Barometer 0910

The Industry Barometer September 2010
The Rental Market

In each edition of Point2Point, we send our roving reporter Annie Panton out into the membership to take the temperature of a hot topic affecting us all.  In this edition, she looks at the pressures being placed on the relocation industry by the current state of the rental market.

Were you aware that a mere 14% of UK households rent property? This figure is predicted to rise to 20% which should mean a growth in the private landlord market – either individuals or institutions. I’m concerned about the London rental market at the moment as we have been in a difficult position in recent months in and around London where there has been a decided shortage of quality rentals.  I’ve heard this from a variety of sources. Having said this, I do sometimes wonder if we shouldn’t recommend to our clients that they can save money by choosing less familiar but nevertheless acceptable locations in which to live. I know that we have to accept the concerns about education and spouse employment but nevertheless, alternative solutions are the name of the game at present.  I’ve also spoken to several people for this edition who are all worried about the state of the rental market.

Here’s one example from Alison Smith of the Relocation Support Group: 

“With the supply of rental property in decline, with many more tenants than available properties, it is proving a challenging time for the Destination Service Provider.  Particularly in London and the South East, the role of the home search consultant is becoming increasingly difficult with more time having to be taken to put together a comprehensive and full itinerary and achieve good results.  Managing client's expectations is becoming paramount with the constant need to emphasise the limited property options available and the speed at which the market is moving. 

The new tendency within the market is that if a property rental has not been achieved within the first viewing day, clients may have to wait for up to a month before going out on another viewing day to allow the rental market to replenish itself.  Therefore clients are being forced to make decisions very quickly to be able to secure a property.  

With the shift in the market, landlords no longer have to be flexible with lease terms, length of tenancies and break clauses due to the lack of the availability and rental prices are increasing as a result.” 

But interestingly enough, I also had a call from a long-standing friend in the industry, Claire Pickles, who was extremely concerned that our industry will suffer immeasurably unless we bring this situation to the attention of other organisations related to the property market. I’ve heard that Tad will be attending a meeting of the NAEA shortly to discuss this and other pressing issues that affect us in relation to property. 

Claire Pickles mentions this as well: 

“In order to purchase property other than as a personal dwelling the lending institutions will oblige individuals, to have something called a  ‘Buy to let mortgage,’ There is no legal requirement for this but the institutions are able to charge  high fees and interest rates ; it is therefore no longer viable to consider this vehicle to fund property purchase.  Many institutions have closed their doors to new BTL mortgages and these include the HSBC bank and Mortgage Express.  Re-mortgaging has become so expensive with fees starting at c£3000 that many investors are simply throwing in the towel and bailing out altogether. Unless this situation is addressed the already dwindling stock of available property to rent will diminish further, and prices for existing rental property are likely to remain unrealistically expensive.” 

I also spoke to another friend – Steve Miller - in the North West who had this to say: 

“The stock of fresh, quality rental properties is reducing. We have enjoyed a long period of quality properties entering the rental market on the back of a poor selling market. Many owners failed to sell at prices acceptable to themselves and turned to the rental market as a means to ride out the storm. With the sales market improving in the higher price brackets, many owners are getting cold feet when they are faced with the prospect of good quality assignees looking to secure 2/3 year terms – and reality scares them somewhat.”  

I recommend you read an article in the BBC News Magazine that summarises this pretty adequately. The link is www.bbc.co.uk/news/magazine-11002344 

Just in case you weren’t aware, there will be a major shift in Tenancy Law with effect from the 1st October – if the annual rent of a residential property is over £25,000, the tenancy is taken outside the assured tenancy regime governed by the 1988 Housing Act and is known as a ‘common law tenancy.’ From the 1st October 2010 this threshold will increase to £100,000. This will affect both existing and new tenancies. Unless any of the exceptions apply under the Act, tenancies with an annual rental of up to £100,000 will become assured or assured shorthold tenancies from that date. 

Apparently this will have an impact on a landlord’s ability to obtain possession and it is clear that the correct procedures will have to be followed in order to do so. As we know an assured shorthold tenancy provides greater protection to tenants so this new regime may restrict a landlord’s ability to obtain possession. 

An interesting point about registering deposits under the TDS also arises – is there a need to register deposits before 1st October for those existing tenancies that will become assured shortholds on that date? I’m sure our valued friend Marveen Smith will have some comments to make on this front! 

Don’t forget the ARP Legal Seminars coming up over the next few monthys - for more details, click here.