In many countries such as the US, Germany and France, purpose-built blocks of rental homes are commonly found. In Britain they are a relatively new phenomenon, but are fast becoming a hot investment for property developers and city firms such as Legal & General, which are eager to tap into the rising trend for long-term renting. The sector is expanding throughout England, with 80,855 Build to Rent homes either completed or planned, according to recent official figures.
Quintain’s Wembley Park development, which will include 5,000 purpose-built rental homes, is the biggest build-to-rent project in the UK, worth £3bn. The 85-acre site is due to be completed in 2025-26, about 15,000 people are expected to be living and working on the site. Currently, more than 1,300 homes have already been built and a further 3,000 are under construction. The tallest tower will be 26 storeys, but not high enough to look into the stadium. Most of the planned 63 new buildings will have roof gardens, office buildings, a primary school, a theatre, health facilities and a park the size of four football pitches is planned.
The rent will include utility bills and ultra-fast broadband. Communal lounge areas adjacent to the entrance come with kitchenettes and Sky TV; there is a residents’ gym and screening room and a concierge is on hand 24 hours a day to deal with deliveries and emergencies.
Quintain however does admit that many tenants will be “paying a premium for the lifestyle,” but it says 32% of the planned homes at Wembley Park will be affordable. This is a higher proportion than seen at many other London developments, and just below the 35% target set by the city’s mayor, Sadiq Khan - down from his election promise of 50%.
The borough, Brent, is one of London’s poorest but nearly 40% of the affordable Wembley Park homes will be let at a discount (in comparison to market rents), with the maximum rent set at 65% to 80% of market value. A further 28% will be at an affordable rent and 33% are earmarked for shared ownership and discount sales.
Brent supports the mayor in seeking a minimum of 35% affordable housing on all new developments. It delivered 30% in the three years to 2015-16, above the 24% London average, according to a council spokeswoman. “We expect to see Quintain construct 3,000 new homes by the end of the year. This can only help to tackle the dire housing situation in London,” she said.
As of 1st April 2018 it will be a requirement for any properties rented out in the private rental sector to have a minimum energy performance rating of E according to the Energy Performance Certificate (EPC) associated with that property. The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020.
This regulation has been put in place to ensure that those tenants who most need energy-efficient homes are able to enjoy a much better standard of living and lower energy bills. Although newly built homes in the private rental sector tend to have higher energy-efficiency ratings than the average, there remains a stock of older, period properties, many of which have poor energy efficiency and are difficult and costly to heat. These less efficient properties result in higher tenant energy bills and, for many, an increased likelihood of living in fuel poverty.
While tenants will benefit in terms of their reduced energy bills or through increased warmth comfort and the associated health benefits, energy efficiency improvements also benefit landlords. When the Regulations were designed, a number of landlord associations identified a range of benefits for landlords including: increased tenant satisfaction and reduced void periods, reduced long-term property maintenance costs, and improved desirability of their properties.
Indeed, a report by Sustainable Homes in 2016 on social housing demonstrated that improving the energy efficiency of rental housing reduced both rent arrears and voids. Recent data has also shown that increasing a property’s energy efficiency may increase the market value. With these quantifiable benefits to hand, landlords should see the new regulations as an opportunity to maximise rental value and return on their properties, and tenants should in turn enjoy lower energy bills as a result of their implementation.
The average rental values for existing homes in Prime Central London have been falling for more than two years due to rising supply but the pattern is now due to reverse. There was a large spike in new lettings properties in the middle of 2017, which followed the introduction of the additional rate of stamp duty in April 2016, one of the reasons behind the increase. The other key factor has been a growing number of ‘accidental landlords’, a group of would-be vendors who are waiting for more pricing certainty before they return to the sales market.
The rate of new lettings properties coming onto the market has slowed. In 2017, November was the first month to reflect a decline in the number of new lettings properties placed on the market, with a fall in instructions of 1.2%. There was also greater demand than in 2016. Both factors combined will strengthen rental value growth. From January to November 2017 there was a 19% rise in viewings in comparison to 2016. The number of tenancies agreed also rose by 14% over the same period, whilst on average 17% more new potential tenants registered with PCL agents.
In a world of low returns, the Prime Central London lettings market became a comparatively more attractive asset class in 2017 from an investors view. Currently, the average gross yield in prime central London is 3.2%, higher than the risk-free rate of a 10-year UK government bond, which was yielding approximately 1.2% in mid December. The stretch between the two is high by historic standards; this trend is likely to continue with bottoming out sales values which will boost total returns. There is no immediate likelihood of a rate rise, despite the fact that UK inflation rose to 3.1% in December. Subject to the usual requirements, the Bank of England expects the base rate to be 1% in 2020, which is still low by historical standards.
The government is currently in the process of reviewing the effectiveness of the Smoke and Carbon Monoxide Alarm (England) Regulations 2015. This will have an impact on all private landlords and tenants, so we invite you to offer your views on the matter.
The Smoke and Carbon Monoxide Alarm (England) Regulations 2015 came into force on the 1st of October 2015. They require private rented sector landlords to install at least one smoke alarm on every storey of their properties and a carbon monoxide alarm in any room containing a solid fuel burning appliance (e.g. a coal fire or a wood burning stove). The landlord is also obliged to ensure the alarms are in working order at the start of each new tenancy, whilst the tenant is responsible for ensuring that they remain in working order throughout their stay in the property.
During the passage of the regulations through Parliament in 2015, ministers made a commitment to review them in 2017. Although the consultation does not indicate any intention to change the existing regulation, it could yet form part of the post-Grenfell Tower building regulations review.
The consultation invites views and comments to gather evidence on the effectiveness of the regulations to date and we invite you to offer your own, along with any experiences you may have had, either directly via the consultation or to us as your managing agent.
You have until 9th January 2018 to respond with your views and we would love to hear from you!
As the weather gets colder and the rain sets in, here are a few helpful tips to make sure your home stays in good condition, even if you're away!
1. Set the timer on your heater so that you can make the most of the warmth when you're in, yet save the pennies when nobody’s home.
2. Open the window or the door a little (obviously not the main one to your flat) so that you ventilate your flat at night, this will help to reduce condensation and subsequent damp when your heating is on.
3. Unplug electric blankets before going to bed, unless they have thermostat and timer controls.
4. Look out for leaks, it’s that time of year when boilers are under pressure and the persistent rain takes its toll on the buildings.
5. If you are a current tenant of City Living London, please notify us if you will be away from your flat for more than 14 days.
Ideally the temperature in your living space should be at 21°C, 18°C for the rest of your home and hot water is best at around 60°C.
Also be mindful that the clocks go back on Sunday 29th October, so yippee for the extra hour in bed but this does mean you should check any timers or clocks to make sure they are correct!
The recent announcement that the United Kingdom is to leave the EU has resulted in widespread announcements regarding the possible effects it may have on the UK housing market. It’s early days, but does Brexit mean that house price growth is over, and the supply of new homes will be reduced making it harder for buyers to get on to the property ladder?
Some have suggested that British property prices will drop by up to 18% in the coming 12 to 18 months which in return would raise the cost of mortgages and therefore lower demand for property. History shows that property prices dropped nationally by 18.7% between the peak of 2007 and bottom of the market in 2009. Having said this, London’s housing market is famously resilient and the possibility of the Bank of England dropping interest rates to 0.25% or even 0% over the summer of 2016 will go some way towards buoying up a teetering economy, as will George Osbourne’s latest announcement that corporation tax is likely to be cut to an all-time low of 15%.
Brexit could be considered a positive move for first time buyers, who may subsequently benefit from lower house prices. Both buyers and sellers will be carefully watching market activity and the effects upon it of the Brexit vote. Uncertainty will continue until David Cameron’s replacement has been appointed, until Article 50 is invoked or even longer, whilst the UK negotiates the terms of its exit from Europe.
Mark Hayward, managing director of the National Association of Estate Agents, and David Cox, Managing Director of the Association of Residential Lettings Agents, made a joint statement that both prices and rents will remain stable in the short term, but that no one can be certain about the next quarter’s performance, as political instability and market unrest could lead through into prices.
Consumer confidence is unsettled and it’s likely to be some time before there is greater clarity around the long term effects.