| Hello and a warm welcome to our October newsletter.
Well the September Equinox has recently occurred and, almost immediately, the weather has taken on a distinctly autumnal feel. Now whilst the beautiful gold and red colours of Autumn are one of the great aspects of our distinctive seasons in Britain, the lettings market is now a 365 day, 24/7 environment with no signs of any seasonal change in activity.
In this issue we reflect that strong activity with reports on reducing void periods and increasing rental values. We must however just air a little caution as the Government is set to announce its public spending cuts shortly and these are bound to have some impact on everyone in society in the weeks and months ahead.
Also in this issue Lucinda Newell reflects on previous periods of austerity and why she feels that we are much better placed to get through this one more or less unscathed.
As befits our award winning use of technology we are also delighted to announce the introduction of lantenA our unique online tenancy renewal system for both landlords and tenants and more information is given below
Good news for landlords. Voids at their lowest for eight years.
The average void period – a key indicator of the buoyancy of the rental market – has fallen to its lowest level for eight years as demand for rental property remains high.
Compared with the previous quarter as part of the Association of Residential Lettings Agent’s (ARLA) survey of members, the average void period has again fallen from 3.6 weeks to 3.2 weeks.
The average number of new tenancies signed up compared to the preceding survey has also increased in line with seasonal trends.
Ian Potter, Operations Manager of ARLA, said: “The rental market is incredibly strong at the moment for those working within the industry but for those consumers who are relying on the Private Rental Sector for housing, the cost of renting must be of concern.
“The new government must ensure that finance is made available to the sector, so that more properties can be brought into the PRS and ensure that more rental homes are made available.”
Average void periods for rented residential properties are already short with nearly eight out of ten ARLA member offices reporting averages of four weeks or less per year.
The South East has experienced the lowest void period at just 2.9 weeks compared with 3.3 weeks for Central London and 3.4 weeks for the rest of the UK.
The average void period of the whole country is down quite sharply and is the third consecutive fall. Average voids have decreased in all three main geographical areas with the greatest decrease being for those outside London and the South East (from 3.9 to 3.4 weeks).
Geographic Average Void Period (weeks)
|Prime Central London
|Rest of UK
The rental market has made a dramatic recovery since the beginning of 2009 when void periods were close to an all-time high. The fall in the last four quarters confirms that the trend has now turned firmly downwards again and the average for this quarter is the lowest since these surveys began nearly ten years ago.
Good news for landlords but tougher times for tenants as rental levels rise.
A national survey has shown that tenants are increasingly in difficulties after rents rose at their steepest rate for two years.
Landlords increased rents in August by 1.4%.
The rise means rents are the highest they have been since September 2008.
The average UK rent is now £686, which is 2.5% higher than the same time last year, following seven consecutive months of rises and an increase of 0.5% in July. The average yield rose from 4.8% in July to 4.9% in August.
Whilst increasing rents is generally good news for landlords, at Lenwell we encourage our landlords to look at the full picture and take into account the quality and security offered by the tenant alongside the headline rental figure. Trouble free letting which avoids the voids and provides good net cash flow can be more important than squeezing the last penny on the gross rental income.
lantenaA – Lenwell’s unique online tenancy renewal system
Lenwell are constantly innovating and looking at opportunities to integrate technological solutions into the way we work and we won Gold at the 2009 Times & Sunday Times Lettings Agency Awards for our use of Technology and Online.
We have now introduced our unique online renewal system to make the tenancy renewal process easier to administer and more automated, providing our landlord clients and tenant customers with more time to enjoy life!
Every landlord and tenant has a secure code which enables them to enter our online system and, entering the property code, complete a simple process to renew or terminate the tenancy and agree terms.
Our property management team will, of course, still happily liaise by phone and email but the new system allows landlords and tenants to renew tenancies simply, quickly and conveniently. Another example of how Lenwell is using technology where it can be effective in improving the administration and management of residential lettings.
For further information or a demonstration, please contact your nearest Lenwell branch.
The Lucinda Newell Column
To be seen pottering along the highways and byways of Luton in her Mini Clubman, her trusted Scottie Malcolm at her side, our super sleuthing property rental expert Ms Lucinda Newell is on the case on your behalf!
One cannot help but be aware of the country’s economic difficulties. Whether it is that harbinger of doom and gloom Robert Peston at the BBC (why does he always sound as if he’s chewing on a toffee?), or most other news and media coverage, the need for radical action is being talked about day in and day out. On one hand this can be somewhat depressing, on the other it can be seen as priming us all for difficult times, times that may feel less painful in reality than they do in anticipation.
Later this month the Government are due to announce their plans in respect of public spending and it is likely to mean significant cuts in costs, services and therefore employment. The huge deficit built up by the previous Government has resulted in UK plc having to pay some £150m a day in interest and a period of austerity measures is clearly required in order to try and redress our budget deficit.
Of course, many of us will remember other periods when the UK economy has been in turmoil and, unpleasant as it can sometimes be to take the medicine needed to cure the “patient”, history gives us hope that things will get better and perhaps more quickly than people imagine.
The so called “winter of discontent” in the late 1970’s was largely caused by Harold Wilson and James Callaghan’s Labour Government’s inability to control inflation and through attempts to manage wage restraint through the trade union movement. The failure of this approach led to waves of public sector strike action with rubbish piling up on our streets, power cuts and the dead lying unburied for weeks at a time. This dreadful situation led to the election of a Tory Government under Margaret Thatcher in 1978. After coming to office, Mrs Thatcher brought about huge changes in union power and by 1983 she was able to win a landslide election victory with strikes at their lowest levels for decades. Unions, whilst still strong, do not wield the same power today that they did thirty years ago and, despite the seemingly hot headed views of a few well paid union leaders, we are unlikely to see a return to industrial action on anything approaching the scale of the late 1970’s.
The next major period of economic instability and recession was when the UK were members of the exchange rate mechanism (ERM) and spent billions under John Major’s Tory Government trying to prop up sterling. Eventually we were forced to leave the ERM and the economy began to recover. We subsequently went on to enjoy one of the longest and most sustained periods of growth and wealth the UK has ever experienced.
In today’s situation, whilst confidence is naturally reduced, in reality we have very low interest rates and have technically come out of recession, albeit only showing slow and minimal growth. Tax rises, through VAT and National Insurance will impact on everyone’s wallets but the vast majority of people will undoubtedly survive relatively unscathed, with varying degrees of battening down the hatches and belt tightening needed in order to get by.
Of course one feels incredibly sorry for anyone who finds themselves facing unemployment and there will clearly be some locations, particularly where the economy is heavily based around public sector jobs, that perhaps suffer worse than others. However, if we can reduce the country’s debt quickly, we will be able to reduce our horrendous interest costs and history shows that we will then be able to reinvest and build the economy again more quickly.
House prices look set to adjust again with falls anticipated over the coming months. This naturally makes property owners feel less wealthy but, in reality, only has a negative impact on those seeking to downsize or leave the market altogether. Those looking to invest or move up-market will actually gain from the improved differentials between their sale and purchase prices.
The lettings market looks set to remain strong with demand outstripping supply. Rental values are likely to hold up or even rise although I shall be making sure that the priority for my portfolio is on maintaining occupancy rather than trying to get the last penny out of a deal and risking a void period. With tighter finances and rising unemployment likely, arrears look set to increase and so I am working with my friends at Lenwell to minimise and mitigate any risks. I believe that strict tenant referencing and insurance backed guarantees are vital as part of this process.
I am not complacent to the difficulties ahead and I have drawn up my own “austerity measures” which I hope will benefit me in other ways too. I have reduced my sherry intake, have taken to walking more than driving, have cut up one of my credit cards to remove temptation and will be looking to send more time with friends and family rather than seeking my entertainment elsewhere. I have also spent time ensuring that I am getting the best rates on my investments and paying the lowest charges and fees on my outgoings such as utilities. Even Malcolm is contributing by cutting down on his “doggy treats”.
We are undoubtedly in for a difficult period but if we stay positive, work hard, continue to help the genuinely needy and are sensible about reducing waste, I believe we can come through this stronger and in better shape.
Come on Malcolm - Walkies!
I love to hear from my readers so let me know your thoughts - email me at firstname.lastname@example.org
Lenwell would like to remind landlords with tenancies up to £100,000 a year that they will automatically default to an Assured Shorthold Tenancy (AST) from October 1 and deposits may have to be protected.
The AST threshold will increase to include all tenancies with annual rent up to £100,000 - up from the current £25,000.
The increase will give tenants paying higher rent the benefit of Tenancy Deposit Protection (TDP), while landlords will be able to use "off-the-shelf" tenancy agreements.
Landlords who have taken a deposit for a property after 6 April 2007 with annual rent up to £100,000 are advised to protect the deposit with one of three government-approved tenancy deposit schemes.
Deposits taken before 6 April 2007 do not have to be protected unless the tenancy agreement has been renewed.
Landlords who fail to protect a deposit taken after this date will not be able to serve a Section 21 notice on a tenant to begin possession proceedings when the property becomes an AST. They may also be ordered to pay the tenant three times the deposit amount as a penalty.
Disputes over the return of a deposit can be heard and determined by the TDP scheme where it is protected, instead of through the county court.