Latest News

Landlords are laughing all the way to the bank

1st November 2011

Record rents mean that buy-to-let landlords are laughing all the way to the bank.


Lodging grievances: despite Government plans to make house buying easier, rents remain undampened


By Ian Cowie

Buy-to-let landlords are filling their pockets as rents hit record highs. The mortgage famine means rising numbers of people cannot afford to buy and so demand for rental accommodation sharply exceeds supply.

Average monthly rents across 18,000 properties in England and Wales are now £718 per month – or £29 more than a year ago – according to LSL Property Services, Britain’s biggest letting agent and owner of Your Move and Reeds Rains.

Sceptics may suspect landlords of trying to talk up rents, but the housing charity Shelter describes private rents as “unaffordable” for families on average earnings in 55 per cent of local authority areas. The charity says acute shortages of social housing have forced people who would normally qualify for subsidised housing into the private sector, raising demand and rents.

This increased average yields to 5.3 per cent, but total returns over the past year slipped to 1.8 per cent after house prices fell outside London, says David Newnes, managing director of LSL: “On a monthly basis, rents rose in all regions of England and Wales for the first time on record. As a result, rents hit record highs in six regions – London, the South East, Yorkshire and the Humber, the East of England, Wales and the East Midlands.”

There is no sign of these trends reversing soon. According to the Association of Residential Letting Agents (ARLA), three quarters of its 6,000 members claim demand outstrips supply and that the average length of tenure has hit a record high of 19 months, as tenants struggle to find better deals elsewhere.

y should be taken with a pinch of salt as the numbers do not add up, claims Ian Potter, operations manager of ARLA: “Although the Prime Minister has announced plans to reinstate Right to Buy, we would query how many social properties are blocked by elderly tenants who do not want to leave the family home. Or the poor who, even with Right to Buy, will struggle to finance a purchase.”

At the other end of the political spectrum, a think tank, the Intergenerational Foundation claims that “empty nester” homeowners aged 60 and above should be subject to increased property taxes to encourage them to sell up and trade down to smaller properties.

This idea is wrong on so many levels that it is difficult to know where to start. First, there is the right of these homeowners to enjoy their private property without excessive interference from the state.

For many people, home is much more than bricks and mortar. It’s the place you raised your children and the location of a lifetime’s happy memories.

Also, who has an “empty bedroom”? Many are regularly used as offices, store rooms for junk you cannot bear to throw out or accommodation for visiting family members. And, of course, only a catastrophic house price crash would bring three or four-bedroom properties within reach of first-time buyers.

I could go on but, finally, it is worth pointing out that one reason older homeowners are reluctant to trade down into a smaller property is the high cost of an earlier tax hike. Gordon Brown raised Stamp Duty on property purchase in each of his first four budgets. When the tax bill to change your address can exceed a year’s State pension, it’s no wonder most older homeowners are keen to stay where they are.

The best hope to solve the accommodation crisis afflicting younger people is that house prices will fall back into line with earnings, and that mortgage availability will rise to the point where home ownership becomes affordable for first-time buyers once again.

Source:  Telegraph 1/11/2011