Why the Residential Lettings Market will continue to expand
PUBLISHED: 11:17 25 May 2012 | UPDATED: 21:25 20 February 2013
In 1960 the population of the UK was 53Million. In 2011 it had increased to 63 Million and by 2027 it is expected to increase to 70 Million, That's an average annual increase of 500,000 people and where will they all live?
In 1960 the population of the UK was 53Million. In 2011 it had increased to 63 Million and by 2027 it is expected to increase to 70 Million, Thats an average annual increase of 500,000 people and where will they all live?
2011 saw the lowest recorded level of New Build property since the 1920s (only 106,000 new homes) despite previous Governments stating that we need 200,000 new homes every year.
Other factors that will and are having an impact on the housing market include the shift in popularity of rental in the UK. The English Housing Survey shoes that the private rented sector is increasing by 262,000 households per year, which now represents about 16.5% of the overall housing stock in England (in 2008 the figure was 14%) and Rightmove forecast that this figure will increase to about 20% of all homes over the next 4 years.
Thats the National figure, but what is happening locally within the West Somerset area? West Somerset and Exmoor, along with other areas including North Devon and Cornwall are considered Low wage economies and when you consider factors such as second homes and in particular the number of Away Buyers looking to move into the area for retirement purposes, this places an undoubtable pressure on the local housing stock and in particular the ability of many young couples and first time buyers to be able to step onto the housing ladder, magnified at present by the large deposit that any new home owner will require to gain a mortgage at a realistic rate of interest.
These factors have ensured that there is an ever increasing demand by local people to rent houses, rather than buy. On top of this a percentage of retired Home Owners have also been seen to sell and move into rented accommodation, thus releasing capital and not having to worry about a property if they decide to travel (other advantages include If the boiler breaks down you ring the rental agent and they have to fix it not you!).
So what makes a good Investment?
1) Buy a modern property. The property will have a long life and you should avoid significant repairs and maintenance.
2) 2 bedroom properties tend to be the most sought after. Larger accommodation, whilst still very attractive and rentable, tend to incur a far greater capital outlay when purchasing but not necessarily the corresponding % increase in rental income. Tenants in smaller 2 (or potentially3) bedroomed properties tend to stay in residence longer and thus there is less likelihood of void periods whilst you are finding a replacement tenant.
3) Whilst period homes offer considerable appeal, your average tenant prefers modern accommodation, smart kitchens and bathrooms, energy efficiency, gas central heating and parking.
4) With increased fuel prices, tenants are now gravitating closer to their place of work to cut down on traveling time and in particular the increased fuel costs of transport. This has had an effect on some rental prices for more rural properties and has kept them in check over the past 24 or so months.
Attracting the best Possible Tenant?
Once you have the most suitable property, you want the best possible tenant! Some key considerations are: - Should I let the property furnished or unfurnished?
We find that 98% of enquiries are for unfurnished property. There is also an undeniable correlation between the standard and quality of the property and the standard and quality of the tenant it generally attracts.
Rents also need to be reflect the demand within the local market (which right now in West Somerset is very strong with so few rental properties being available at any given time) but also must be realistic. Rental prices are almost never negotiated, so its important from day one to ensure that the price is set correctly. Long Void Periods with no prospective tenant cost you as a landlord a considerable amount of Lost Income which can never be recovered. A sustainable and achievable rent will also mean an increased level of enquiries, allowing your letting agent to pick and choose the most suitable tenant.
Key Legal Points (though not an exhaustive list) include
1) Compliance with the Housing Health and Safety regulations Rating System to ensure that the property is safe and to prevent any reasonably foreseen harm. Typical examples are lack of stair rails, poorly fitted carpets and loose garden patio slabs.
2) Gas and electrical safety checks are a must Too many people are still maimed of killed by accidents in rental properties Landlords and letting agents are fully responsible to ensure that these checks must be carried out.
3) An Energy Performance Certificate is compulsory when renting a property.
4) All deposits must be registered with an appropriate body to protect both the Tenant and the Landlord. Failure to do so can invoke quite painful fines!
5) There is currently a bill before Parliament which will, if passed, make it a legal requirement for all rented property to install smoke alarms A long overdue measure.
6) Ensure that before you let your property that a very detailed Inventory and Schedule of condition is provided including notes on all marks within the property and corresponding photos It may seem boring but this really does help if there is ever a dispute over how the property may have been left.
7) Regular quarterly maintenance visits by your letting agent to ensure that everything is running smoothly and to pick up any potential issues before they get out of hand Essential for the smooth running and letting of your property.
Other factors to consider when purchasing property to let out include.
Should you pay out of cash funds or finance? What level of deposit is required/ which lenders are more amenable to Buy to Let Mortgages. How is Affordability calculated and what insurance is required.
These questions themselves require a very detailed response and our in house Financial Advisors would be pleased to go through these and other questions in detail to assist you with your decision and can be contacted through any of our 5 Somerset Offices (Minehead, Dulverton, Taunton, Wellington and Wiveliscombe)
Ultimately, if approached professionally, letting property can be a rewarding process and our Property Management Business in West Somerset is based out of our Minehead Office and ably run by Andrew Hobbs FRICS and Sarah Corlett who can be contacted on 01643 706917 firstname.lastname@example.org@webbers.co.uk Floyds Corner, Friday Street, Minehead, Somerset, TA24 5UW