Teenage tenant, Lee Davis destroyed the flat he was renting in Darlington following a request to vacate the property due to non-payment of rent. Most tenants would simply accept this as a fair request, but Mr Davis was intent on going on a rampage instead.
The Judge, whilst admitting that he would like nothing better than to make Mr Davis repay the costs of repairing the property, was only able to give the defendant 300 hours of unpaid community service as punishment. He said his hands were tied as there was no way that Mr Davis could find the funds to pay for the damage. The defendant walked away whilst the landlord was left open-mouthed and out of pocket.
These problems are actually fairly common in the rental world. Often, when discrepancies arise between tenants and landlords they are settled amicably, but occasionally a tenant will take umbrage over a request or issue and set about destroying their surroundings in anger. Many of these issues can of course be avoided by carrying out thorough checks of tenants before agreeing to let the property. The good news is that the majority of tenants are law-abiding, respectful and honest and will give no cause for concern.
We don’t believe thorough checks were made in the case of Mr Davis and that if checks were made there was probably fraudulent information supplied or shortcuts taken. A thorough tenant check requires credit checks, personal character references, financial checks, and employment checks to ensure the tenant is who they say they are and that they can afford to pay the rent each month. £20,000 is not a figure that any landlord wants to think about coughing up and we think this landlord probably cut their losses and sold the property in the end. A big price to pay for not checking up on a tenant.
Any landlord who has suffered losses because of malicious damage will understand how important it is to conduct proper checks of their tenants. Of course, even a tenant that looks great on paper can suddenly turn into whirling dervish when tempers fray and there is little you can do in these cases.
In addition to carrying out the right level of checks you should also add malicious damage to your landlord insurance. Many low price insurance policies won’t usually include this as standard so it’s worth covering your back and your property.